Buying power

How PG&E and Mercury Insurance are spending millions to try to trick Californians into voting for corporate interests


California voters are about to be bombarded by more than $50 million in political advertising designed to convince them to approve a pair of measures desperately sought by two powerful corporations with a long history of lies and political corruption.

Will this brazen and transparently self-serving effort work? And what does it say about the state of modern politics — particularly California's money-driven initiative system — that these deceptive campaigns just might convince voters to cast ballots against their own interests?

The corporations have every incentive to try to buy the election — and if they win, it could encourage others to follow. By spending tens of millions of dollars on a campaign today, they will potentially save and earn many times that over the long run. It's a business decision, plain and simple.

If Pacific Gas & Electric Co. can pass Proposition 16, which requires a two-thirds vote for any municipalities to do renewable energy projects and deliver that power directly to consumers, that will kill the chances of government-backed rivals popping up to compete. It will save the company the tens of millions of dollars it regularly spends to defeat public power campaigns across the state.

If Mercury Insurance is successful with Proposition 17, which overturns part of the landmark insurance reform measure Prop. 103 and would allow companies to increase the car insurance premiums for new drivers and those whose coverage has lapsed, a company notorious for mistreating customers and defying regulators will be able to greatly increase its market share and profits.

Both measures are strongly opposed by legitimate consumer rights groups, public interest advocates, and almost all of San Francisco's elected officials. But both corporations have proven to be unusually effective over the years at using lavish spending — with money extracted from consumers — to convince private groups and public officials from both major parties to do their bidding.

And plenty of public officials who ought to be opposing the measures are either on the wrong side or silent.

Will Mercury-backed Californians for Fair Auto Insurance Rates (which calls itself Cal-FAIR) be able to convince voters that Prop. 17 is really about saving drivers money? And will PG&E-financed Californians to Protect our Right to Vote succeed in making the case that supermajority thresholds are a needed safeguard against the electricity schemes of elected officials?

That all depends on how informed voters are when they cast their ballots.



Mercury Insurance founder and chairman George Joseph became a billionaire by offering car insurance policies to California drivers who were at a higher risk for accidents than most other companies would accept, charging them expensive rates and then challenging their claims.

When Forbes magazine named Joseph the 283rd richest American in 2005, with an estimated worth of $1.2 billion, it wrote laudably about the practice in describing him: "Numbers guru earned Harvard math and physics degree in three years. Began as actuarial trainee at Occidental Life for $225 a month, quit after realizing salesmen made more. Created own property and casualty insurance company. The Mercury General 1962: targeted customers having trouble getting auto insurance; aggressively investigated suspicious claims. Took public 1985."

Mercury currently has about $2.3 billion in market capital and a stock price that has roughly doubled in the year since the company began funding a $3.5 million signature-gathering effort to place Prop. 17 on the June ballot. That may be a coincidence, but it's certainly true that Mercury's fortunes are tied up with California motorists.

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