GOP nominee keeps stumbling in California

SACRAMENTO, Calif. -- Bill Simon, the man Republicans hope will wrest California's top post from Democratic Gov. Gray Davis, is being battered by controversies about his finances.

Simon's troubles -- including a civil fraud verdict Wednesday against his family's investment firm -- come as public confidence in corporate America wavers. And they have some GOP officials wondering whether high level Republicans, including President Bush, should distance themselves from the first-time candidate.

"It's a frustration for many Republicans because we believe with fervor that Davis is inherently and considerably vulnerable," said GOP analyst Arnold Steinberg, who has worked on several Republican political campaigns.

Since his surprise primary win in March, Simon's campaign has been battered by his refusal for three months to release his income tax returns, by revelations that the Internal Revenue Service was examining his use of what investigators call an illegal tax shelter, and by his inability to raise the money needed to challenge Davis. Simon also has shuffled his staff several times.

In the latest and most explosive setback, jurors awarded businessman Paul Edward Hindelang $65-million in punitive damages Wednesday and $13.3-million in compensatory damages Tuesday from William E. Simon & Sons, and $18.9-million in damages from another investment firm. Hindelang is the founder of pay phone company Pacific Coin. Simon & Sons invested in Pacific Coin in 1998.

The lawsuit, which did not name Simon personally, concerned Hindelang's allegations that the investors destroyed Pacific Coin by overloading it with debt in a risky secret plan to take it public. A bank took the company over two years ago.

Simon has described the week's outcome as "a bad verdict" that would be set aside or overturned on appeal. He also has sought to distance himself from the legal battle, emphasizing that although subpoenaed, he was not called to testify.

As Simon copes with those problems, Davis has unleashed a series of negative television advertisements questioning everything from Simon's business practices to his involvement with his family's charitable foundations. Davis has called it "far from clear what Mr. Simon's business ethics were."

Davis also scored a major victory last week when two teenage girls who had been abducted were rescued with the help of a new statewide alert system Davis launched just days earlier.

Simon, meanwhile, has been peppered with questions about his financial dealings at campaign stops where he attempted to announce his public policy plans. On Friday, he announced a plan to boost health insurance to workers, only to face reporters' queries about the fraud verdict.

Strategists say Simon -- who has held up his business credentials as a chief qualification to run the most populous state -- must deflect attention from questions about his record in business.

"If it's up to Gray Davis, he'll define Bill Simon as (former Enron chairman) Ken Lay's evil twin," said GOP consultant Dan Schnur. "It's Simon's challenge now to move past the lawsuit story and the way that Davis wants him to be perceived and explain to voters the positive accomplishments he's had in the private sector."

To do that, however, Simon needs money for television advertisements that dominate all major California campaigns.

Davis had $31.6-million in the bank on June 30 compared with Simon's $5-million.

Republicans hoped to focus the campaign on Davis, whose popularity has been battered by a power crisis, budget shortfalls and questions about his fundraising practices.

Now, with Simon on the defensive, Republican operatives say the national GOP has been waiting to see if Simon can recover before pouring large amounts of money into the governor's race.

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