Posted on 01/31/2004 6:02:35 PM PST by NormsRevenge
SACRAMENTO -- Although he said he could pay for his own race and not take money from special interests, records show Gov. Arnold Schwarzenegger has a pattern of relying on bank loans and other credit, which some critics say disguises hundreds of thousands of dollars of special-interest donations.
Schwarzenegger's borrowing of millions of dollars before the Oct. 7 recall election was ruled a violation of state campaign law by a Superior Court judge last week because he could raise money to pay off the loans after the election. That ruling may mean Schwarzenegger may have to pay back $4.5 million in loans with his own money.
Campaign laws compel candidates to disclose their financial supporters before an election. There is also a restriction that candidates cannot loan their campaigns more than $100,000.
While Schwarzenegger said Tuesday he never intended to repay the loans with contributors' money, he did just that with his campaign for Proposition 49, a 2002 initiative for state-supported after-school programs.
The measure, which was approved by voters in November 2002, called for as much as a half-billion dollars in tax money for after-school programs but is also considered the launching pad for Schwarzenegger's political career.
While the actor -- estimated with a personal fortune of more than $100 million -- donated more than $1 million of his own money to the after-school measure, he also took out two bank loans of nearly $500,000 each, money that he in turn loaned to the campaign.
One loan, taken out in October, 2002 for $450,000, was repaid sometime between January and June, 2003, records show. Records also show that in June, 2003, Schwarzenegger held two fund-raising events that brought in $470,000 for repaying the campaign debt, money owed to vendors and staff as well as the remaining bank loan.
Although that's similar to what the governor did during the recall, Rob Stutzman, a spokesman for the governor, said one has nothing to do with the other.
"It's a leap to draw that conclusion," said Stutzman, who argued that no one "knows what the governor is thinking."
Campaign finance experts, however, said the use of loans and credit usually indicates a candidate doesn't want to disclose the source of campaign money or wants to limit the amount of his or her money used in the race.
"A lot of candidates get bank loans to help fund their campaigns because they don't have to pay it back until after the election and they can tell voters they are not taking money from contributors," said Robert Allison, managing director of the Washington-based Center for Public Integrity.
"I don't think you can have a functioning political system without disclosure," he said. "Information is crucial to the public deciding whether to support a candidate."
State campaign finance records show many similarities between finances of the Proposition 49 campaign and Schwarzenegger's run for governor.
Besides the loans, Schwarzenegger's Proposition 49 committee was also slow to pay many of its vendors and consultants. The fund-raisers held last June brought in $421,731 and was used to pay off money owed for months to a pollster, attorneys and campaign consultants.
Schwarzenegger's recall campaign also relied on the good will of vendors and staff to wait for payments. In September, Schwarzenegger's two committees -- one aimed at the actor's election and the other at recalling former Gov. Gray Davis -- had a combined debt of $2.4 million. Much of that money was owed to some of the same consultants who worked on the Proposition 49 campaigns.
The same bank, City National of Los Angeles, provided the loans for both Proposition 49 and the Schwarzenegger gubernatorial campaign, records show.
While Schwarzenegger borrowed money and was repaid by contributors for Proposition 49, he never wanted to do that for his governor's race, Stutzman said.
"There's no question that the campaign set up those loans and retained that option," Stutzman explained. "The governor had several advisers who wanted him to keep that option open, but the governor personally never liked the idea nor ever intended to raise money to pay off the loans."
Lowell Finley, the attorney who won the judgment over the recall loans, said that argument makes little sense. He has gone as far as to call Schwarzenegger a liar based on the loan documents he reviewed as part of the suit.
"As a specialist for the last 18 years in campaign finance, I can confidently say that the only reason a candidate would have for loaning his campaign committee money rather than giving it outright is to preserve his legal right to get paid back," said Finley.
Finley pointed out the judge's order protecting the release of the bank loan documents, which he claims would prove the governor wrong, was demanded by Schwarzenegger and his bank as part of the lawsuit. Finley has challenged the governor to release the records and has threatened to go back to court himself to lift the order.
Stutzman said the loan documents do preserve the option of raising the repayments through campaign support but the loans were not taken out with that in mind. He contends that the loans were needed because fund-raising abruptly stopped after the courts initially called off the recall election in September.
This week, the governor's final 2003 campaign reports will be due out and Finley and others believe those documents will provide more insight into how the governor's campaign money was spent. A review of daily fund-raising reports since the election shows that Schwarzenegger has raised about $3.3 million since the recall election, but there is no indication how that money was used and what payments were made.
While we spent endless hours debating Schwarzenegger's political philosophies, few, except the hard core party faithful, questioned that he was a politician or at least was advised by the political elite.
If Freepers are offended by the "real" governor they had better tug their sombreros done over their eyes and cover their ears with their hands for the next three months
Does anyone know how much money Arnold has made in his acting career?
396 Gerstner, Louis V Jr 600 million 61 Greenwich , CT IBM
There are 5 tied with 600 million net worth. These are the bottom guys!
I didn't question it; I proved it.
The posse didn't like proof.
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