Meg Whitman: A Female Checchi or Simon?

By Garry South

May 7, 2009

Capitol Weekly

So, former eBay CEO Meg Whitman has decided she wants to trade on-line flea-market trading for the governor’s office of the largest state.  In one fell swoop, no less.  She’s never run for office before at any level.

Truth to tell, I’ve never actually met Whitman.  I did, however, run the campaigns that beat the last two novice-candidate businesspeople seeking to be governor – Northwest Airlines magnate Al Checchi in the 1998 Democratic primary and Republican financier Bill Simon in the 2002 general election.  I’ve still got the playbook on ‘em.  Will Whitman be different?  It depends.

One of the major problems with wealthy business types attempting to cross over into politics is their own – how shall we say? – inflated self-impression.  Many really do envision themselves as smarter and more accomplished than officeholders who have succeeded in the political system for years or decades.  After all, they’ve run a business, created jobs, “met a payroll.”  Checchi derided Gray Davis as a “helpless paper pusher” as a way of describing Davis’ 12 years in two different statewide offices and six and a half years as Gov. Jerry Brown’s chief of staff.

In 1998, Checchi also appeared genuinely proud of his messy leveraged buyout of Northwest Airlines in 1989.  He regularly bragged even to working-class Democratic audiences that his takeover of the company had been turned into a “case study at the Harvard Business School.”  And indeed, it had.  But he was apparently hoping no one would actually read the Harvard study.  When intrepid political reporter Phil Trounstine pored over it, his resultant investigative piece in the San Jose Mercury News laid out the ugly facts and gave the lie to Checchi’s rose-colored version of the buyout.

In focus groups, we would expose voters to Checchi’s own, unedited bio – “a self-made business man who took over a struggling company and made the hard decisions that turned it around.”  Democratic and independent voters alike would sneer knowingly, “Yeah, I know what that means – he made a fortune while firing workers and taking away the rest’s health benefits, and now he thinks he’s a genius because he got filthy rich on the deal.”  And, that is exactly how he got to be the 113th richest man in America by 1998.

Simon also seemed equally pleased with his record as a private-sector operator, largely managing enterprises founded or passed on to him by his father, a former treasury secretary.  On his own, though, Simon the Younger had bought out the venerable Bekins Moving & Storage, and rechristened it Geologistics – a high-end, worldwide moving company catering to shipping such things as priceless works of art for wealthy tycoons moving from, say, New York to Singapore.  It all sounded very classy and upscale.

Except that when we checked into the company, it turned out it was flailing if not failing, and that Simon had been forced to go to Wall Street to sell commercial paper to keep it afloat.  Because it was closely held by the Simon family, it would have been impossible for us to determine its solvency absent his need to turn over financials in order to borrow money to save the company.  As it turned out, it was far from the success story Simon glowed about.

But the biggest laugher with Simon was his earlier takeover of a company called Pacific Coin.  Unbeknownst to the Davis campaign or even to the media, Simon was going through a civil jury trial in Los Angeles in the late summer of ‘02 that resulted in a $78- million-dollar fraud verdict against him in a lawsuit brought by his partner in the takeover deal.  So the guy who was promising to run government like a business was found guilty of fraudulently running a business into the ground.  (In fairness to Simon, the verdict was thrown out by a judge a month later – but not in time to save his candidacy.)  In fact, Simon had so many simultaneous legal actions going on that we started to term him the first candidate for governor in California history whose campaign was covered mainly on Court TV.

When we quickly assembled focus groups to throw this new development at them, people were astonished that such a huge verdict for fraud would be levied against a major-party candidate for governor just three months before the election.  But they were even more incredulous when told the nature of the company in which the supposedly savvy Simon had bought a controlling interest.  Pacific Coin was, in fact, an old-fashioned pay-phone company – in the age of the cell phone.  So much for Simon’s acumen as an investor.

In Whitman’s case, eBay in truth is probably an asset of some value.  As senior advisor to then-Controller Steve Westly’s 2006 run for governor, we used his eBay experience to positive effect in building his bona fides as a business-savvy entrepreneur.  Voters generally view the on-line auction market as a non-polluting, populist company that allows average people to sell unwanted items and buy things of interest – even to make a living on eBay, as about 400,000 people do.

But in Checchi’s case, I used to say, “You live by Northwest Airlines, you die by Northwest Airlines.”  And as with Whitman and eBay, when association with one major company is the prime credential on which you are seeking to become governor, that entity and your stewardship of it legitimately will come under intense, microscopic scrutiny.

In that vein, Whitman’s tenure at eBay was not without controversy or failure.  For the last couple years under Whitman, the company experienced a marked slowdown in growth, and its stock lost half its value.  In 2005, she also engineered the $2.6 billion purchase of Skype, the Internet-based video calling service, believing that eBay buyers and sellers would find talking to each other directly to be peachy keen.  Instead, it turned out to be a lemon, and eBay wrote off Skype and is trying to dump it.

While Whitman was CEO, the company also came under heavy fire for forgeries and stolen items, dishonest sellers and inaccurately described merchandise.  In addition, criticism was leveled at the Whitman-era eBay for generating revenue growth by ever-increasing fees on sellers, which was an unsustainable, self-defeating strategy.

Whitman shares yet another commonality with Checchi – a spotty voting record.  Voters in polls and focus groups were flabbergasted to learn that the guy who wanted to be elected governor in 1998 hadn’t even gotten off his duff to vote in either the primary or general election the last time California elected a governor in 1994.  This was an immediate disqualification for many primary voters (Checchi finished with only 12.5 percent of the vote, despite spending a then-record $40 million on his primary campaign).

Whitman didn’t bother to vote in four statewide elections since just 2003 – including the ‘03 recall election that put Gov. Schwarzenegger in office.  À la Checchi, she hasn’t been able to verify whether she voted in the 1994 gubernatorial election, when the controversial anti-immigrant Prop. 187 was on the ballot.  She has apologized for these lapses, saying she was busy running a company and had two kids.  (Average voters with kids use that as an excuse for skipping the polling place?)

In addition, Whitman was registered decline-to-state until the fall of 2007.  How will that sit with die-hard Republican primary voters?  We also made great use with Democrats in the ‘98 primary of Al Checchi’s political contributions to Republican U.S. Senate and presidential candidates.  Likewise, Whitman has made contributions to Democratic candidates – including to Westly in the last governor’s race, and even to liberal Democratic Sen. Barbara Boxer.  How will that fly with purist GOP primary voters?

In the end, there is simply no way to predict how good a candidate Whitman will turn out to be, or how good of a campaign she and her plethora of handlers will manage.  But one thing is for certain: She will be running against history as a first-time candidate for governor whose only major credential is having run a major business.