Gray Davis is the California governor who cost the state billions by mismanaging California’s energy contracts. He finances 25% of the state’s budget with red ink, and he wants to raise taxes, thereby jeopardizing economic recovery in California.
Normally, a governor with such a terrible record would face a poor prospect of reelection. But Davis, with the media’s help, has managed to keep the gubernatorial campaign off his record—indeed, off any issue relevant to Californians.
Davis’s Republican challenger is Bill Simon, Jr., a successful businessman and son of the former U.S. Treasury Secretary. If issues played a part in the campaign, Simon would be a formidable opponent. In the Republican primary, Simon easily defeated the Republican machine politician, a former mayor of Los Angeles. But Democrat dirty tricks, not issues, have steered the campaign for governor.
A Democratic political activist, who doubles as a lawyer in the U.S. Justice Department’s tax division, leaked a story to the Wall Street Journal that the IRS was considering reclassifying a legal financial transaction, widely used on advice of accountants and lawyers, as a tax shelter. The leak named Simon as one who had participated in an investment that the IRS might find suspect after the fact.
Davis immediately ran TV political ads accusing Simon of being a rich man who didn’t pay taxes.
Simon released his tax returns showing that he paid 30% of his income to the government, but the Enron and WorldCom accounting scandals kept fast dealings in the news and helped Davis keep Simon on the defensive.
The “tax shelter” charge eventually wore out, but before Simon could focus the campaign on issues, on July 31 the Los Angeles jury pool produced another O.J. verdict.
Four or five years ago Simon’s investment firm purchased a majority interest in a coin operated telephone company. The former owner retained a minority interest and a place in the management.
Unbeknownst to Simon and his partners, the former owner was a former big time drug smuggler and had served a prison term. This came to light when the man made a deal with the Justice Department to disgorge $50 million in drug profits that he had hidden offshore.
As the man had kept his past from Simon and the other new owners, they decided to dismiss him from the company’s management. Shortly afterward, the company failed and all parties lost their investment.
The former drug smuggler sued Simon, claiming fraud, perhaps hoping Simon would agree to a settlement in order to avoid bad publicity. Advised that the case was a shakedown without legal merit, Simon let it go to trial, and a jury influenced by Simon’s bad press found for the drug smuggler.
The latest headline is that the jury ruled against Simon’s investment firm and awarded the former drug smuggler $78 million.
Lawyers expect the verdict to be overturned, assuming that the judge looks at the facts rather than the politics of the case.
Regardless, the media will make certain that more people hear about the jury verdict than about its being overturned.
Simon is not a rich kid living off inherited wealth and his father’s connections. He is a well-respected successful man of business in his own right. Many seek to join his investment ventures. He is generous to charities and to the downtrodden. He cut his teeth working 70 and 80 hour weeks as a federal prosecutor.
It is an amazing thing that a man like Simon is willing to take on the task of rescuing California from the economic and political mess in which the state finds itself. When a good man steps forward and is savagely blackened, when will another good man step forward?
The liberal media is making certain that only party hacks and machine candidates run for office. The public’s interest is effectively barred from politics, which makes democracy a hoax. As long as the voting public permits the media to decide political outcomes, there is no hope for responsible and responsive government.[VDARE.COM NOTE: But see Joe Guzzardi's August 9th column for a depressing assessment of Simon's wimp-out on immigration.]
Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.
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