Bringing Up Baby Gavin

How William Newsom's pipeline into the Getty fortune has put money -- lots of it -- in his politically ambitious son's pocket

Retired state appeals court Judge William A. Newsom III likes to take his lunch at the Balboa Cafe, a pleasant Marina District eatery that happens to be owned by his son, Supervisor Gavin Newsom, the leading contender for next mayor of San Francisco. Judge Newsom is friendly, gracious, and self-assured; he seems very much at ease with the considerable political and financial influence he commands despite retiring from the bench eight years ago. As he eats, a federal judge stops by his linen-covered table to say hello, and a portly lawyer politely inquires if they can do some business after lunch. An aging widow of the billionaire Getty clan nods to him as she eases out the front door.

The 69-year-old judge is a familiar face to the Gettys. Loyal, unobtrusive, and smart, Newsom has been a major player in Getty family business for many years. Not only does he help oversee a wide array of Getty family trust investments, he directly manages the personal wealth of Gordon Getty — one of the world's richest men, with a fortune estimated at more than $2 billion.

“I make my living working for Gordon Getty,” Judge Newsom says. “He's not a day-to-day businessman. He's more interested in poetry, music. He's a hell of a guy; he's down here every day for a burger.”

Newsom serves as Getty's financial consigliere, screening potential investments and recommending whether to sink millions into real estate, stocks, bonds, or other moneymaking vehicles. A longtime friend of state Senate leader John Burton and a leading figure in local Democratic circles, the judge also has employed his ample political skills to advance the Getty family fortunes. In 1985, for example, he helped persuade the state Legislature to make a legal change that dramatically boosted the annual income of Gordon Getty and other beneficiaries of the main Getty family trust.

But the judge is not the only Newsom who has benefited from his financial entwinement with the Gettys. William Newsom has cut in his son — who often cites his successes as a “small businessman” as a political credential — on at least one lucrative Getty-backed deal. In 2001, the judge brought Gavin Newsom into a Hawaii beachfront real estate investment in which his initial $125,000 stake soared to more than $1 million — an eightfold increase — in just six months, according to interviews and public records.

Gavin owes his political career to his father as well. The elder Newsom is a longtime crony of John Burton, whom he has known since high school and with whom he regularly plays racquetball. Burton convinced Mayor Willie Brown to appoint Gavin to the Board of Supervisors in 1997. “It was based on Burton's friendship with me,” the judge says. “And he liked Gavin. Besides, they needed a straight white male on the board.”

Savvy Irish-American operator that he is, the judge continues to answer a reporter's questions suavely and smoothly over lunch. His back goes up only when he discusses the San Francisco Chronicle's recent story detailing Getty loans to his 35-year-old son and Getty investments in Gavin's “PlumpJack” businesses, including five restaurants, a Napa winery, a Squaw Valley hotel, and two retail clothing stores. The newspaper concluded that of the self-described entrepreneur's 11 enterprises, Gordon Getty was the lead investor in 10. The article helped reinforce the view of some that the younger Newsom is a silver spooner who has grown wealthy not as a result of his own business moxie, but because of his connection to the ultrarich Gettys.

“The piece enraged me,” the judge complains, a steely look coming into his eyes. “It's a delusion that the Gettys rain money on Gavin.”

The judge is at least partly right. To some extent, it's him raining Getty money on his son. (Gavin Newsom did not return multiple calls for comment for this story.)

The bonds between the Newsom and Getty clans go back more than half a century.

William Newsom met Gordon Getty and his brother Paul in the late 1940s while attending St. Ignatius Catholic prep school in San Francisco. The Getty boys were offspring of oil tycoon J. Paul Getty and his third wife, Ann Rork. Known for decades as the richest man alive, Getty père was a notorious miser and womanizer who lived in a succession of cheap European hotels. He pretty much ignored his four sons and five successive wives. Gordon and Paul enjoyed comfortable but hardly rich lifestyles made possible by stipends from the Sarah C. Getty Trust, created by the oilman's mother because she doubted his willingness to provide for her grandchildren. When Sarah passed away, her Midas-fingered son poured billions of oil dollars into the trust, now his, to escape taxation. As his boys matured, their annual trust incomes increased, but their father refused to give them any real control over his fabulous fortune.

