It’s a tough time to be a Republican in California. The party‘s candidate for governor, investor Bill Simon Jr., is all tangled up in his secretive financial and legal affairs, which include offshore tax shelters the IRS considers ”abusive“ and a $78 million fraud judgment won against his firm by a former business partner, a convicted major drug trafficker. Top Republicans fear their party may fall victim to the first clean sweep of statewide offices since 1946.
After Simon won the nomination last March by a huge margin over fumbling former L.A. Mayor Dick Riordan, whose candidacy was shattered by the intervention in the Republican primary of Democratic Governor Gray Davis, Simon enthusiasts touted their man as ”the new Reagan.“ It hasn’t turned out that way. ”That‘s a joke,“ says one ranking Republican now. Yet Simon and campaign chief Sal Russo, currently California’s most prominent Republican political consultant, have continued to push the Reagan illusion, signing up two of President Reagan‘s most famous political advisers, Ed Rollins and Lyn Nofziger. It turns out, however, that neither man is really working for the campaign. It also turns out that the principal architect of Reagan’s supply-side economics, Dr. Arthur Laffer, successfully sued Simon campaign chief Russo over the collapse of Laffer‘s proposed statewide flat-tax initiative in 1996. And these are only a few of the problems.
Last month, amid a campaign shakeup, Simon announced that his rather green team would be joined by former Reagan campaign manager Rollins and Nofziger, who played many roles during his tenure as Reagan’s most consistently close aide throughout the former president and governor‘s political career. Rollins declared that he would punch Garry South (Davis’ pugnacious strategist) in the nose up and down the state. The two veteran Reaganites, said Simon operatives, would provide savvy guidance to a misfiring campaign. It hasn‘t happened. Rollins and Nofziger quietly assumed what some in the press thought were low profiles. Very low, as it turns out, though Russo says the two are ”active senior advisers.“
Reached in Washington, the avuncular Nofziger was asked by the Weekly what he was doing for Simon. ”Nothing,“ he replied. ”I told them when I came out there last month that I wouldn’t have any more time to give them. My wife is ill.“ What does he think of Simon‘s predicament? Nofziger laughed. ”It’s not necessarily fatal.“
Rollins, who failed to return 15 calls placed to his private number and to the Simon campaign, which implied he was in campaign headquarters on a regular basis, was harder to track down. The Weekly finally reached him at his home in New York last Sunday night after midnight. ”I‘m sorry I didn’t get back to you,“ he said. ”I was out in California for a wedding.“ What if anything is he actually doing for Simon? ”I‘m just helping a little bit. I’m not involved in running the campaign.“ What about his vow to punch Garry South in the nose every week? ”Well, you should talk to Mark Miner [Simon‘s press secretary]. That’s what he does.“
Annoyed by Simon and Russo‘s presumptuous failure to pull the Reagan sword from the stone, Republican sources informed the Weekly of Arthur Laffer’s successful lawsuit against Russo for his management of a proposed 1996 statewide initiative to institute a flat tax. (The judgment called for Russo to pay less than $20,000 and return about $200,000 to contributors from the campaign firm he controlled.)A onetime USC professor turned consultant, Laffer was Reagan‘s economic guru as well as a family friend.
His daughter once tossed a weasel into the lap of a startled Nancy Reagan during a dinner party at the Laffer home. The famous ”Laffer curve,“ showing lower taxes leading to higher growth and revenue, was drawn on a cocktail napkin to explain supply-side economics to Dick Cheney.
Reached at his ranch outside San Diego, Laffer spoke at length about Russo and Simon. ”He [Russo] caused a lot of damage to the [flat tax] issue. I don’t trust him. I don‘t know why anyone else would, either. Sal was after one thing, making money. There was no dream, none of that stuff.“ (Russo seemed stunned when asked about Laffer’s lawsuit. ”God, I don‘t know,“ he told the Weekly. Didn’t Laffer win a breach-of-contract judgment against you? ”Yeah.“ Long pause. ”I don‘t remember much.“)
Laffer expressed shock at the state of Simon’s campaign. ”I was very close to his father [former Treasury Secretary Bill Simon Sr., a champion of the American right whom many true-believer Reaganites wanted to be the Gipper‘s running mate], but I could never support him. Because his campaign is a mess under Russo. The whole campaign shocks me. Wouldn’t they think these things, the tax shelters, the fraud case, would come out?“
Evidently not. While claiming that a Los Angeles jury‘s $78 million judgment against William E. Simon & Sons for fraudulently running the Pacific Coin company into the ground will be overturned, Simon struggles with an explanation for why he, a former federal prosecutor, did not know that the company president with whom he was going into business, Paul Edward Hindelang, was in fact a convicted major drug trafficker. The $1 million ”due diligence“ procedure carried out for Simon by the Deloitte accounting firm as part of his company’s takeover of Pacific Coin was, according to Simon, limited to the 10 years before his firm took control of Pacific Coin in 1998. But that spin is not correct. Deloitte hired the L.A.-based Scherzer & Co. investigative firm to check out Hindelang and received the report of his big-time criminal background. Hindelang went to prison in the early ‘80s for his role as one of the nation’s biggest marijuana traffickers.
The Weekly engaged in an amusing e-mail exchange with Russo, who finally refused to answer when asked why Simon was not suing Deloitte for failing to red-flag Hindelang‘s criminal past in its report.
It’s all part of the endless game of pick the pea from under the pod of Simon‘s finances. During Simon’s disastrous appearance last month before the statewide political press corps at a Sacramento Press Club luncheon, the Weekly pressed Simon on the question of his offshore tax shelter, news of which had just been plastered on the front page of The Wall Street Journal. What was it, and was it on his public statement of economic interest, which Simon had just finished touting as evidence of his ”remarkable overdisclosure“ of his finances?
Simon said the investment was listed on his disclosure form, but wouldn‘t say where it was. ”You’ll have to find it,“ he said. The Weekly persisted, and Simon finally admitted that this most famous (though still unnamed) of his investments was not in fact listed on his ballyhooed disclosure form. ”What else isn‘t on your disclosure form?“ asked the Weekly. As the laughter subsided, we pressed Simon on the secretive and vaguely titled partnerships that crowd the back end of his financial disclosure. Simon agreed to have his campaign answer questions about the partnerships. No answers have been forthcoming.
The campaign struggles with its credibility in other areas as well. Informed Republican sources tell the Weekly that Simon campaign chairman John Herrington, Reagan’s former energy secretary and ex–state Republican chairman, has been tossed to the side in the wake of increasingly bad relations between Simon and the White House, which Herrington reportedly handled. Herrington has not returned repeated calls to his office and home. Informed Republicans also say that media consultant Larry McCarthy — best known for creating the notorious ”Willie Horton ad,“ which, using images of a scary-looking black man, flayed 1988 Democratic presidential nominee Michael Dukakis for allowing Horton to murder while on a prison furlough, a policy also allowed by Reagan — will join the Simon campaign. McCarthy has not returned phone calls, but Russo confirms that he is onboard.
Then there are questions about current operations. TV ad buys have been touted as ”big“ but have been seen by few Californians. The ambitious program of a dozen Simon policy summits — four or five of them to occur in July and August, affirmed just last month — actually seems to have come to an end after the first one. That was his agricultural summit in Lodi, during which Simon came off as a somewhat interested bystander and after which, under questioning, the candidate changed his position on the global-warming bill from opposition to neutrality and acknowledged that he neither knew how much the state‘s agriculture budget was nor had a policy on farm-labor issues.
No wonder Republicans increasingly fear a Democratic broom come November.