Execs brace for more 211 battles

Electronic News, Nov 11, 1996 by Crista Harde

Even after mounting a sound 3-to-1 defeat of Proposition 211, California's high-tech executives say they are not ready to rest on their laurels. The thrill of victory appears to be somewhat tempered by the expectation of future battles.

If nothing else, the controversial securities reform initiative--drafted by trial lawyers after being drummed out of federal courts by Congress last year--served as a wake-up call to industry leaders who had previously resisted political activism.

A Semiconductor Industry Association (SIA) spokesman commented that the high-tech community has not exploited its political clout to its full extent. "It's a ripe time for the technology world to look at the long-range future and decide whether getting involved at the political level makes sense," he said.

In this corner, the California Technology Alliance--a by-product of the anti-211 campaign--is recharging for the next round, which they intend to fight on the steps of the state capitol. Led by Tom Proulx, founder of Intuit and co-chair of Taxpayers Against Frivolous Lawsuits (TAFL), the group plans to actively recruit membership from the high-tech world to establish a political voice, supporting local candidates who are kind to tech. California State Controller Kathleen Connell is a good example, Mr. Proulx said.

"(Ms. Connell) was the first big-name Democrat to have the courage to break with the trial lawyers and publicly oppose 211, even before President Clinton. It took guts to do that," Mr. Proulx said.

Some in the industry expect the trial lawyers to initiate a second round in another state using somewhat different language, while others say it would be a wasted effort, considering the massive defeat of Prop. 211. Rumors surfaced near the end of the campaign that the "yes on 211" people had backed off in order to save money for round two.

The battle over Prop. 211 prompted the most expensive initiative campaign in California history, with opponents spending more than $40 million and proponents spending about $10 million.

A Citizens for Retirement Protection and Security spokesman said any talk of future plans is premature, but "I can guarantee we will be there to fight any further attempts by Tom Proulx and his political action committee to dismantle the current California laws that protect people from fraud." The spokesman referred back to Prop. 201 on the state ballot in March--initiated by TAFL--which he said would have thrown up a roadblock to legitimate claims of securities fraud by imposing a bond requirement to file a shareholder class action and a "loser pays" provision. The initiative was defeated (EN, Antenna, April 1).

"At the moment, both sides have fought to a stalemate," commented Sen. Bill Lockyer, president pro tempore of the California state senate.

Sen. Lockyer's Blue Ribbon Commission on Securities Litigation Reform, formed in August, is regrouping following the election to collect data on securities and litigation abuses and lobby for legislative changes at the state level. With membership from business leaders, attorneys and academics, the task force aims to influence legislation in 1997.

"The mission will be one of fact-finding. We believe the plural of anecdote is not evidence," Sen. Lockyer asserted.

Meanwhile, a transfer of nearly $3 million in anti-211 campaign funds to fight other initiatives in the final weeks before the November ballot may have left a black mark on the TAFL campaign.

"It was just in poor taste, plain and simple," said Bernie Aronson, president of EPIC Design Technology. "There were apparently some contributors to the 211 campaign who didn't want their money supporting those other propositions. My concern is, if the same people try to raise money for an issue next year, the question will come up: 'Are you going to take our contribution and put it somewhere else?'

"It's a small matter in the overall scheme of things, but like Caesar's wife, they have to be above reproach. They're business leaders, not politicians--that's probably why they let this happen. I hope they learned from it," Mr. Aronson said.

The California voters last week also turned down two measures which were targeted by high-tech forces for defeat--Prop. 207, which would have made it illegal to limit lawyers' fees, and Prop. 217, which would have imposed a higher tax rate on people with incomes in the six figures.

Whether the threat of future battles along the lines of Prop. 211 is real or imagined, business leaders here are vowing to be proactive, instead of reactive.

"There are 51 separate sets of (securities) laws right now," Mr. Proulx said. "You can assume that every public company has shareholders in every state. We beat Prop. 211, but they'll be back, maybe in another state. If they get one state to pass this, it will affect all states. We've got to beat the trial lawyers every time they do this. They only have to win once.

"They did a great job of drafting Prop. 211 in a way that forced us to spend a lot of money to educate voters," he continued. "It's been a real wake-up call to Silicon Valley to maintain a political presence, and we aren't going back to sleep," he said.