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Sacramento Bee
Feb 28, 2004 - 01:00 AM

by Margaret Talev, Bee Capitol Bureau

Governor OKs loan conversion

He agrees to give up $4.5 million rather than let campaign donors cover it.
Following through on a judge's orders, Gov. Arnold Schwarzenegger has given up $4.5 million he loaned two campaign committees in last fall's recall election.

In documents made available Friday, the GOP governor agreed to convert a $2.5 million loan and a $1.5 million loan he made to Californians for Schwarzenegger, as well as a $500,000 loan he made to his Total Recall Committee, into campaign contributions he can never recoup.

"The governor is following through on what he said he would do," spokesman Rob Stutzman said.

Last month, Sacramento Superior Court Judge Loren McMaster said Schwarzenegger likely violated state election law when he borrowed the money from a bank last September, then loaned it to his gubernatorial campaign.

Schwarzenegger had first consulted with the state's Fair Political Practices Commission, but McMaster said the commission's advice probably wouldn't hold up in court against a lawsuit brought by a Berkeley attorney. That attorney argued that the loan plan would have allowed Schwarzenegger to shield the identities of major donors until after the election was over - when those donors could effectively cover his loans through contributions of their own.

McMaster ordered Schwarzenegger, who became a multimillionaire through his movie acting career and business investments, not to collect donations to repay the existing loan.

Schwarzenegger agreed to comply, saying he always planned to repay the loans himself - contradicting aides who had said for months that the campaign was keeping its options open.

He also called the ruling "fantastic," a reaction consumer advocates called disingenuous.

"It's a good thing that he listened to the court and didn't try to challenge what the court said," said Carmen Balber of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. "It's regrettable that he waited until the court forced his hand."

Schwarzenegger's advisers would not say Friday why he waited a month to convert the loans to contributions, or whether he has repaid the bank loans.

"That's no one's business," Stutzman said. "How he dispenses with it is his personal business."

Originally, the loans were to be repaid by the end of this month.
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The Bee's Margaret Talev can be reached at (916) 326-5540 or mtalev@sacbee.com




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