Schwarzenegger Under Fire Over $8 Million Contract

By Carolyn Bolls | July 7, 2008 | 8:31pm EDT

( - California Gov. Arnold Schwarzenegger's $8 million contract with a muscle and fitness magazine is being criticized as a possible conflict of interest because the state regulates the industry that provides the publication's main source of revenue.

The Foundation for Taxpayer and Consumer Rights (FTCR) requested that Assembly Speaker Fabian Nunez appoint a committee with subpoena power to investigate the contract after Schwarzenegger failed to fully reveal his financial interests.

"The details of the governor's magazine contract should not have been hidden from public view," said Doug Heller, FTCR's executive director. He added that "only a legislative investigation can ensure other contracts and possible conflicts of interest are revealed."

"It is even more egregious than some we've seen from politicians that have been properly chastised for having contracts," Heller told Cybercast News Service
According to Heller, Schwarzenegger might have "other contracts which have not been fully itemized and disclosed."

In September 2004, Schwarzenegger vetoed a bill that would ban schools from accepting sponsorships from firms that make performance-enhancing dietary supplements but did sign into law a bill that prohibited companies from selling the supplements to minors.

The vetoed bill, according to Schwarzenegger, dealt with "performance-enhancing dietary supplements instead of focusing on ensuring that students participating in high school sports are not engaged in steroids use."

In the 5-year contract with Weider Publications, a subsidiary of American Media, Inc., Schwarzenegger -- referred to as "Mr. S." -- agreed to serve "as the 'Executive Editor' of Muscle & Fitness and Flex in relation to the consulting services being provided to Weider."

Schwarzenegger entered into the agreement with AMI two days before being sworn into office in November 2003. Much of the revenue supporting the magazines comes from advertisements from performance-enhancing dietary supplements.

According to FTCR, Schwarzenegger hid his multi-million-dollar contract by lumping it with 20 other contracts under his own company, Oak Productions. The governor only disclosed that "more than $100,000" comes from the Oak Productions.

Schwarzenegger's spokesman, Rob Stutzman, told Reuters that it has "been clear ever since he's become governor that he still would have outside income.

"He reports that income under state law in a form filed on an annual basis," Stutzman added.

California law allows governors and other elected officials to hold additional jobs, but critics consider Schwarzenegger's contract a "conflict of interest."

However, Heller said the controversy means that "Californians don't know if they can trust that the governor's decisions are based on the public interest and not on his own personal business deals."

Margita Thompson, another of Schwarzenegger's spokesmen, told the Los Angeles Times that the governor's contract presented "no conflict of interest" because he did not solicit any advertising.

One of Schwarzenegger's responsibilities at Muscle & Fitness and Flex is writing monthly columns, which he dictates to the editorial staff.

In addition to his contract, American Media, Inc., agreed to annually donate $350,000 until 2009 to Schwarzenegger's programs, "Arnold Classic" and "Governor's Counsel" on Physical Fitness.

Upon taking office, the California governor refused to accept his annual salary of $175,000. Stutzman suggested that Schwarzenegger is fulfilling his promise to "give back" to California through his private contracts.

"That's one of the reasons maybe he doesn't need to take it from the state," Stutzman said. "He can continue to take consulting fees from something like this."

Heller called Stutzman's reasoning an "absurd apology," saying that "California taxpayers are far more willing to pony up his salary as governor than to learn down the line that lobbying interests are paying him a million dollars a year on the side."

According to Heller, it is too early to tell whether Schwarzenegger will become the target of an investigation. "To get politicians to investigate other politicians is not always the easiest path, but I do believe that the legislature is seriously concerned about this," he said.

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