CALIFORNIA ELECTIONS: GOVERNOR : Feinstein Defends Husband’s Role in Selloff of Stock

ANAHEIM — 

Dianne Feinstein, responding to questions about her husband’s $2.7-million sale of stock in an Orange County company and his role as the chief financial backer of her campaign for governor, said Saturday that he is “the most honest person I know.”

“I recognize what’s happening here,” Feinstein told reporters after a luncheon address to local Democrats. “And what’s happening here is using him, to get at me.”

Feinstein’s remarks were her first public reaction to a report by The Times on Friday that her husband, Richard C. Blum, had sold the stock on the eve of a management shake-up that caused the stock’s value to immediately plunge.

Blum, who is a director and top shareholder in the company, Irvine-based National Education Corp., has said that he had no advance knowledge of the impending management shake-up when he sold the stock on March 14, 1989, and March 15, 1989, on behalf of the investment partnership he invests in and controls, Richard C. Blum & Associates. On March 16, 1989, National Education Corp. announced that its president was resigning, causing an immediate drop in the firm’s stock price.

Because he had no advance word of the management announcement, Blum said, he is confident that the transactions complied with federal law that bars directors and other top corporate executives from profiting on information unknown to shareholders at large. The stock Blum sold amounted to 15% of the shares he then controlled.

Feinstein expressed confidence Saturday in the propriety of Blum’s transaction, saying, “I believe an SEC (the federal Securities and Exchange Commission) investigation was done and there was no impropriety.”

Blum, reached later on Saturday, confirmed for the first time that he was interviewed “some months ago” by the SEC about the transaction. Blum said he did not know what, if any, conclusion the SEC has reached.

“I presume they’re not looking into it,” Blum told The Times. “But I haven’t heard anything. I can’t speak for the SEC.” Blum said that his attorney, Michael R. Klein, was present during the questioning, which Blum said occurred in Newport Beach.

Robert La Framenta, regional trial counsel for the SEC in Los Angeles, said that the commission would not say whether it has, is, or will investigate.

Bolstered by Blum’s multimillion-dollar income as an investor and manager of investment partnerships, Feinstein and her husband have loaned about $3 million to her campaign. The loans have been the largest single source of money to the campaign.

Asked Saturday if any of the proceeds from Blum’s sale of National Education Corp. stock could have been included in the money that she and Blum have loaned to her campaign, Feinstein said, “I don’t believe it was.”

At that point, Feinstein noted the depth of her love for her husband and her reputation for integrity during the 19 years she held public office in San Francisco, the last 10 as mayor, from 1978-1988. She also questioned the motives of those who would question Blum’s stock transactions.

“I married my husband as a widow (in 1980),” Feinstein said. “I love him very much. . . . What’s happening here is using him to get at me. And somehow . . . that strikes me as being wrong. I’ve been a mayor without a hint of scandal. . . . There has never been raised any impropriety. And I pride myself on my integrity and my credibility. . . .

“And something in my sense of fair play tells me that the continuation of this, the effort really isn’t to bring forward facts about my husband. The effort is to impugn my candidacy. And I don’t believe that’s right. And I’ve seen this done with other women candidates, too.”

Feinstein did not identify which women candidates she had in mind. It could well have been a reference to former New York Rep. Geraldine A. Ferraro, the 1984 Democratic vice presidential nominee whose husband John Zaccaro’s business interests became a campaign issue.

Before The Times’ report of the National Education Corp. stock sale, other Blum holdings and past investment activity already had emerged as issues in Democrat Feinstein’s campaign for governor against Republican U.S. Sen. Pete Wilson.

Both Wilson and Feinstein’s opponent in the Democratic primary last spring, state Atty. Gen. John K. Van de Kamp, cited the $3-million worth of loans to her campaign in calling on Feinstein to provide more complete financial disclosure of her and her husband’s personal finances.

Feinstein said Saturday that her disclosure has been extraordinary and noted that she and Blum allowed reporters last April to review the couple’s previous tax returns and that Blum last month disclosed a list of his holdings and investment clients.

“There has never been any couple that I know of, in the history of American politics, that has made a more complete, forthright and honest disclosure of everything,” she said.

Feinstein predicted that large numbers of Californians would turn out to vote for her on Nov. 6 as a mandate for change and a return to strong, activist government in Sacramento, reminiscent of Edmund G. (Pat) Brown Sr. in the 1960s.

“I want to be the governor that says, ‘Wake up, California, let’s move this state into a problem-solving mode,’ ” Feinstein said.

As part of the wake-up call, Feinstein offered her most-detailed endorsement yet for Proposition 128, the initiative on the fall ballot that would create a number of new state environmental programs, from tougher pesticide controls to protection of old-growth redwood forests in private ownership.

Feinstein said features of the initiative, sponsored by a coalition of environmental organizations who call it “Big Green,” are “ideas whose time has come.”

Wilson also talked about Proposition 128 during Orange County appearances Saturday. The senator is opposed to the measure, particularly its establishment of a new statewide elective office of environmental advocate, a post Wilson claims was tailor-made for Assemblyman Tom Hayden (D-Santa Monica), the onetime student radical.

Of Proposition 128, Wilson complained: “There is too much detail. There is much too much rigidity.”

Wilson has recommended putting all environmental policy matters under the jurisdiction of a state agency modeled after the federal Environmental Protection Agency. He said Saturday that such a move would ease consumer and industry problems in dealing with “a welter” of different and sometimes contradictory directives by existing state agencies.

Times staff writers Bill Stall and Cathleen Decker contributed to this story.