California Confidential

"It's a victory. A total victory!" Howard Kaloogian exclaimed on the right-wing after hearing that the petition to recall the election of California's embattled Gov. Gray Davis had gained enough signatures to qualify as a ballot question. Kaloogian, a former Republican California legislator, had plenty of reason to cheer. Because while the media have presented Rep. Darrell Issa (R-Calif.), the wealthy car-alarm magnate, as the man who drove the recall, he's actually been little more than a useful idiot for a stealthy group of GOP operatives who laid the groundwork. Months before the recall was even a blip on the media radar, this consultant cabal began manipulating California's idiosyncratic electoral system, creating a muscular funding mechanism and exploiting it for its members' own ends.

The cabal includes Kaloogian, who was a right-wing backbencher in the state Assembly, Sal Russo, who handled banker Bill Simon's hapless 2002 gubernatorial campaign, and David Gilliard, a veteran GOP strategist with a career steeped in scandal. They're joined by former Enron pollster and Republican tactician Frank Luntz, who devised a strategy for the recall campaign centering around negative character attacks and avoidance of policy discussion. With the surprise announcement of actor Arnold Schwarzenegger -- who boasted on The Tonight Show Aug. 6, "I have plenty of money. Nobody can buy me off." -- the movie star's high-priced uber-consultants George Gorton and Don Sipple have grabbed the baton in the recall race, eager to take it the last mile to the state capitol. Thanks to this handful of men and the millionaires who bankrolled them, what started with a petition and a few phone calls has become an election that may unseat a twice-elected governor and dramatically affect the lives of one in seven Americans.

The recall saga began in February when Ted Costa, a self-styled "anti-tax activist," started gathering the requisite 100 signatures to file a recall petition. (It took an additional 899,900 signatures to turn that petition into a ballot initiative.) Kaloogian and Russo urged Costa to hold off. They wanted time to get their own recall committee off the ground to solicit donations. But Costa went ahead on his own and filed the petition, forcing them to improvise. With little public interest in a recall despite Davis' low approval rating and the state's fiscal crisis, Russo and Kaloogian realized that a movement would have to be manufactured from the top down.

In order to find a funding source to jump-start the movement, Kaloogian enlisted Ray Haynes, a Republican leader in the state Assembly's far-right caucus. To his chagrin, Haynes was rebuffed by Simon, Schwarzenegger and Gerald Parsky, George W. Bush's chief California fund-raiser. Parsky initially distanced himself from the recall out of concern that it might backfire or divert funds away from Bush's 2004 re-election drive. Only after these rejections did Haynes call on fellow right-winger Issa, who was planning to run for governor in 2006. Issa enthusiastically stepped forward to form his own recall committee, Rescue California, with $1.7 million from his personal fortune. Suddenly, droves of clipboard-waving petitioners were descending upon the nucleus of California civic life -- shopping-mall parking lots -- and were paid $1 per signature.

To direct Rescue California, essentially the recall's funding mechanism, Issa hired Dave Gilliard, a Republican operative with a reputation for using underhanded tactics to help his archconservative clients' campaigns. In 1988, for example, in a stunt reminiscent of Mississippi's Reconstruction-era "shotgun policy," Gilliard arranged for uniformed guards to stand outside Orange County polling places in predominately Latino districts to deter the kinds of voters who might cast ballots against his conservative Republican client.

As the director of Rescue California, Gilliard contrived an ingenious plan to get contributions from state legislators who were his clients in exchange for political favors. The Sacramento Bee first reported in May that Gilliard had sent 1 million mailers to heavily Republican -- and highly affluent -- zip codes in the state soliciting donations and support for the recall. These letters bore the signatures of a number of Gilliard's clients, giving them much-needed name recognition in next year's Republican primaries against opponents not included in the letters. For the privilege of inclusion in Gilliard's promotions, the politicians were prepared to pay him.

One of Gilliard's clients, Republican Assembly member John Campbell, signed letters sent to Irvine, where he is facing a primary challenge in the overwhelmingly Republican district from fellow Republican Ken Maddox, who was not included in the letters. Campbell donated $10,000 to Rescue California and gained the endorsement of the Lincoln Club, an organization of businesspeople and executives that has also coughed up $100,000 for Rescue California. Another of Gilliard's clients who signed the letters, Cristi Milazzo-Cristich, is a Lincoln Club activist and a candidate for the Assembly in Orange County; she has kicked in $7,000 to the committee. Meanwhile, Republican State Sen. Rico Oller paid Rescue California $30,000 for the honor of being the voice of a radio spot on behalf of the recall.

Though Gilliard told The Sacramento Bee that "involving many politicians is a good way for Rescue California to cover costs," in late July he told me that the notion that his clients have donated to Rescue California to advance their own campaigns is "idiotic." "We asked every member of the legislature if they would like to sign the letter for Rescue California," he said. "Most of my clients accepted because my clients happen to be smarter. The other half that didn't accept are not my clients."

Russo, who directs the Recall Gray Davis committee along with Kaloogian, called Gilliard's fund-raising ploy the natural byproduct of a dog-eat-dog political atmosphere. "People in politics always do things for their own advantage, like Issa funding the recall with his own money, so that's the way politics works," Russo told me. "I don't see anything wrong with that." Both Russo and Gilliard have been enriched considerably by the donations to their own committees: Russo has run up a $67,000 tab while Gilliard sent Issa a $72,000 bill for June alone.

