Mayoral hopeful has parlayed Getty money, family ties and political connections into local prominence
Sunday, February 23, 2003
He's the wealthy young entrepreneur who took a stand against San Francisco's scandalous homeless problem - and through it built a formidable political base.
Now, as city government bleeds red ink, Supervisor Gavin Newsom, 35, says the grit and drive he showed in building a small-business empire sets him apart in the 2003 race to become San Francisco's next mayor.
"As a business person who has created jobs, met a payroll and balanced the books, I am uniquely qualified to meet the new fiscal crisis," he wrote in a recent pitch to campaign donors.
He portrays himself as a self-made businessman, but Newsom has reaped huge financial benefits from his ties to old money and power in San Francisco, particularly with his lifelong association with Gordon P. Getty, one of the nation's richest men.
Getty, 69, billionaire heir to an oil fortune and friend of Newsom's family for 50 years, helped Newsom become a millionaire by investing in every important venture of the supervisor's business career.
According to public records and documents Newsom himself provided:
-- Getty, or trusts and firms he controls, is lead investor on 10 of Newsom's 11 businesses, including his PlumpJack group of wine, restaurant, resort and real estate ventures. "Plump Jack" is the name of an opera Getty wrote.
Newsom's stake in those Getty-backed businesses is more than $6.9 million, according to a disclosure report filed last year with the Ethics Commission. Newsom says now that he overstated his share of one of the businesses, a development company, and has since gotten out of that venture.
-- Newsom's annual income from 1996 to 2001 topped $439,000 per year, according to tax returns he provided. Most of it came in wages and dividends from the same Getty-backed concerns.
-- Newsom's 2000 income ballooned to more than $1.3 million thanks to an $844,000 profit he made on the sale of a Pacific Heights house he bought with Getty's help, the returns show.
-- A Getty trust paid Newsom $169,000 for investment advice from 1997-2000, Newsom said.
-- When the family-owned Getty Images photographic business took its stock public in 1996, Newsom was in on the initial public offering, buying $10,000 worth. Since then, he has made $60,900 profit on trades of the stock, the tax returns show.
-- When Newsom wed San Francisco prosecutor Kimberly Guilfoyle, Getty and his wife, Ann, paid for a glittering reception at their Pacific Heights mansion. The gift section of Newsom's disclosure report states his half share of the reception's value was $116,708.
Newsom described Gordon Getty as a lifelong friend, but said the billionaire's investments in his ventures are strictly business. His own hard work - not the Getty fortune - made him a success, Newsom said.
"I started every one of those businesses," he told The Chronicle during two lengthy interviews. "Conceived of them, wrote the business plans, got all the investors, and by no means are the investors exclusive to the Getty family. Quite the contrary."
Nevertheless, Newsom's financial dealings with Getty feed a "rich kid" persona being exploited by his political foes - "This campaign is going to be a class war against me," he said.
The financial dealings already have roiled his campaign. On Feb. 14, in response to a Chronicle story about omissions and mistakes in his financial disclosure statements, Newsom amended his filings to report $2.1 million in loans he had received from Getty.
BORN TO POWER
A fourth-generation San Franciscan, Gavin Christopher Newsom was born Oct. 10, 1967, to William and Tessa Newsom.
From birth, he was connected to the city's elite.
His grandfather, William A. Newsom, was a confidant of Edmund G. "Pat" Brown, the former San Francisco district attorney and two-term governor.
His aunt was married to the brother-in-law of Rep. Nancy Pelosi, D-San Francisco, the House minority leader.
His father, retired state appellate Justice William Newsom, is a longtime friend of Edmund "Jerry" Brown, also a former governor and now Oakland mayor; John Burton, the powerful state senator from San Francisco; and especially Getty - son of legendary oilman J. Paul Getty - his friend since they were classmates at St. Ignatius High School in the 1940s.
As a youth, Getty kept a room at the Newsom family's Marina District home, and later Justice Newsom served as a Getty lawyer and trusted family adviser, Justice Newsom recalled in an interview.
