Davis dodges blackouts, but embroiled in conflict scandal

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The Associated Press

In California this summer, energy prices have stabilized, the lights have stayed on and Gov. Gray Davis keeps raising millions of dollars for his re-election bid.

But the heat’s still on for the leader of the nation’s most populous state.

Instead of rolling blackouts, Davis has been hit with revelations that his energy consultants owned stock in the same companies with which they negotiated taxpayer-backed power contracts.

“We are moving from an energy crisis into a political crisis,” said Doug Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights.

Last week, Davis fired five consultants who acknowledged they owned stock in Calpine, a San Jose-based power generator that has received about $13 billion in electricity contracts with the state over the next 20 years.

The following Monday, Davis’ chief spokesman Steve Maviglio revealed he bought $12,000 worth of Calpine stock on June 20. On Thursday, Davis’ office said Maviglio had sold the stock, and Maviglio said he wouldn’t quit, despite a Los Angeles Times editorial calling for his resignation.

Meanwhile, the U.S. Securities and Exchange Commission began investigating last week to see if Davis’ consultants had broken any security fraud laws, according to a Los Angeles Times report. SEC officials have declined to say whether the agency is investigating.

And two of Davis’ financial advisers for energy, Joseph Fichera and Michael Hoffman, sent letters Friday to his chief of staff saying they do not have any stock holdings in companies providing power through the Department of Water Resources.

Fichera acknowledged in his letter that the managers of an account he owns, but said he does not actively manage, sold options to acquire stock in The Williams Companies, Inc. But that was “prior to my commencement of substantive work for the Department of Finance or the Department of Water Resources,” he wrote.

The unfolding controversy comes as Davis has managed to deflect many potential political obstacles. He signed a $103 billion budget that, although a month overdue, saw him use his veto power to make cuts legislators could not. His conservation plan has seen Californians make dramatic cuts in their power use.

And this week Davis filed his campaign finance reports that show he raised $5.8 million for his 2002 campaign during the first six months of the year. That gives him $30.5 million in the bank, more than 10 times the total of any of his announced opponents.

One of those opponents, Republican Secretary of State Bill Jones, is leading the latest attacks. Other Republicans, who were bruised by the scandal that forced Insurance Commissioner Chuck Quackenbush to resign last year, have been quick to jump in.

“By avoiding blackouts thus far, he should have had a nice quiet summer once you got past the state budget, and the worst possible political nightmare is now occurring for him,” said Rob Stutzman, a political consultant for the state Republican Party.

Aides to the Democratic governor accuse Republicans of trying to divert attention from Davis’ aggressive approach to easing the state’s power woes.

“They are trying to incite a political witch hunt based on rumor and innuendo,” said Davis spokeswoman Hilary McLean.

Davis, she said, had acknowledged the possible conflicts and moved quickly to fix them.

When blackouts hit, “we were in a crisis mode,” McLean said, and the administration didn’t ask the consultants to make the financial disclosures that are required of state officials.

At best, the stock revelations show poor judgment, critics said, and corruption at worst. Senate Republican leader Jim Brulte called the Davis administration “ethically challenged” and needs to be prodded by legislative hearings to tell the truth.

Because the energy crisis had ebbed somewhat, Davis’ power victories may be overshadowed by scrutiny of his consultants, said Mark Baldassare, a pollster for the Public Policy Institute of California.

“This is a very important time politically for the governor,” said Baldassare, whose poll in May showed Davis’ popularity slipped to its lowest point.

“A lot of attention will turn to the fiscal and political issues surrounding the development of the state’s energy policy,” he said.

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