COLUMN ONE : The Man Behind the Governor : Karl Samuelian is more than the governor's chief fund-raiser. He is one of the most powerful men in state politics.

By PAUL JACOBS

March 25, 1990 12 AM PT

TIMES STAFF WRITER

SACRAMENTO — He is one of the most powerful figures in California politics, but has never run for office and is hardly known outside a small circle of Capitol insiders.

His name is Karl Samuelian and without him George Deukmejian likely would never have become governor.

The son of Armenian immigrants--a poor boy who worked his way through college and law school in his dad’s dry cleaning shop--he has won his place in the political firmament by doing a job for Deukmejian that few politicians enjoy doing for themselves: raising money to pay for political campaigns.

Samuelian’s fund-raising activities, particularly in the Armenian-American community, gave Deukmejian the money he needed to launch his underdog bid to become governor in 1982. His subsequent efforts literally put a roof over the governor’s head--providing him with a furnished $880,000 house rent free.

All governors have their money men; most have a gaggle of them. Samuelian, however, is unique. He has come to dominate fund-raising for his governor like no one else in recent California history.

And Samuelian is more than a fund-raiser. He also is one of Deukmejian’s closest friends and confidants, who shares the governor’s Armenian heritage and modest roots. The two men and their wives have traveled the world together.

Privately, some current and former Deukmejian Administration officials complain that Samuelian is “a rainmaker” who has used his personal closeness to the governor and his role as chief political fund-raiser to drum up business for his own firm.

But others--including Deukmejian--defend him as a man of integrity, as well as a skilled attorney and fund-raiser, who would never take advantage of his access to the governor to win favors for a client.

Samuelian insists he gets no special favors from the governor.

“The thing that amazes me more than anything else, even today,” said Samuelian (who pronounces his name Sa-million), “is the look I find on people’s faces when I say to them, ‘I don’t discuss those things with the governor.’ Some make it appear, ‘Who are you kidding?’ I’m not kidding anybody. People think you do things but you don’t, but they think that. I guess the perception is so important.”

Deukmejian has taken pains to back up Samuelian on this point. Earlier this year, the governor told The Times that Samuelian “never discussed his work on behalf of his clients . . . with me or people in the governor’s office.”

Nonetheless, Samuelian leaves little doubt that his unflagging devotion to raising money for Deukmejian has been a boost to his status as an attorney. A year after Deukmejian’s inauguration in 1983, he became a named partner in his prestigious, 75-year-old law firm--now Parker, Milliken, Clark, O’Hara & Samuelian. He acknowledges that probably would not have happened if he hadn’t been so successful in politics.

“If (Deukmejian) had lost and gone out of office, my prominence in the community would have been lost with it, as a practical matter,” Samuelian said in a recent interview. “But his becoming governor and my being so much behind him in becoming governor helped my visibility, and that visibility has helped my career.”

The 58-year-old Los Angeles attorney acknowledges that his role in helping Deukmejian has had its rewards. It has given him a say in gubernatorial appointments, won him easy access to top-level government bureaucrats, and granted him entree to potential clients drawn from the rarefied world of top corporations.

But recently Samuelian has attracted some unwanted attention.

The reason was the collapse of Lincoln Savings & Loan and its parent company, American Continental Corp.--a financial disaster that may cost U.S. taxpayers more than $2 billion and left more than 22,000 Southern Californians, many of them retirees, holding $250 million in worthless junk bonds.

It was Samuelian and his law partners who pitched Lincoln’s case to Deukmejian-appointed regulators as the company fought to loosen the limits imposed on the thrift’s investments and to permit the sale of the junk bonds to customers at the S&L;’s branch offices. It was Samuelian who helped arrange meetings between Lincoln owner Charles H. Keating Jr. and the governor’s appointees. Two key regulators were former members of his law firm--people he had recommended to Deukmejian for appointment to their jobs.

For his part, Keating and his associates contributed $150,000 to Deukmejian’s 1986 reelection campaign and an additional $100,000 to the Republican Party--all of it through Samuelian.

In 1988 alone, Lincoln and its subsidiaries paid Samuelian’s law firm $281,630 for government relations and litigation, said a legal source quoting an audit of the troubled thrift.

