Spin Cycle

The governor's goons are trying to discredit critics of his energy gaffes by leveling personal attacks against them.

By Jill Stewart

Gary Leonard

Governor Perfect Hair


One thing I love about my work is picking up the phone and calling anyone I please, no matter how high or low their rank. Often, they get right on the line and we have a bit of a chat. What I learn allows me to illuminate readers about issues I find terribly juicy or deeply confusing, and the energy crisis is both.

I spoke recently to key journalists, lawyers and state officials who've been busy snipping through thick layers of secrecy built up by Governor Gray Davis to keep the public from understanding the mess he's created.

Davis desperately needs secrecy so he and his horde of consultants can pursue his throwback energy policies and cut asinine long-term power contracts, all without one whit of independent critique or public debate, and all carefully designed to ensure that He of the Perfect Hair comes out looking blameless.

Davis' secrecy scheme worked for quite a while. The polls and media were very good to him. Most journalists fell hard for his artful theater, in which Perfect Hair's crack speechwriters scripted a believable scenario that had Davis righteously blaming out-of-state energy suppliers, especially in dastardly Texas.

But it turns out that trying to cover up the energy boondoggle is about as intelligent as yanking a movie curtain shut just when the true killer is being revealed. Control freak Davis is finally getting hammered, and I cannot think of anybody who deserves a few ball-peen whacks more richly that he. For the first time in a decade, the top newspapers and other media banded together to get access to meetings and documents that should have been public. That kind of legal challenge hasn't hit a governor since George Deukmejian refused to show his appointments calendar to the L.A. Times.

Dow Jones Newswires' Jason Leopold, one of the most aggressive reporters on the energy crisis, ticks off a crescendo of hits on Davis:

"Secretary of State Bill Jones revealed that Davis' top consultants bought stock in companies the state was negotiating with, and I could kick myself because those documents were there if I had done the legwork," he says. "State Controller Kathleen Connell announced she was not going to pay the $50,000 [monthly] salary to Davis' two political operatives, Chris Lehane and Mark Fabiani, because they weren't doing state business. Then Connell refused to pay an $11,000 bill for "emergency' meals for state negotiators, including $1,000 for sushi. For sushi! The L.A. Times broke the story about Davis' five consultants getting fired due to conflicts of interest in owning stock. I broke the story that Steve Maviglio, Davis' spokesman, bought stock in Calpine and Enron Corp. during contract negotiations."

A week ago, Leopold reported that the Securities and Exchange Commission has opened an inquiry into possible insider trading by Davis' team. The Times came out with the SEC story two days later.

"The Times got the credit for that story," says Leopold, "but frankly I don't care who gets credit. I just want to see the media jump harder on this crisis. For most of the past year, the media has done a pretty bad job by just believing the administration. For months the media just bought the "We won't need to raise electricity rates' and "Caused by outside forces' lines."

Leopold touches on a fascinating phenomenon: Davis' success at drawing attention away from his huge missteps by creating an other.

Although Connell agrees that out-of-state generators formed a cartel and took advantage our new "deregulation" laws, she lays much of the blame for the crisis on Davis. She says the governor is using chapter and verse from the book Spin Cycle, which details how Bill Clinton's spin-meisters (including Lehane and Fabiani) turned the Monica Lewinsky scandal into a triumphant slam on Clinton's detractors and saved the Clinton presidency.

Says Connell, "Just as in Spin Cycle, the governor's people immediately move to discredit those who make critical comments about the governor, by making personal attacks on those people, which diverts the issue away from their boss, Gray.

"The attacks are done through Davis staffer Garry South, because as Spin Cycle says, it should never be done by the anointed person but by a third party. Then the governor's people try to ingratiate themselves with one or two media [people] by giving them access to exclusives. It's a fascinating transference technique."

When the governor's "nice quiet summer of no blackouts and cool weather suddenly turned out to be not a nice quiet summer for Davis at all," as Alexa Haussler of the Associated Press so aptly described it to me, Gray's intermediaries began their attacks.

They slammed respected Secretary of State Bill Jones (as a blindly partisan Republican who just wants Davis' job). They attacked Connell (as just a bitter, unhappy person because she lost the Los Angeles mayor's race). They even targeted journalists such as Leopold (you can't trust him because he's little more than a business-wire version of Matt Drudge).

Last week, Davis ramped up his defensive strategy to Def-Con Four. Maviglio announced he was selling his stock in Calpine at a $1,300 loss, and Davis' office put out a press release stating that Leopold erred in breaking a controversial Dow Jones story and was going to issue a retraction. The scoop concerned Viju Patel, an executive manager at the state Department of Water Resources. Leopold's story alleged that Patel oversaw long-term power contract negotiations with a company that won a $4 billion deal, and Patel owned stock in the company.

