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Nonprofits Cloak Donors to Governor

Tax-exempt groups provide millions from sources not made public. Ethics watchdogs say the practice avoids state disclosure laws.

August 24, 2005|Robert Salladay and Peter Nicholas | Times Staff Writers

SACRAMENTO — Gov. Arnold Schwarzenegger is benefiting from millions of dollars raised by a network of tax-exempt groups without revealing that the money comes from major corporations with business before his office.

The groups are run by Schwarzenegger's closest political allies, who also represent some of California's biggest interest groups. Unlike the governor's many campaign funds, the nonprofits are not required to disclose their contributors and can accept unlimited amounts.

One group controlled by a powerful corporate consultant pays the $6,000-a-month rent on a Sacramento hotel suite used by the governor, who is a multimillionaire. Others have funded media events and political rallies featuring Schwarzenegger and helped pay for his foreign travel. So far, five tax-exempt groups aiding Schwarzenegger have collected $3 million.

Other elected officials also raise money through nonprofit groups. But Schwarzenegger campaigned on creating an open government answerable to the public. His use of the nonprofit groups has the opposite effect, ethics watchdogs said.

State and federal laws allow groups performing a broadly defined "public benefit" to operate tax exempt. But the lack of disclosure requirements means potential conflicts of interests between the governor and his contributors remain hidden, allowing powerful donors to curry favor with Schwarzenegger behind the scenes, they said.

"This is an end run around the campaign finance laws," said Larry Noble, executive director of the Center for Responsive Politics in Washington. "It does away with the contribution limits and it avoids disclosure, and it's a way for the special interests who are supporting him to buy access and buy influence."

Rob Stutzman, the governor's communications director, said Schwarzenegger has asked the nonprofits directly helping him -- such as the foundation paying his rent -- to disclose their donors. In any case, he said the governor pays little attention to who donates to the nonprofits.

"He just never bothers himself with it," Stutzman said.

State law requires that politicians disclose contributions to nonprofits made at their "behest," but Schwarzenegger's attorneys say it does not apply to the donations at issue. Democrats disagree and have filed a formal complaint.

Although the groups have not disclosed donors on their own, three of them provided information to The Times after repeated requests. Two of the organizations declined to do so.

One of the organizations, the California Commission on Jobs and Economic Growth, has raised $1 million from corporate donors and staged events in California and abroad featuring Schwarzenegger as a way to boost economic development. The governor is an honorary member of the commission.

The group is run by a San Francisco lobbyist, Mark Mosher, whose corporate clients include Motorola, Clear Channel billboard company and Verizon Wireless. The commission's board of directors includes such business executives as Gap Inc. Chairman Donald Fisher, Edison International President and Chairman John Bryson and Fox Entertainment Group Chairman and chief executive Peter Chernin.

The $1 million came from a variety of firms affected by state actions. Wells Fargo Bank, which regularly lobbies the government on mortgage issues, student lending and identity theft, gave $100,000. This year, Wells Fargo is pushing for or actively opposing two dozen bills in the Legislature, state records show.

Catholic Healthcare West, a group of 40 hospitals in California and the Southwest, also gave $100,000 to the jobs commission. Last year, Schwarzenegger issued an emergency order to relax nurse-patient ratios at hospitals -- a move meant to reduce the financial burden on a hospital industry facing a nursing shortage.

The move set off a political maelstrom for the governor, led by a nurses union that favors more nurses in emergency rooms and certain other hospital wards. The California Nurses Assn. sued to reverse the governor's order and won. The court ruled that Schwarzenegger had overstepped his authority as governor.

In another case, last September, Schwarzenegger's aides said the governor would not accept contributions from Pacific Gas & Electric and other utilities -- to avoid any appearance of conflict as he drafted a state energy policy. But the jobs commission took a $100,000 donation from PG&E a month later. The commission also received $100,000 from Southern California Edison.

The jobs organization has staged splashy events with the governor as the centerpiece. It arranged for the move of a 14-employee company from Nevada to California in an 18-wheel truck dubbed "Arnold's Moving Co." It commissioned a billboard campaign featuring Schwarzenegger promoting the state and helped pay for events in Japan when the governor visited.

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