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Controller Candidate Minds His Opponent's Business

Politics: State senator questions stock sale by former EBay executive, who defends his record.

October 03, 2002|DAN MORAIN | TIMES STAFF WRITER

SACRAMENTO — State Sen. Tom McClintock, a Republican running for state controller, joined the ranks of career politicians attacking their entrepreneurial opponents Wednesday, questioning Democrat Steve Westly's dealings when he was an executive at EBay Inc.

Westly, who quit EBay almost two years ago to run for controller, scrambled to respond, convened a news conference to defend his former company and to call McClintock "confused" and "clueless about how the stock market works."

McClintock is a fiscal conservative who often advocates a free-market approach to governance. But Wednesday, the Thousand Oaks Republican contended that Westly sold 270,000 shares of EBay stock and made about $14 million in October 2000, shortly before the stock price briefly fell.

"I don't think it is a good time to be running on a record like this," McClintock said, seated beside a chart that he contends depicts facts showing how "Inside trader Steve Westly pockets millions."

"The public is entitled to a full airing of this issue," he said. "They have a right to know all the details on this matter."

The stock's slippage in 2000 resulted in no lawsuits by shareholders; the federal Securities and Exchange Commission took no action against the company. And unlike many high-tech firms, EBay has not retreated on its generally upbeat predictions about its future. It also has shown consistent growth.

In leveling the accusations against Westly, McClintock seemed to be taking a cue from Democratic Gov. Gray Davis, who has repeatedly attacked his Republican challenger, Bill Simon Jr., over Simon's business acumen and ethics. Other candidates have used a similar tactic in this year of corporate scandals, declining stock prices and shrinking 401(k) retirement funds.

Treasurer Phil Angelides noted that in the official voter handbook for the spring primary, his Republican challenger, Greg Conlon, called himself a "certified public accountant for over 30 years with Arthur Andersen." With Arthur Andersen dissolved amid the Enron scandal, Conlon altered his self-description. Conlon describes himself in the general election voter handbook as a "senior partner at a CPA firm."

Political consultants had assumed that business ethics would be an issue that resonates with voters worried about their retirement funds and angry about corporate bankruptcies. Republican consultant Kevin Spillane said that while the public anger may not be as great as expected, corporate scandals have tarnished the image of entrepreneurs-turned-politicians.

At his news conference, McClintock focused on events at EBay during the fall of 2000, and particularly its stewardship of the Butterfields auction house, a part of the company that Westly oversaw for a time.

Two weeks after Westly exercised stock options, EBay laid off Butterfields workers and Ebay's stock fell.

By early 2001, however, as high-tech stocks continued to fall, EBay regained much of its value. It now sells at about $53 a share, roughly its price when Westly sold his 270,000 shares.

Westly, who hastily convened Wednesday's news conference to respond to McClintock, noted that he sold the stock in a previously announced and programmed sale. He also said that he did not oversee the Butterfields operation in 2000, and that Butterfields represented a small portion of EBay's overall business.

Additionally, Westly said there was nothing untoward about his departure from the firm. He had announced he was leaving EBay about two months before the sale to mount his campaign.

"Tom McClintock doesn't have a handle on his facts," said Westly, contending that McClintock, a career politician, "has never worked a day in his life in business."

Westly is tapping his personal wealth to help finance his campaign, and is expected to heavily outspend McClintock.

Nonetheless, some Republicans believe McClintock has the best chance of winning a statewide office, perhaps depriving Democrats of a sweep of so-called down-ballot offices.

McClintock's name is relatively well-known among voters because he has run for controller before and has gained attention with a variety of his past stands. McClintock would not say whether he would use his allegations against Westly in ads.

Part of that will depend on whether he has the money to mount a media campaign against Westly. McClintock is expected to report having less than $500,000 next week when he releases his latest campaign finance statement.

The cost of airing television ads statewide for a week is about $1.5 million.

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