This a corrected version of the story that ran in the paper.
Gavin Newsom's flood
of campaign cash isn't flowing just from San Francisco's elite: there's
a sleazy Wall Street connection.
By Rachel Brahinsky and A.C. Thompson
WHEN HE'S STUMPING on the campaign trail, Gavin Newsom typically
tries to present his run for mayor as a unifying force. He likes to
point out that his campaign has received financial support from people
from all walks of life and from every neighborhood in the city. He's
not lying: his donor list includes cops, architects, taxi drivers, and
restaurateurs, along with many of the city's power brokers.
Newsom's spokesperson, John Shanley, has described the campaign
which has already spent more than $3.8 million as a "grassroots
But there are some names in Newsom's most recent campaign filing that
the candidate isn't advertising.
Many of Newsom's top donors are players in the high finance arena:
investment bankers, venture capitalists, hedge fund managers, and the
like (see "The King of Cash," 9/13/03). But the Nov. 28 campaign
finance filing shows that 15 of those donors are executives working
for firms linked to the wave of corporate scandal that has washed over
Wall Street during the past two years. They include top-level employees
at banks that paid $480 million in 2002 to settle charges of defrauding
And while Newsom's money does indeed come from all over the city, more
than $1 million of his local donations are concentrated in the city's
toniest neighborhoods, including the Marina, Pacific Heights, and North
More than a third of his cash comes from outside city borders. Out-of-town
donors from locales as distant as Hawaii and New Jersey
have sunk some $1.25 million into the fund. (For a detailed map showing
the origins of Newsom's money, go to http://www.sfbg.com/38/10/newsom_zips.jpg).
Newsom's backers also appear to be skilled at skirting campaign finance
limits. Several of his top real estate donors have given to the campaign
through a web of different corporate entities, many of which
share the same address. Technically, it's legal but the outcome
is that one individual can have a disproportionate impact on the race,
effectively circumventing the city's contribution limit regulations.
Reaping ill-gotten dollars
Top-tier employees at scandal-plagued investment banks are among those
The candidate received donations from nine executives with Charles
Schwab Co., including CEO David Pottruck. According to news reports,
San Francisco-based Schwab is under heavy scrutiny by the federal Securities
and Exchange Commission and state regulators for possibly violating
laws governing the corruption-riddled $7.1 trillion mutual fund business.
Late last month Schwab publicly admitted its employees may have improperly
"late-traded" mutual funds, a practice that cost small investors
money. The firm could face criminal charges.
Newsom has gotten $4,725 from Schwab bosses. "These are individual
contributions, and the company encourages all of our employees to support
causes and candidates as they see fit," Schwab spokesperson Greg
Gables told the Bay Guardian.
The Newsom campaign has also received donations from three executives
with financial leviathan Bank of America, whose illicit after-hours
trading with Canary Capital Partners, a Bermuda-based hedge fund, triggered
the ongoing high-profile mutual fund probe.
In September, Canary turned over $40 million in fines and ill-gotten
profits to New York authorities, and Bank of America has acknowledged
that shareholders may have been screwed by its dealings with Canary.
In addition, Newsom is backed by executives at three investment banks
Merrill Lynch, Credit Suisse First Boston, and J.P. Morgan Chase
which last year paid out colossal sums to settle charges of feeding
bogus stock advice to small investors. Collectively, the three banks
spent nearly half a billion dollars to make the fraud cases go away.
Merrill Lynch and CSFB dropped $200 million each, while J.P. Morgan
Chase's securities division paid $80 million to settle.
One of the most powerful firms on Wall Street, Merrill Lynch also paid
another $80 million in 2003 for allegedly helping energy-industry pariah
Enron hide its true financial status.
Upper-echelon staffers at the trio of problem banks have given Newsom
donations totaling $850.
There's no evidence that any of Newsom's banking donors are directly
responsible for the purported deceptions. In fact, we have no reason
to believe that any of the finance-industry execs who gave money to
Newsom have been implicated in any illegal or unethical activity.
And the banks, which are currently fending off a raft of multimillion-dollar
civil suits alleging illegal business practices, deny any wrongdoing.
But it's noteworthy that senior staffers with firms at the heart of
some of Wall Street's biggest scandals are such fans of Newsom.