The Lincoln connection has proven to be an embarrassment to the lawyer who began raising money for Deukmejian in 1978.

Samuelian’s work for Lincoln is one of a few instances where his behind-the scenes role in representing clients before state officials burst into public view. Usually, he has been able to gain access to the highest levels of government without public exposure--even when millions of dollars were at stake.

On one occasion, for example, he argued a client’s case before a top transportation official at a meeting held in the governor’s suite in the Capitol, according to the official.

In another case, Samuelian prepared a legal opinion for a client declaring that a piece of legislation was unconstitutional. The client passed the brief on to the governor, who came to the same conclusion and vetoed the measure.

When Deukmejian retires from public life at the end of his term in January, Samuelian’s role as a top GOP fund-raiser appears secure.

“Some campaign finance chairmen fade into oblivion and go back to work at their jobs, only to await an unpleasant phone call saying it’s time to run again,” said Republican political consultant Doug Watts, who was Deukmejian’s first communications director. “Others revel and glory in it. Karl is in the latter category.”

He is currently finance chairman for the state Republican Party. And he has also raised money for U.S. Sen. Pete Wilson’s race for governor, for Treasurer Tom Hayes and for attorney general candidate Dan Lungren.

In 1988, he was active in raising money for then-Vice President George Bush, hosting a reception for Bush in his Bel-Air home. Now, two of Samuelian’s children hold appointed jobs in the Bush Administration.

Samuelian asserted that he has never, ever picked up the phone to ask for favors for his children, but he affirmed that the people who decided on appointments “know who I am.”

In a lengthy interview with a Times reporter, Samuelian was quick to point out that he had become a prominent attorney even before he ever raised a dime for George Deukmejian or any other politician.

His political involvement has “helped the law firm in attracting business,” he acknowledged with typical candor. “But I was well along when I first got started (raising funds for Deukmejian) in 1978, both socially as well as in the legal profession. I couldn’t have done for him what I was able to do except for the fact that I was a senior partner in a well-regarded law firm.”

As one sign of his pre-Deukmejian stature, Samuelian cites his longstanding memberships in the California Club and the Los Angeles Country Club.

And there is no doubt about his earlier professional success as well.

The crowning achievement of his legal career was his work on the $3.6-billion merger of Shell Oil and Belridge Oil in 1979, at the time the largest such transaction in U.S. history. In addition to his many corporate clients, he has been actor Kirk Douglas’ personal attorney for 20 years.

Even before he assumed the mantle of king fund-raiser in state party politics, Samuelian had lived out an American success story--Horatio Alger with an ethnic twist. It is a story similar to that of the man he helped elect governor.

Samuelian was born in Philadelphia during the depths of the Great Depression. His parents had emigrated from Turkish villages close to those that Deukmejian’s parents had fled during an era of anti-Armenian persecution.

In America, his father scraped out a living as a tailor and dry cleaner, moving to California in 1950 to recuperate from a series of devastating illnesses.

Working his way through school in the dry cleaning shop, the younger Samuelian graduated in just three years from UCLA, where he earned his law degree three years later. To support a family while studying to pass the bar, he took a job moving furniture for $2 an hour in a Westwood department store.

For several years he worked for the Internal Revenue Service, a steady job for a young lawyer whose Armenian heritage might be a barrier to entering a well-established law firm. But he wanted to do more with his career than be a government tax attorney.

His break came when a lawyer he had worked with at the IRS recruited him to join Parker, Milliken. It was, said Samuelian, “an American-oriented law firm” and it opened up opportunities for someone who otherwise might have had to content himself with a solo practice, largely limited to an ethnic clientele.

Within four years, he was a partner, then a senior managing partner. Along the way, in 1971, Samuelian met George Deukmejian, then a state senator, at the dedication of a new cathedral of the United Armenian Congregational Church.

Samuelian’s initiation into politics came in 1978, when he and his wife, Dolores, hosted a fund-raiser for Deukmejian’s campaign for state attorney general. The dinner raised $50,000, much of it from the Armenian community.