In 1973, the abduction of a grandson of J. Paul Getty made international headlines when the kidnappers severed the victim's ear and mailed it to his mother. To win the youth's freedom, Justice Newsom and others traveled to southern Italy to deliver the $2.7 million ransom to intermediaries dressed as priests, he said.
Gavin Newsom said his childhood wasn't easy. His parents broke up when he was 2; his father moved to Placer County, while his late mother, Tessa, raised Gavin and his younger sister, Hilary, in San Francisco, sometimes working three jobs as a secretary, bookkeeper and waitress.
Newsom said he also had "pretty severe" dyslexia, a disorder that causes difficulty with writing and spelling, and sometimes reading and working with numbers. It still affects him today.
Newsom said he received a private education at the French-American bilingual school and Notre Dame de Victoire in the city, and, after he was unable to gain admission to a prep school, at public Redwood High School in Marin County.
When he needed help, his family's contacts came in handy, he acknowledged.
While applying for college, Newsom said, his family "called everybody we knew," including lawyer John Mallen, a friend of his father and a member of the Board of Regents at Santa Clara University, where he was given a partial baseball scholarship.
After graduating and earning a real estate license, Newsom said, he visited Walter Shorenstein, the real estate baron and major Democratic Party fund- raiser, who knew Newsom's father and grandfather.
At that 1991 meeting, Shorenstein told an aide, " 'Let's see what we can do at the Russ Building for Gavin,' " Newsom recalled. He said he spent an "intense" year working as an $18,000-per-year assistant for the Shorenstein Co.
While still working for Shorenstein, Newsom formed his first business partnership, PlumpJack Associates, to open a wine shop on Fillmore Street. His partner was Gordon Getty's son, William or "Billy" as he's called, whom Newsom had known since boyhood. He said Gordon Getty invested between $7,500 and $15, 000.
The wine shop opened in 1992. Other ventures followed. By last year, Newsom had created a network of limited partnerships and holding companies to own and operate businesses and investments in San Francisco, Napa Valley, Squaw Valley and Maui.
Most are part of the PlumpJack group, which in addition to the wine shop includes the upscale PlumpJack Cafe, also on Fillmore Street, the PlumpJack winery and an online wine outlet.
Other Newsom partnerships own two popular Cow Hollow night spots, the venerable Balboa Cafe and the MatrixFillmore bar, which features designer cocktails, a plasma screen video system and tables shaped as letters S, E and X. Other partnerships run the Squaw Valley Inn, or are associated with PlumpJack and Balboa cafes at the ski resort.
And while Newsom contended that Gordon Getty is only one financial backer of many, records show the billionaire is Newsom's top outside investor, either individually or through his firms and family trusts.
Getty owns 49 percent of the concern that manages all the PlumpJack businesses; 96 percent of the winery; 96 percent of the partnership that runs the Squaw Valley Inn; and more than 80 percent of Newsom's real estate development firm (recently, Getty and Judge Newsom bought him out, Newsom says). Getty has a smaller stake in the other businesses, but he's still the lead outside investor in most.
Getty declined to be interviewed for this story. In response to written questions, he said he treats Newsom like a son and invested in Newsom's first business because of that relationship. "After that," he said, "the reason for my further investments was the success of the first."
Getty's son Billy also invested in five businesses, and other Gettys, including Gordon's wife, Ann, own stakes in some.
Other investors represent a slice of upper-strata San Francisco: a firm associated with Pelosi's husband, Paul Pelosi; high-society plastic surgeon Jack Owsley; even TV newscaster Ross McGowan, whose morning news show has often showcased Newsom the politician.
Newsom, who told a reporter in 1998 that he wanted to be president of the United States, said he got into politics by volunteering on Mayor Willie Brown's 1995 campaign and hosting a fund-raiser for him in PlumpJack Cafe's private dining room.
In April 1996, Newsom was part of a San Francisco entourage that flew on the Getty family jet to a celebration in the mayor's hometown of Mineola, Texas.
