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California Court Ruling May Breathe New Life into Republican Campaign for Governor - 2002-09-14

A court ruling in California may breathe new life into the campaign of the Republican challenger for the office of governor. Thursday, a Los Angeles judge reversed a fraud verdict against the investment firm of candidate Bill Simon Junior. Mr. Simon still faces an uphill battle in the race to lead the nation's most populous state.

Mr. Simon, who is best known as the son of a former U.S. treasury secretary, proclaimed the ruling a "new beginning" for his campaign. Judge James Chalfant swept aside a $78 million civil fraud verdict against William E. Simon and Sons, the family investment firm.

In July, a jury ruled that the company had defrauded a business partner, but Judge Chalfant said the partner had actually cheated the Simon family firm by failing to reveal that he had a criminal record as a drug trafficker.

Mr. Simon's firm lost more than $16 million in the failed partnership with a pay-telephone company. Court papers say the company was started with drug profits, which the owner did not reveal to Mr. Simon or other investors.

A spokesman for Democratic Governor Gray Davis questions the ruling and the judge's objectivity, noting that Judge Chalfant was appointed to the bench by Mr. Davis's Republican predecessor as governor.

The lawyer for the former partner said he may appeal the judge's decision.

Mr. Simon has promoted himself as a successful businessman. The tactic may have backfired in a year when major corporate scandals have dominated the headlines.

Ads by the Davis campaign have attacked Mr. Simon's business record, some citing the fraud judgement against the Republican and others questioning his judgement.

"Is Bill Simon qualified to be governor? The savings-and-loan he directed went belly up (failed), costing taxpayers millions. Another Simon company, Geologistics, lost millions more. Simon if he can't run a business, how can he run the fifth largest economy in the world?"

Governor Davis points to California's growth during his tenure, when the state rose from the world's seventh largest to fifth largest economy.

Mr. Simon charges the Democratic governor with mismanaging California's energy crisis and leaving the state with a debt of more than $20 billion.

Bill Simon's advertising points to his endorsements by two popular Republicans, President Bush and former New York mayor Rudolph Giuliani.

They alternate their accolades in this television ad, beginning with Mr. Giuliani.

Giuliani: "I wanted to tell you about one candidate for governor of California who stands out from the rest."
Bush: "You need somebody who's willing to make tough decisions and set priorities."
Giuliani: "Bill Simon will make a great governor for California."
Bush: "It's my honor to come and support the next governor of the state of California, Bill Simon."

A recent poll shows California Governor Gray Davis with a 7-point lead over his Republican rival. But with 1-in-5 voters undecided in the state, Mr. Simon's supporters say he is still very much in the contest.