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F A REPORTl:Q THE PUBLIC Consumer Impostors: The Big Business Deception Behind Props 200,201,&202 by Jamie Court Foundation for Taxpayer & Consumer Rights . FOUNDATION TAX?AYER • • 4 0 • • CONSUMER ·.RIGHTS 1750 Ocean Park Blvd. Suite 200 Santa Monica. CA 90405 phone:. 310-392-0522 fax 310~392-8874 f- l c- 1 - THE CONSUMER IMPOSTORS: A REPORT TO THE PUBLIC "You need to have credibility.And that means when you pick people to join your coalitionmake sure they're credibleand if they're not crediblekeep 'em away. In a tort reform battle, if State Farm -I think they're here,Nationwide- is the leaderof the coalition,you're not gonna pass the bill. It is not credible.Okay?" Neil Cohen, Grassroots Consultant to American Tort Reform Association, in a speech at Colony Beach Resort Hotel, Sarasota Florida, February 7, 19941 (Exhibit 1) Who is really behind Propositions 200, 201 and 202? If you believe the proponents, it is a unique combination of businesses and consumer advocates working to improve the economy. But, like so many other political manipulations California voters have come to expect during political campaigns, the truth is that cash-rich special interests are once again seeking to further their own self-interest at the expense of Californians - only this time masquerading in a "consumer" disguise. An exhaustive investigation of documents from court proceedings, reports filed with the Fair Political Practices Commission and other confidential sources reveal an elaborate Ponzi scheme. Political mercenaries, whose histories are fraught with misdealings, fraud and hypocrisy in which the interests of consumers are ignored or abused for personal gain, have organized a highly-lucrative campaign guaranteeing themselves hundreds of thousands of dollars in consulting and signature-gathering contracts from big business and the insurance industry- principally by merchandising the name of "Voter Revolt," 2 once a non-profit organization and the state's toughest critic of insurance companies and big business. Only the Silicon Valley and its big money could pioneer the latest in artificial grassroots technology: the "virtual consumer group." The political action committee of the big business interests, the so-called "Alliance to Revitalize California," has done just that by buying the "Voter Revolt" name with $3 million and putting it at the front of its multi-million dollar campaign to strip consumers of their rights. The Alliance's· own internal memo notes that using the name "Voter Revolt" will confuse the public about who the true proponents of their proposals are,3 and thus give the Alliance a far better chance of success at the ballot box than it would ever stand if the identity of the true sponsors - insurers, business interests and wealthy individuals who have had more than one brush with the law - were known to voters. While the backers of Props 200, 201 and 202 work desperately to project a "consumer" face to the public, the true sponsors are a consortium of Silicon Valley tycoons, millionaire high I" Coalition and Ally Development," Transcript of Presentation by Neal Cohen, APCO Associates, Grassroots Consultant to the American Tort Refonn Association, Public Affairs Council Conference, Colony Beach Resort, Sarasota Florida, February 7, 1994 (Tape available upon request.) 2''Voter Revolt to Cut Insurance Rates" operated under the umbrella of Access to Justice Foundation, a non-profit advice group incorporated by Proposition 103 author Harvey Rosenfield in 1986. 3Toe campaign memo is attached as Exhibit 14. I rollers, Wall Street investment firms and the likes of Transamerica Insurance Company, all operating under the misnomer of "the Alliance to Revitalize California." Many of these major donors have engaged in allegedly illegal conduct in the past, for which Propositions 201 and 202 could buy them legal immunity. Proposition 200, the no fault auto insurance, is the Trojan Horse in an elaborate scheme to sneak Props 201 and 202 by the voters. Thus far, the Alliance to Revitalize California has spent $10.9 million of big business and insurance company money to re-write the laws to benefit themselves pursuant to a blueprint for subverting the judicial branch born and nurtured in their East Coast think tanks. With every public interest and consumer group in the state and nation opposed to Propositions 200,201, and 2024, there are indications that the big business backers themselves have become the targets of a scam by political consultants who promised them that the name "Voter Revolt" would deliver the vote of the California consumer. The election fraud has extended to ballot arguments in the voter pamphlet in which the proponents of Propositions 200, 201 and 202, according to the Los Angles Times, "went far to find someone with consumer credentials to tout their measure - 1,500 miles, in fact, to Spencer, Iowa, and the home of Garry DeLoss." As the Times notes, ballot signer De Loss, an Iowa businessman, was ousted eleven years ago as director of the San Diego-based Utility Consumer Action Network (UCAN), for mismanagement, but signed the ballot argument in favor of the initiatives identifying himself as UCAN's former executive director. 