Loans Loophole Under Fire
Nearly half the $9.5 million Arnold Schwarzenegger has poured into the recall race has been in the form of loans that his campaign staff says can be repaid by fund-raising after the election.
Most of the loans came late last week, as polls began to show Schwarzenegger's prospects for winning the governor's office strengthening. In announcing his run for governor Aug. 6, Schwarzenegger had said that he did not need money from others.
The Republican candidate has lent $4.5 million to his recall efforts, starting with $1.5 million to his gubernatorial committee, Californians for Schwarzenegger, on Sept. 19. Last week, he gave the same campaign another $2.5 million and deposited $500,000 in his Total Recall fund.
Schwarzenegger obtained the loans, which carry a 4% interest rate, by tapping a line of credit with City National Bank, based in Beverly Hills.
Robert Stern, president of the Center for Governmental Studies, a Los Angeles organization that promotes campaign reform, criticized the candidate's arrangement.
If Schwarzenegger becomes governor, Stern said, he should not be allowed to solicit money to repay the loans. "It would be a sure thing for contributors that they are giving money to the governor," Stern said. "It is basically money directly into his pocket."
And Californians would not know before the election who is funding Schwarzenegger's candidacy, Stern added.
Campaign spokesman Sean Walsh said Tuesday the loans were needed because Schwarzenegger's fund-raising slowed markedly after a three-judge panel of the 9th Circuit Court of Appeals issued an order last month postponing the Oct. 7 recall election. That decision was overturned eight days later by a larger panel of the same court, and the election date was reinstated.
Walsh said Schwarzenegger's loans comply with the letter and spirit of Proposition 34, which governs fund-raising in California elections. The measure's $100,000 limit on personal campaign loans does not "apply to loans made to a candidate by a commercial lending institution in the lender's regular course of business on terms available to members of the general public," he said.
"We're playing by the rules," Walsh said. "This to us is a nonissue."
And campaigns are allowed to accept sufficient contributions after an election to pay off the debt, said Colleen McAndrews, treasurer and legal counsel for Schwarzenegger's campaign.
- Gov.'s Loan for Recall Ruled Illegal Jan 27, 2004
- Campaign Could Top $50 Million Jul 28, 2003
- Simon Still Carrying Debt From Last Campaign Aug 01, 2003
