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EBayʼs Whitman Faces Brown for California Governor (Update3)

June 09, 2010, 6:46 AM EDT

(Updates vote count in second and last three paragraphs.)

By Michael B. Marois

June 9 (Bloomberg) -- Former EBay Inc. Chief Executive Officer Meg Whitman won the California Republican nomination for governor to face Democrat
Jerry Brown in an election to decide who will lead the most-populous U.S. state as it struggles to emerge from its worst fiscal crisis since the Great
Depression.

Whitman, a 53-year-old political newcomer, led Steve Poizner, the state Insurance Commissioner and a former Silicon Valley executive, 64 percent to 27
percent with 93 percent of votes counted, according to the Associated Press. Brown, 72, the state attorney general and two-term governor from 1975 to
1983, had no significant opponents in yesterdayʼs primary.

“California is in crisis,” Whitman told supporters in Los Angeles. “We certainly cannot save Californiaʼs future by repeating the failures of the past.”

The November victor will take over a state whose jobless rate was 12.6 percent in April, the highest in more than three decades. At the same time, a
resurgent budget gap led Governor Arnold Schwarzenegger and lawmakers to approve $12.5 billion of tax increases and $32 billion in spending cuts in
2009, only to have the deficit re-emerge this year.

A Los Angeles Times poll published May 30 showed Brown beating Whitman, 44 percent to 38 percent, in a head-to-head matchup. The telephone survey
was based on responses by 1,506 registered voters from May 19-26, with a margin of error of plus or minus 2.6 percentage points.

ʻDemolition Derbyʼ

Whitman poured more than $71 million of her estimated $1.2 billion fortune into the primary race and plans to match that against Brown, who has $20
million for the campaign, according to state records. Term limits require Schwarzenegger, a Republican, to leave office in January.

“We have just seen the two Republican candidates for governor stage a billionaireʼs demolition derby,” Brown told supporters in Los Angeles. “They both
say they want to run the state like a business but they set a national record for excessive spending.”

A group backed by labor unions and Ron Burkle, the billionaire chairman of Yucaipa Cos., a Los Angeles-based private-equity firm, plans to raise more
than $30 million to back Brown and buy advertising through an independent campaign committee. Direct contributions to political campaigns are limited
under state law, while there are no caps on cash given to such independent support groups.

Goldman Sachs Director

Democrats already are attacking Whitman for her one-time role as a director of New York-based Goldman Sachs Group Inc., the Wall Street bank sued for
fraud by the U.S. Securities and Exchange Commission in connection with the sale of mortgage- linked securities. She left the bankʼs board in 2002.

Whitman has said her business experience and status as a political outsider will empower her to turn around the state. She has said sheʼd spur job creation
by easing regulation and reducing business taxes. To bridge the stateʼs budget deficit, sheʼd curb government waste and fraud, put new state workers into
corporate-style 401(k) retirement plans, cut 40,000 government positions and lower lawmakersʼ pay by making legislating a part-time job.

Brown has said he wonʼt raise taxes absent voter support and has emphasized his government experience. A lawyer and former California secretary of
state, he also served two terms as mayor of Oakland before becoming attorney general in 2006. Heʼs the son of former Governor Edmund G. “Pat” Brown,
who served from 1959 to 1967.

Insidersʼ Contest

“This is going to be the contest of the insiders, the corporate insider versus the political insider,” said Jack Pitney, who teaches politics at Claremont
McKenna College in Claremont, California, before the vote. “Whitman is going to talk about restraining the growth of government, but the question is going
to be whether Jerry Brown can harness the public reaction against corporate misconduct and turn it against Whitman.”

Either candidate is likely to confront a resistant Legislature, where Democrats outnumber Republicans. Its leaders have clashed with Schwarzenegger over
how to bridge budget gaps stemming from the recession. The Democrat majority is shy of the two-thirds margin needed to pass a budget or raise taxes,
hampering legislative action and tarnishing Californiaʼs credit rating.

The penalty investors demand on California debt has fallen, with the yield premium on 10-year securities over top-rated debt narrowing to 1.16 percentage
points on June 8 from about 1.5 percentage points in January, according to indexes compiled by Bloomberg. Californiaʼs debt is rated A1 by Moodyʼs
Investors Service and A- by Standard & Poorʼs, the fifth- and seventh- highest ratings, respectively.

Senate Race

Elsewhere in California, Republicans chose Carly Fiorina, 55, a former Hewlett-Packard Co. CEO, to run against U.S. Senator Barbara Boxer, a 69-year-old
Democrat. Fiorina beat former U.S. Representative Tom Campbell, 57, an economist who served five terms in Congress and worked as Schwarzeneggerʼs
budget director from December 2004 to August 2005.

Boxerʼs re-election bid comes amid growing anxiety over the economy and the expanding role of government, and she may be at risk of losing the Senate
seat after three terms, according to Jennifer Duffy, a senior editor of the nonpartisan Cook Political Report in Washington.

Voter Mood

Boxerʼs position as chairman of the Senateʼs Environment and Public Works Committee may open her to Republican criticism for advocating stricter
business regulation at a time of high unemployment, Duffy said in an interview last week.

“Voters seem to be in the mood for some change right now, even in a state as Democratic as California,” Duffy said. Democrats account for about 45
percent of registered voters, compared with Republicans at 31 percent, according to state records as of May 24.

Republicans picked state Senator Mimi Walters of Orange County to run against incumbent Treasurer Bill Lockyer, a 69- year-old Democrat, in November.
Walters, 48, who once worked for Drexel Burnham Lambert Inc. and Kidder Peabody & Co., served two terms in the Assembly and is a former mayor of
Laguna Niguel.

In the controllerʼs race, Republican state Senator Tony Strickland, 40, won his partyʼs primary with 60 percent of the vote, according to the AP, and will
challenge Democratic incumbent John Chiang, 47. Strickland, elected to the Senate in 2008 after two terms in the Assembly, lost to Chiang in 2006.

San Francisco District Attorney Kamala Harris, 45, won her bid to be the Democratic nominee for attorney general. She beat Chris Kelly, the 39-year-old
former chief privacy officer at social-networking website Facebook Inc., 33 percent to 16 percent, according to the AP.

A ballot measure backed by PG&E Corp., owner of Californiaʼs largest utility, was faltering. With 93 percent of the vote counted, 53 percent were opposed
while 47 percent were in favor. If passed, it would require a two-thirds majority vote to approve steps by local governments to enter the electricity business.
Another measure to create an open primary system, doing away with partisan elections, was approved.

--With assistance from Christopher Palmeri in Los Angeles, Laura Litvan in Washington and William Selway in San Francisco. Editors: Mark Tannenbaum,
Pete Young.

To contact the reporter on this story: Michael B. Marois in Sacramento, California, at mmarois@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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