Despite criticism, Schwarzenegger ignores conflict-of-interest concerns about magazine deal

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Associated Press

SACRAMENTO, CA — Despite a chorus of criticism, Gov. Arnold Schwarzengger largely ignored claims that a multimillion-dollar deal with a fitness magazine publisher poses a conflict of interest.

Schwarzenegger last year vetoed legislation seeking to crack down on the useof performance-enhancing substances in high school sports. Nutritional supplements represent a major source of advertising income for the fitness magazines.

But the governor’s aides maintain that Schwarzenegger believes strongly in the use of nutritional supplements and is allowed under the law to maintain
business relationships that he’s had since his days as a bodybuilder.

“These are deeply held beliefs that he’s had a long time before he became governor,” said Rob Stutzman, Schwarzenegger’s communications director. “And these are publications that he has been associated with his entire adult life and will continue to be.”

A Securities and Exchange Commission filing showed Schwarzenegger is being paid at least $5 million over five years to act as a consultant for several magazines published by American Media Inc., including Flex and Muscle & Fitness. The publications derive much of their profit from firms advertising nutritional supplements.

One lawmaker said the arrangement presents a conflict of interest and asked the governor to cut ties with the magazines.

“The governor of the state of California makes some important decisions everyday. Today, he has to make a decision about a conflict of interest – his own,” said state Sen. Jackie Speier, D-Hillsborough, who sponsored the bill to crack down on performance-enhancing substances for teenagers. “It’s time for him to step up and show some leadership.”

Not so, said Stutzman. “There is no technical conflict,” he said.

He said the arrangement was fully disclosed last spring when Schwarzenegger announced he would become executive editor of the two magazines. The governor also filed a financial report with the state saying he was being paid, although the filing did not specify the amount.

Stutzman said the business relationship did not create a conflict because Schwarzenegger had no contact with the magazines’ advertisers.

“There’s not a direct link to the governor’s activities and supplements,” Stutzman said in an interview. “There may be an indirect one that can be suggested, but the governor is not out there selling advertising for the supplement industry.”

The governor does not accept his $175,000 annual salary from the state, and California law allows elected officials to keep outside jobs.

The contract between Weider Publications, a subsidiary of American Media, and Schwarzenegger’s production company, Oak Productions Inc., states that
Schwarzenegger will receive 1 percent of the magazines’ advertising revenue each year for five years. The payment will be no less than $1 million a year but could reach much higher, according to the contract.

Schwarzenegger’s lone public event Thursday was a brief appearance at a west Los Angles high school before a federal commission charged with recommending a list of military base closures. He avoided a large group of reporters before the appearance, and afterward, waved but did not speak to reporters shouting questions from behind a fence.

Government watchdog groups reacted swiftly to the financial arrangement revealed in the SEC filing.

“He has broken his trust to the people by vetoing legislation to protect young people from dangerous supplements without ever telling us that he is earning millions of dollars from these companies,” said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Experts and lawmakers differed about whether Schwarzenegger’s contract with the magazines and his veto of the Speier bill represented a conflict.

One government expert said Schwarzenegger’s veto was acceptable because Speier’s bill had the potential to affect an industry rather than an individual or specific entity.

“There’s considered to be an exemption from disqualification on industry bills,” said Bob Stern of the Center for Governmental Studies in Los Angeles.

The governor’s financial disclosure filings with the state show only that he received an undisclosed amount from American Media, which also publishes The National Enquirer, Star and other celebrity tabloids.

Schwarzenegger writes monthly columns for Muscle & Fitness and Flex, and last year announced that he had agreed to serve as executive editor for both.

The bill Schwarzenegger vetoed last year would have required high school athletes to pledge not to use performance-enhancing substances, created a list of banned substances and barred supplement makers from sponsoring school events.

In his veto message, Schwarzenegger said key parts of the bill were unclear and that it was focused erroneously on dietary supplements rather than on steroids, which he has acknowledged using during his bodybuilding career. Speier at the time said the governor was putting the interests of supplement makers above the well-being of student athletes.
Associated Press Writers Beth Fouhy in San Francisco, and Michael Blood and Alex Veiga in Los Angeles contributed to this report.

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