Dear Ron,
In August 2003, before he was elected, Schwarzenegger filled a
"Statement of Economic Interest" (SEI) with the Fair Political
Practices Commission. The SEI reveals some information regarding his
holdings at the time.
The disclosures plus public records show that Schwarzenegger takes
part in more than 100 “assorted ventures, 19 of which are valued
at more than $1 million, including individual stocks (Gannet Co., IBM,
Roto-Rooter, International Speedways, International Weight-watchers),
managed stock accounts, private investment funds, venture funds,
bonds, stakes in operating businesses (movie theaters, Internet
software).” (SOURCE: Arnold Built Vast Financial Empire,
NewsMax, 11 August 2003,
http://www.newsmax.com/archives/articles/2003/8/10/201110.shtml).
Funds and Stocks
----------------------
The "documents he released and interviews with business partners
suggest he has handled his financial affairs well. Although movies
remain his main meal ticket, generating $20 million-plus paydays, his
income tax returns for 2000 and 2001 indicate that investment income
generated one-fifth of the $57.2 million he earned over those two
years." (SOURCE: Dale Kasler, "Schwarzenegger can flex some business
muscle, too", The Sacramento Bee, August 15, 2003,
<http://www.smc.edu/budgetcrisis/08_2003/8_15_2003/schwarz_can_flex_some.html>).
Newsmax reports that Schwarzenegger also maintains “A
significant ownership stake in Dimensional Fund Advisors, a Santa
Monica-based mutual fund company that manages about $40 billion. The
majority of Dimensional's clients are corporate and public employee
pension plans, including the California Public Employees Retirement
System.” (ibid). Reportedly, he “owns approximately 5% of
Dimensional Fund Advisors, the secretive mutual fund index group in
Santa Monica that is popular among index advisors and institutional
investors.” (SOURCE: “Terminator Pulls Trigger on
Indexing, Sort of”, Index Funds, September 4, 2003, <
http://www.ifa.com/archives/articles/staff_20030904_terminator_pulls_trigger_on_indexing.asp>).
Dimensional Find Advisors
< http://www.dfaus.com/>
Regarding his investments through funds and stocks, "The SEI reveals
that the action star is an investor in no less than 14 funds, having
invested anywhere from $100,001 to $1 million in each, including with
Goldman Sachs Capital Partners, Morgan Stanley Capital Partners and
Redpoint.
Seven of the investments are for buyouts, five are venture and one is
a fund-of-funds, according to Thomson Venture Economics (publisher of
PE Week). No information was available for one of the funds: Alson
Signature.
His first private equity investment came in 1992, the year after the
release of Terminator 2: Judgment Day. That's when he invested in
Goldman Sachs Private Equity Partners, a $250 million buyout fund. His
next private equity investment came in 1995 when he pumped $1 million
into Acacia Venture Partners, an $80 million venture fund.
After playing Mr. Freeze in the 1997 Batman & Robin, Schwarzenegger
invested in one buyout fund and one venture fund in 1998. His big year
was 1999, when he invested in two buyout funds and two venture funds.
It's hard to say how well he's done financially, since internal rates
of return aren't available for most of the funds. One, Apollo
Investment Fund IV, posted a net IRR of 8.95% as of June 30, 2002,
according to data made public by the California Public Employees'
Retirement System (CalPERS)."
(SOURCE: Lawrence Aragon & Alastair Goldfisher, "Pumped Up with
Venture Investments", Private Equity Week, Aug 18, 2003,
<http://ventureeconomics.com/pew/protected/articles/weeklyheadlines/1060714513267.html>).
Nevertheless, Kasler reports that in 2000, Schwarzenegger
“[…] lost $12,659 on AT&T, $36,270 on Yahoo, $7,551 on
Berkshire Hathaway -- Buffett's holding company -- and $3,707 on The
McClatchy Co., publisher of The Sacramento Bee. But he made money on
Nestl? and Heineken.” (ibid).
Entertainment
------------------
Schwarzenegger has made most of his fortune from the entertainment
industry. He began with promoting bodybuilding products for his
sponsor, Weidner, when he was a bodybuilder. In 1975 he started a
bodybuilding-promotions business with Jim Lorimer, “Arnold
Classic”, “an annual competition that attracts 10,000
athletes and offers a top prize of $100,000” (SOURCE: Chris
O'Brien and Eric Nalder, “Schwarzenegger's style is to build one
step at a time”, Mercury News, August 23, 2003, <
http://www.siliconvalley.com/mld/mercurynews/news/politics/6602468.htm?template=contentModules/printstory.jsp>).
Schwarzenegger is still partner/investor in some Weidner enterprises,
including his media company and nutritional supplements: “Two
days before assuming the governorship of California, freshly won in
the recall election of Gray Davis, movie icon Arnold Schwarzenegger
signed a lucrative deal with Muscle & Fitness and Flex magazines, two
bodybuilding publications that agreed to pay him 1 percent of their
advertising revenue, or at least $1 million a year for five years, in
exchange for a monthly column from Schwarzenegger.” (SOURCE:
Matt Palmquist, “Muscle & Fitness for Office”, San
Francisco Weekly, 27 July 2005,
<http://www.sfweekly.com/Issues/2005-07-27/news/apologist.html>.