When the old man died in 1976, though, control of the $2 billion trust was transferred to Gordon, who used his income to support a life of leisure. He composed classical music, invented elaborate economic theories, and raised four sons with his wife, Ann, the doyenne of Nob Hill society. (In 1999, Gordon revealed that he had also fathered three daughters with a Los Angeles woman named Cynthia Beck.) In the mid-'80s, Gordon decided that Getty Oil's stock was undervalued and forced a sale of the company to Texaco Corp. for $10 billion, doubling the assets of the Getty trust. With a major assist from Judge Newsom, Gordon then broke the trust into four portions. One went to his brother Paul, a reclusive drug addict (now recovered). Another was assigned to the children of his elder brother George (who died of a drug overdose in 1973). The third chunk went to the children of Ronald Getty (a brother who had been disinherited by Daddy Getty in a fit of spite). Gordon kept the fourth piece for himself. [page]

Getty has the bulk of his $2 billion estate sequestered in the Gordon P. Getty Family Trust, managed by Newsom. The judge says the trust earns about 2 percent a year, which translates into roughly $40 million in annual income for Gordon. Despite his and his wife's profligate lifestyle — flying to and from vacation spots around the world on their personal Boeing 727 — it must be difficult to spend it all.

Far from being the potty, absent-minded professor type, as the media often depicts him, Gordon Getty, 69, is one of the nation's leading venture capitalists. He also is a well-known philanthropist. Last year, he donated $3 million to the Ann and Gordon Getty Foundation, a charitable trust. Though a Republican, he is a major fund-raiser for local and national Democratic Party candidates. House Whip Nancy Pelosi and many other powerful politicians, including Willie Brown and Massachusetts Sen. John Kerry, a leading presidential contender, benefit from his patronage.

But it is William Newsom — his boyhood friend — whom Getty relies on most, to protect and enhance his fortune.

Newsom's grandfather immigrated to America from Ireland in 1865. His father, a building contractor, was an associate of San Francisco Democratic Party boss William Malone, who was overthrown in the 1960s by Congressman Phil Burton and his brother John. Pat Brown, who rose from San Francisco district attorney to become governor of California (and father of a future governor), was close to Judge Newsom's father, also named William.

After graduating from the University of San Francisco, Newsom attended Stanford law school and was admitted to the California Bar in 1962. He did a stint as legal adviser to the Italian division of Getty Oil and worked as a tax attorney for the Gettys. At 32, the handsome lawyer was smitten by Tessa Menzies, then still in her teens. Married in 1967, the couple produced Gavin and a daughter, Hilary, before splitting after five years. “It was an Irish divorce,” says the judge. “We remained friends, neither remarried.” (Tessa died last year.)

Newsom blames the breakup of his marriage on politics. In 1968, he says, the Burton brothers and Willie Brown talked him into running against state Sen. Milton Marks, a popular Republican. Newsom lost.

“Tessa did not share my passion for politics,” he says. “I wish I'd dropped out of the race. I watch Gavin — I hope politics doesn't affect his marriage.”

In 1975, Gov. Jerry Brown, son of Pat, appointed William Newsom to the Superior Court bench in rural Placer County. Three years later, Brown elevated him to the state Court of Appeal in San Francisco, where he served until 1995.

According to Painfully Rich, a biography of the Getty family by British author John Pearson, Newsom has been, above all else, a pillar of probity upon whom Getty family members have leaned in times both sweet and sour. (“Pearson's book is reputable,” the judge says.) He officiates at Getty marriage ceremonies. He creates trust funds for angry wives divorced by philandering Getty men. He remembers family members' birthdays. He mourns at their funerals. He chaperones their drug addicts and alcoholics in and out of treatment programs. He even helps them cope with criminal tormentors.

In 1973, kidnappers snatched 18-year-old Jean Paul Getty III in Rome. They demanded that the boy's grandfather ransom him for $17 million. The old miser refused to give them a lira. Months went by. The kidnappers sliced off the boy's ear and mailed it to an Italian newspaper. (Due to a postal strike, the appendage did not arrive for three weeks.) In the face of public disgust at the depth of his stinginess, Getty coughed up $3 million to save his grandchild's life. In order to put the kidnappers more at ease, the Gettys asked Newsom to help deliver the money. The boy was released and Newsom's stock with the Getty family soared.