What’s more, Samuelian enjoyed it. And he liked Deukmejian, who was close to his own age. “He was my kind of guy,” Samuelian recalled. “He was honest. He had a background almost identical to mine--both in terms of his parents being immigrants and not being well to do by any means.”

In late 1980, Samuelian asked Deukmejian if he was considering a run for the governorship two years later. “ ‘The question is whether I can get support,’ ” Samuelian quotes his friend as saying. “ ‘Mike Curb (then lieutenant governor and the favorite of the GOP Establishment) has got a million dollars in the bank. We’ve got $25,000.’ ”

A few months later, Samuelian helped organize a $500-a-plate dinner that raised more than $500,000 for Deukmejian’s candidacy--half of the money coming from the Armenian community. “We got on the map,” Samuelian recalled.

After Deukmejian’s narrow victory over Los Angeles Mayor Tom Bradley in November, 1982, Samuelian became an active participant in putting together the new Administration--recommending candidates for top state jobs and for appointments to boards and commissions.

“We encouraged people to make recommendations,” said Steven A. Merksamer, Deukmejian’s first chief of staff. “Did Karl’s recommendation carry more weight than others? The answer is, sure.”

And in a number of cases, Deukmejian did follow Samuelian’s advice.

Samuelian’s law partner, Franklin Tom, was named as corporations commissioner. Another attorney from the firm, Christine W. Bender, became Tom’s assistant. Later, with Samuelian’s recommendation, she succeeded Tom as commissioner.

Prompted by press coverage surrounding the Lincoln failure, the Fair Political Practices Commission is now investigating both Tom and Bender for possible conflicts of interest. The watchdog commission is also trying to determine if Samuelian violated state law by failing to register as a lobbyist. The State Bar of California also investigated the three attorneys and concluded that there was no evidence that any of them had violated the bar’s ethical standards.

In addition to Tom and Bender, Samuelian also recommended accountant Bruce Bunner to be Deukmejian’s first insurance commissioner, and bank executive Christy M. Campbell to head the state’s business development department.

Other law partners also benefited from Samuelian’s recommendations: Frank Albino, who does legal work for several hospitals and medical clinics, was named a member of the state Medical Board. N. Matthew Grossman, a sports fan, was named to the board of the California Museum of Science and Industry, which owns the property where the Coliseum sits. Grossman recently became president of the Coliseum Commission.

Another partner, Frank W. Clark Jr., first named to the UC Board of Regents by Gov. Edmund G. Brown Jr., was reappointed by Deukmejian--to become one of the few Democrats to be named to an important post in this Republican Administration.

Samuelian agreed that his work for Deukmejian and other GOP politicians has been good for his law firm. The campaign work has been “a unique opportunity,” he said. Among the clients picked up by Samuelian’s firm in recent years is Atlantic Richfield Co., whose chairman, Lodwrick (Lod) Cook, is one of his political acquaintances.

Through the years, Samuelian and his wife, his law firm and partners have themselves plowed sizable contributions into Deukmejian’s political campaigns and the Republican Party. Since 1981, they have donated more than $130,000 in direct contributions and in-kind services to Deukmejian’s campaign committees. In the last two years, the firm gave $40,000 to the Republican Party.

In Deukmejian’s first successful campaign for governor in 1982, Samuelian was one of three key campaign fund-raisers. By the 1986 reelection campaign, he had become the sole finance chairman, raising more than $15 million.

Some contend that Samuelian and his firm have landed legal work for political, as well as professional, reasons.

Ronald Rus, an attorney for the Lincoln bondholders, bluntly asserted that Samuelian’s law fund was hired by Keating’s companies because it “had the key to the revolving door in the Department of Corporations.”

Last fall, the bondholders named Samuelian’s law firm in a suit against Lincoln officials and the state of California, charging that the purchasers were the victims of a deliberate scheme of “fraud and deceit.” The lawsuit, Rus said, “is about how people get things done. It is about influence, about buying influence. . . . About how to grease the skids.”

And some of those close to the Deukmejian Administration say they have been troubled at times by Samuelian’s representing clients before state regulators.

Samuelian blames the criticism on resentment born of jealousy--”because how many people are able to pick up the phone and are able to call the governor and feel pretty confident that he’ll call back at the first opportunity he has, within, say, 24 hours?”