Arnold Calssic
< http://www.arnoldclassic.com/>
Arnold Classic – World Largest Fitness Expo – from About.com
< http://columbusoh.about.com/od/events/a/arnoldclassic.htm>
When his movie career took off, he did not only take salary, but since
“Twins” (1988), part of the film’s profits, which
was not a norm at the time – he reportedly made $30 million from
Twins.
Schwarzennegger owns “Pumping Iron America Inc “, which
produces “Arnold Classic” and similar events and is
involved in the bodybuilding industry. Schwarzenegger also owns Oak
Productions, a movie production company and the company "is to receive
1 percent of the net print advertising revenues of Weider
Publications. But the payment must be at least $1 million a year. Mr.
Schwarzenegger has also been granted 'phantom equity,' a way of
sharing in the growth of the value of the company. The equity could
become worth 1 percent of the company's value, which was stated at the
time of the contract as $520 million." (SOURCE: Wikipedia, Arnold
Schwarzenegger, <http://en.wikipedia.org/wiki/Arnold_Schwarzenegger>,
quoting Andrew Pollack, "Schwarzenegger Is Drawing Fire for an Ad
Deal", New York Times, July 15, 2005,
<http://www.nytimes.com/2005/07/15/national/15calif.html?ex=1279080000&en=d59de5489ea19d3b&ei=5090&partner=rssuserland&emc=rss>).
However, Schwarzenegger began quite small. His first business was
“a mail-order business peddling bodybuilding courses, T-shirts
and more” (Kasler, ibid). He also founded a brick laying
business, “Pumping Bricks” and Weidner, his sponsor,
encouraged him to start investing in real estate.
Real Estate
--------------
Real Estate was in fact Schwarzenegger’s first business venture
outside the entertainment industry (not counting the brick laying
business). In 1972, Schwarzenegger bought with a partner land near a
proposed airport in the Mojave Desert outside Los Angeles. “It
was a bust; the airport wasn't built. But that didn't deter him”
(OBrien and Nadler, ibid). Schwarzenegger bought property in downtown
Denver beginning 1983, together with development partner Al Ehringer.
“Schwarzenegger's downtown Denver investment also didn't go
according to plan. He began buying property in 1983 and then waited
out a collapse in the real estate market. When the market recovered,
he and his partner, operating under the name Pumping Bricks, proposed
a big entertainment-retail complex. But they were beaten to the punch
by another project. […] They scaled back and mostly built office
space. It has been successful but not a big hit. Schwarzenegger sold
his stake” in 2000. (Kasler, ibid).
He was also involved as a minority investor in a Columbus, Ohio
shopping mall, developed by Georgetown Co., “Easton Town
Center”. Kasler also mentions ownership of property “all
over Southern California”, including an office building in San
Diego, invested in 2000. “Several of these ventures generated
big losses in 2000 and 2001, according to the income tax returns. But
Wachter said the losses were the result of non-cash expenses such as
depreciation; he said the investments themselves are generally doing
well.” (ibid). He also owns Main Street Plaza in Santa Monica.
Easton Town Centre
< http://www.eastontowncenter.com/index.cfm>
Hospitality/Tourism
-------------------------
Planet Hollywood wasn't Schwarzenegger's only adventure in the realm
of the hospitality industry. In 1991, he opened Schatzi, a meat eatery
in Santa Monica. His investment in Planet Hollywood has been in fact
quite minimal, and therefore so were his loses when the company went
bankrupt: “in reality the celebrities were given stock in
exchange for promotional work” (Kasler, ibid). He sold the
restaurant in 1998 “after seven years of more or less breaking
even” (ibid).
Schatzi on Main
<http://www.schatzi-on-main.com/frameset.htm>
Schwarzenegger is also the sole owner of Legend International Air, a
company which leases a jet to Singapore Airlines.
By the way, the Sctosman reported, that Schwarzenegger has invested
not less than $10 Million in his election campaign. (SOURCE: Stephen
McGinty, Knowing where to draw the line", The Scotsman, Tue 8 Jun
2004, <http://news.scotsman.com/features.cfm?id=647572004>).
Critique/Conflict of Interests
------------------------------------
Schwarzenegger’s adversaries frequently accuse him of conflict
of interests; this, also in context of the latest proposition,
regarding the political involvement of unions.
Peter Byrne , “The truth about Arnold”, Salon.com, 15
February 2005, < http://www.salon.com/news/feature/2005/02/15/arnold/index_np.html>
Peter Byrne, “The Byrne Report – Pumping $$”,
Metroactive, 22 June 2005, <
http://216.239.59.104/search?q=cache:fShWQxUHYEMJ:www.metroactive.com/papers/sonoma/06.22.05/byrne-0525.html+Schwarzenegger+%22Dimensional+Fund+Advisors%22&hl=en>
Mark Martin, John Wildermuth, “Loophole lets rent flow to
governor Building he owns charges political groups he controls
“, San Francisco Chronicle, July 20 2005 <
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/07/20/MNG8CDQMGB1.DTL>
You can read many articles about Schwarzenegger as businessman from a
Democratic website :
Arnold the Businessman
<http://think.100acrewood.net/asfiles/#ArnoldtheBusinessman>
A good summary of Schwarzenegger’s investments and holdings is available at:
Lance Williams, “Schwarzenegger reveals pumped-up
finances”, San Francisco Chronicle, 10 August 2003, <
http://www.sfgate.com/cgi-bin/article.cgi?f=/chronicle/archive/2003/08/10/ARNOLD.TMP>
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