Three months later, Brown put Newsom on the city Parking and Traffic Commission and in 1997 appointed him to the Board of Supervisors, filling a spot viewed in the political arena as reserved for a "straight, white male." He's been re-elected three times.
As a supervisor, Newsom was known for spearheading reform of the Municipal Railway and for forcing all city departments to write customer service plans.
His signature success, however, is his Care Not Cash ballot measure, which won in a landslide Nov. 5. It calls for ending cash aid to the homeless in favor of beefing up the city's system of shelter, counseling and treatment services.
To pass Care Not Cash, Newsom barnstormed the city, proselytizing on the virtue of eliminating the cash handouts to keep the homeless from spending their money on drugs and alcohol.
The measure created a political base - volunteers, donors, campaign staff - for his mayoral run.
At times, Newsom's business affairs have interfered with his official duties: Six times, he had to recuse himself from voting because of conflict-of- interest concerns.
Three recusals arose from Newsom's stake in a real estate firm whose legal entanglements brought the company to the edge of a scandal involving former Planning Commission President Hector Chinchilla.
Chinchilla faces criminal charges for allegedly working as a legal consultant to three developers who had matters requiring Planning Commission approval. Chinchilla said he broke no laws because he never voted on the matters.
Court records show that in 2000, Chinchilla worked for yet another developer with business before the Planning Commission: Ecker-Folsom Properties, the real estate firm in which Newsom was an investor.
Ecker-Folsom was run by Brian Bock, a developer and Newsom friend. Newsom said that in 1996 his PlumpJack Development Fund, which he owned with Gordon and Billy Getty, bought a 38 percent share of the firm.
Ecker-Folsom owned a former coffee warehouse on Folsom Street. In 1999, court records show, the firm leased it out as office space to the e-mail firm Critical Path Inc. for $100,000 per month.
But the building had a city planning permit for live-work lofts, not offices. And soon landlord and tenant were locked in a bitter legal dispute over who would pay the estimated $800,000 cost to get the permit changed so Critical Path could move in.
In a suit filed in San Francisco Superior Court, Critical Path claimed Ecker-Folsom was responsible: in lease negotiations, Bock said he had hired Walter Wong, an influential permit expediter, "to take care of" any permit issues.
Ecker-Folsom said the permit was the tenant's problem, and threatened that if Critical Path wouldn't pay for the permit, it would terminate the lease.
The lawsuit said the threat came in a letter from Ecker-Folsom's law firm, Crosby, Heafey, Roach & May, where Chinchilla was a partner. A copy of the letter was sent to Chinchilla. Bock says Chinchilla also sat in on one meeting about the matter, "representing me and Ecker-Folsom."
The Planning Commission, with Chinchilla absent, ultimately granted the permit. Ecker-Folsom and Critical Path settled their suit.
Newsom said he had "no idea" about Chinchilla's role, describing himself as a passive investor in the project who wasn't apprised of what Bock was doing. Bock confirms this. Newsom also said he never spoke to Chinchilla or any other planning commissioner about the project.
When asked whether he thought it was appropriate for the partnership to retain Chinchilla's firm, he replied: "It's up to you. I mean, I assume Brian did everything right. If there's something wrong, then I'm outraged by it, but if there is nothing wrong I have no problem with it."
Later in the interview, he railed against Chinchilla, saying it was "a disgrace, a black eye on the city, an outrage" that he had hired himself out as a planning consultant while on the commission.
Newsom said he cut his ties to Ecker-Folsom in December, when he sold his stake in PlumpJack Development to his father and Getty. He also said he gave up his title of president and is no longer involved in operations at the management firm that runs his PlumpJack businesses. Stepping back from and divesting of his businesses is part of his preparation to run for mayor, he said.
If he wins, Mayor Newsom will likely find himself on a tightened personal budget and facing potential conflicts arising from the businesses he still owns.
The mayor earns $167,192 a year. The City Charter specifically bars the mayor from having any other job, but not from being a business owner. "The Mayor shall devote his or her entire time and attention to the duties of the office, and shall not devote time or attention to any other occupation or business activity," it reads.
