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The San Francisco Chronicle
Jul 16, 2005 - 01:00 AM

by Mark Martin, Chronicle Sacramento Bureau

Governor to quit 2nd job;

Schwarzenegger relents amid controversy over lucrative pay and potential conflict of interest
Sacramento, CA -- Gov. Arnold Schwarzenegger announced Friday he was quitting his job as the executive editor of two body building magazines amid a storm of criticism about his lucrative moonlighting.

Schwarzenegger said he will relinquish his title as executive editor of Muscle & Fitness and Flex magazines and give up the multimillion-dollar salary that went with it. A spokesman said, however, that he will continue writing a monthly column for the magazines, albeit without compensation.

The release this week of the governor's contract with the magazines -- which showed he would earn at least $1 million a year for five years -- sparked national press coverage, and Schwarzenegger bowed to calls that he should have only one job.

"When I became governor, I pledged to put the people of California front and center," Schwarzenegger said in a press release announcing his decision. "I don't want there to be any question or doubt that the people have my full devotion."

Facing plummeting poll numbers and a crucial special election campaign this fall, the governor clearly hoped to avoid more criticism. The decision Friday was a complete turnaround from Thursday, when Schwarzenegger spokesman Rob Stutzman said the governor believed the coverage of the issue was "much ado about nothing" and said the governor would continue with the editing job.

"Schwarzenegger did something he absolutely had to do, but he should never have put himself in this position in the first place," said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights, a group that is a frequent Schwarzenegger critic.

Many who criticized Schwarzenegger for his magazine career this week applauded his decision to step down.

Some lawmakers said they will create legislation to tighten financial disclosure laws, and government watchdogs called for a ban on outside jobs for elected officials.

"It was time for him to be a leader and to sever the contract," state Sen. Jackie Speier, D-Hillsborough, said. "I am pleased that he has acted appropriately."

Stutzman said that American Media Inc., which owns the magazines, agreed to allow Schwarzenegger to end his contract without penalty. A spokesman for the company did not return calls.

Stutzman also said Schwarzenegger will not return the money he has made so far. That amount is unknown because Schwarzenegger has refused to release his income tax returns, and the governor's public disclosure forms are vague.

Schwarzenegger lists that he earned more than $100,000 from his production company, called Oak Productions, and lists the various entities that paid the company. But he does not detail how much each company paid Oak Productions.

Heller called on Schwarzenegger to provide more details about how much money he earns.

Schwarzenegger has refused to take income from his governor's job, which is set at $175,000 per year.

According to a Wednesday filing with the U.S. Securities and Exchange Commission, Schwarzenegger entered into an agreement with the magazines two days before he was sworn in as governor in 2003. He was to earn 1 percent of the magazines' advertising revenue between 2004 and 2009, or at the least $1 million a year. Contract estimates showed the company could have paid more than $8 million to Schwarzenegger and two groups he sponsors, a bodybuilding competition and a state fitness council.

Schwarzenegger has been associated with the magazines for 30 years and is featured prominently in each issue. The magazines are filled with advertisements for dietary supplements, and the ads prompted Speier and others to suggest that the governor faced an apparent conflict of interest.

Schwarzenegger vetoed a bill authored by Speier last year that would have banned some supplements among high school athletes.

The governor was sure to face continued conflict-of-interest charges had he continued receiving income from the magazines. A trade group representing dietary supplement companies -- including one that is a sister company to another company that launched the magazines Schwarzenegger worked for -- is lobbying against Speier's bill this year. That could have put the governor in the awkward position of being lobbied by a group with ties to his employer.

The controversy may bring new legislation. Speier said she wants to work on a new law that would require more specific financial disclosure for public officials. Current forms require politicians and some government workers to provide only a range of money they are making in outside jobs, such as between $10,000 and $100,000, for example. The highest amount of money officials have to disclose is $100,000.

Assemblyman Mark Leno, D-San Francisco, said he plans to amend a bill he is carrying to require more information about income.

"Voters need more specific information," Leno said. And some political reform advocates have suggested the state should ban second jobs for the governor, and possibly for lawmakers, many of whom earn outside incomes.

Schwarzenegger earlier this year criticized Assembly Speaker Fabian Nez for earning $35,000 from a voter participation group with ties to labor unions. Nez quit that job after media reports disclosed it.

Having a second job opens up too many potential conflict-of-interest problems, said Ned Wigglesworth, analyst for TheRestof Us.org, a government watchdog group.

"Serving as a state legislator or governor is not a paper route or lemonade stand -- it deserves and demands an official's full attention," Wigglesworth said. "The speaker and governor can demonstrate that they understand the importance of their position by passing a law which prohibits state elected officials from holding private employment while in office."
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Chronicle staff writer John Wildermuth contributed to this report.
E-mail Mark Martin at markmartin@sfchronicle.com




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