During the 1970s and '80s, the judge strategized with Gordon about ways to pull more cash out of the Sarah C. Getty Trust, which was basically a padlocked treasure chest. J. Paul Getty had administered the trust as a perpetual growth fund that allowed only a thin trickle of riches — measured in thousands rather than millions of dollars annually — to flow into the bank accounts of his children and grandchildren. Newsom convinced Gordon to sue his father for more access to the family gold. The lawsuit failed, but the older Getty was reportedly impressed by his son's mettle, and in his will entrusted Gordon with administering the vast family trust.

In 1985, Newsom, then a sitting state appellate judge, made use of his extensive political contacts in an effort to help his old friend. He lobbied Democratic state Sen. Bill Lockyer of Hayward — now California's attorney general — to push a bill that would permit the “partitioning” of trusts, thereby allowing the Gettys to divide the Sarah C. Getty Trust into four parts and giving them easier access to its riches.

“I think it's going to be a great thing for the Getty family,” Newsom told the Los Angeles Times. He also claimed, unconvincingly, that he had not discussed the bill with Getty family members.

The Legislature subsequently enacted the bill, adding enormously to the wealth of Gordon and his relatives.

In a recent interview, Judge Newsom said he did not receive so much as a cup of coffee for talking to Lockyer. But years later, Newsom wound up overseeing large parts of the gargantuan Getty fortune — a circumstance that has helped enrich both him and his son. Last year, for instance, the judge earned about $250,000 for his work for the Gettys, he says.

The U.S. tax code allows wealthy people to create trusts to reduce their tax load. A trust may own a variety of investment instruments, and some profits are distributed to its beneficiaries. [page]

The Gordon P. Getty Family Trust is governed by a board of trustees composed of Gordon and his four sons, Andrew, Peter, John, and Billy. For the past eight years, William Newsom has been the trust's administrator, deploying hundreds of millions of dollars in blue-chip stocks, bonds, real estate ventures, and the occasional start-up company.

Since 1989, Newsom also has served as a trustee of the Ronald Family Trust A, another piece of the original Sarah C. Getty Trust, which benefits offspring of Gordon's brother Ronald. And the judge is a partner with Gordon Getty in a real estate investment firm, Donwilong LLC, created to provide for Gordon's half sister, Donna Long.

The judge further serves as co-trustee of the Ann and Gordon Getty Foundation, which gives millions of Getty dollars to nonprofit organizations. Most of these tax-deductible donations support classical music and opera companies. In 2001, the foundation gave $750,000 to the San Francisco Symphony, $585,000 to the San Francisco Opera, and, in a more modest act of charity, $1,000 to Meals on Wheels.

But Newsom also is deeply involved in helping Gordon Getty invest his personal trust income.

Newsom acts as co-trustee of Gordon's San Francisco Revocable Trust, which buys and sells Bay Area real estate. Among its holdings is 704 Sansome, a small office building that Getty purchased for $2.1 million in 1997 from political consultant Clint Reilly. For a while, Getty's sons used it as headquarters for several businesses.

In 1989, Newsom incorporated a Nevada-based firm, Newsom Investments Ltd., to manage Getty's investments in real estate and other ventures. Newsom Investments is managing partner of Loma Rica Ranch LLC, a corporation that plans to build a large housing development in rural open space near the city of Grass Valley in the Sierra foothills of California. The developers are lobbying city officials to annex the Ranch property, which would greatly increase its value.

“Loma Rica will be smart growth,” the judge says. “Eighty percent open space — two bedrooms, one bathroom [homes] for $140,000 to $180,000.”

Indeed, the judge has incorporated a dozen or more Getty-financed investment vehicles in low-income-tax Nevada, including one that earns royalties from oil wells and another that owns property in South Africa.

Newsom and Gordon Getty have other interests in the Third World as well.

The judge serves on the board of directors of the Getty-funded Conservation Corporation Africa, which owns 25 safari lodges in wild areas of South Africa, Zimbabwe, and Tanzania. The luxuriously appointed lodges cater to well-heeled eco-tourists who can afford to pay $350 a night.

