Judge Says Schwarzenegger Broke Campaign Law
By JOHN M. BRODER
Published: January 28, 2004
LOS ANGELES, Jan. 27 — A state judge has ruled that Gov. Arnold
Schwarzenegger violated state campaign finance law by using a $4.5 million
bank loan to cover campaign costs in the closing days of the recall election
last fall.
In ruling late Monday on a lawsuit, the judge, Loren E. McMaster of
Sacramento Superior Court, said the loan violated provisions of Proposition
34, a ballot initiative passed by voters in 2000, which prohibits personal
loans of more than $100,000 by candidates to their own campaigns. Judge
McMaster issued a temporary injunction barring Mr. Schwarzenegger from
raising any money to repay the loan and ordering him to put any money raised
for that purpose in an escrow account.
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Judge McMaster noted that Mr. Schwarzenegger had borrowed the money from
City National Bank of Beverly Hills on his own signature and then used the
money to pay last-minute campaign expenses. He said the maneuver avoided the
$100,000 limit and thus constituted legalized "money laundering."
The judge said that borrowing money before an election and raising money to
repay it afterward left voters in the dark about who financed a candidate's
campaign.
"The public would not learn who financially contributed to the campaign
until after the election," the judge wrote, "when it would be too late to
use such information in making the determination for whom a vote would be
cast."
Mr. Schwarzenegger's campaign lawyer, Colleen C. McAndrews, said the
campaign had relied on an interpretation of the loan provisions of the
finance law by the California Fair Political Practices Commission in 2002.
Judge McMaster explicitly stated that the interpretation was wrong.
"We are gratified that the judge held the campaign acted in good faith and
in reliance on the F.P.P.C.'s erroneous regulation," said Ms. McAndrews, a
former member of the campaign regulatory commission.
Ms. McAndrews said that the Schwarzenegger campaign would not appeal the
judge's preliminary injunction and that she expected it would stand.
Aides to the governor, a Republican, said he would probably repay the loan
from his own bank account.
Democratic and labor activists filed the lawsuit just before the Oct. 7 vote
in the recall campaign, seeking an immediate injunction to prevent Mr.
Schwarzenegger from using the loan proceeds in the campaign. That effort
failed, but Judge McMaster has now agreed with their complaint that the loan
violated the spirit and the letter of state campaign finance law, their
lawyer said.
"We thought it was important to continue with the case to establish the
principle that the $100,000 limit is a real one and not subject to an
exception as Schwarzenegger contended," said Lowell Finley, a Berkeley
lawyer who represented the plaintiffs.
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