While the consultants paid by Issa propelled the recall, Issa personally intimidated one Republican consultant to shut down his operation against it. As founder of Republicans Against the Recall, political consultant and former Lincoln Club CEO Scott Barnett called the recall "a political weapon of mass destruction." Even though he shares Republicans' disdain for Davis, Barnett opposes the recall because he believes it will set a dangerous precedent that will widen the partisan divide. "If this recall goes through here, there will be retribution by Democrats against Republican officeholders across California," he said. "This will open the door to say, 'It's acceptable to go after officeholders who have committed no crime and are mentally and physically capable of governing.'" Barnett claims that in retribution for his own principled stance, Issa personally called one of his clients, a Republican state legislator, and told him to fire Barnett as his pollster. Barnett also claims that Andy Gharakhani, Issa's district director, called another of his clients and threatened to run a Republican against Barnett's client in the upcoming primaries if the client did not fire the dissident Barnett.

"I don't take it personally," said Barnett. "You know, Darrell Issa has got a lot of money and because of that he has very little accountability -- that's just Darrell."

Still another consultant who has been instrumental in setting the recall in motion -- and profiting from it -- is the Washington-based Luntz, a former pollster for Enron and Newt Gingrich. His services were retained by Issa's Rescue California to develop an anti-Davis strategy based on focus-group research conducted in Orange and Sacramento counties. His memo, provided in July by U.S. House Minority Leader Nancy Pelosi to the San Francisco Chronicle, outlined 17 ways to "kill Davis softly." "It is important to trash the governor," Luntz wrote, but he added, "Issues are less important than attributes and character traits in your recall effort." Luntz pointed out that the majority of Californians "are unfamiliar with the recall process -- and this uncertainty means voters can be easily swayed in either direction."

Luntz's tactics were on bold display during Schwarzenegger's boisterous Tonight Show appearance. The actor used the spot to announce his surprise candidacy while launching a withering attack on Davis and the Sacramento establishment before a national audience. Carefully avoiding mentioning the budget or any policy, Schwarzenegger boomed the Luntz-tested line, "Do your job for the people and do it well, otherwise you are 'Hasta la vista, baby!'"

Cheering in the audience were a gaggle of Republican operatives, including Schwarzenegger handler George Gorton. Gorton was first hired by Schwarzenegger in 2002 to direct the star's campaign for Proposition 49, a feel-good ballot measure providing grants for after-school programs (and intended as a vehicle to establish Schwarzenegger's political credibility before a run for governor in 2006). Gorton is a veteran consultant known for his work with Republican moderates like former Gov. Pete Wilson. He is highly regarded in California political circles, and for that, his services carry a hefty price tag. During the Prop. 49 campaign, Schwarzenegger heaped $780,000 on Gorton's California Group. This June, with the premature arrival of a gubernatorial campaign thanks to the recall, the money started rolling again with a $60,000 payment to Gorton through the Prop. 49 committee.

In this new effort, Gorton has taken on Sipple, his former partner from Wilson's campaigns, as Schwarzenegger's media director. Sipple gained a reputation as a hard-hitting media consultant by fashioning ads to push viewers' emotional buttons. These negative, character-based attacks on opponents were instrumental in securing a series of Republican victories, notably George W. Bush's defeat of Ann Richards in the 1994 Texas gubernatorial race. But after working on Bob Dole's 1996 presidential campaign, which ended in a landslide defeat, and weathering a personal scandal in 1997, which caused his resignation from his ongoing political work, Sipple's luster was tarnished. In 2000, Sipple again found himself embroiled in scandal, exposed for accepting $120,000 from then-California Insurance Commissioner Chuck Quackenbush -- a client planning to run for Senate -- to craft a veiled campaign ad in which the commissioner played a starring role. The money Sipple received was part of $13 million intended for earthquake victims. The victims never saw a penny of it, and Quackenbush was forced to resign in disgrace. But now as Schwarzenegger's media consultant, Sipple is positioned to return to his former influence and paycheck.

On Aug. 13, Schwarzenegger shuffled his team, demoting Gorton and adding another consultant embroiled in the Quackenbush scandal, Martin Wilson, who accepted $375,000 from the former insurance commissioner. Gorton's role as Schwarzenegger's chief strategist has been assumed by Bob White, Gov. Wilson's former chief of staff. The move highlights Schwarzegger's close ties to Wilson, who is persona non grata among Latino voters for his support of the anti-immigrant initiative Prop. 187 in 1994.

After The Tonight Show, Gorton told a reporter from the San Francisco Chronicle that he was unaware of Schwarzenegger's intentions prior to the program. Besides his impending demotion, there are other signs that Gorton may have been telling the truth. Russo recounts a series of private meetings, while Schwarzenegger was in Mexico City promoting Terminator 3, between Gorton and former Los Angeles Mayor Richard Riordan, who lost to Simon in the 2002 Republican gubernatorial primary. As Russo explained to me, Gorton was planning to jump ship and join Riordan's campaign if Schwarzenegger did not declare, moving from one self-funding client to the next.

But Schwarzenegger's announcement came as the greatest shock to Issa, who had already spent some of his car-alarm fortune to warm up a gubernatorial campaign. He had taken out radio ads, printed up posters and hired a new team of consultants, including Ken Khachigian, a veteran speechwriter who served on President Richard Nixon's 1972 campaign "attack group," and Larry McCarthy, the media producer of the infamous Willie Horton ad that helped elect George Bush Senior in 1988. However, with the Republican Party suddenly lined up behind Schwarzenegger, Issa's ambition was crushed. He found himself at a press conference, the victim of a vast Republican conspiracy, and he cried.

Make way for Schwarzenegger and his team of consultants, whose credo can be best summarized by a statement Gorton made in Mother Jones while working on then-Russian President Boris Yeltsin's 1996 re-election campaign: "Unless you're going to make some serious money, it's not worth it."

Max Blumenthal is a writer in Los Angeles.