Davis aide Hilary McLean and the chief of the Department of Water Resources insisted that Leopold was dead wrong. Says Leopold, "They actually had me convinced Viju Patel was a secretary type who set up chairs and was in charge of the copy machines and facilities. They simply insisted. They were certain."

Leopold agreed to retract his story if they turned out to be right. But Leopold says he found that he was mostly right: Patel's job was to make sure the contracts were signed in a timely manner and communicated to awaiting state workers. Patel had access to high-level information.

"I was fxxxxxx pissed once I realized they had convinced me I was wrong, and it wasn't true," says Leopold. "I was never spun like that, and boy did they do a good job."

But even precision pressure on individual journalists couldn't save Davis from the onslaught of the past week led by Jones and Connell.

Connell is a number-sniffing toughie. She won most of the 20 mayoral debates I attended, but could not beat James Hahn or Antonio Villaraigosa because she jumped into the fund-raising race five months too late. She has been a Davis critic since she took over his old controller job and found his department in shambles.

Connell refused to cut checks to pay Davis' political attack dogs, Lehane and Fabiani -- $50,000 for one month of advice. Lehane and Fabiani got hauled into court by a citizen who called their hiring an obvious conflict of interest because they were also regular strategists for Edison. With Connell refusing, the pair agreed in court to forgo the 50 grand.

Connell also refused to pay an $11,000 bill for takeout food submitted by Davis' energy negotiators as an "emergency" food cost incurred during hectic power-buying negotiations, including the $1,000 for sushi alone.

Now Connell is pointing her six-shooters at Saber/Blackstone, the secretive financial firms trying to sell Davis' financial strategy and the Edison bailout during presentations to Wall Street. Saber/Blackstone have "tremendous influence on who will profit from California's energy plan," says Connell. "I am asking the Securities and Exchange Commission whether Saber/Blackstone should disclose [their] holdings in energy companies."

She is also slamming the Department of Water Resources, which Davis wants to turn into a huge power authority, forcing California even further backward in time as other states move ahead on true deregulation.

"The administration wants to take powers away from the Public Utilities Administration and give them to Water Resources, a scandal-ridden backwater that is filled with trouble," warns Connell. "Gray Davis is making an effort to maintain the tremendous veil of secrecy, even on such public issues as rate-setting, by burying it deep within a new bureaucracy."

Remember, California never got deregulation. We got a bizarre reregulation hybrid with far more regulations than before. Much of it was written by Edison and Pacific Gas & Electric consultants in a closed room with legislators like Assemblyman Steve Peace (D-Chula Vista). These screw-ups are the same crowd forming Davis' new plan to turn the Department of Water Resources into a power monolith that represses "green" energy like it was 1952.

"History is repeating itself," says Leopold, "with Edison overseeing the backroom dealings between the legislators and Davis, secret deals nobody can find out about, legislation hammered out behind closed doors -- exactly how they created deregulation in 1996."

As I have explained in the past, "deregulation" blew up partly because the big power monopolies in 1996 were allowed to fill the deregulation bill with loopholes they believed would give the big monopolies a leg up over green energy suppliers and out-of-state competitors.

But as Peter Navarro, a UC Irvine professor of economics and public policy, points out, "The big monopolies have no deep understanding of the open market because they have never operated in an open market. They did not understand the effect their provisions would have, and things turned against them."

Their doom was sealed when the PUC ruled that the monopolies all had to break up and sell their power plants.

Foolish Davis is demanding that the reluctant legislature back a huge public bailout of Edison. Moreover, our once-fat state treasury has been drained of an incredible $50 billion to buy power. For $50 billion, Gray Davis last fall could have supplied every home in California with free compact fluorescent light bulbs, free R-35 insulation in walls and attics, a complimentary energy-efficient refrigerator and a very large shade tree.

Instead, Perfect Hair got us sucked into secretly arranged long-term contracts in which California must buy energy for the next decade at premium prices.

As the Wall Street Journal's John Emshwiller told me, "The last time I interviewed Davis, he said that his long-term contract negotiators were like a T-ball team against the New York Yankees. So, gee, he lets the T-ball team go make deals on $43 billion in long-term contracts and $9 billion in spot purchases? That's committing an extraordinary amount of money in a very compressed time."

Several media outlets revealed in July that because power demand has leveled off, the state is selling the long-term energy it got stuck with back to out-of-state generators and other power suppliers. The loss, as of press time, was $34 million and counting.

Gray Davis' energy strategy appears to be backfiring like an old gas-guzzling pickup. But even if the scandal and horrendous missteps in his administration turn out to be "bigger than Quackenbush" (as Leopold suspects), Californians will probably still get stuck with a bloated new public power overlord and a huge bill for the bailout.

Our only hope is that after this nauseating Spin Cycle, Davis' aspirations for the presidency will get sucked down the drain.