Governor-elect Arnold "pay-to-play" Schwarzenegger gets millions from "spec

The Sacramento Bee

Giving millions to back a winner

Candidate who denied needing money got lots.

By Alexa H. Bluth -- Bee Capitol Bureau

Published 2:15 a.m. PDT Sunday, October 12, 2003

Gov.-elect Arnold Schwarzenegger has pledged to shed the "pay-to-play" atmosphere that Gov. Gray Davis was accused of creating in Sacramento and has asserted that his personal wealth shields him from being beholden to special interests.

But in a span of 62 days, the Republican raised questions as he collected millions of dollars in two campaign accounts from a variety of business interests that stand to gain from a Republican administration promising to improve California's corporate climate.



On Aug. 6, the day Schwarzenegger announced he would run for governor, he said: "I will go to Sacramento and I will clean house. ... I don't have to take money from anybody. I have plenty of money myself."

By Oct. 7, Schwarzenegger had raised more than million for his successful race, the largest portion from his own wallet, and the most of any of the candidates, who spent a collective million on recall campaigns, according to campaign finance reports filed electronically with the California secretary of state's office and analyzed by Common Cause.

The actor and businessman spent million of his personal fortune for a campaign that included wall-to-wall statewide television advertising, a sizable staff and elaborate rallies.

He financed the remainder of the campaign with .5 million in loans and more than million in donations stretching from to more than 0,000 apiece.

"His campaign ended up very different than what he said when he started," said Larry Noble, executive director of the Washington-based Center for Responsive Politics.

Schwarzenegger's list of contributors is largely made up of private business interests -- ranging from real estate developers and manufacturers to car dealers and a produce baron -- and has raised concerns from campaign finance watchdogs. He also drew criticism for collecting donations of up to six figures after announcing that he needed no help from contributors to finance the campaign.

After himself, Schwarzenegger's top donors included Alex Spanos, a Stockton developer and prolific campaign contributor in California who hosted a fund-raiser for Schwarzenegger and donated 0,000 to his bid. Spanos also chipped in 0,000 to the main committee behind the recall effort, according to finance records.

Schwarzenegger also received more than 0,000 each from: William Lyons Homes, a Newport Beach-based real estate developer; the American Sterling Corp., an Irvine-based financial firm; William Robinson, an Idaho-based rancher and investor; the New Majority PAC, moderate Republican business owners; Tim Blixseth, who runs Yellowstone Development LLC; and Paul Folino, chairman of the Costa Mesa-based technology company Emulex Corp.

Many of Schwarzenegger's contributors have donated heavily to other Republican candidates as well.

"It's because he campaigned on an agenda that he wanted to improve California's job climate," said California Chamber of Commerce President Allan Zaremberg. "I don't think there's any question he wanted to help business create jobs by reducing their costs."

At least one of the firms agreed, issuing a written statement Friday regarding its 1,200 contribution to the Schwarzenegger campaign.

"American Sterling Corp. supports individuals who can bring fiscal responsibility, accountability and change to what we believe is a very serious crisis in California," the statement said.

According to campaign finance records, the firm also donated 0,000 to former Los Angeles Mayor Richard Riordan's failed GOP gubernatorial bid last year.

Schwarzenegger spokesman Rob Stutzman said the governor-elect "didn't raise money from the special interests of Sacramento."

"Commerce is the backbone of our society, and those that want to create jobs are hardly a special interest," Stutzman said.

He also defended the size of Schwarzenegger's campaign accounts.

"The reality is there are a lot of people in this state that wanted to support his effort to bring true reform to Sacramento, and that includes a lot ... that want to create jobs and improve our economy," he said.

Campaign finance watchdogs, however, warned that businesses and developers could seek favorable treatment from the government in the form of tax breaks, contracts and eased regulations.

"The business community has a huge stake in what happens at the state Capitol in the area of taxation, which is going to be a big issue with the budget, all the way to legislation which would affect land use, workers' rights and the whole gamut of areas where business and government intersect," said Jim Knox, executive director of California Common Cause.

Many businesses have lamented legislation enacted during the Davis administration that they said hampered businesses' ability to operate in California.

The measures that Republican lawmakers have tagged "job killer" bills range in purpose from improving access to overtime pay for workers to requiring large businesses to provide for health insurance for their employees.

Schwarzenegger has not said whether he will attempt to roll back specific measures, but he promised to enact changes to help businesses.

His donors "looked favorably at Schwarzenegger's promise to make the state more favorable to business interests," Noble said. "They want to get in on that."

"The one thing he doesn't have is a history," Noble said. "The groundwork is there for the special-interest entree that has existed with other administrations. The question now for him is, 'Are you going to give these people a special seat at the table?' "

It is a criticism that also plagued Davis throughout his administration. Davis raised millions for his re-election campaign, and later his recall campaign, from a variety of interests that had business with state government and from individuals whom he appointed to government posts.

His largest and most loyal contributors were unions, who won approval in California's Democratic-controlled Legislature for many employee-friendly bills.

Davis also, however, raised millions from corporate interests.

"What made Gray Davis a uniquely successful fund-raiser was that as a moderate he was able to raise money from both sides on any issue, because with Davis you knew you weren't going to get everything but you had to play to get something," Knox said.

Meanwhile, Schwarzenegger's chief Democratic rival, Lt. Gov. Cruz Bustamante, collected large sums from unions and drew criticism for accepting six-and seven-figure donations from Indian tribes during his recall bid.

Bustamante was forced to halt television ads and return some of the donations after a judge ruled that some of his fund raising violated the state's new campaign finance limits.

"What (Schwarzenegger) did that was very effective ... was he managed to label Bustamante's contributions as special interests while claiming the people who were contributing to him were not special interests, when the reality is they all were," Noble said.

Schwarzenegger, however, has yet to take any specific action that could tie him to his contributors.

"If Arnold Schwarzenegger continues his very public stance of trying to stand up to interest groups and does not act as if he's influenced by the interests that helped his campaign, I don't think we'll see the same comparisons," said Thaddeus Kousser, an assistant professor of political science at the University of California, San Diego.

Bustamante, meanwhile, fired back at Schwarzenegger during the campaign, charging that he violated state laws by taking out .5 million in loans for his gubernatorial campaign.

A new state law bars candidates from loaning their own campaigns more than 0,000. But the Schwarzenegger campaign maintains the initiative allows candidates to obtain a bank loan of any amount.

A judge put off a hearing on the matter until December, and critics assailed the campaign's tactic.

"When you loan yourself money and then pay it off after the election, the identity of the donor doesn't surface until after the election," Knox said, "so that's troublesome."

Stutzman said the loans have yet to be repaid.

The Bee's Alexa H. Bluth can be reached at (916) 326-5542 or abluth@sacbee.com.