SACRAMENTO — As Gov. Arnold Schwarzenegger demands that lawmakers allow private interests into California's huge market for public works projects, a company with close personal and financial ties to the governor's economic advisor is positioned to benefit.
The advisor, David Crane, has spent years promoting private-sector involvement in public construction projects -- one of a few issues holding up a deal between Schwarzenegger and legislative Democrats to ease the state's worsening fiscal crisis.
Babcock & Brown, the financial services firm where Crane worked for a quarter of a century, hired a Sacramento lobbyist last year to influence the governor's office on so-called public-private partnerships, records show. Since joining the governor's team in 2004, Crane has received hundreds of thousands of dollars of income from deals he made while at Babcock, a firm founded in San Francisco and based in Australia, according to financial disclosure reports.
Those deals included projects in areas such as telecommunications, in which he served as a financial advisor; personal investments in real estate from Babcock's public-private partnership projects in England; and partnerships he formed with other Babcock executives to invest in oil wells and an Italian restaurant chain.
In an interview, Crane said the income he earns from deals completed years ago has nothing to do with Babcock today or the firm's potential to generate business from his support of public-private partnerships. He said he sold his ownership stake, which was less than 10%, when he left in 2003.
"There is nothing that Babcock & Brown could do, or any company in public-private partnerships, that could benefit me," Crane said.
State ethics law prohibits a public official from taking actions that would benefit himself or his family.
Jessica Levinson, the director of political reform at the nonprofit Center for Governmental Reform in Los Angeles, said Crane appears to be operating within the letter, though perhaps not the spirit, of the law.
"It starts to have the appearance of doing political favors for old friends, and that is not something that I think is illegal, but it still may not be fully ethical," Levinson said. "I think it all comes down to, is he making this decision for public good or is he making it to help his old business friends?"
Babcock is one of a number of firms that compete for public-private partnerships with governments worldwide.
