Conflicts of Interest

What You Should Know About Gubernatorial Candidate Phil
Angelides

by Peter Byrne

Democratic Party heavyweights in California smell the blood of
an Austrian. Looking to unseat Arnold Schwarzenegger, Senators
Dianne Feinstein and Barbara Boxer and Congresswoman Nancy Pelosi
have endorsed Phil Angelides for governor. How did Angelides — who
has the charisma of an undertaker — become the Man?

Until he was elected state treasurer in 1998, Angelides, 52, was
the junior business partner to one of the most powerful men in
California, a guy you probably never heard of, Angelo Tsakopoulos.
In 1984, Angelides became president of Tsakopoulos’s AKT
Development Corp. He soon started his own development company,
River West, and entered into a series of enduring real estate
partnerships with Tsakopoulos, who is his financial and political
godfather. Together, they have made a fortune paving over thousands
of acres of wetlands inside the Sacramento sprawl.

Although he keeps a low media profile, Tsakopoulos, 69, is a
prodigious campaign donor to California office-holders. As chair of
the California Democratic Party in the early 1990s, Angelides
disbursed millions of party dollars to government officials. State
Senator Don Perata, former Assembly speaker Willie Brown,
Feinstein, Boxer, and Pelosi have long been recipients of
Tsakopoulos’s and Angelides’s largesse. In fact, most successful
elected democrats in California are beholden to both men. Here is a
lesson in how things work in Sacramento: In the late 1980s,
Tsakopoulos and Angelides were trying to plow over protected vernal
pools in the flood plains of Sacramento County. But their
development projects were stalled due to federal and state
environmental concerns. Suddenly, a real estate partnership called
Live Oak Associates II bought up part of the flood plain adjacent
to AKT Development’s land. Government disapproval of wetland
development vaporized. The land was lifted from the flood
plain — on paper. Live Oak Associates II mysteriously obtained
permission to build over the wetlands.

Departing from normal practice, the city of Sacramento
subsidized the development of Live Oak’s physical infrastructure.
And as Live Oak’s suburb was planted on the banks of Laguna Creek,
new life was breathed into AKT Development’s projects in North
Laguna Creek and Laguna West — both of which proceeded without
significant regulatory opposition.

Miraculously, the state Legislature funded a network of freeway
exits and access roads and pretty parks to serve the expanded
sprawl. Local environmentalists were incensed, but there was
nothing they could do to stop the development juggernaut because,
you see, one of the limited partners in Live Oak Associates II was
Mr. Willie Brown, who, as Assembly speaker, had the power to turn
the wishes of his friends into bureaucratic realities.

During his long career, Brown regularly took campaign
contributions from Tsakopoulos, but that money was chump change
compared to the $9 million profit that his Live Oak Associates II
reportedly made on the deal that opened up the south of Sacramento
County to Tsakopoulos and Angelides.

To serve the expansion of his inland real estate empire,
Tsakopoulos created Phil Angelides. He hired him fresh out of
Harvard University, made him wealthy, and smoothed his way into
high public office where he could, presumably, look after their
shared interests. State Treasurer Angelides’s 2005 Statement of
Economic Interest shows that he receives two separate sources of
income — each worth “over $100,000” a year — from Tsakopoulos. He
is a limited partner with Tsakopoulos in several ventures,
including Placer 2780 Limited Partnership, a controversial project
that is trying to get government permission to develop 3,000 acres
of farmland near Sacramento. Angelides is substantially invested in
real estate projects run by River West, the company he sold to an
associate when he became state treasurer. He participates in River
West’s Canyon Creek, Mesquite Village, and Gateway West
developments.

Last year, Tsakopoulos donated $779,000 to fund the political
activities of Tracy Hills Citizen Planning Association, an
astroturf citizen group he designed to promote the development of a
6,000-acre Tsakopoulos/River West industrial development project in
the Sacramento River Delta.

The list of real and/or potential conflicts of interest goes on.
But the point is that Angelides has not successfully separated his
official self from the business interests of his mentor, nor from
his own financial interests. The profitability of his gargantuan
real estate portfolio is contingent upon the granting of multiple
governmental favors by scores of officials who are politically
beholden to Angelides and Tsakopoulos. His financial holdings can
easily be affected by his actions as a member of a score of state
finance authorities that oversee billions of dollars in
transportation, housing, and infrastructure development projects.
The treasurer influences government lending and taxation policies
that affect all real estate developers. He also sits on the board
of CalPERs, the state pension system that invests heavily in
Sacramento-area real estate and has huge leverage in the
market.

In short, whether or not the treasurer has consciously used his
official power to benefit himself and Tsakopoulos, he is in a
position to do so. Responding by email, Angelides spokesman Dan
Newman asserted, “Angelides sold his business before taking office.
He and his family do hold personal assets and investments. He holds
himself to an extremely high ethical standard, consistent with
protecting the best interest of taxpayers. No one has been tougher
than Treasurer Angelides in cracking down on Wall Street conflicts
and criminal behavior to protect taxpayers, pensioners, and
shareholders from well-connected insiders who exploit their
position for personal gain.”

It is worth noting that Angelides recently steered clear of an
obvious conflict of interest when he recused himself from acting in
his official capacity on deals that routed the state’s proposed
bullet train though property tied to Tsakopoulos. But the Treasurer
appears to not be so fastidious about refraining from official
actions that could affect his campaign donors.

Consider: the treasurer presides over the California Tax Credit
Allocation Committee, which subsidizes private developers. Under
Angelides, lucrative tax credit packages were awarded to the
Related Companies of California and AF Evans Company — companies
who have donated tens of thousands of dollars to Angelides’s run
for governor.

According to the state campaign finance database, the Angelides
2006 campaign has nearly 2,500 donors and $14.5 million in cash;
Friends of Phil Angelides has $802,000; and his committee, Standing
Up for California, has $1.55 million. Public employee unions,
building trade unions, and trial lawyers have donated millions to
his political committees. Furthermore, what goes around comes
around: Friends of Barbara Boxer has donated $5,000 to the
Angelides campaign; Paul Pelosi, Nancy’s husband, gave him $10,000.
Casino interests have donated at least $50,000. A general partner
of Live Oak Associates II, William Falik, sent a check for
$2,000.

But the biggest contributor, by far, is — guess who? Since 2001,
Tsakopoulos has donated $1.4 million to Angelides’s campaign
committees. His daughter Eleni Tsakopoulos-Kounalakis has given
Angelides $250,000. Other of his relatives have contributed a total
of more than $200,000. If Arnold Schwarzenegger is the captive of
the Chamber of Commerce, Angelides is the captive of Angelo
Tsakopoulos.

Like Schwarzenegger, Angelides promotes himself as a populist
reformer. “I see a state budget still bleeding red ink as
politicians in Sacramento fail to face fiscal reality,” he said
recently. Huh? The guy has been in charge of the state treasury for
nearly eight years! In all that time he has not achieved a reform
of lasting significance such as taxing commercial real estate or
putting a sales tax on Internet transactions or raising taxes on
the wealthy by a point. Instead, he has sat by waiting for
permission to reach for the brass ring. And that, ladies and
gentlemen, is all you need to know about the man who would be
governor: Angelo Tsakopoulos.

Investigative reporter Peter Byrne writes for Mother Jones,
Salon.com, Scientific American, San Francisco, S.F. Weekly, Metro
Newspapers, and other venues. This article was reprinted with the
permission of the North Bay Bohemian. Check out peterbyrne.info.