July 14, 2005latimes.com : CaliforniaE-mail story Print Most E-mailed THE
STATE
Gov. to Be Paid $8 Million by Fitness Magazines
The publications rely heavily on advertising for dietary supplements.
Schwarzenegger vetoed a bill that would have regulated their use.
By Peter Nicholas and Robert Salladay, Times Staff Writers
SACRAMENTO Two days before he was sworn into office, Gov. Arnold
Schwarzenegger accepted a consulting job paying an estimated $8 million over
five years to "further the business objectives" of a national publisher of
health and bodybuilding magazines.
The contract pays Schwarzenegger 1% of the magazines' advertising revenue, much
of which comes from makers of nutritional supplements. Last year, the governor
vetoed legislation that would have imposed government regulations on the
supplement industry.
ADVERTISEMENT According to records filed Wednesday with the Securities and
Exchange Commission, Schwarzenegger entered into the agreement with a
subsidiary of American Media Inc. on Nov. 15, 2003. The Boca Raton, Fla.-based
company publishes Muscle & Fitness and Flex magazines, among others.
Watchdog groups and state lawmakers called the contract which refers to
Schwarzenegger as "Mr. S" a conflict of interest.
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 law allows governors and other elected officials to keep outside jobs.
Assembly Speaker Fabian Nuñez (D-Los Angeles) has been paid $35,000 a year by
the Voter Improvement Program in Los Angeles, a nonprofit organization created
by the former president of the Los Angeles County Federation of Labor.
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.
The contract calls for the governor to help the company through his own
suggestions and by "being responsive to the reasonable requests" of Weider
Publications, a subsidiary of American Media.
In a concession to Schwarzenegger's job as California governor, the agreement
says that he is not compelled to work for the company during "normal business
hours on business days."
"Mr. S shall seek in good faith to make himself available from time to time to
Weider" after the workday or on weekends, the filing says.
As recently as a few days ago, American Media refused to say anything about
Schwarzenegger's pay. The company filed an 83-page annual financial statement
with the SEC last month that, in one paragraph, mentioned a consulting
agreement with an unnamed "third party." Stuart Zakim, an American Media
spokesman, refused to say whether the third party was Schwarzenegger.
American Media, which also owns the National Enquirer, the Globe and the Star
tabloids, made public the terms of Schwarzenegger's contract in a separate SEC
filing Wednesday.
The governor announced last year that he had agreed to become executive editor
of Muscle & Fitness and Flex. He writes monthly columns for both, dictating
them to the editorial staff of the magazines. The governor's office had
declined to reveal his salary.
The SEC filing by American Media, which followed repeated inquiries by The
Times, is the first public indication of the size of the contract.
Schwarzenegger's financial disclosure statement covering 2004 shows that he
received an undisclosed amount of income from American Media. But the state
form calls for little specificity, requiring only that public officials report
income in excess of $10,000. The statement offered no more detail. And unlike
past governors, he has declined to make his tax returns public.
The contract shows that Schwarzenegger's firm, Oak Productions, gets 1% of the
subsidiary's annual advertising revenue. It holds that "in no event" will
payment be less than $1 million a year.
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.
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 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.
Schwarzenegger's office characterized the article as "hyperbole."
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."
Thompson said Schwarzenegger is committed full time to his job as governor: "We
just signed a budget, and the governor has a reform agenda. I don't think
anyone could dispute that he has been absolutely focused on his agenda and the
state, from the media perspective, from the institutional perspective and from
a civic perspective."
American Media's publications have been Schwarzenegger boosters since he formed
a partnership with the company.
That wasn't always the case. The National Enquirer published an article in 2001
alleging that Schwarzenegger had had an extramarital affair. Two years later,
just before Schwarzenegger signed the contract, American Media produced a
120-page glossy magazine called "Arnold, the American Dream."
In a new book about Schwarzenegger, author Laurence Leamer said the governor
was aware that his contract with AMI would prompt the publisher to end any
negative coverage of him. In the book, Schwarzenegger is quoted as saying: "Do
you want to work with someone who you are attacking?"
For his pay, the governor's most public role is his monthly columns. A
seven-time Mr. Olympia winner, he speaks with the magazine editors by phone
every few weeks. They take notes, draft a column and send it to him for review,
said Vincent Scalisi, editor-in-chief of Muscle & Fitness.
"Obviously, we know that he has a busy, full-time job," Scalisi said in an
interview in recent months. "And we don't want to be a drain. But the reality
is
what a wonderful resource we have access to."
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July 14, 2005
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