State Farm donates to governor’s fund;

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With the $25,000 contribution, the insurer gains direct access to Schwarzenegger.

Los Angeles Times

SACRAMENTO, CA — An insurance giant that rarely gives to politicians has dropped $25,000 into a fund controlled by Gov. Arnold Schwarzenegger, at a time when the company wants the governor’s office to embrace its legislative agenda.

The donation by State Farm‘s auto-insurance arm enabled the firm’s executives to attend a private fundraising reception at Schwarzenegger’s Brentwood home last month. The company has lobbied lawmakers on at least 10 bills proposed in the Assembly and Senate since January.

By making the contribution, State Farm became part of the Governor’s Advisory Committee, a status that entitles donors to attend four private meetings with the governor and be included in regular conference calls with him, according to the reception invitation.

The April 12 donation went to the governor’s California Recovery Team. Schwarzenegger has used the tax-exempt fund, which can accept unlimited donations, to promote ballot measures and otherwise pursue his political agenda.

The California Recovery Team’s board of directors includes Steve Schmidt, the governor’s 2006 reelection campaign manager; Duf Sundheim, past chairman of the California Republican Party; and Donna Lucas, a former aide to both the governor and first lady Maria Shriver.

State Farm, a mutual company that shares profits with policyholders in the form of dividends, has a long-standing ban on contributions to political campaigns. Company officials often cite that practice as proof that it is nonpartisan.

State Farm believes that it is not appropriate to “pick sides,” lobbyist Mark Delegal told the newspaper Florida Today last year. “The money belongs to the policyholder.”

Bill Sirola, spokesman for State Farm in Sacramento, said in a recent interview: “We don’t think our money should be used for political purposes, because of the vast number of people we represent.”

The $25,000 was accompanied by a letter from a lawyer for State Farm. “Our analysis of the California Recovery Team indicates that our contribution will be used to support the governor’s issue and legislative agenda,” the letter said. If the money is used for anything else, State Farm wants it back.

Watchdog groups said the company’s rationale was unconvincing. They said the donation would inevitably be used to keep Schwarzenegger politically viable, while affording State Farm access to the highest levels of state government.

Schwarzenegger aides have said that in 2010 the governor may run for the U.S. Senate seat now held by Democrat Barbara Boxer.

“Gov. Schwarzenegger has so monetized politics that even companies like State Farm that have a long-standing policy of not giving to politicians feel they have to give to be in the governor’s game,” said Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights, a Santa Monica group.

A spokeswoman for the Recovery Team said State Farm need not worry — Schwarzenegger is now working in bipartisan fashion.

“He is interested in working with both parties to get things done,” Julie Soderlund said. “And the California Recovery Team exists to support that.”

But Schwarzenegger has used the committee for partisan causes.

Money collected by the group has gone to pay pollsters, campaign consultants and aides whose job it is to raise more money — all part of the political apparatus that Schwarzenegger has set up to build voter approval and advance his goals. He has moved about $1.9 million from the Recovery Team to the California Republican Party in the last two years.

Since Schwarzenegger created the Recovery Team four years ago, it has collected hundreds of thousands of dollars from companies with business before the state. Many of the donors get access to the governor that is not available to ordinary Californians.

In the fundraising event at the governor’s home last month, donors could sip cocktails for contributions exceeding $25,000. For donations of $100,000 to $250,000, contributors are invited to dine with Schwarzenegger and Shriver at their home June 6.

“Members will also be included in regular conference calls with the governor and leading and well-known Californians from the public and private sector,” the invitation reads.

Several issues that could influence State Farm‘s finances are likely to come before the governor in coming months.

Apart from auto insurance, State Farm also markets health insurance — a focus of intense debate in the Capitol as state officials strive to expand access to healthcare coverage. Lawmakers are considering several wide-ranging proposals intended to ensure that most or all Californians have medical insurance.

On another issue, a bill supported by State Farm and insurance industry lobbyists could undercut class-action lawsuits alleging that insurers are overcharging some customers. The bill, by Sen. Mark Ridley-Thomas (D-Los Angeles), centers on the legal definition of the fee that insurance companies charge customers for paying their premiums over time rather than in a lump sum.

Attorneys pressing the lawsuits say that if the bill passes, the litigation will be undermined, because the state will have affirmed that what the insurance companies have been doing is acceptable.

State Farm is a defendant in one such case in San Diego County. A State Farm lobbyist, Gene Livingston, said in an interview that ending the litigation “is certainly the goal of the bill.”

Livingston last month wrote a letter to a state Senate committee urging support for the bill and sent a copy to Schwarzenegger’s top insurance aide.

State Farm is also resisting a proposal to protect consumers from unwittingly purchasing used cars damaged beyond repair by saltwater. The damage, typically the result of flooding caused by hurricanes, is highly corrosive, potentially dangerous and easily concealed.

Consumer advocates say thousands of such cars are on the market. The bill would prohibit insurance companies from selling such vehicles to anyone other than a licensed “automobile dismantler” to be crushed.

Insurance companies are now allowed to sell the vehicles to auction companies and used-auto-part dealers. The bill would prevent that, cutting off a source of revenue.

Livingston wrote a letter to a Senate committee leader opposing the bill, by Sen. Jenny Oropeza (D-Carson), and sent a copy to three Schwarzenegger administration officials.
Contact the authors at [email protected] or [email protected]

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