Some More Info on Governator's $8 Million Deal

After posting my first article on California Governor Arnold Schwarzenegger's $8 million consulting deal with Weider Publications, I've found another article from the Los Angeles Times which describes the details of Schwarzenegger's consulting deal. There are a couple of other interesting tibits of information in this article. For example:

Larry Noble, executive director of the Center for Responsive Politics in Washington, D.C., said: "This is one of the most egregious apparent conflicts of interest that I have seen. This calls into question his judgment as to who he is working for, and it calls into question what he thinks he owes the public."

He added: "For a governor to have … contracted his decision-making and judgment to a company is a real conflict of interest."

The Times gives Schwarzenegger's side of the story, saying:

A Schwarzenegger spokeswoman, Margita Thompson, said that his financial holdings were "probably the most complicated of any governor" and that he had complied with all laws for disclosing his income. She said the consulting contract presented "no conflict of interest" because Schwarzenegger did not solicit any advertising.

"The governor did not direct sales or marketing activities of American Media and did not have personal contact with any advertisers to generate the advertising revenue," Thompson said.

But then what was the real reason for the governor's vetoing of the bill regulating nutritional supplements to high school athletes? Especially since the nutritional supplemental industry uses the publications industry to heavily advertise their products to increase sales. The health and fitness publications industry targets its magazines towards high school and young adult men. Both groups would have a major stake if California started regulating nutritional supplements towards high school athletes.

Some more interesting tibits of information from the Times article:

The agreement estimates that the governor's company will receive $2.15 million in fiscal year 2006; the same amounts in '07 and '08; and $1.7 million in '09. Those sums exceed the salary of the chairman and CEO of American Media, David J. Pecker, whose base pay this year is listed at $1.5 million.

American Media has also agreed to contribute $1.5 million over six years to one of the governor's tax-exempt groups: a physical fitness council launched this summer at Disney's California Adventure theme park. The chairman of the council is Austin M. Beutner, a director of American Media.

As a consultant, Schwarzenegger's role includes "advising on the direction of the" magazines and "otherwise helping in various ways to further the business objectives of the Weider business," the contract shows.

Schwarzenegger is going to be getting more money, each year, in those five years from his "consulting fees," than the salary of American Media chairman and CEO David J. Pecker. In addition, American Media's $1.5 million contribution to the governor's tax-exempt at Disney's California Adventure Theme Park is headed by the director of American Media, Austin M. Buetner. So Buetner gets to decide how to spend the $1.5 million that his company is giving to the fitness council that he sits on for Schwarzenegger. Finally, Schwarzenegger consulting duties gives him a say as to where the direction of the magazines are going. When discussing the magazine's future, the role of advertising will certainly come up. And the biggest advertisers for the fitness magazines will be the nutritional supplements, who wouldn't want California to regulate their supplements towards their biggest market of high school teenagers.

Here's another blow-out from the Times:

Weider Publications was started by longtime bodybuilding promoter and Schwarzenegger patron Joe Weider, who brought Schwarzenegger to the U.S. in 1968. Weider sold his magazines to AMI in 2003.

Schwarzenegger's two muscle magazines(Muscle & Fitness, and Flex) are crammed with ads for performance-enhancing dietary supplements promising chiseled bodies and surges of energy. The 257-page August issue of Muscle & Fitness contains 110 pages of ads for supplements, from creatine ethyl ester to anabolic/androgenic "absorption technology."

The governor used his regular column in the June issue of Muscle & Fitness to defend the supplement industry. He vowed to oppose any effort to restrict sales of the products in California, writing that he is "so energized to fight any attempt to limit the availability of nutritional supplements."

An article in the August issue of Muscle & Fitness said Schwarzenegger had "lent his support" to a new lobbying group that would work to promote nutritional supplements. "The governor also made it clear that he will remain a phone call away as the coalition progresses," the magazine said.

Last year, the governor vetoed a bill by state Sen. Jackie Speier (D-Hillsborough) that would have required coaches to take a course in performance-enhancing supplements, created a list of banned substances for interscholastic sports and barred supplement manufacturers from sponsoring school events. In his veto message, the governor said that most dietary supplements were safe and that Speier's bill would have been difficult to implement. He also said the bill unfairly focused on "performance-enhancing dietary supplements (PEDS) instead of focusing on ensuring that students participating in high school sports are not engaged in steroids use."

Speier said in an interview Wednesday: "I have got to believe the electorate will be incensed that he has this relationship, that he has not been upfront in disclosing it, that he has taken action on legislation that has an impact on the very industry from which he is indirectly receiving financial support."

So Schwarzenegger was not only getting consulting fees from media publications--once owned by a close body-building friend--that gets their income from heavy advertising by the supplemental industry, but has also been supportive of a lobbying group to promote the supplemental industry, a lobbying group that was probably created after Schwarzenegger vetoed the bill regulating the supplements to high schools. Any new bills that come up into the legislature calling for stronger regulations of supplements in public high schools will certainly be opposed by this lobbying group, and the supplemental industry. Passage of such regulations would affect Weider Publications bottom-line magazine advertising profits, and Schwarzenegger's consulting fees. How much more egregious can this conflict be?