Consumer Watchdog – Feasting on an Ailing California

The following commentary was published in The Los Angeles Times on Wednesday, February 18, 2004:
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Good dinners in Manhattan are notoriously expensive, but the New Yorkers who have agreed to pay as much as $500,000 to dine with Arnold Schwarzenegger on Tuesday may be picking up the check for the world's highest-priced meal ever.

Certainly it's the most expensive political fundraiser in modern memory. For as little as $50,000 per person, or as much as $500,000 a head, the nontransferable invitation promises a private dinner with Gov. Schwarzenegger to be served high above Central Park at the residence of Robert Wood Johnson IV, owner of the New York Jets and heir to the Johnson & Johnson pharmaceutical fortune.

To be fair, breathing the air is pretty pricey in Johnson's exclusive One Central Park West residence, which sits atop Donald Trump's International Hotel & Tower. Woody Johnson's neighbors have included Mark Swartz, the indicted chief financial officer of Tyco International, and former General Electric CEO Jack Welch, who received his One Central Park West apartment as a retirement gift from the company's shareholders. The invitation doesn't mention who's cooking.

But even if the catering is done by Jean Georges, the exclusive four-star French restaurant in the hotel lobby, the dinner's price tag still doesn't add up; a seven-course meal there costs only about $115 per person -- or $220 with truffles.

So what's going on here? Why would New York's masters of the universe dig this deep into their pockets to help the governor of a state 3,000 miles away? To improve the quality of life in California? To help house our homeless or rebuild our schools? Of course not. There's only one reason: to make -- or save -- a buck.

The money will go to the campaign for Proposition 57, the governor's $15-billion bailout bond measure on the March 2 ballot. California's voters oppose the bonds, polls show -- but Wall Street has a huge financial stake in seeing the measure succeed. Bond traders would make a killing in commissions floating California's long-term debt.

The governor -- who first told voters he did not need any special-interest money and then redefined special interests as only Indian tribes and labor unions -- said through a spokesperson Sunday that he did not intend to accept contributions from any bond dealers who would directly benefit from the sale.

But what about not accepting dollars from CEOs of investment banks that employ bond dealers, attorneys for the bond dealers, spouses of bond traders, investors likely to buy the bonds and others with less-obvious financial interests? In addition to the investment community, we should expect Johnson's pharmaceutical industry colleagues to be on hand Tuesday. An audit by the Bush administration's Department of Health Services shows that pharmaceutical companies owe the state of California $1.3 billion in rebates for prescription drugs purchased by the state Medi-Cal program -- enough to restore the $900 million in proposed budget cuts to health-care programs for children and the poor.

Yet Schwarzenegger has not collected on the debt, and his own audit of state finances made no mention of the money owed. You can be sure the drug executives want to keep it that way.

Commercial real estate interests that operate nationwide are also likely to be at dinner. They desperately want California's recovery to be dependent on the $15-billion bond measure because the alternative revenue source for Schwarzenegger would be to reassess commercial property values for tax purposes. That alone would cost commercial real estate interests about $4 billion per year. That's probably why mega-developers A.G. Spanos and Castle & Cooke have already given $500,000 between them.

Executives from New York-based insurance companies, which tend to invest in bonds, are also likely to stop in for a bellini. Schwarzenegger is turning out to be a master salesman. If the who's who of Wall Street comes out Tuesday night at Johnson's, we'll know exactly what our governor is selling: California to New Yorkers.

Gov. Schwarzenegger, you're still on your honeymoon. Don't forget your vows.
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Jamie Court is author of "Corporateering: How Corporate Power Steals Your Personal Freedom" (Tarcher/Putnam, 2003) and a founder of arnoldwatch.org