Hearing on Simon Firm’s Case Delayed

Dealing a setback to Republican Bill Simon Jr., a Los Angeles Superior Court judge dimmed the candidate’s hopes Tuesday for quick reversal of a $78-million verdict against his family investment firm. Instead, the judge set a hearing just eight weeks before election day and said he may not even rule at that time.

As Democratic Gov. Gray Davis stumped across the state, attorneys in the civil case clashed in a downtown Los Angeles courtroom, arguing whether William E. Simon & Sons was guilty of fraud, or whether Simon and other principals in the company were themselves defrauded by one of their business partners.

The GOP gubernatorial nominee was campaigning Tuesday in Tulare and did not attend the court hearing, which lasted about 45 minutes.

A civil jury found last month that William E. Simon & Sons defrauded Paul Edward Hindelang Jr., in a deal to take control of his Los Angeles pay phone company, Pacific Coin. The jury said the Simon firm hid from Hindelang, who retained an interest in the company, that it planned to borrow huge sums of money to expand Pacific Coin against his wishes, and then to take it public in a stock offering. Pacific Coin collapsed under the weight of the debt burden, wiping out Simon’s investment and Hindelang’s business.

The fraud verdict dealt a major blow to Simon’s campaign, because the candidate has used his business record as one of the central themes in his bid to unseat Davis. Simon, co-chairman of the investment firm, is on leave from the company as he campaigns for governor.

In an effort to resolve the political and legal issues quickly, attorneys for Simon and the family firm asked Superior Court Judge James C. Chalfant earlier this month to set aside the multimillion-dollar verdict. A hearing on those motions had been set for Sept. 6.

But in court papers filed Friday, the lawyers opened another legal front by arguing that Hindelang defrauded Simon and other investors by not revealing his criminal record as a marijuana smuggler in the late 1970s and early ‘80s.

Attorneys for Hindelang contend that Simon representatives never asked whether Hindelang had been convicted of a felony before deciding to invest in the pay phone business in February 1998.

On Tuesday, Chalfant canceled the Sept. 6 hearing and set another for Sept. 10, when he will hear further arguments in the case. Even then, he said, he may take the matter under submission--which would push the case even closer to the Nov. 5 election.

In a bid to get off the political defensive, Simon planned to launch a new TV ad today attacking Davis’ record on the environment.

The spot cites a report in the San Jose Mercury News that a board with Davis appointees approved the release of toxic substances into San Francisco Bay by the Tosco refinery shortly after it donated $70,000 to the governor’s reelection campaign.

The spot is the first that Simon has aired in weeks, as he struggles with a chronic shortage of funds. Sal Russo, the campaign’s chief strategist, described the new ad campaign as modest. He said that Simon’s advertising reach would expand over time and that the GOP hopeful will remain on the air from now through election day.

Possibly anticipating the attack, Davis defended his environmental record at a San Francisco appearance alongside some of his fellow Democratic governors. He cited his decision to sign legislation to limit greenhouse gas emissions, protect endangered redwoods, cut state park fees in half and clean up California’s beaches.

“My opponent likes to describe himself as an old oil and gas man; far be it for me to quarrel with this description,” Davis gibed. “He is not in touch with California’s need to have a clean environment. He is not the person to turn the environment of California over to.”

Earlier, the governor appeared in Los Angeles with schools Supt. Roy Romer, who released improved standardized test scores for the district’s elementary schools.

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Times staff writer Dan Morain contributed to this report.