Donations from candidate’s father fueled high-spending race for California’s No. 2 position

It’s a job that can be a stepping stone to one of the most powerful jobs in America, or nothing more than a political footnote. The race to become California’s next lieutenant governor for the first time has two Democrats battling this November.

State Sen. Ed Hernandez and former U.S. Ambassador Eleni Kounalakis have each made clear they will spend big to try and replace Lt. Gov. Gavin Newsom, who once described his days in Sacramento in the job as “just so dull.”

Perhaps most interesting is the personal wealth Kounalakis has spent and the $5 million her father gave to an independent expenditure promoting her campaign.

The spending by self-made Sacramento real estate magnate Angelo Tsakopoulos through a political action committee of the California Medical Assn. has drawn scrutiny. State law encodes “a rebuttable presumption that an expenditure funding a communication is made at the behest of a candidate” if funded by a family member. The consultant who managed the donation and spending says everything was done legally.

Hernandez, an optometrist, spent just over $2.1 million through May 19, and Kounalakis, who was a prominent fundraiser before being named ambassador to Hungary by President Obama in 2009, raised almost $5.3 million and spent nearly $3.9 million — at least $3.3 million of which she donated to her own campaign.

The contest received scant attention compared with the race to become governor, which saw more than $90 million in fundraising as of mid-May.

On the campaign trail, Kounalakis has played up her father’s success story as an immigrant who started with nothing, worked hard and succeeded. She spent some 18 years working in his real estate company and rising to become its president, while joining her father as a major donor to Democratic congressional and presidential candidates — reaping such gratitude that Obama selected her for an ambassadorship even though she had first supported Hillary Clinton in the 2008 primaries.

Tsakopoulos gave millions to the CMA’s PAC promoting his daughter. Combined with Kounalakis’ donations directly to her own campaign, at least $8.3 million of the family fortune supported her through June 5.

Political consultant Richie Ross said Tsakopoulos contributed $5 million to the independent expenditure. Ross, who managed the donations, told The Times that this CMA committee has since been shut down — and Kounalakis’ father won’t do additional independent spending for her campaign because “there won’t be a need.”

CMA referred inquiries to Ross and otherwise declined comment. Ross said he was paid about $160,000 to manage the Tsakopoulos cash. The candidate’s father’s donations underwrote a television spot produced by an ad firm that has worked on Super Bowl commercials.

Despite the mandate to keep matters completely separate, the Kounalakis campaign made at least $1,400 in reimbursements to her father’s company, AKT Development. She also received about $30,000 in contributions from AKT employees, and another $29,200 directly from her father and brother.

Ross said he had an election lawyer brief Tsakopoulos on precautions the independent expenditure would need to take to remain independent from his daughter’s campaign. The attorney, Ross said, made clear that it was important to be able to prove the separation given how it would appear from the outside.

Ross, who has consulted four decades for Tsakopoulos, said he was given completely free rein to spend the $5 million while “at no time would Angelo, any member of his family — anybody associated with the campaign — know literally anything about what we were doing.”

The ad firm said Ross emphasized that it had to keep its work separate from Kounalakis’ campaign. “It was like, ‘They will never see or know anything about what we are doing,’” said Matt Burgess, creative director of the agency, Wongdoody.

Track the money in the race for governor »

The pro-Kounalakis ad does include a disclaimer noting her father’s funding — but since she uses her husband’s last name, the average voter may not have understood the message that the spot was “Sponsored by the California Medical Association. Committee major funding from Angelo Tsakopoulos.”

Ross said Tsakopoulos was not informed about the CMA independent expenditure’s plans to do mailings, TV ads or anything else until “Vote Eleni” billboards appeared in San Francisco and Los Angeles.

The Kounalakis and Hernandez campaigns did not respond to requests for comment. Tsakopoulos declined to comment through his office.

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Kounalakis listed her many assets on disclosure forms spanning 38 pages. She reported holdings in at least 10 properties worth over $1 million and numerous others worth between $100,000 and $1 million.

Kounalakis criticized GOP candidate Cole Harris during the primary for donating millions to his own campaign even as she was doing the same and her father was spending on her behalf.

“You have a Republican in this race who just gave himself $2 million, so I hope everybody up here agrees we need campaign finance reform and across the country,” Kounalakis said in April.

Loyola Law School professor Jessica Levinson, who specializes in ethical issues and money in politics, said the Kounalakis campaign could face questions if someone files a complaint or if the Fair Political Practices Commission decides on its own volition to open an investigation. Either way, it’s likely that any investigation wouldn’t be completed until after the November election, “at which point it just becomes a cost of doing business,” said Levinson, who is skeptical such a complaint would move voters.

“It could be legally significant though not necessarily politically significant, given that most voters think campaign money is dirty anyway,” agreed Jack Pitney, professor of government at Claremont McKenna College.

Hernandez enjoys support from dozens of labor unions, including the California Teachers Assn., and Democratic officials, including the state party chair, Eric C. Bauman, a registered nurse who endorsed Hernandez in 2016 before he was elected to the party leadership post. He said he still personally supports Hernandez but is not actively campaigning for him.

The state party is not endorsing in the race, since the candidates each agreed they would avoid that battle. “[W]e will be campaigning as individuals and sharing our personal stories and messages,” and an endorsement fight “would only serve to divide our time, our focus and our Supporters,” Kounalakis and Hernandez said in a joint statement.

Bauman said he thinks Kounalakis will maintain the the money advantage in the race. “I can imagine that there are groups that will do independent expenditures on Ed’s behalf, but I don’t know that they’ll be able to keep pace with the kind of money that Eleni and her father have been able to put in,” he said.

Hernandez has built business interests that include an optometry practice that pays both him and his wife, also an optometrist, each more than $100,000 per year. His investments appear to include three or more properties worth at least $1 million each.

Elected to the state Assembly in 2006 and the California Senate in 2010, he has been in the middle of numerous healthcare battles that have won him political friends and enemies. Through a prodigious fundraiser from pharmaceutical interests, he collected more than $207,000 from 2011 to 2017, the most of anyone in the Legislature, according to the Sacramento Bee. He has earned the enmity of organizations like CMA, with doctors battling nurse practitioners over changes in what elements of healthcare must legally be done by physicians or may be done by other practitioners.

He is termed out of the Legislature.

The $146,854-per-year job Kounalakis and Hernandez are seeking is notoriously light on responsibilities other than sitting on boards and commissions and filling in for the governor when he or she is out of state or leaves office.

“My sense is not a lot of people who want to be lieutenant governor say, ‘I’ll be happy if I retire as lieutenant governor,’” said Levinson of Loyola Law School. “You have the bully pulpit but not all that much else…. It really is a stepping stone position.”

Burger is a special correspondent.