Governor Defends Magazine Deal

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.

California law does not explicitly bar governors from holding outside employment. But that may be because legislators never anticipated that anything like that would happen, said Robert Stern of the Center for Governmental Studies in Los Angeles.

“Everybody assumes being governor is a 24/7 job and that a person devotes all their time to being governor,” said Stern, a former general counsel for the California Fair Political Practices Commission and author of the state’s Political Reform Act of 1974.

Other government bodies, including Congress and the Los Angeles City Council, have rules prohibiting outside employment. In light of the Schwarzenegger revelation, Stern said, California should adopt similar restrictions for the governor.

“We’ve never had this problem before,” Stern said. “It is a new area. This is an ethical conflict. It shouldn’t happen in the future.”

Schwarzenegger declined to speak with nearly a dozen reporters who greeted him at Los Angeles’ Westchester High School, where he briefly testified at a public hearing on military base closures.

He stayed about 100 yards from reporters, behind a chain-link fence, and only gave a thumbs-up and a smile when he came in and left. He then flew to Mexico for a private dinner with governors from 10 U.S. and Mexican border states.

In a sign that the issue could reverberate in the 2006 governor’s race, Democratic state Controller Steve Westly weighed in, calling for the governor to drop the contract.

“It’s plain wrong to spend your time in public office doing private deals,” said Westly, who has announced that he is candidate.

“I’m troubled by the revelation that Gov. Schwarzenegger has made millions of dollars on the side from a company whose advertisers have business before the state,” Westly added. “When I was elected controller ... I refused to accept outside income. Gov. Schwarzenegger should have done the same.”

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.

Schwarzenegger is also executive editor of Flex and Muscle & Fitness. He writes regular columns for both. In the August issue of Muscle & Fitness, the magazine boasts of an article about Schwarzenegger: “the interview ONLY M&F; could get.”

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.

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.

In comparison to his movie deals, the money is not huge, Stutzman said.

He noted that Schwarzenegger was paid “$25 million for doing ‘T-3’ [‘Terminator 3’]. You and I should be so lucky, right?”

Schwarzenegger aides maintain that it’s not uncommon for elected officials to earn outside income. They’ve pointed to Assembly Speaker Fabian Nunez (D-Los Angeles), who has been paid $35,000 a year by the Voter Improvement Program in Los Angeles, a nonprofit group created by the former president of the Los Angeles County Federation of Labor.

Nunez’s office said that comparison was flawed.

As a legislator, the speaker can remove himself from decisions on issues that might create a conflict of interest, a spokesman said.

But under state law, the governor cannot step aside. A bill that might pose a conflict could simply become law without the governor’s participation.

“That dog doesn’t hunt,” said Steve Maviglio, a spokesman for Nunez.

In a sharply polarized state capital, reaction to Schwarzenegger’s outside deal broke largely along party lines.

“When I first saw it, I called it ‘DD’: Democrat Desperation.... It’s a nonissue,” said Senate Republican leader Dick Ackerman of Irvine.

“I think this is an issue Democrats threw out hoping the press would make a big thing out of nothing. We have looked at it and there is no ‘there’ there.... He does not control the advertising. He does not own the magazine. He is merely a consultant.”

Sen. John Campbell (R-Irvine) said any suggestion that the governor’s contract posed a conflict of interest was unfair -- “pure politics,” Campbell called it.

“I do not understand why anybody thinks this is a story at all,” Campbell said, “not to mention a big story. This governor has been into supplements ... since long before he was even thinking about politics. Morally, there’s absolutely no conflict here. It’s not like he’s changed his position on this issue. It’s not like there’s anything new.”

A dissenting note, however, came from Republican Assemblyman Keith Richman of Northridge.

“At a minimum there’s a perceived conflict of interest and the governor should not be doing it,” Richman said. “He should be severing his relationship with the publishing company.”

Assemblyman Hector De La Torre (D-South Gate) said the governor’s arrangement was “outrageous not only in and of itself but in the context of his apologists, his staff, the arguments they present.”

De La Torre called the position that other politicians take outside income “a teenager argument.”

“Mom, everybody’s doing it,” he said. “During the campaign he made such a big deal of being so rich that he didn’t need to ... take a salary. Well, now we know why he didn’t.”

Last year, the governor’s office announced that he would become executive editor of the two magazines. Aides revealed how much American Media would pay to the physical fitness council in exchange for the governor’s work. But they would not say how much Schwarzenegger was pocketing. Nor did they mention that his pay was tied to the company’s ad revenue.

American Media released nothing about Schwarzenegger’s salary until this week. Late last month, the firm mentioned in its annual report, filed with the SEC, that it had signed a consulting agreement with an unnamed “third party.”

Over the past week, a spokesman for the company refused to say whether the “third party” was Schwarzenegger. On Wednesday, the company filed another financial report with the SEC detailing the contract and identifying the governor.

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.”

Times staff writers Evan Halper and Robert Salladay contributed to this report.