He also asserted, “I do not in any way advertise or flash my credentials or my relationship to this governor.”

But early in the Administration, at a meeting with Caltrans officials, Samuelian surprised the state administrators by wearing a Deukmejian campaign pin in his lapel. And according to Caltrans attorney John R. Bell, Samuelian announced as he left the meeting that “if we had any questions he could be reached at the governor’s office.”

At a 1985 session on behalf of Lincoln Savings in the Glendale office of then-Assembly GOP Leader Pat Nolan, a Nolan aide interrupted the meeting to tell Samuelian that the governor was trying to reach him. But Samuelian has denied that the message was intended to have an effect on representatives of the savings and loan industry, who were trying to win support for a regulation that could have put a limit on Lincoln’s high-risk investments. After the meeting, the industry decided to drop the proposal.

However, the record shows that Samuelian does not always get his way with decision-makers, even when his political connections have opened doors for him.

In one case, early in the Deukmejian Administration, gubernatorial aide Greg Kahwajian summoned a deputy secretary of the Business, Transportation and Housing Agency to meet with Samuelian in the governor’s office suite to discuss a problem that a Samuelian client was having with a Caltrans contract to clean up a contaminated city dump that lay in the path of the Century Freeway.

“It was a single isolated event, where Greg Kahwajian called me and asked me to meet with Karl Samuelian in Kahwajian’s office to deal with a matter having to do with Samuelian’s client,” said the agency deputy, Dana Reed, now an Orange County attorney.

“I don’t recall the specifics,” said Kahwajian. “I very likely did call.”

Caltrans stuck to its position and took Samuelian’s client, Andrew Papac & Sons, to court in an unsuccessful attempt to recover $12 million from the company. In a separate criminal action, the Papacs were later found guilty of grand theft and diversion of highway construction funds--misdemeanor convictions now on appeal.

One of the Papacs’ business associates, William Dunlap, later told an investigator from the Los Angeles district attorney’s office that without the help of Samuelian and Republican Los Angeles County Supervisor Mike Antonovich, “we would have been history before (the cleanup) even started; we wouldn’t have even got (the contract),” according to court documents.

Samuelian also played a behind-the-scenes role in 1988 representing the Marriott Corp. The company was trying to persuade the governor to veto a bill aimed at helping a rival company build a resort in the desert town of Indian Wells east of Palm Springs.

Samuelian acknowledges that he called a top state housing official on behalf of Marriott and wrote a legal opinion arguing that the legislation was unconstitutional. The legal opinion was included in a package of material sent to Deukmejian, who--in a victory for Marriott--vetoed the bill.

Another of Samuelian’s clients with an interest in issues before state government is Los Angeles County.

Beginning in late 1987, the county began hiring Samuelian’s law firm to represent its departments in a series of matters, including two issues that thrust the firm into delicate negotiations with Deukmejian-appointed officials at Caltrans and the State Health and Welfare Agency.

In a little over two years, the firm has billed the county $7.1 million--including $4.5 million in fees and $2.6 million passed on to outside attorneys and for trial preparation expenses.

Last year, Samuelian chaired a fund-raiser for Supervisor Antonovich; and over the last two years, he and members of his law firm contributed $14,400 to Antonovich and the other two Republican supervisors, Pete Schabarum and Deane Dana.

Samuelian also represented two insurance firms that were battling in 1983 to hold onto a contract with the state Department of Veterans Affairs, headed by Deukmejian appointees.

At issue was a $94-million mortgage insurance reserve that had been collected from veterans borrowing money from the state’s Cal Vet home loan program. Department officials contended that the reserve was excessive and that much of the money could be better used to make additional loans to veterans.

The department stood its ground and canceled the contract.

A number of state officials proudly proclaim that they too would never let Samuelian’s connection to the governor influence a decision. But they concede that they would have little choice but to hear him out.

Said one high-level Deukmejian Administration official: “I don’t suppose there’s anybody at my level who doesn’t know who Karl Samuelian is. If I get a call from him, I return the call. It stands to reason, if you know a man is the governor’s finance person, you’re not going to ignore him.”