Governor Is Focus of Ethics Complaint

Times Staff Writer

Officials with the California Democratic Party said they intend to file a complaint today with a state watchdog agency over Gov. Arnold Schwarzenegger’s lucrative consulting deal with a magazine publisher, saying that he ran afoul of conflict-of-interest and gift laws.

The complaint, to be filed with the Fair Political Practices Commission, would contend that the governor’s multimillion-dollar agreement with the publisher was barred under state laws designed to keep public officials from getting excessive gifts or using their position for personal gain.

“We think that the governor’s actions here are pretty outrageous,” said Lance Olson, general counsel for the state Democratic Party. “He’s lined his pockets and he’s vetoed legislation that directly affects those people giving him money. And we think that violates several pretty clear provisions in the Political Reform Act.”


At the same time, Assembly Speaker Fabian Nunez (D-Los Angeles) said that he is discussing with state lawyers the possibility of holding legislative hearings into Schwarzenegger’s contract with Florida-based American Media Inc.

Margita Thompson, a spokeswoman for the governor, said there was no need for hearings, or an FPPC inquiry. In any case, she said, the issue is “moot” because Schwarzenegger ended the deal on Friday, a day after financial details were disclosed in newspaper reports.

“There’s no legal conflict of interest,” Thompson said.

The contract guaranteed Schwarzenegger a minimum of $1 million a year over five years based on a percentage of advertising in seven magazines put out by an American Media subsidiary. In return, the governor was to “further the business objectives” of the subsidiary, Weider Publications.

The governor also served as executive editor of two muscle magazines, Flex and Muscle & Fitness, and wrote a monthly column for each. He said the column would continue but with no pay. Schwarzenegger and the company reached the agreement on Nov. 15, 2003 -- two days before he was sworn in as governor. The contract began in January 2004 and was to run through 2008.

In a filing last month with federal regulators, American Media estimated that the deal would pay at least $8 million. Schwarzenegger has declined to return any of the money he has received under the contract to date.

Some of the magazines contain many ads for performance-enhancing dietary supplements that promise improved athletic performance. Last year, the governor vetoed a bill that would have imposed restrictions on the supplement industry, an action that some lawmakers and ethics experts contend was a conflict of interest.


Nunez said he may want a legislative committee with subpoena power to examine the deal. But he said he wants to avoid a “circus” atmosphere. He said he may delay a decision on hearings for several weeks while he consults with advisors.

A delay could mean that any hearings would spill into the campaign over several initiatives that Schwarzenegger has placed on the ballot for a fall special election -- which could prove embarrassing for the governor.

“While I think the governor did the right thing by canceling the contract with this firm, it still raises lots of questions and a lot of doubts about political transparency,” Nunez said. “Whether or not there was an implied or direct conflict of interest ought to be looked into further in the scope of a legislative probe.”

Schwarzenegger took a few questions about the deal in Oakland on Monday while signing legislation to complete construction on a new span of the San Francisco-Oakland Bay Bridge.

“It’s the way it is in life -- you encounter problems and you try to eliminate them as quickly as possible and then move on,” Schwarzenegger said, according to Associated Press. He quipped that his wife, Maria Shriver, might be more upset than he was to relinquish millions of dollars.

“I have no problem about the money, but my wife has a little problem with that. She thinks it means less diamonds or something like that,” Schwarzenegger said.


He dropped the consulting job amid accusations that it was a distraction from his duties as governor.

On Oct. 8, 2003 -- the day after he was elected -- Schwarzenegger held a news conference and said he would make no movies or let his attention lapse while serving as governor.

“The people of California want me to be the governor, and I would do that if nothing else,” he said. “I will work as the governor. I will work as much as I can, even if it is around the clock. There will be no time for movies or anything else. I will pay full attention to this job.”

The Democrats’ complaint against the governor comes down to three concerns. Party officials said the governor is violating a rule that prohibits him from getting gifts worth more than $360. Because his duties under the contract were so vague, Olson said, he was pocketing an amount that outstripped the value of his work. Therefore, the money was really a gift, he contended.

“Read the contract,” Olson, the Democratic Party counsel, said. “You can’t figure out what he does for $8 million. All we know is he’s written a couple of columns -- and it isn’t even clear he writes those columns. That’s the definition of a gift.”

Every few weeks, Schwarzenegger would talk to the editors of the muscle magazines, who then would write a proposed column based on his thoughts and send it back for his approval, a Muscle & Fitness editor said.


The complaint also would allege a conflict of interest. Olson cited a state law barring public officials from making government decisions that influence their income. By vetoing a bill that would have regulated supplements -- a substantial source of magazine advertising -- Schwarzenegger violated that measure, Olson said.

Schwarzenegger’s office has countered that he was paid not by advertisers but by the magazines, so no conflict applies.

Another violation, Olson said, was Schwarzenegger’s acceptance of “honoraria” from writing magazine articles -- something that state ethics law prohibits. In the June edition of Flex, Schwarzenegger wrote a column headlined “In Defense of Supplements,” which drew distinctions between legal supplements and illegal steroids.

He criticized government attempts to “limit the availability of many dietary supplements” and mentioned his veto of a bill that, he wrote, wrongly sought to “restrict the availability of performance-enhancing dietary supplements in schools.”

Olson said that the honoraria law is aimed at preventing acts where elected officials use the office to “get additional income and take advantage of their status, which is exactly what happened here.”

Some legal experts say, however, that in California case law, public chief executives are governed by a “rule of exception,” which requires them to make decisions even if there is a conflict of interest.


In 1986, an appeals court ruled that then-San Francisco Mayor Dianne Feinstein was allowed to veto a rent-control bill even though it benefited her as a landlord. Her “legally required participation” in running the city nullified the conflict-of-interest law, the court ruled.

A similar appeals court decision in 2000 exempted Mayor Jerry Brown of Oakland, allowing him to work on redevelopment issues in his neighborhood. Brown argued that his work was “legally required” and overshadowed the Political Reform Act of 1974, which he, coincidentally, helped write.

A separate FPPC complaint against the governor was filed late Monday by a Petaluma couple who blame steroids for their son’s suicide. Denise and Raymond Garibaldi contend that Schwarzenegger was required to disclose that the bill he vetoed last year would have hurt him financially.

Denise Garibaldi said she was moved to act because “we believe our son’s steroid use was precipitated by his supplement use.” She previously testified before Congress on steroid abuse and in the Legislature on behalf of the 2004 bill. She said her son Rob, a baseball player who turned down a draft offer from the New York Yankees to attend USC, began taking supplements when he was 15.

After high school he switched to steroids, which his family blames for psychological problems that hurt his chances of playing in the major leagues and ultimately led him to kill himself in 2002 at age 24.

Times staff writer Joseph Menn contributed to this report from San Francisco. Times staff writer Robert Salladay contributed from Sacramento.