There are not a lot of people in the Republican Party who wield as much influence as Gerald Parsky without ever having run for office. Fresh out of law school in the early 1970s, Parsky was taken under the wing of George Shultz, then secretary of the Treasury Department and later secretary of state. By age 31, Parsky was handling international economic affairs as assistant secretary of the Treasury, and he went on to serve in five successive Republican presidential administrations. These days, when he’s not dining with California Gov. Arnold Schwarzenegger or chatting up his old pals George H.W. and George W. Bush, Parsky is helping to overhaul the state’s tax structure. The 67-year-old former chairman of the University of California Board of Regents was appointed by Schwarzenegger to chair the Commission on the 21st Century Economy, a 14-member panel tasked with reforming the state’s tax system so as to bring stability to the state’s revenue stream. The commission recently unveiled its controversial plan, which Parsky has spent the better part of the last two months defending. But all of that is merely secondary to his full-time job: running a local investment firm. Parsky recently sat down with the Business Journal in the offices of Aurora Capital Group, a Westwood-based private equity firm he founded in 1991, to discuss his life in politics, the opportunities for private equity in this tough economy and why it was tough to swallow the Yankees’ recent World Series win.
Question: The commission recently released its state tax overhaul plan. The reception was, to put it mildly, cool. Why do you think that was?
Answer: People fear how the policy will affect them. There was a lot of public debate, which was appropriate for this subject matter. The subject matter – namely tax policy – is complex. Because of its complexity, naysayers can create confusion, which may cause legislators to resist making policy changes.
Q: But critics say the plan favors the wealthy, slashing taxes for millionaires, but cutting taxes by just $3 on those making $50,000 or less.
A: I think what people perhaps didn’t understand was that our proposal reduced taxes for all income groups about 29 percent. For the larger income groups, it would amount to more money because they pay more tax. However, it is not fair to characterize the proposal as reducing taxes on the wealthy and increasing taxes on the middle class because all income groups got a reduction in tax.
Q: How did you get this gig?
A: I met Gov. Schwarzenegger briefly when he was in the entertainment business, but I got to know him quite well as he decided to participate in the recall election that ultimately he won. Once he became governor, I talked to him often about policy. As a result, he asked me to chair two commissions – one in 2007 relating to public pension fund liabilities, and then the second one in 2008 having to do with the 21st century economy.
Q: How close are you two?
A: I have socialized with him. My wife, Robin, and I have had occasions to have dinner with the governor and his wife. So we’ve gotten to know him socially in that context.
Q: Do you ever lift weights together?
A: No, I have not done that. I think he’s a little stronger than I am.
Q: Are you a fan of his movies?
A: I’m a fan of Gov. Schwarzenegger. I’ll leave the selection of movies to another day. He was obviously very popular as a movie star, but I think he is doing a truly admirable job and he is dedicated to helping California.
Q: How did you first get into politics?
A: In my late 20s, I was recruited to go to the United States Treasury Department by Edwin Cohen, a former professor of mine from the University of Virginia law school. I did some very interesting work for him in the tax area. As a result, I also got to know George Shultz, who was secretary of the Treasury at the time.
Q: What did that relationship do for you?
A: Thanks to Secretary Shultz, I was nominated and confirmed as assistant secretary of the Treasury in June 1974 in charge of international economic policy and capital markets.
Q: That must have been very exciting for someone so young.
A: I was very fortunate to have such a senior position at a very young age. It was a fabulous experience. I got a chance to work on a wide range of international economic, monetary and development issues.
Q: I noticed you went to Princeton. Did you come from an uppper-class background? Was that your family’s milieu?
A: My dad did not go to college. He founded, with my family, a trucking company in Hartford, Conn. My father was one of four brothers. They lived through the Depression. Three brothers worked so one could go to college, and my father was one of the three who worked. He believed very strongly in education and he wanted to be sure that his children could be educated in whatever institution they could qualify for. He was very supportive of my going to Princeton and to law school.
Q: Given you didn’t have an economics degree, did you feel qualified to work on international economic issues?
A: I do think that it illustrates that opportunities can come along if you remain open and flexible to study and understand a variety of different issues. I always was very interested in economics and finance, and when Secretary Shultz took an interest in me and gave me some projects to work on in the economic and finance area, that started a process of doing a lot of analysis in that area.
Q: How did you end up in California?
A: I was introduced to one of the senior partners at Gibson Dunn & Crutcher, a California-based law firm, by George Shultz. They made me an offer as I was leaving the Treasury Department to become a partner. (At the same time), I was very involved in writing about economic policy. That got me involved with the Republican Party.
Q: Have you always been a Republican?