“We lease the land and restore it to pristine condition,” says Newsom. “There is light impact with 15 rooms [in each lodge] on 10,000 acres. We employ 3,500 people and provide medical clinics and schools. I am very proud of steering the [Getty] family to it.”

An ardent environmentalist, Newsom sits on the boards of a number of green groups, including the Environmental Defense Fund, the Audubon Society, and the Sierra Club Foundation, financial parent of the Sierra Club. Last December, the Sierra Club began selling shares in a Gordon Getty-owned mutual fund to its 700,000 members and to the public. The Forward Fund eschews investments in oil, timber, or automotive firms. According to Newsom, Getty believes inflation can be ended by replacing national currencies with interest-bearing mutual funds. His theory, called “fertile money,” has yet to find much acceptance with economists, but being a billionaire means, among other things, that you get to experiment with the monetary system by setting up your own mutual fund.

Like father, like son. William Newsom's closeness to the Gettys opened the door for Gavin to piggyback on what quickly turned into a highly profitable real estate investment in Maui.

In January 2001, the Ronald Family Trust A, of which the judge is a trustee, purchased 4,500 acres of beachfront property, called Hana Ranch, on the island for $24 million.

A few months later, the judge secured a conservation easement from the Maui Coastal Land Trust to permanently protect 2.5 miles of beachfront from development. Newsom says a Getty-financed group, Hana Ranch Partners LLC, plans to run cattle on the property and allow up to 10 buyers to build nice homes overlooking the permanently conserved beaches. As point man for the project, Newsom says he will set aside 100 acres for affordable housing for locals. “The residents of the area are poor and mostly on welfare,” he remarks.

Newsom says he and his son each invested $125,000 in Hana Ranch in July 2001. Gavin reported on his economic disclosure statement that by December of that year, his share had zoomed in worth to more than $1 million.

The land value rose “a lot more” when Oprah Winfrey later purchased a piece of the ranch, Judge Newsom says. Winfrey read about the conservation easement and called the judge on his cell phone. Last April, she and her personal trainer, Bob Greene, bought several hundred acres of the beautiful spread.

The Newsoms also each have owned stock in Getty Images, a $1.6 billion conglomerate that owns an archive of 70 million photographs and illustrations. The Seattle-based firm rents these images to advertising agencies and media of all sorts. William and Gavin have served on the board of Getty Investments LLC, which sank $32 million into Getty Images in 1999. The supervisor was later allowed to buy $10,000 worth of Getty Images stock when the company was restructured. A few months after that, his stake was worth more than $60,000, according to the Chronicle.

(In a small but wonderful irony, an information-industry trade magazine called CIO recently ran a glowing article on Supervisor Newsom's “Care Not Cash” initiative to kill cash benefits for the homeless in San Francisco. The mag ran a picture of a shivering homeless man that it bought from … Getty Images.)

Gavin Newsom also has a partnership stake in his father's firm, Newsom Associates, located in an office across the street from the upscale Marina Safeway store in the supervisor's district. On his financial disclosure statement, the younger Newsom valued his share in Newsom Associates at “over $1 million.” Judge Newsom says that reflects his son's interest in the Hana Ranch property. [page]

“I fronted Gavin the money and he paid me back,” the judge says. “I have the canceled checks to prove it.”

Judge Newsom says that one of his favorite books is Imperial San Francisco, Gray Brechin's historical account of the predatory political and financial practices of the city's monied families.

“The Gettys are not absolutely evil like some of the old families,” Brechin said in an interview. “Ann and Gordon have minds. He is serious about music, she had a book-publishing business. But Gordon has the gravitational field of Jupiter. We are dust particles to him.

“Democracy requires the presence of level playing fields in order to work. In the end, the size of the Getty fortune is not compatible with democracy.”

From the PlumpJack businesses — which grossed $25 million last year — to the Maui beach deal, the Gettys have embraced and rewarded Gavin Newsom as they embraced and rewarded his father. The only question that remains to be answered is whether Gavin, as mayor, would reward his patrons in return — and how that might affect us dust motes and our local democracy.

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