- The Washington Times - Friday, September 13, 2002

LOS ANGELES (AP) A judge threw out a politically damaging $78 million civil fraud verdict against gubernatorial candidate Bill Simon's family investment firm yesterday and ruled that William E. Simon & Sons was actually the victim.

Superior Court Judge James C. Chalfant dismissed both the huge compensatory and punitive damages verdict against William E. Simon & Sons and a nearly $20 million verdict also levied by a jury against another investor group.

He also awarded the investors $125,000 to cover their costs for fighting the charges.

Mr. Simon, a Republican who faces Democratic Gov. Gray Davis in the November election, had described the July 30 jury verdict as "crazy" and "fundamentally flawed."

"We're very pleased with the court's decision today, and now it's time to move on with this election and talk about the issues," said Simon spokesman Mark Miner. "Gray Davis has nothing more to hide behind."

The jury had awarded the verdicts to Edward Paul Hindelang of Santa Barbara, a convicted marijuana smuggler who founded Pacific Coin, a Van Nuys pay-phone company in which Mr. Simon's firm had invested.

In his ruling, Judge Chalfant wrote that it was "an immutable fact established by overwhelming evidence that Hindelang defrauded" the investors by failing to disclose his criminal convictions, his negotiations with federal authorities to forfeit drug proceeds and the fact that Pacific Coin may have been founded with drug money.

The investors "never would have invested $26 million in Pacific Coin had they known the truth," he wrote.

Mr. Hindelang's attorney, Geoffrey L. Thomas, said he will appeal the ruling.

Mr. Simon was not personally named in the lawsuit, but with corporate wrongdoing in the spotlight, the fraud verdict was political poison for his campaign.

The verdict spooked supporters and became the focus of a Davis attack ad that remained on the air yesterday morning. It also struck at a key theme of Mr. Simon's first-time candidacy, his boast of private-sector success.

Last month, when President Bush toured California to raise nearly $3 million for Mr. Simon's campaign, many viewed it as a cautious embrace of the GOP's best hope in a critical state.

The lawsuit arose from the 1998 acquisition of Pacific Coin by B-R Investors and William E. Simon & Sons, the firm Mr. Simon started with his brother and father, a former U.S. Treasury secretary.

Mr. Hindelang had served 30 months in prison in the early 1980s, but the investors said they didn't know that at the time.

They planned to grow Pacific Coin, but with the pay-phone market shrinking, the company faltered, fell into debt and was seized by its lenders in December 2000.

The same month, Mr. Hindelang sued Simon & Sons, charging the investors defrauded him by concealing a perilous and ultimately failed plan to take Pacific Coin public and make huge profits.

The investors countersued, accusing Mr. Hindelang of committing fraud and costing them millions by hiding his troubled drug past. Simon & Sons had invested $16.5 million in Pacific Coin and lost it all, and Mr. Simon personally lost $1.2 million.

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