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Associated Press
Aug 04, 2004 - 01:00 AM

by DON THOMPSON, Associated Press Writer

Schwarzenegger 'slush fund' hides political spending

SACRAMENTO -- Gov. Arnold Schwarzenegger has funneled nearly a quarter-million dollars to a private nonprofit committee that is lobbying the Legislature and promoting his views without disclosing how the money is being spent or where it originates, records show.

Campaign finance experts called the California Recovery Team a "slush fund" that allows the governor to skirt disclosure laws that apply to most political committees.

Although the committee filed campaign finance reports that showed the total amount of money it spent - $252,013 - to influence legislative or administrative action, it didn't detail where the money went or where it came from. The sources of the money were determined only by checking payments from other Schwarzenegger-controlled funds. By passing the money through those funds, Schwarzenegger avoided revealing its ultimate source.

Schwarzenegger is following the law, said his attorney, Thomas Hiltachk, who blamed campaign disclosure rules that require few details from lobbying committees such as the one he created. Yet Schwarzenegger both before and after his election pledged to be open about his public finances.

"It's troublesome that we don't know how they're spending the money," said Bob Stern, president of the Center for Governmental Studies. "The law should require more detail, but it doesn't."

Campaign finance records show the California Recovery Team has received $222,744 from two Schwarzenegger committees: the similarly named "Governor Schwarzenegger's California Recovery Team," and "Arnold Schwarzenegger's Total Recall Committee," which helped pay for his campaign in last year's recall election.

Hiltachk said the tax exempt corporation paid the governor's expenses for public rallies designed to pressure lawmakers - most notably one at a mall in Ontario last month where he derided legislators as "girlie-men" because they were reluctant to approve his budget.

The committee reported it spent nearly $50,000 this year lobbying lawmakers on the budget, and more than $200,000 last year lobbying the Legislature on Schwarzenegger's repeal of the increase in the car license tax, his first executive order as governor.

Total Recall lists the $100,000 it gave last year as a "civic donation," without giving details. Schwarzenegger's committee says its $122,744 was for "member communications," "meetings and appearances" or "candidate travel, lodging and meals." In each case, the Schwarzenegger committees simply plugged in a general expense code without elaborating.

"Every penny has been disclosed. That's what the form requires," Hiltachk said. "The complaint shouldn't be to us, it should be to the FPPC," the Fair Political Practices Commission that wrote the rules.

In March, Hiltachk said "California Recovery Team" and "Governor Schwarzenegger's California Recovery Team" are identical, the former set up only to avoid paying taxes on contributions and interest accumulated by the governor's namesake committee.

However, the two parent committees have raised and spent far more than the money they gave to the tax exempt corporation. On Tuesday, Hiltachk said the nonprofit was created to fund Schwarzenegger's lobbying activities, which he contended are separate from the governor's campaign activities.

Those include Schwarzenegger's frequent campaign-style public rallies.

"I truthfully am not trying to hide anything here," Hiltachk said, saying the $252,013 went to contractors who put on the events.

In a March interview with The Associated Press, Schwarzenegger also said there is no intent to hide any contributors.

"We don't put any blocks on information," the governor said. "It's all legitimate. One of the very important directions everyone has on my team is to do everything straight forward, legitimate and open. There's no monkey business."

By moving money through such a committee, however, Schwarzenegger has created the "real appearance of a problem," said Larry Noble, executive director of the Center for Responsive Politics in Washington, D.C.

In May, the nonprofit Foundation for Taxpayer and Consumer Rights filed an appeal with the Internal Revenue Service challenging the corporation's tax exempt status, noting that it is controlled by Schwarzenegger, run by his staff, and is used for political purposes. The fund was incorporated as a social welfare organization.

"They're able to conduct a large portion of their fund-raising and spending out of public view," said foundation spokeswoman Carmen Balber.

The FPPC is amending its rules to impose contribution limits on candidate-controlled committees formed to influence ballot decisions, which would apply to California Recovery Team, said Lance Olson, a Sacramento attorney has set up several similar committees.

Olson called Schwarzenegger's committee a political "slush fund." He noted that the new rules won't take affect before November, and won't affect disclosure requirements.
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