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The Los Angeles Times
Feb 03, 2006 - 01:00 AM

by Dan Morain & Robert Salladay-Times Staff Writers

Gov.'s Gift to PUC Official Questioned

Schwarzenegger gave Susan Kennedy $25,000 after he received that amount from AT&T. Days later, she voted to OK its merger with SBC.
SACRAMENTO, CA -- Gov. Arnold Schwarzenegger paid thousands of dollars in campaign money to a California Public Utilities commissioner three weeks after receiving contributions in the same amount from a company the commissioner regulated.

Susan P. Kennedy, now the governor's chief of staff, received $25,000 from his campaign account 21 days after AT&T donated $25,000 to the fund.

In disclosures filed with the state this week, AT&T reported donating the money on Nov. 14. At that time, the governor was contemplating appointing Kennedy as his chief of staff. Four days later, on Nov. 18, Kennedy, as one of five PUC members, voted to approve AT&T's merger with SBC Communications.

On Dec. 5, Schwarzenegger's campaign finance reports show, he paid Kennedy, listing her as a campaign consultant. By that time, Schwarzenegger had announced that Kennedy would become his chief of staff, although she stayed on the PUC for the final month of 2005 and did not join his staff until Jan. 1.

Later in December, Pacific Gas & Electric Co. donated $44,600 to Schwarzenegger's reelection campaign. Kennedy participated in a PUC hearing for the final time in mid-December, when at least one matter that could affect PG&E came up.

An aide to Schwarzenegger and spokesmen for AT&T and PG&E denied any connection between the donations and Kennedy's actions in her final days as a Public Utility commissioner.

Consumer activists rebuked the governor and Kennedy, homing in on the AT&T donation. Bob Finkelstein, executive director of the Utility Reform Network of San Francisco, said: "The timeline is pretty damning." TURN, a group that advocates on behalf of consumers, opposed the way the PUC approved SBC's purchase of AT&T, and says the decision will cost consumers more than $330 million.

Doug Heller, of the Foundation for Taxpayer and Consumer Rights in Santa Monica, called on Kennedy to return the $25,000 she took from Schwarzenegger.

"The PUC ought to throw out any votes that involved her on this telecommunications rule," Heller said. "It is an absolute conflict that goes to the heart of what's wrong with use of public officials in campaign functions."

Schwarzenegger aide Adam Mendelsohn called the attacks politically motivated, saying that state Treasurer Phil Angelides, a Democrat running to unseat Schwarzenegger, last year directed $35,000 in donations to Heller's group.

As a nonprofit corporation, the Foundation for Taxpayer and Consumer Rights is not required to identify its donors.

"Susan Kennedy was paid by the campaign for her work advising the governor on campaign activities," Mendelsohn said. "There is no conflict for work done on a political campaign."

AT&T spokesman Gordon Diamond said there was nothing unusual about firm giving to the governor's reelection campaign. Like PG&E, it gives to Republicans and Democrats alike.

"To try to draw some sort of correlation is a stretch," Diamond said, adding that Kennedy didn't solicit the donation.

The $69,600 from AT&T and PG&E came after the Nov. 8 special election, in which voters rejected the governor's effort to change state government. The donations represented about a fifth of the $305,000 than Schwarzenegger received in his reelection account between Nov. 8 and the end of 2005.

The $25,000 payment to Kennedy came as Schwarzenegger's campaign was trying to climb out of debt after spending $45 million in the special election. Kennedy's agreement with the governor will pay her $100,000 from campaign funds -- the $25,000 December payment plus $75,000 this year -- on top of the $131,000 annual government salary she is making as chief of staff.

Schwarzenegger, in a speech to the Sacramento Press Club, defended the campaign payment to Kennedy. He said there was no conflict involving donors and her public policy work because he and First Lady Maria Shriver have given at least $25 million to his various campaigns.

"I think my wife and I -- we contribute enough money to our campaigns that you can consider this money coming out of our share rather than out of the various different companies' share. So there is no conflict of interest, OK?" Schwarzenegger said. "So she is only representing us."




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