SACRAMENTO: Gov. Arnold Schwarzenegger dismissed criticism of his $8-million consulting deal with a magazine publisher Thursday, saying through a spokesman that the work takes up little time, poses no ethical conflicts and may even be saving taxpayers money.
Schwarzenegger believes that questions about his company's five-year agreement are "much ado about nothing," Rob Stutzman, the governor's communications director, said.
As governor, Schwarzenegger has refused to accept his $175,000 salary. He has talked repeatedly in his speeches of how he ran for the office to "give something back" to California, a state that propelled him to the status of box office sensation and multimillionaire.
He can more easily afford to refuse his state salary because of his private contract, Stutzman suggested. "That's one of the reasons maybe he doesn't need to take it from the state," the aide said. "He can continue to take consulting fees from something like this."
Asked if the governor had any other outside deals, Stutzman said no. "He spends very little time on this," the spokesman said. "It's something he would essentially do in his spare time. These are magazines he's had a relationship with throughout his entire career in bodybuilding and fitness."
Stutzman's unwavering defense of the deal, revealed Wednesday afternoon through a corporate filing with federal regulators, came on a day when some ethics experts, watchdog groups and state legislators sharply criticized Schwarzenegger's moonlighting and demanded that it stop.
Under the governor's agreement, he gets a fee based on 1% of the advertising revenue of various health and fitness magazines.
Much of that revenue comes from makers of nutritional supplements, and the governor vetoed legislation last year to impose restrictions on them. Stutzman said Schwarzenegger rejected the bill because it was poorly drafted and would have created confusion.
Welcome to Political Ethics 101 Governator. This is what we call a "conflict of interest."
This story is complicated. When Schwarzenegger became governor, he had forgone his $175,000 salary, claiming he was giving something back to the state. Of course, Schwarzenegger's rich--he didn't need the governor's salary. He's a mega-movie star who's made hundreds of millions of dollars with his Terminator, Conan, and many other blockbuster movies he's starred in over the last 20 years. But before Schwarzenegger became a movie star, he was a famous body builder--winning the Mr. Olympian title several times. His body-building career has also provided him with lucrative advertising contracts. Under the governor's agreement, Schwarzenegger gets a fee based on 1% of advertising revenue from health and fitness magazines. According to the LA Times:
Schwarzenegger's contract is with Weider Publications, a subsidiary of American Media Inc. of Boca Raton, Fla. Among the publications that American Media puts out are the tabloids National Enquirer and Star, along with fitness magazines Flex and Muscle & Fitness.
Schwarzenegger agreed to the deal two days before he was sworn in as governor in November 2003, according to financial records filed with the U.S. Securities and Exchange Commission. The contract expires Dec. 31, 2008.
The agreement holds that Schwarzenegger, referred to as "Mr. S," must "further the business objectives" of Weider and make himself available to the company outside business hours, to avoid interfering with his job as California governor.
Must "further the business objectives" of Weider Publications. Magazines make their money through advertising, not through subscription sales. So the business objectives of Weider Publications is to sell advertising space in their magazines to companies who need to sell their products. And in the case of health and fitness magazines, the companies selling nutritional supplements are candidates for advertising dollars. A bill comes up to the governor's desk restricting the use of nutritional supplements to high school athletes, especially those supplements that increase blood pressure and heart rate. These high school athletes probably make up a large percentage of the readership in the health and fitness magazines of Weider Publications, and are a prime market segment for the companies pitching their supplements in the magazine ads. What does the governator do? He vetos the bill. The governor's representatives say there was no conflict of interest. Schwarzenegger doesn't solicit any of the ads selling the supplements that can be targeted towards the high school athletes. However, according to a San Jose Mercury News article the one percent annual fee that Schwarzenegger gets from advertising revenue could come out to at least $1 million a year minimum. And both the San Jose Mercury News and LA Times point out that Schwarzenegger cannot recuse himself from signing or vetoing a bill. In the absence of the governor's action, the bill would become law. So had Schwarzenegger vetoed the bill restricting supplements to high school athletes, he would have been violating his contract in furthering the business objectives of Weider Publications.
But the corruption goes further. Schwarzenegger is also the executive editor of Flex and Muscle & Fitness--both are magazines owned by Weider. He writes regular columns for both publications. And yes, both publications are certainly targeted towards high school and young adult men, with heavy advertising of nutritional supplements. According to the LA Times:
Of the estimated $8 million that will go to Schwarzenegger's company, Oak Productions, $1.5 million is funneled to a new tax-exempt group the governor started, a physical fitness panel, according to American Media [the parent company of Weider Publications].
Asked what Schwarzenegger did to earn his consulting pay, Stutzman mentioned the column. Schwarzenegger can command such fees because of his celebrity, his office said.
So Schwarzenegger is getting an $8 million consulting and advertising fee from Weider Publications for services that are not specifically described in detail. Even more surprising is that this disclosure came from SEC filings released by American Media--parent company of Weider Publications. None of this information was ever publicly disclosed by the governor's office. The LA Times article continues saying:
Some legal experts said such disclosure was not sufficient when it came to outside employment on this scale.
Kathleen Clark, a law professor at Washington University in St. Louis and a government ethics expert, said California's disclosure requirements "may not be nuanced enough" for present-day incomes and for voters to accurately gauge if a politician has a conflict of interest.
"It surprises me that the way we found out about this was an SEC filing," she said. "It surprises me that it was not [fully] disclosed. That is precisely the sort of information that the public needs."
We're going to hear more about this scandal when the 2006 governor's re-election comes up.
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