Deal pays governor $5 million
Schwarzenegger's pact with bodybuilding magazines is disclosed to federal regulators.
By Gary Delsohn -- Bee Capitol Bureau
Published 2:15 am PDT Thursday, July 14, 2005
Gov. Arnold Schwarzenegger is receiving at least $5 million for his work as executive editor of two bodybuilding magazines whose advertisers have business at the Capitol, the publishers revealed for the first time Wednesday.
The money is in addition to $250,000 annually over five years that the magazines have agreed to pay to the Governor's Council on Physical Fitness.
Schwarzenegger's office and the magazine publisher, American Media Operations, have disclosed the Council on Physical Fitness payments before. But a Wednesday filing with the U.S. Securities and Exchange Commission reports for the first time that the former bodybuilding champion is personally earning $1 million a year or 1 percent of the magazines' ad revenue, whichever is higher, in a five-year contract for his "various consulting and other services."
Another $100,000 a year for five years goes to Schwarzenegger's Arnold Classic bodybuilding expo held each year in Columbus, Ohio, according to the filing.
The governor's aides noted that many California legislators accept outside income. But the disclosure immediately opened Schwarzenegger to new criticism over his activities promoting bodybuilding magazines, which are fat with ads for controversial dietary supplements.
He vetoed a bill last year, for instance, that sought to restrict supplement use among high school students. He said in his veto message that the bill, which was strongly opposed by the supplements industry, was too vague and would have banned healthy supplements as well as unhealthy ones.
"It calls into question the veto of my bill last year," said Sen. Jackie Speier, D-Hillsborough, the author of the measure. "If you recall the veto message, he went out of his way to say that dietary supplements are safe.
"It was an unusual statement that standing alone an elected official would never make. One, because he's not a scientist and two, because of evidence that some dietary supplements are very dangerous."
Speier called on Schwarzenegger to "sever his relationship" with the publications.
The Bee reported Wednesday that Schwarzenegger deepened his personal involvement with the industry earlier this year, when he attended a March meeting to help the dietary supplement companies launch a lobbying group aimed at avoiding government regulation of their products. That meeting took place as a new measure by Speier to restrict supplement use was pending at the Capitol.
"Whether it is an actual conflict or not, it certainly gives the appearance of being a conflict," she said. "I don't think the governor should ever be placed in a position of having to defend his contract or act on legislative matters that may be linked to the dietary supplement industry."
According to American Media filings, Schwarzenegger's consulting work on the magazines occurs around his "other commitments and his professional and personal availability as determined in his sole discretion."
It also says Schwarzenegger "shall seek in good faith to make himself available from time to time" to the magazines "after regular business hours and on weekends."
Margita Thompson, Schwarzenegger's press secretary, said Schwarzenegger had no conflict in considering Speier's bill because his pay comes from the magazines, not the supplement manufacturers and he plays no role in soliciting ads. She noted that other politicians earn money from private sector jobs.
"The Legislature operates so when they are in office they are allowed to have sources of outside income," Thompson said. "The governor doesn't take his state salary, and this governor has the most complicated financial holdings of any governor in California history. All the arrangements are properly disclosed and stated according to state requirements."
Bob Stern, a political reform expert who is president of the Center for Governmental Studies in Los Angeles, said Schwarzenegger "may be the first California governor ever paid outside income while he's governor."
"I realize he only gets paid $1 a year or something by the state, so maybe that's his justification, but I'd rather the state pay his salary and he devote all his energies to being governor than have someone else pay him $8 million," Stern said.
"That creates all kinds of conflicts of interest and raises a bunch of other questions, including, where is his loyalty?"
Schwarzenegger announced the executive editor arrangement in March 2004 and disclosed the $250,000 payments to his fitness council. Aides said at the time he would receive other compensation, but declined to reveal the amount or the terms of the deal.
His latest statement of economic interests lists investment income from American Media but does not identify its value.
American Media, which also publishes the Enquirer and Star tabloids, reported in a June SEC filing that it had entered a five-year consultant agreement with "a third party which provides various editorial consulting and other services," but did not identify Schwarzenegger by name. It estimated in that document that the compensation would cost the company $8.15 million.
In an addendum filed with the SEC on Wednesday, the company identified Schwarzenegger - calling him Mr. S in subsequent references - and said he will be paid, among other provisions, $1 million a year for five years or 1 percent of the magazines' ad revenue, whichever is greater.
Asked why Schwarzenegger was identified only now after going unnamed in the original filing, American Media spokesman Stu Zakim said there was "not really" any reason.
"We place enormous value on Arnold, and Arnold brings enormous credibility to the magazines," Zakim said.
Zakim said Schwarzenegger agreed to the terms of the deal in November 2003, the same month he took office and four months before the governor's appointment as the magazines' executive editor was made public.
"We didn't feel we needed to" disclose the monetary relationship sooner," he said.
About the writer:
The Bee's Gary Delsohn can be reached at (916) 326-5545 or firstname.lastname@example.org. Andy Furillo and Kevin Yamamura of The Bee Capitol Bureau contributed to this report.