The City Attorney's Office has interpreted that to mean San Francisco's mayor cannot be paid any salary for outside work, though Newsom said he still would be able to draw dividend income from his businesses.
Public records show Newsom has $2.3 million in loans on his current Pacific Heights home - a $1.3 million first mortgage from a bank and a $1 million second from a Getty trust. He says his payments top $12,000 per month.
Newsom said that in addition to his share of profits distributed by his businesses, he and his wife, Kimberly, can still count on her prosecutor's salary, once she returns from a leave of absence taken for the mayor's race.
Besides, he said, he didn't purchase his house to live in it for long, explaining that he's gotten in the habit of buying, remodeling and selling his homes - and not minding living without a stick of furniture save for a bed and television.
"I don't have a grand lifestyle," he said. "One of the great things about owning restaurants is you eat at a restaurant. I have some of the most modest restaurant bills in America. There's nothing particularly grandiose about my lifestyle."
He makes the point over and over again. He's not that rich, and what he has,
"I developed strategies and I created opportunities," he said. "I executed. I implemented. I produced results and I did it over and over again. . . . No one ever knocked on my door saying, "Gavin, this is all yours.' "
Gavin Christopher Newsom
Born: San Francisco,
Oct. 10, 1967
Education: Bachelor's degree, political science, Santa Clara University, 1989
Work: Entrepreneur in wine, restaurant, bar, resort and real estate ventures
Politics: Democrat, member San Francisco Board of Supervisors,
former city Parking and Traffic Commission president
Hero: Robert F. Kennedy
IF ELECTED, VENTURES GO INTO BLIND TRUST
San Francisco Supervisor Gavin Newsom says he wants to enter the mayor's race "clean" - unburdened by potential conflicts of interest arising from his business ventures and partnerships.
To that end, Newsom says that if elected he'll place all his holdings in a blind trust.
"I want to come into this race clean, absolutely focused on a set of priorities that will make a difference for San Francisco," he told The Chronicle. "I just want to remove any expectation of impropriety in terms of any potential conflict."
Typically, politicians use blind trusts to keep investment portfolios at arm's length by empowering a trustee to trade stocks and bonds. Newsom said he plans to designate Robert Goldberg, his business partner and president of his PlumpJack Management Group, as his trustee.
However, Newsom also said he intends to maintain his stake in his PlumpJack group of wine, restaurant, bar and resort ventures and would rely on dividends from the businesses to supplement his City Hall income.
Other businessman-mayors have confronted similar issues.
Last year, in an agreement with New York's Conflict of Interest Board, Mayor Michael Bloomberg, the billionaire media company founder, agreed to sell as much as $45 million in stocks in nearly 100 publicly traded companies, many of which do business with New York City government.
Bloomberg also resigned as chief executive of his Bloomberg L.P. worldwide media firm, but retained his ownership of the firm. The agreement called for him to recuse himself as mayor from matters involving Merrill Lynch, which owned 20 percent of his company, and issues involving cable television franchises.
Former Los Angeles Mayor Richard Riordan set up a blind trust after his 1993 election. He also resigned from his law firm. Riordan's trust held stock and other interests, including his stake in a Los Angeles restaurant.
Assets Newsom holds through his trust still would be subject to the state's annual economic disclosure requirements. He also could still be prohibited from making, participating in making or seeking to influence governmental decisions in which he has a financial interest.
- Chuck Finnie, Rachel Gordon and Lance Williams
BUILDING A SMALL-BUSINESS EMPIRE
Supervisor Gavin Newsom, 35, has become a multimillionaire through a series of successful entrepreneurial ventures since the early 1990s.
Newsom ventures backed by Gordon P. Getty:
PlumpJack Associates L.P.
Formed: June 14, 1991
Business: PlumpJack Wines shop
Location: 3201 Fillmore St., San Francisco
PlumpJack Cafe Partners L.P.