5 When UCAN, which opposes all three initiatives, learned that the group's name was being misused to mislead voters, the consumer group went to court to ask a Sacramento judge to remove the consumer group's name from the ballot. To stop the litigation, the Alliance char1ged DeLoss's name to read, "Former Executive Director, California Consumer Organization." As the Los Angles Times points out, "In fact, no group with that name exists." Because "California Consumer Organization" was printed in the voter pamphlet in capital letters, 12 million voters will be given the fraudulent impression, assiduously cultivated by the initiative proponents, that a California consumer group supports the measure, when none do. The deception perpetuated against the electorate is designed to win the big business and insurance interests their prize: limiting the right of the consumer to have their day in court. This report details the election deception behind Propositions 200, 201 and 202. 4More than 50 public interest groups oppose the initiatives and none support them. Those in opposition include Consumers Union, Ralph Nader, Consumer Action, NAACP, Congress of California Seniors, California Public Interest Research Group (CALPIRG), Lincoln Bondholders Association, Public Citizen, Sierra Club, Center for Pubic Interest Law, California Nurses Association, California State Council of Service Employees International Union(SEIU), California Foundation for Independent Living Centers, California League of Conservation Voters, Southern Christian Leadership Conference, and Utility Consumer Action Network(UCAN). 5"Dan Morain, "Unseen Side of Voter Guide," Los Angeles Times, February 22, 1996, A3. See Exhibit 2. 2 TABLE OF CONTENTS Introduction 1 The Drafters 3 Manhattan Institute 3 Manhattan Institute & Prop 200 4 Manhattan Institute & Prop 202 6 Proposition 201 6 The Money Men 8 Andrew Tobias 8 Tom Proulx 12 Rep. Chris Cox Connection 13 Al Shugart ... Frivolous Lawsuit? 13 Who Else's Money? ... CEOs With Legal Troubles 15 Money From Keating's Accountants 1 7 Where is the Insurance Industry? 18 The Front Guys 21 Bill Zimmerman 22 Solicited Trial Lawyers Anti-No Fault Contract 23 Phone Fraud in Voter Revolt's Name 24 Zimmerman Arranges $25,000 Loan from Lawyers 26 The Big Switch 2 7 The Merchandising of the 'Voter Revolt" Name 28 Allied With Republican Attackers of I 03 2 9 Bill Replicating 200 Sponsored By Insurers 30 No Fault Critic Turned Champion 3 1 No Premium Reductions? 32 Conclusion 32 THE DRAFTERS The proponents of Propositions 200, 201 and 202 claim they wrote the initiatives themselves. That is incorrect. The measures are the product of insurance company lobbying groups and big business-funded East Coast "think tanks" that have for many years advocated restrictions on the rights of consumers and citizens to seek legal redress under state consumer-protective "tort laws." Last year, the work of these organizations leaped to the fore in Washington: Newt Gingrich's "Contract With America" contains a laundry list of their proposals under the misnomer "Common Sense Legal Reforms," the same title occasionally used in the past by the promoters of these initiatives. 6 See Exhibit 3. The Manhattan Institute. A primary source of two of the proposed ballot initiatives, the Manhattan Institute is a conservative think tank,7 and one of the leaders of national and state efforts to restrict tort laws. While the Manhattan Institute purports to be concerned about the protection of consumers against avaricious lawyers,8 it is funded by a roll call of some of the largest corporations in the world: State Farm Insurance, Aetna, Chase Manhattan Bank, CitiCorp, Bristol-Myers Squibb, Exxon, Pfizer, Phillip Morris, Procter & Gamble, Prudential, RJR Nabisco, Cigna, Dow Chemical, General Electric, Union Carbide, Metropolitan Life, Safeco, and Traveler's. Among the four corporate donors listed at the $50,000 and above level by the Manhattan Institute two are insurers, State Farm Insurance Company and Aetna. A copy of the donor list is attached as Exhibit 4. The Institute' s Judicial Studies Program, created in 1986, brought together Michael Horowitz, Peter Huber and Walter Olsen, a three-some who emerged as the leading critics of the civil justice system and proponents of "tort reform." 9 Horowitz is a long-time 6According to "ABUConsumer Groups Discuss No Fault," Independent Insurance Agent and Brokers. of California Weekly Insider, October 3, 1994: "The Coalition for Common Sense Auto Insurance - sponsor of a pay-at-the-pump auto insurance proposal-- has joined Voter Revolt--sponsor of Prop 103--with the intent of filing two initiatives ...IIABC's ABL partners, are in the process of reviewing the no-fault draft language and recommending language. " Gingrich's Republican Contract With America legislation is titled, "Common Sense Legal Reform Act." It was the ninth of the Contract bills to be brought to the House floor.