State Races See Corporate Scandal Spillover
By Jason White, Assistant Staff Writer
From New Hampshire to Texas to California, candidates running for governor on the strength of their business records have been thrown on the defensive by a falling stock market, corporate scandals and the public's growing mistrust of big business.
Attacks leveled against these candidates read like a list of ethically dubious practices by a deposed Enron executive: shaky accounting practices, insider deals, tax dodging and Securities and Exchange Commission investigations.
In New Hampshire, Craig Benson, founder and former CEO of Cabletron Systems Inc. and candidate for the Republic nomination for governor, is facing a television ad blitz that suggests he ran Cabletron into the ground even as he profited from it handsomely.
The source of the ads is his opponent for the Republican nomination, former U.S. Senator Gordon Humphrey.
"[Craig Benson] says he wants to run the state like he runs his business," said Humphrey spokesperson Jim Rubens. "Stock collapse, workforce reductions, restatements of earnings. Does that sound like something you want in a leader?"
Humphrey's ads allege that on Benson's watch Cabletron's stock price collapsed 90 percent and 85 percent of its New Hampshire workforce was laid-off. In addition, the ads say that Cabletron had to pay more than $2.5 million to settle sex discrimination and other civil rights charges after Benson fired a woman manager.
"Retirements are threatened," a narrator says in one ad. "But not Craig Benson's. He's been selling off stock for years, pocketing over $400 million."
Benson spokesperson Kate Whitman says the ads play fast and loose with the truth.
"CNN says the ads are misleading. The New Hampshire press says so too," said Whitman. "They're negative attack ads. They are politics as usual."
Whitman says the ads mix figures from Cabletron with those of a spin-off company, Enterasys.
Humphrey's spokesman Rubens defends the ads and says they resonate now, in the midst of a declining stock market and corporate scandals, in ways they never would have before.
Despite the barrage, Benson leads Humphrey by 20 points, according to a recent University of New Hampshire Survey Center poll.
In California, Democratic Gov. Gray Davis has been lambasting his opponent, Republican businessman Bill Simon, for poor management of a savings and loan.
"Bill Simon claims he's a successful businessman and that his background qualifies him to run California," said Garry South, Davis' senior political advisor, in a press release announcing a new television ad. "But his first business experience in California consisted of running an S&L into the ground and costing the taxpayers more than $90 million."
In response to the commercial, Simon said, "In a sign of his growing desperation, Gray Davis is attempting to deflect public attention from his own incompetence and corrupt administration of California by attacking me today on my record as a successful businessman."
Litigation over the S&L's collapse is ongoing, with Simon and other investors blaming a government rule change for the bank's collapse.
In addition, Simon has drawn heat for refusing to release his tax records. He relented Monday (7/22), allowing reporters to view his tax returns for two hours.
But reporters said the time allowed was not enough to effectively glean important information about Simon's tax strategies. Some Democratic party officials said tax and accounting experts should have been present as well to view the returns.
The Internal Revenue Service recently disclosed in court documents that Simon and his family investment firm benefited from offshore tax shelters that could be illegal.
In Texas, the home of Enron, there's been a heated back and forth between Tony Sanchez, the Democratic candidate for governor, and his Republican opponent, Gov. Rick Perry. Only there, both candidates are getting dragged through corporate muck.
Sanchez has criticized Perry for accepting campaign contributions from WorldCom and Enron.
"Rick knows that Enron was engaged in what is turning out to be the biggest business scam in history," Sanchez said in a May press release. Perry has donated some of the Enron money to a fund for college scholarships for children of Enron employees.
Perry too has been on the attack, criticizing the business practices of Sanchez, a banker and oilman.
"It's mind-boggling that a person with his ethical lapses" wants to be governor of Texas, Perry said in an interview with The Dallas Morning News .
The Morning News reported in early July that the IRS dismissed as shams a series of tax shelters involving Sanchez' bank, the International Bank of Commerce, and ordered it to pay $4 million in taxes.
But for all the back and forth in such high-profile states as California and Texas, New Hampshire's scuffle between two Republicans, Benson and Humphrey, may be the one to watch to see how the issue resonates with voters.
"This is going to be an amazing test case for what the public thinks about corporate scandals," said Humphrey spokesperson Rubens.