Schwarzenegger a Big Fundraiser in 2004

By Dan Morain

Feb. 1, 2005 12 AM PT

Times Staff Writer

SACRAMENTO — Gov. Arnold Schwarzenegger raised more than $23 million in political donations in 2004, using the money for initiative campaigns, travel -- and fundraising, according to reports filed with the state Monday.

He reported spending more than $300,000 raised earlier to help pay for lawyers to defend him against libel suits stemming from allegations of groping made against him in the final days of the 2003 recall campaign.

At the same time, embattled Secretary of State Kevin Shelley reported lending $100,000 of his own money to help pay expenses as he tries to fend off criminal, civil and legislative investigations into his campaign activities and the management of his office. Shelley reported expenses of $255,000 for his legal defense, which includes a criminal law specialist.

Year-end campaign finance reports also show that Californians spent roughly $200 million promoting and opposing November ballot measures, and tens of millions more on legislative races. And fundraising is well underway for the 2006 elections, several candidates’ filings show.

None of the sums raised by individual candidates in 2004 came close to matching the $23.07 million Schwarzenegger collected last year -- his first full year in office. The Republican governor spent the bulk of the money promoting two successful initiatives on the March ballot to help ease the state’s budget woes, and helping to defeat two failed initiatives on the November ballot that would have authorized significant expansion of gambling.

“Certainly,” said Schwarzenegger campaign aide Marty Wilson, “he was very focused and remains focused on areas of reform, and he is willing to spend political capital raising the necessary capital to get the message out. Voters are obviously responding to it.”

The governor’s reports show he spent $1.9 million on campaign consultants and $302,000 on fundraising. He spent $802,000 on his campaign-related travel and that of his entourage. His bill at the Hyatt Hotel across the street from the Capitol, where he stays when he is in Sacramento, totaled $91,000.

The governor paid three law firms $309,000 from a separate bank account left over from the 2003 campaign to defend separate lawsuits stemming from sexual misconduct allegations reported in The Times shortly before the 2003 election. The governor and a former Hollywood stuntwoman settled one suit in September after a judge dismissed the claim.

In an action still pending, a former British TV host who accused Schwarzenegger of fondling her breast is alleging in a libel suit in the United Kingdom that her reputation was smeared in the final days of the 2003 recall campaign.

The woman was one of six quoted in a Times article that appeared five days before the recall election, saying Schwarzenegger had touched them without consent.

Schwarzenegger said last week he hopes to more than double his 2004 contributions this year to $50 million -- to promote ballot propositions he and his allies are preparing for a possible special election. The governor says his donors do not influence his decisions, and often recalls that he returned a $100,000 check after the contributor demanded a meeting with him.

“And since then,” Schwarzenegger said last week, “I have never heard any one of the people that have contributed money to me ever say, ‘I want to have a meeting, and I demand that the governor does this or that because we gave him money.’ ”

Schwarzenegger’s biggest single donor was Orange County billionaire Henry Nicholas, who gave him $1.5 million to help defeat Proposition 66, which would have softened California’s three-strikes sentencing law.

The next largest donor, at $1.054 million, was Ameriquest Capital Corp., a mortgage lender with interests in state affairs. Ameriquest spent more than $200,000 on lobbying in Sacramento last year.

Some analysts and critics of the campaign financing system question whether Schwarzenegger can raise such sums and not heed some of his donors’ wishes.

“People always think this with campaign money: Where there is smoke, there is fire,” said Shaun Bowler, a political science professor at UC Riverside.

While Schwarzenegger raises significant sums, Democrat Shelley appears to be floundering as his legal bills mount. He reported raising $18,028 in a reelection fund since August, when critical news accounts about him, and investigations into his activities, began.

Shelley has been accused of breaking civil service rules to hire the son of a fundraiser; mishandling tens of millions of dollars of federal funds intended to upgrade California’s voting network; and taking campaign contributions that may have been laundered through a nonprofit organization for which Shelley had arranged a state grant.

He faces investigations by the U.S. Justice Department, the state attorney general, federal elections officials and the Fair Political Practices Commission. He is scheduled to testify Thursday before a legislative audit committee. Shelley, who has two children, earns $131,250 a year as secretary of state.

To defend himself, Shelley borrowed $500,000 against his family home in San Francisco -- the same house where he was raised -- and put $100,000 into his legal defense fund, said Shelley spokesman Sam Singer. The remaining $400,000 may be shifted into the defense fund too, said Singer.

“He simply hasn’t had the time to raise funds,” Singer said. “But many, many people have offered to help, and I’m sure the secretary will take them up on their very kind and generous offers.”

Reports filed Monday show that Shelley has paid $110,000 to the Sacramento law firm Downey, Brand and $24,900 to San Francisco public relations firm Singer Associations Inc. Shelley still owes $156,561, including $12,360 to Singer, $78,873 to Downey and $65,328 to the Sacramento law firm of Olson, Hagel & Fishburn.

In other filings Monday, Oakland Mayor Jerry Brown, running for California attorney general, reported raising $1.7 million in 2004. A former Democratic governor who also ran for president and the U.S. Senate, Brown is relying heavily on small donors, drawing $1.6 million from contributors who gave $100 or less. Brown reported receiving $5,300 each from Los Angeles billionaire Ron Burkle, San Francisco philanthropist Gordon Getty, E&J; Gallo Winery and Playboy magazine publisher Hugh Hefner.

Backers and foes of the 10 costliest propositions on the November ballot spent $206.3 million, campaign finance reports show. The amount appears to eclipse the previous record for a single ballot, in November 1998.

Last November’s high-priced ballot measures included ones to fund stem cell research, expand gambling, limit lawsuits and repeal a law mandating that employers provide health care. Promoters of Proposition 71, which authorized the state to sell $3 billion in bonds to fund stem cell research, spent $34.7 million.

The Yes On 71 campaign reported a debt of almost $6.5 million.

In the final days before the November election, venture capitalist John Doerr and his wife, Ann Doerr, lent the campaign a combined $1 million, as did Robert Klein, who since has been named chairman of the board overseeing the initiative’s implementation.

Altogether, Klein, a Palo Alto developer, gave or lent the campaign $2.1 million and spent an additional $200,000 on other state campaigns, placing him among the biggest individual spenders on state politics in 2004.

A campaign spokeswoman said backers of the stem cell initiative intend to raise money to pay off the Doerrs, various vendors who worked for the campaign and possibly Klein -- raising the possibility that entities and individuals seeking stem cell research money could make donations that would help Klein recoup some of the $1 million loan.

Klein was not the biggest individual spender last year. That distinction apparently belongs to Republican entrepreneur Steve Poizner, who spent $6.2 million on his failed bid for a Silicon Valley-area Assembly seat. Schwarzenegger later appointed Poizner to the California Public Utilities Commission.

Times staff writers Nancy Vogel, Robert Salladay and Jordan Rau contributed to this report.

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Tracking the money

Here are top contributors to Arnold Schwarzenegger’s main campaign fund in 2004:

*--* Contributor Employer Occupation Amount Henry Nicholas NS Holdings High-Tech $1,500,000

Ameriquest Capital NA Finance 1,054,000

California Republican NA Political 800,000 Party

Alex G. Spanos AG Spanos Cos. Development 750,000

A. Jerrold Perenchio Univision Television 750,000 Communications

William A. Robinson Retired Transportation 450,000

American Sterling NA Finance 250,000

Hewlett-Packard NA High-Tech 250,000