Maloofs involved with Schwarzenegger campaign

September 1

Last February in California, when they organized a $1 million fundraiser for Gov. Arnold Schwarzenegger, Sacramento Kings owners Gavin and Joe Maloof's family casino business was negotiating a deal that would most definitly net them millions from running what could be one of the world's largest casinos, according to interviews and state records.

Six months later, Schwarzenegger announced a deal for a huge tribal casino that will be managed by a company partially owned by the Maloofs. The Maloof fundraiser means that Schwarzenegger, who campaigned on a refusal to take money from Indian gambling interests, received huge contributions through those connected to gambling businesses.

George L. Maloof Jr., who runs the family's Palms in Las Vegas, said he discussed the deal before the fundraiser, but said his brothers weren't involved at the time and the agreement wasn't signed until afterward.

The Maloofs publicly emerged two weeks ago as players in the deal. Schwarzenegger spokesman Vince Sollitto said that's when the administration learned of their involvement as well.

Schwarzenegger stated Aug. 19 that his administration had agreed to let the Lytton Band of Pomo Indians operate 5,000 slot machines in the Bay Area city of San Pablo. The number of slots was later sliced in half and legislative approval postponed until at least December after Bay area officials opposed it.

Bob Stern, president of the Center for Governmental Studies, said Schwarzenegger should refund the $64,505 contributed by Maloof Sports and Entertainment.

Despite once saying he didn't need special interest money, Schwarzenegger has raised campaign funds at an unprecedented pace, much of it from interests with bills passed by the Legislature and now awaiting his signature or veto.

It is said that at the time of the fundraiser, Joe and Gavin Maloof bragged they'd raised more than $1 million for Schwarzenegger by hosting $100,000 and $25,000 per person fundraisers before and during a Kings game in February.

Money raised during the Feb. 6 event went to Schwarzenegger's California Recovery Team fund, which the governor uses to support his various political interests. For the March 2 primary, the fund's priority was supporting Schwarzenegger's campaign for Propositions 57 and 58. Now, as he fights two gambling-related ballot issues, the California Recovery Team fund has donated $300,000 to a Schwarzenegger-controlled committee opposing those initiatives, Propositions 68 and 70.

Proposition 68 gives card clubs and race tracks 30,000 slot machines, with a third of the revenue going to state and local governments, while Proposition 70 gives tribes unlimited gambling with 8.8 percent of their revenue to the state. Either would undermine the agreement the administration reached on the San Pablo and other casinos.

If the San Pablo casino deal is approved by the Legislature and U.S. Interior Department, the Maloofs are set to collect about 20 percent of the profits from a planned 200,000 square-foot casino projected to take in $540 million a year.

State records show the two companies that will run the San Pablo casino, California Indian Gaming Development LLC and California Indian Gaming Management LLC, were registered Nov. 24, 2003. Ownership is shared between the Maloofs, gambling executive Jerome Turk, the Rumsey Band of Wintun Indians, and the Pala Band of Mission Indians. Public records don't show when the Maloofs signed on.

Turk stated that he most likey started talking to the Maloofs at the beginning of the year. Earlier this year Turk and George Maloof said it wasn't until March they were officially involved, at least a month after the fundraiser.

George Maloof announced that the family has been looking for potential California gambling opportunities since it purchased the Kings in 1997. He said the family has been on good terms with officials of the Cache Creek Casino Resort operated by the Rumsey Band, who also brought Turk into the San Pablo discussions about two years ago.