A Venture Into the Political Forest : Logging: An investment adviser bankrolling a ballot measure says he wants to save redwoods. The timber industry says he’s trying to manipulate stocks.

A lanky, publicity-shy San Mateo investment adviser has unwittingly become an issue in the debate over Proposition 130, a statewide ballot measure that would radically change logging regulations in California.

Harold L. (Hal) Arbit personally gave $940,000 to put the logging-reform measure on the November ballot--prompting timber-industry officials to say he is trying to manipulate timber stocks to benefit himself or his clients.

In an interview with The Times, Arbit denied the allegation, saying that he personally owns no stocks at all, and that the timber stocks he has bought for his clients are a tiny fraction--one-fifteenth--of their portfolios.

Instead, Arbit accused timber interests of attacking him to divert attention from the industry’s own destructive logging practices and its plans to harvest the last remaining privately owned virgin redwoods on Earth.

About 100 timber workers and their families have threatened to demonstrate today outside Arbit’s low-rise office building in San Mateo, about 15 miles south of San Francisco. They accuse Arbit of buying paper and timber stocks for his clients in 1989, just before contributing to the environmental initiative.

“Why would you double your holdings in timber stocks when at the same time you are contributing $1 million to a ballot measure that will cut California’s timber harvests by up to 70%?” asked David Fogarty, a public-relations expert hired to represent opponents of the ballot measure.

Fogarty said he believes that Arbit backed the measure to reduce logging in California, thus driving up the price for wood products from Oregon and other states. Such a development would benefit companies with holdings in those other states, and he said Arbit has invested his clients’ money in those companies.

But some independent economists consulted about Arbit’s moves said they doubt he is trying to manipulate the market. They said even if he were trying, he would not be likely to make enough added profit to recoup his $940,000.

“It seems to me to be pretty unlikely (the passage of this measure) would have much of an impact on (his clients’ holdings) either way,” said William F. Sharpe, emeritus Timken professor of economics at Stanford University. “If he did this to bring money to his own personal bottom line, it’s a pretty bad investment.”

Documents filed with the federal Securities and Exchange Commission show that Arbit’s company, Concord Capital Management, has bought $137 million in paper and timber company stock for clients that include Ford Motor Co. and the Rockefeller Foundation. This represents 6.6% of the $2.08 billion in total assets they have entrusted to Concord.

Arbit said his donation was not an investment or an attempt to profit from the political debate over the state’s forest. Instead, he said, he wanted to save California forests, which he believes are grossly mismanaged. He also wants to preserve the last virgin redwoods and suggests that state legislators and regulators are unable to make essential reforms.

“If a special interest group wanted to dam up Yosemite, there would be a real outcry,” he said. “If someone wanted to develop Big Sur and put up a bunch of hotels, Californians would cry out. Because the forests and what is going on there is basically hidden from them for the most part, Californians aren’t as aware of what is going on and how desperate it is.

“What they are trying to do is liquidate the forests as fast as possible, take the money out and invest it someplace else,” Arbit added. “Their interest is . . . maximizing short-term profit. If you ask (timber executives) about 10 or 15 years from now, they look at you like you’re crazy. They’re compensated on how well the stock performs now. “

Proposition 130 would allow the sale of $710 million in bonds to preserve ancient forests about to be cut; ban the practice of clear-cutting, in which loggers cut down every tree in parts of the forest; require sustained yield, which would stop the depletion of forests now being over-cut; reform the state Board of Forestry to limit timber-industry influence, and provide $32 million to retrain unemployed loggers.

The timber industry has offered its own initiative, Proposition 138, which would impose less severe restrictions on the industry and in some cases ease restrictions already in place.

Ironically, these propositions, which could have profound impact on the rural northern third of the state, probably will be decided by residents of populous Southern California who are largely unaware of the debate.

Arbit became involved in the timber issue last year, when he approached the Natural Resources Defense Council to see how he could help preserve redwoods. Wealthy environmentalists normally do so by buying land from timber companies and giving it to the state park system.

Arbit said he was unsatisfied with saving only a few acres of the redwoods. As a businessman, he said he decided to try to “leverage” his gift by sponsoring an initiative that could save thousands of acres while also reforming forest-management regulations.

He said he donated the majority of the campaign’s costs--91% as of May 22--because there was not enough time for grass-roots workers to raise the money needed to get the measure on the 1990 ballot. The initiative, he said, could not wait for the next statewide general election in 1992 because of the rapid rate at which redwoods are being cut.

But timber industry skeptics are asking why he never donated to environmental initiatives in the past. Arbit says his interest is not new and said he did contribute to the Natural Resources Defense Council, Save the Redwoods League and other groups that sponsored environmental measures.

He also has donated to other charitable causes. A former art student at the State University of New York at Albany, he has sponsored promising artists and underwritten art historians. Administrators at Stanford University confirm that a “generous” gift from Arbit’s company now funds scholarships for minority economics students.

In the past, his donations were made anonymously, but that was not possible for this political campaign. California’s anti-corruption laws require the disclosure of major contributors to all political races.