We asked Bob Stern, president of Los Angeles-based Center for Governmental
Studies, about Newsom's donors. "I don't think a candidate should
be turning away contributions from executives," Stern said. "But
it's basically up to the candidate to decide whether it's worth any
Of course, the mainstream media has yet to notice Newsom's connections
to the Wall Street meltdown.
Newsom spokesperson Shanley did not respond to repeated requests for
comment for this story.
Maximum money, minimum oversight
When he's not taking contributions from Wall Street's wheeler-dealers,
Newsom pulls in big donations from real estate and development firms
that have learned to push campaign finance laws to their limits.
Not surprisingly, topping the list is Shorenstein and Co., San Francisco's
largest commercial landlord. Members of the Shorenstein family, headed
by patriarch Walter Shorenstein, are major players in Democratic Party
politics nationally and locally. Companies affiliated with the clan
have given a total of at least $21,500 to help elect Newsom.
The maximum any individual or corporation can legally give the Newsom
effort is $750. The Shorensteins circumvented the law by giving through
several different business entities, each of which can legally donate
(The total Shorenstein-related wad of cash is larger: another $4,250
was donated by employees of several Shorenstein-owned firms and a Shorenstein
For now, this practice is legal, but under a new city law that will
take effect Jan. 1, giving through affiliated companies will be strictly
Shorenstein and Co. declined to comment.
Several other real estate and development interests employed the same
tactic. Companies tied to Syufy Enterprises, which operates the Century
Theaters chain of movie houses, gave at least $13,500.
Real estate manager and developer Carmel Partners is linked to at least
$13,000 in donations. Carmel Partners owns the Parkmerced development
and South of Market's City Lofts, making it the largest private residential
landlord in the city.
Companies affiliated with Ron Kaufman, husband of former San Francisco
Board of Supervisors president (and Willie Brown ally) Barbara Kaufman,
gave at least $6,000. Ron Kaufman was also a major supporter of Brown
in his last race.
Rival candidate Matt Gonzalez's balance sheet is much lighter on the
corporate cash. The former public defender has gotten a decent sum of
money from other lawyers, but only one high-finance honcho, the boss
of a hedge fund, has donated. Gonzalez has raised a little over $400,000
Ethics questions have also dogged the Gonzalez campaign. First Newsom
spokesperson Shanley charged that Gonzalez aide Ross Mirkarimi was campaigning
while on the clock as a juvenile crime investigator for District Attorney
Terence Hallinan. Mirkarimi says his work for Gonzalez was on his own
Now the Newsom campaign has seized on irregularities in Gonzalez's
campaign filings, saying the candidate didn't list the employers of
115 of his donors.
According to Gonzalez's people, the incomplete paperwork is a minor
issue. "The big story is not 115 donations to the Matt Gonzalez
campaign," said Gonzalez campaign manager Enrique Pearce.
Instead, at a Dec. 1 press conference, Gonzalez supporters questioned
Newsom's accounting tactics, which have allowed him to raise money in
It goes back to a somewhat arcane twist in local regulations.
Under city law, if a candidate heads into a runoff election with campaign
debt, some donors can give three times the usual limit, until the debt
is paid off.
Indeed, at the end of November, Newsom's account was deep in the red
owing $225,322 in unpaid bills.
But oddly, on the same document, the campaign also reported having
quite a full bank account with $231,548 in cash on hand. That's
more than the debt, raising the question: is the debt in part an accounting
trick to allow the campaign to pull in extra dollars?
Whatever the answer, it's not likely the Ethics Commission, the city
agency charged with administering campaign finance laws, will be on
anybody's case any time soon.
According to executive director Ginny Vida, the commission is understaffed
and overworked, and has an ever shrinking budget while complaints
of campaign finance violations mount.
Late last month the commission had 40 complaints pending double
the number from a year ago. Meanwhile, Vida's investigations staff has
been cut in half.
"We are seriously understaffed in the area of enforcement,"
she said. "We are stretched very thin, and we do not have adequate
Research assistance by James Curnow, Alex Lantsberg, Tali Woodward,
Helen Christophi, Savannah Blackwell, Steven T. Jones, and Nikki Woodard.
E-mail Rachel Brahinsky and