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Simon's Success Story Is a Secret

Politics: He boasts a 20% return on investments but says rules bar him from revealing specifics.


Day after day, Republican gubernatorial nominee Bill Simon Jr. describes himself as a "successful businessman."

The proof, he says, is the high rate of returns on investments by his family's financial firm, William E. Simon & Sons. But when Simon is asked to specify how high they are, he responds: "They're private," "I can't give them out," and "I'm not allowed to talk about it."

The absence of concrete data to back up Simon's self-proclaimed success poses a growing problem for his campaign, political analysts say. That is particularly true at a time of deep public skepticism about the integrity of corporate America, with WorldCom, Tyco and other companies engulfed in scandal.

On Friday, Simon's difficulty in trying to leap from business to government was further complicated by news, first reported in the Wall Street Journal, that the Internal Revenue Service has named him as a beneficiary of a possibly illegal tax shelter.

The disclosure only underscored Simon's challenge in convincing voters that secret balance sheets would prove his acumen--if only he could make them public.

"I don't see why people would believe him if he doesn't provide evidence," said Ann Crigler, director of the Jesse Unruh Institute of Politics at USC. "He's got to substantiate that."

Simon and his advisors say securities rules and confidentiality agreements with clients bar them from making public the records that would demonstrate his success.

But they recognize that those constraints clash with Simon's political needs. Indeed, a key rationale of his candidacy is that Democratic Gov. Gray Davis has mismanaged the state, and that Simon, as a successful businessman, could do a better job.

"There would be nothing better for the campaign than for Bill to be able to tell you what the rates of return are," said Jeff Flint, a senior Simon campaign advisor.

The closest the campaign has come so far is to say that the overall rate of return on investments by William E. Simon & Sons since 1994 has averaged more than 20% per year.

But the campaign used a highly subjective methodology to calculate that figure, declined to release documentation to back it up and would not provide specific annual returns. The campaign also would not divulge any information on investment performance from 1988, when Simon joined the firm, to 1994.

Simon worked full time as a top manager at the firm for 14 years. He has taken a leave of absence for the duration of the campaign.

In the normal course of business, William E. Simon & Sons does not track its global year-to-year returns, according to the firm. Instead, it monitors returns only by specific investments, said Michael Lenard, a managing director of the firm. Its $1-billion portfolio is a labyrinth of partnerships, corporations, real estate projects, bonds and other securities.

Lenard did not dispute that average returns have exceeded 20% per year since 1994, but said federal rules bar disclosure of specific numbers. Many clients, he added, "don't want to be known," so they require the firm to keep investment deals private.

"They like to be under the radar; we like to be under the radar," Lenard said.

But as a candidate for governor of America's most populous state, Simon has drawn intense scrutiny to the firm from the news media and the Davis reelection campaign.

Davis researchers have combed through court files and reams of other documents on William E. Simon & Sons in search of material to undercut Simon. The Davis campaign is spending millions of dollars to publicize its most damaging findings in television ads: a savings and loan that "went belly-up," a shipping company that "lost millions," Simon ties to an Enron partner "under federal investigation" for questionable accounting practices.

Garry South, chief strategist of the Davis campaign, called Simon an "idiot kid" who "mucks up everything he gets his mitts on," then denies responsibility for his business failures.

"The guy is like a little kid in a room with a broken lamp who swears up and down that he had absolutely nothing to do with it," South said. "That lamp fell off the table all by itself. He has no idea how it occurred."

Simon advisors say the Davis team has grossly distorted the Republican candidate's business record and deny every accusation in the governor's ads.

"They're completely false and misleading," Flint said. "The voters do not believe that Bill Simon has been a bad businessman. The voters understand instinctively that Bill Simon has been a good businessman. It's clear to them that he has been successful."

With no hard data to bolster such assertions, Simon has struggled to establish their validity.

Now, the storm of allegations on corporate shenanigans, from Arthur Andersen to Martha Stewart, has made the task harder.

Ross K. Baker, a political science professor at Rutgers University, said the political environment "has never been less auspicious" for first-time candidates who put boardroom experience at the top of their resumes.

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