EGG ON GOP-CALIFORNIA SIMON'S FACE - TRADING WITH DRUG LORDS
"SIMON CAMPAIGN MAY NOT RECOVER"
Another case of the GOP finding terrible candidates. Like Bush with his Harken sins, Cheney's Cheatin" Hallibacon, Inc(ompetent)., here's the GOP's California Governor candidate looking mighty dirty......
Another "OooPs, Gee"(SM) Party Episode, brought to us by the party that couldn't count straight. But continues to shoot itself in both feet and their personal perforation ulcer, greed.
bayarea.com
Posted on Fri, Aug. 02, 2002
GOP knew nothing of Simon suit
Party unprepared for candidate's loss in court to former drug smuggler
By Thomas Peele, Andrew LaMar and Jessica Guynn
CONTRA COSTA TIMES
As a $78 million fraud verdict against Republican gubernatorial candidate Bill Simon's investment firm reverberated through California politics Thursday, Simon faced renewed questions about the legitimacy of a candidacy built on business acumen and character.
Gov. Gray Davis' campaign debuted a blitz of television ads attacking Simon's business record and vowed to keep them on the air for months. Many political analysts looked at the damage and concluded that the Simon campaign may not recover.
"When the average voter hears the word fraud, it conjures up a criminal offense, and that doesn't set well in the electorate," said Sherry Bebitch Jeffe, a political scholar at the University of Southern California. "The foundation of his entire campaign is he is different than (Davis) because he has business experience and ethics and Davis doesn't.
"Even without this ruling, Simon was in some trouble because the political climate has changed. It isn't necessarily a plus to be a businessman, and if that's the only thing a candidate has to offer, there is no fallback," she said.
"Obviously nobody wants to be on the losing end of a high-profile lawsuit, but in a political climate where people are so distrustful of business leaders, it becomes that much more important for Simon to more fully flush out his background in business," Republican consultant Dan Schnur said.
Simon took no further steps Thursday to discuss the suit or further explain his dealings, sticking to two scheduled appearances in Southern California. Speaking with reporters outside a Los Angeles High School, he noted that he was not named as an individual defendant in the case and never took the stand.
"The fact that I wasn't called is indicative of the fact that, frankly, I had very little involvement in this," he said.
Sean Walsh, a Republican consultant working for the campaign, said Simon will still make Davis' record, including allegations that the governor runs a "pay to play" administration through fund raising, the central point of the race.
"This race will be about one CEO who has attracted companies and investors and entrusted them with hundreds of millions of dollars and another who inherited a surplus and turned it into a $24 billion debt," Walsh said of the state's budget shortfall.
Simon, a former federal prosecutor and a political neophyte, has said repeatedly since he entered the race that his success in business as chief executive of the very company against which the jury levied the fraud verdict has prepared him to serve as governor of the nation's most populated state.
Now, he has to deal with the verdict and the fact that the person whom the jury decided Simon's firm badly defrauded is also a convicted drug felon who once smuggled marijuana in Louisiana and Florida for Colombian cartels.
Simon and his campaign staff distanced him from the convicted drug peddler, Paul Edward Hindelang, who won the fraud verdict. Simon, in a prepared statement issued Wednesday night, said his firm examined the pay telephone company that Hindelang ran before investing in it and failed to discover his past.
Simon said Hindelang hid his past from investors.
However, a relatively simple search of the online database LexisNexis on Thursday found newspaper accounts of Hindelang's 1981 drug smuggling arrest. His attorneys said that while not proud of his past, Hindelang never hid it.
"It's all public record," said attorney Jason Frank in Los Angeles.
Jeff Flint, a senior adviser to the Simon campaign, said the candidate's investment firm, William E. Simon and Sons, researched Hindelang's background for 10 years, but did not go back to the late 1970s and early 1980s when Hindelang admitted to smuggling tons of marijuana.
"The background check focused on his business background," Flint said. "They didn't go back to the drug business."
Flint said Hindelang failed on two documents to identify himself as a convicted felon. Frank, one of Hindelang's lawyers, agreed. Both documents were used as evidence at trial, he said, and the jury still awarded Hindelang $78 million in damages from William E. Simon and Sons.
Simon's firm began to investigate going into business with Hindelang in 1997 and bought 39 percent of his pay phone company, Pacific Coin, in 1998 for $16.48 million.
Hindelang's case centered on claims that the Simon firm and another defendant agreed to a slow growth policy but secretly planned to take the company public and in the process drained it of money.
Stephen Bainbridge, a UCLA corporate and securities law professor, said the kind of litigation Hindelang brought is not uncommon. Simon's firm invested in Pacific Coin during an economic boom.
The Simon firm called its acquisition of Pacific Coin a leveraged buildup in which it used borrowed money to buy the pay phone company and build it up through acquisitions to the point where it was large enough to take public. The company aggressively began acquiring other pay phone companies, culminating in the $42 million acquisition of Golden Tel, which owned pay phones in Las Vegas casinos. That deal put Pacific Coin so deeply into debt that lenders took it over.
Anthony Duffy, another Hindelang attorney, compared the undercapitalization of Pacific Coin to that of Western Federal Savings & Loan, the thrift federal regulators seized in 1993 from Simon and other investors.
Simon has downplayed his involvement in that matter, but court records show his involvement in the thrift. While he served on a five member board of a holding company that owned Western Federal, government regulators were critical of its management. Simon sued, claiming the government improperly seized the thrift.
The case, which could reveal more about Simon's business practices, is scheduled to go to trial in Washington, D.C., in September.
That proceeding will be no secret, unlike the Pacific Coin case, which even Simon's closest Republican allies apparently did not know about.
Flint, regarded as a key member of Simon's inner circle, refused to say what the candidate told him and when.
"I don't want to get into what I had personal knowledge of," Flint replied when asked if he had knowledge of the suit before this week. "I am not going to comment on who in the campaign knows about stuff and who doesn't."
GOP consultant Allan Hoffenblum said Thursday, "I don't know who within the campaign knew about the trial, but obviously no Republican leaders outside knew, and they should have known and been prepared for whichever way it went."
Frank, one of Hindelang's attorneys, said there were settlement discussions. He said he could not discuss the substance of them. He also said that his firm would have agreed to delay the case until after the election, but that lawyers for the Simon firm, confident that they could use Hindelang's past against him, pushed ahead. |