A: I entered the government as an independent, not associated with either political party. However, I worked in a Republican administration and became a strong believer in certain economic principles that were associated with the Republican Party.
Q: Like what?
A: Among other things, that there is an important role for government, but that our economy functions well if markets operate as freely as possible. I think things have evolved so that many of these same principles are not exclusive to the Republican Party now.
Q: You served as the California chairman of President Bush’s 2000 and 2004 campaigns. How did you get to know the Bushes?
A: My initial involvement came about during my time as assistant secretary of the Treasury because President Bush 41 was the director of the Central Intelligence Agency at the time. Because of my involvement in international policy, I spent a good deal of time with him and got to know him well.
Q: What did you think of him?
A: I thought very highly of him, and I still do. He introduced me to his son. As a result, I have gotten to know the family well over the years.
Q: Have you talked with them recently?
A: Recently, I haven’t had an opportunity to spend any time with them, but I consider them close friends, especially President Bush 41.
Q: What kinds of things would you chat about with them?
A: Each of them, in their own way, would ask questions of me whenever we were together about how I thought Californians would be affected by certain aspects of public policy. I believe that all elected officials should reach out to people in the private sector so they can hear how the policies they are enacting are affecting the populace.
Q: Tell us how you got into the finance industry.
A: From the time I served in the Treasury Department, I have been interested in economics and finance. By 1991, I was able to save enough money to start a firm.
Q: How big is Aurora today?
A: We oversee about $2 billion in private equity funds. We have a team of 22 professionals and a support staff of another eight, so it’s about 30 people in all. We have built our firm from within. All of our partners and associates are younger than I am by a significant degree. Most started at Aurora before they went to business school and came back to Aurora afterward. I’m very proud of that.
Q: What kinds of companies does Aurora invest in?
A: Our private equity fund buys healthy companies and helps them grow and become better. In 2007, we established a second fund that buys distressed debt of companies and helps them get better.
Q: How attractive are the opportunities right now?
A: For the areas that we focus in, I think the opportunities are as good as I have seen in the last 30 years. When you come off a deep recession, capacity is not being fully utilized and you can acquire a business at a reasonable price. As the economy improves, you have an opportunity to significantly grow that business. This is a strong opportunity for the kind of businesses we’re looking at.
Q: What’s next for you?
A: From a professional standpoint, I’m totally dedicated to Aurora. I don’t know exactly where volunteerism may take me, but I do believe that you can continue to contribute to your society throughout your lifetime.
Q: As a child did you ever think you would accomplish all that you have?
A: As a child, I thought I wanted to be a professional baseball player. I’ve always loved sports, having played soccer and baseball in college.
A: I only played baseball my freshman year. I played soccer for four years and captained the soccer team at Princeton in my senior year.
Q: Are you a big baseball fan?
A: I am a Red Sox fan. Having grown up in Hartford, Conn., you choose between the Yankees and the Red Sox. My father was a Yankee fan; my son is a Yankee fan. So I have been caught in the middle.
Q: These past few weeks must have been tough, as the Yankees won the World Series.
A: It’s been extremely difficult for me.
Q: By the way, I notice you were an English major. That seems odd given where your career has taken you.
A: I believe strongly that it’s important to remain flexible in your younger years in terms of where your interests may lead you. When you are in school, you have an opportunity to let your creativity expand. I do not think you should try to overplan careers when you’re in high school and college.
Q: What kind of literature did you study?
A: There was not one particular specialty, but I did write my senior thesis on the author E.M. Forster, whose most famous work was called “A Passage to India.” I also like Shakespeare; I like poetry.
Q: Do you have time to read these days?
A: I can’t say that I read except when I go on vacation. On my last trip, I read coach John Wooden’s book about leadership. I also read the latest Chris Matthews book and I read Glenn Beck’s book on common sense.
Q: Where have you traveled recently?
A: Over the last few years, my wife and I have wanted to explore places that we hadn’t visited before. Over the last five years, we made one trip to South Africa. Another year we went to Tanzania and Kenya. I also went on a trip with Princeton alumni to Turkey. My wife and I had never been to Turkey and found that to be a fabulous trip.
Q: How did you meet your wife?
A: We met in Washington, when I was working in the Treasury Department and she was working in the White House. She was born and raised in Pasadena, so she was very anxious to live in California. She helped me transition to become a Californian.
Q: What do your kids do?
A: I have a daughter, Laura, who is a Superior Court judge in San Diego. I have a son, David, who is in charge of real estate in the West for Citigroup.
Q: Did you ever think they would follow in your footsteps?
A: (They have a) desire to make their own way, or leave their own footprints. I don’t think either of them would want to be working at a firm that I helped found.
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