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The Byrne Report
IN LATE SEPTEMBER--in what appears to be a conflict of interest--Gov. Arnold Schwarzenegger vetoed a bill that could have affected his personal finances. The legislation proposed that, as a condition of playing sports, public high school athletes agree not use performance-enhancing dietary supplements (PEDS) listed as dangerous by the Department of Health. Authored by Sen. Jackie Speier, D-San Mateo, Senate Bill 1630 prohibited public schools from accepting sponsorships from supplement manufacturers. It forbade school officials to promote or sell PEDS to students.
This bill was not directed against vitamins, minerals, Gatorade and benign substances that are generally recognized by the U.S. Food and Drug Administration as safe. Speier targeted the use of pain-numbing concoctions designed to build muscle mass and improve athletic performance by exciting the cardiovascular and central nervous systems. Popular dietary supplements, such as ephedrine and androstenedione, have been linked to the deaths of young athletes.
In his veto message, Schwarzenegger claimed, without citing any statistics or studies, that most dietary supplements are safe. He said that state regulation of PEDS is not needed because the FDA already regulates these substances.
"What most people do not understand is that PEDS are not regulated by the FDA," says Roger Blake, an official with the California Interscholastic Federation, a state-funded organization of high school sports officials that advocated for Speier's bill. The FDA treats cocktails of "body shredding" amino acids and hormones as food. The agency does not test or approve them.
Blake notes that about 3 percent of California's 700,000 student athletes take steroids. A recent BlueCross BlueShield Association study reports that, nationally, more than 1 million adolescents use "potentially dangerous performance-enhancing supplements and drugs." Last month, Congress passed the Anabolic Steroid Control Act of 2004, adding many chemical compounds that are often marketed as PEDS to a list of controlled substances.
Blake says that the Internet is a major pipeline for PEDS sales, including anabolic steroids. The latter are illegal to buy in the United States without a prescription. The PEDS industry is reported to gross more than $4 billion a year.
According to Schwarzenegger's Statement of Economic Interests, he had extensive financial ties to the PEDS industry when he assumed office in November 2003. California's Political Reform Act, as administered by the Fair Political Practices Commission, states that an elected official, such as the governor, must disqualify himself from taking any governmental action on a matter which he has reason to know could significantly impact his economic interests. Fair Political Practices Commission guidelines say that an official has an economic interest in an individual or organization from whom he has "received $500 or more in income within 12 months prior to the [relevant governmental] decision."
In order for a conflict of interest to occur, the official's action must be discretionary. It must significantly impact his economic interest. Depending on the size of the interest, the definition of "significant" ranges from $5,000 to $10 million.
According to his disclosure statement, Schwarzenegger earned "more than $100,000" last year from Classic Productions Inc., based in Worthington, Ohio. Using the trade name Schwarzenegger-Lorimer Productions, Classic Productions is producing a fitness expo this coming March in Columbus known as the Arnold Classic. In an interview last week, Schwarzenegger's business partner of 30 years, Jim Lorimer, said that he and the governor formed Classic Productions in 1993. Lorimer was president; Schwarzenegger, vice president.
Lorimer says that when Schwarzenegger became governor, he divested his Classic Productions stock and he is no longer a corporate officer. "I am the owner of [Classic Productions]," Lorimer explains. "Schwarzenegger-Lorimer Productions is no longer an operating entity."
The promoter is "thankful" that the governor will still participate in the fitness expo named after him. "The exact arrangements are confidential," Lorimer says, "but [Schwarzenegger] receives no income [from participating]."
Classic Productions' advertising campaign for the Arnold Classic is constructed around Schwarzenegger's persona and focuses on his active participation in it. The event's primary sponsors are PEDS sellers, such as Twinlab, MuscleTech and Bodytronics-Pinnacle, which are listed as "investments, income and assets of business entities/trusts" for Classic Productions in the governor's disclosure.
Last year, according to the disclosure, Schwarzenegger received income from 18 manufacturers and distributors of PEDS. Products sold by these companies include creatine monohydrate, glutamine, testosterone boosters, anabolics, and fruit-flavored amino acid drinks. Lorimer says that these companies are all paid sponsors of the Arnold Classic.
This world-class event is also sponsored by Weider Publications, which owns Muscle & Fitness and FLEX magazines: Gov. Arnold Schwarzenegger, executive editor. Both of the governor's muscle mags are packed with advertisements for PEDS. An unsigned editorial in a recent FLEX observed, "At the pro level, muscle-enhancing drugs, such as testosterone, anabolic steroids and growth hormone, are a fact of life."
When he became governor, the multimillionaire Schwarzenegger put "certain assets" into a blind trust, designed to keep him in the dark about what he owns. To avoid conflicts of interest, the trustee is supposed to liquidate the original portfolio and replace it with assets that are kept secret from the governor and the public. Schwarzenegger's press office declined to reveal whether or not Classic Productions is included in the governor's blind trust, but as a privately held corporation, it is clearly dependent for its market value upon Schwarzenegger's continued involvement in the business.
The California Government Code requires a governor to disqualify himself from making a decision that could directly or indirectly and significantly impact his economic interests--defined, in part, as the sources of income that he received during the year prior to the day the relevant decision was made. When Schwarzenegger vetoed Speier's bill, he surely knew that he had grossed more than $100,000 in the preceding year from the supplement companies--not to mention the $250,000 per year that his PEDS-promoting muscle mags claim to donate to the Governor's Council on Physical Fitness as payment for his services.
Robert Stern, president of the nonpartisan Center for Governmental Studies in Los Angeles, says, "The question is, how much material financial effect did Schwarzenegger's veto have upon [his holdings]?" Stern says the law provides a formula for figuring this out, but that previous governors have not needed to use it.
"We have never had a governor with this many investments," Stern says, pointing out that if Schwarzenegger had recused himself because of a conflict of interest, responsibility for deciding whether or not to veto the bill would likely have fallen to the lieutenant governor.
According to a spokesperson for the FPPC, violation of the conflict of interests provisions by a public official is a misdemeanor, punishable by criminal prosecution, civil actions and a $10,000 fine--unless you are the governor. In that case, the penalty is a $5,000 fine and an order to fix the violation.
A month's worth of muscle-building pills or gel tabs costs, on average, $40. That's nearly $10 million a year in sales of unregulated, potentially dangerous performance-enhancing drugs and supplements sold to roughly 20,000 adolescent athletes in California. By any standard, that is a significant market, and Schwarzenegger owes the people of California an accurate explanation of why--in an apparent conflict of interest--he vetoed the PEDS bill.
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From the November 17-23, 2004 issue of Metro, Silicon Valley's Weekly Newspaper.
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