Formed: Nov. 3, 1993
Business: PlumpJack Cafe restaurant
Location: 3127 Fillmore St., San Francisco
Partners: television actor Ed Asner and others .
Villa Encinal Partners L.P./ Airelle Wines, Inc.
Formed: March 1, 1995
Business: PlumpJack winery
Location: 620 Oakville Cross Road, Oakville, Napa County
CNCML L.P./SVI Management Inc.
Formed: Oct. 20, 1994
Business: PlumpJack Squaw Valley Inn, PlumpJack Cafe offshoot
Location: 1920 Squaw Valley Road, Olympic Valley, Placer County .
Balboa Cafe Partners L.P.
Formed: July 10, 1995
Business: Balboa Cafe bar and grill
Location: 3199 Fillmore St., San Francisco .
PlumpJack Development Fund L.P.
Formed: May 21, 1996
Business: Real estate investments
Location: 3201 Fillmore St., San Francisco .
Pierce Street Partners L.L.C.
Formed: Aug. 24, 1998
Business: MatrixFillmore bar
Location: 3138 Fillmore St., San Francisco .
Formed: April 28, 1999
Business: PlumpJack Wines shop Noe Valley branch, online wine sales
Location: 4011 24th St., San Francisco .
Formed: June 8, 2000
Business: PlumpJackSport retail clothing
Location: 1920-1995 Squaw Valley Road, Olympic Valley, Placer County
Balboa Squaw Valley Partners L.L.C.
Formed: Oct. 25, 2000
Business: Balboa Cafe offshoot at Squaw Valley ski resort
Location: 1995 Squaw Valley Road, Olympic Valley, Placer County
Members of Gavin Newsom's wine, restaurant, bar, resort and real estate partnerships since 1991:
Kevin & Bronwyn Brunner, John Burton, Casey and Michelle Cadwell, Bob and Barbara Callan, Frank Caufield, Donna Chazen, Lawrence Chazen, Joe & Victoria Cotchett, Michael & Hilary Decesare, Philip DeLimur, Don Dianda, Gretchen Dianda, Edward Everett, Richard Freemon, James Fuller, Stanlee Gatti, Robert Gerry, Andrew Getty, Ann Getty, Anna Getty, Chris Getty, Gordon Getty, Mark Getty, Peter Getty, Ronald Getty, Tara Getty, William "Billy" Getty, Robert Goldberg, Florianne Gordon, Stu Gordon, Gordon Goletto, David Goodman, Arthur Groza, Richard & Martha Guggenhime, Tony and Anthony Guilfoyle, Shelly Guyer, James & Shea Halligan, Bob & Jill Hamer, Erin Howard, Thomas Huntington, Isolep Enterprises (Paul and Nancy Pelosi family personal investment company), Peter Jacobi, Gaye Jenkins, Jeffrey Kanbar, Chad Kawai, David Lamonde, John Larson, Rob Lavoie, Leavitt/Weaver interior designers, Marc Leland, Maryon Davies Lewis, Anne McCutcheon, Chris McCutcheon, Ross McGowan, Rich McNally, Robert & Carole McNeil, Paul Mohun, Robert Mohun, Jeff Morin, Sara Moughan, Terry Moughan, Brian Mueth, Bob Naify, Marshall Naify, John Nees, Barbara Newsom, Brennan Newsom, Catherine & David Newsom, Gavin Newsom, Patrick Newsom,
Tessa Newsom, William Newsom, John O'Hara, Jack Owsley, Pacific Design, Matt Pelosi, Robynne Piggott, James Samuel Powers, Elizabeth Rice, Jeremy Scherer, Paul Scherer, Gary Schnitzer, Steve & Theresa Selover, Steve Siino, Trevor Traina, Chris Vietor, Francesca Vietor, Kenneth Weeman, Nicki West, Justin & Aridne Williams, Kevin Williams, Thomas & Kiyoko Woodhouse.
This article appeared on page A - 1 of the San Francisco Chronicle
© 2008 Hearst Communications Inc.