Simon to Donate Loan Repayments to Charity

A day after ethics groups questioned the propriety of his $9 million in loans to his gubernatorial campaign, Republican Bill Simon Jr. pledged Thursday to donate any repayments to charity.

“Given my track record of giving away money with my family and my wife, I’ll pledge to you that I’ll give away that amount of money that’s repaid--if indeed it is repaid,” Simon said.

“And I’ll give it away to help people--to help the poor, to help the underprivileged, to help kids get an education, just as I have my entire career.”

Simon’s vow came a day after he disclosed a new $4 million loan to his cash-strapped campaign, on top of the $5 million he loaned it before the March primary. The loans were criticized by ethics watchdogs. They said donations to repay the loans would go directly into Simon’s pocket, and the donors’ names would only become known to voters after the election.

Simon, who often accuses Democratic opponent Gov. Gray Davis of trading state favors for campaign money, denied that the loans created any ethical problems.

“I disagree with the watchdogs,” he told reporters at a campaign stop in Montebello.

Simon declined to say how quickly he would donate the $9 million to charity if his loans are repaid. “Over the course of time, I’ll be giving away that amount of money returned,” he said.

Asked whether he also would give to charity the repayments of any future loans to his campaign, Simon smiled, paused and responded, “Yep.”

But Simon’s pledge failed to quell the concerns of ethics groups. By writing off the charitable donations on his tax returns, they said, Simon would still get a direct personal benefit from campaign donors.

“It’s a shell game,” said Jim Knox, executive director of California Common Cause.

Davis also questioned Simon’s decision to lend--rather than donate--millions of dollars to his campaign.

The governor, responding to a question about his own campaign money, told reporters in Sacramento: “I’ll tell you what is not in the best interests of California is for Mr. Simon, my opponent, to loan himself $9 million and say he hopes to get paid back with contributions from all kinds of people that will go directly into his pocket. These contributions to me help finance my campaign. They do not finance my lifestyle.”

Simon, who runs a charitable foundation with his wife, Cindy, last year donated $525,414 to charity, including $441,778 worth of Hanover Compressor Co. stock that he bought for $20,866, according to his income tax returns. A former Hanover board member, Simon bought the stock before the energy company went public, said a senior advisor, Jeff Flint.

Simon’s pledge to forsake the loan repayments came at a rare campaign stop designed to promote his record as an investment banker: a Montebello meat processing plant owned mainly by William E. Simon & Sons.

Simon used the visit to the Custom Food Products plant to blunt accusations by Davis that he is a dishonest and incompetent businessman.

“Gray Davis has relentlessly distorted my record,” said Simon, who is on leave of absence as co-chairman of the firm. “The fact is, we have a firm with an outstanding record. The fact is that our investments have helped provide the capital that has created or saved thousands of jobs.”

Simon’s defense of his family investment firm came exactly a week after a Los Angeles judge overturned a jury’s fraud verdict against William E. Simon & Sons. In a summer-long barrage of television ads, Davis has used the fraud case and a host of other Simon investments that went sour to undermine Simon’s contention that he has been a successful businessman.

A spot that Davis started running Monday says Simon “fired hundreds of workers, many without notice,” citing companies in which the family firm had invested.

At the meat processing plant, Simon sought to make the reverse argument amid a rumble of conveyer belts carrying ground beef patties into giant ovens. The Simon firm helped pull Custom Food Products out of bankruptcy in July when it paid $12.5 million for a controlling stake in the company, which employs 150 people at the Montebello plant, said company President Eric W. Elk.

Wearing a white lab coat and a white hard hat over a white hair net, Simon said Davis “cherry-picks” his family firm’s bad investments when, on balance, it creates jobs.

“There are 1 million Californians out of work right now, and the fact is this: We’ve got to create more jobs for our citizens,” Simon said. “We’ve got to lower taxes. We’ve got to encourage the growth of businesses like this that provide important products for our people.”

The main products at Custom Food are the meat used in Arby’s roast beef sandwiches, Subway’s Philly cheese steaks and Hot Pockets frozen food.

Simon said Custom Foods would hire more people if electricity rates and workers’ compensation costs had not risen dramatically since Davis became governor.

Davis campaign spokesman Roger Salazar said California has gained 900,000 jobs since the governor took office in 1999--”even with the economic problems that this country has been facing.”

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Times staff writer Carl Ingram contributed to this report.