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The Orange County Register (California)
Jan 27, 2004 - 01:00 AM


Governor broke law, judge rules;

Schwarzenegger's $4 million loan made in good faith, campaign treasurer says.
SACRAMENTO -- Gov. Arnold Schwarzenegger broke state campaign-finance laws when he loaned his recall campaign $4 million last year, a judge ruled Monday.

By taking out a $4.5 million bank loan, then turning most of the money over to his campaign, Schwarzenegger broke a law that forbids candidates from loaning their campaigns more than $100,000.

Critics said the loan, which Schwarzenegger intended to pay back with donations collected after the recall race, constituted a $4 million campaign contribution shielded from public disclosure, since voters would not know until after the election who helped Schwarzenegger pay it off.

A Schwarzenegger campaign treasurer said in a prepared statement that the governor made the loan with the approval of the Fair Political Practices Commission. Sacramento Superior Court Judge Loren E. McMaster, in a preliminary ruling, said the FPPC guidelines cited by the campaign are an erroneous interpretation of Prop. 34, the campaign-finance ballot initiative approved by voters in 2000.

"The court today held that the Fair Political Practices Commission misinterpreted the Prop. 34 loan statute which permitted Gov. Arnold Schwarzenegger to loan his campaign committee $4.5 million. The campaign committee intends to comply with the judge's order. We are gratified that the judge held that the campaign acted in good faith and in reliance on the FPPC's erroneous regulation,'' said Colleen McAndrews, the campaign treasurer.

FPPC officials could not be reached for comment.

"I think this is a bit of sunlight on the fact that, with all his popularity and brand ID, this governor has engaged in the same type of politics as everyone else,'' said Jamie Court of the Foundation for Taxpayer and Consumer Rights. "What Schwarzenegger did was basically take a back door and use a kind of institutional money-laundering.''

The suit, filed days before the Oct. 7 recall election by a Sacramento labor leader, demands that Schwarzenegger immediately pay back the bank loan. McMaster ordered the governor to halt any repayments to himself but delayed ordering payback to the bank until a final ruling.

After initially promising voters he was rich enough to avoid fundraising altogether, Schwarzenegger raised roughly $22 million in contributions and loans to help himself win.

Campaign staff members said none of the nearly $4 million Schwarzenegger has raised since the election has gone to pay back the loan.
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