Candidate Schwarzenegger discloses details of business empire

Los Angeles Times

LOS ANGELES -- Some three decades back, young Arnold Schwarzenegger and a bodybuilder friend, Franco Columbu, came up with a get-rich-quick scheme.

Tipped by an acquaintance that a planned new international airport and freeways were about to trigger a land rush in California's Antelope Valley, the two scraped together cash from their joint bricklaying business and bought parcels in the desert.

But the jets never came, nor did the real estate stampede. In fact, the promised land turned out to be nothing more than dirt. Still, Schwarzenegger was undaunted. "You know what?" Columbu quoted his buddy as saying. "We're going to start buying."

Since then, Schwarzenegger has indeed bought a lot, a bounty thrown open to public inspection Saturday in financial disclosure statements the gubernatorial candidate filed with the Los Angeles County registrar-recorder.

While many celebrities prefer passive and extremely conservative investments, Schwarzenegger's 100-plus ventures -- 19 of which are valued at more than $1 million -- include individual stocks, managed stock accounts, private investment funds, venture funds, bonds, a number of direct stakes in operating businesses, and even a high-end mutual fund company overseen by Nobel laureates.

"In my opinion, it's very different from the normal Hollywood portfolio," said Paul Wachter, co-owner of Main Street Advisors, which manages Schwarzenegger's investments.

Saturday's disclosure also lists dozens of assets in a family trust set up by the mother of his wife, Maria Shriver, who is a member of the Kennedy family.

Schwarzenegger's business acumen and history are likely to move center stage in the campaign because of the state's deep budget crisis and his own minimalist political resume. Already, his campaign is working to downplay Schwarzenegger's acting career while touting his business skills.

Talking with Warren Buffet

In the process, he's scrambling to tap the expertise and cachet of his most prominent friends in the corporate world.

"He was on the phone yesterday with Warren Buffet," said Bonnie Reiss, chief executive of the Inner City Games Foundation, with which the actor has been closely associated.

Speaking in an interview Friday, Reiss said the legendary investor was one of several business contacts whom Schwarzenegger is trying to enlist.

Under California law, Schwarzenegger isn't required to reveal his net worth or even the precise percentage he owns in various ventures. But the 63-page disclosure form, interviews and a review of the public record reveals an unusually wide range of business interests that extend far beyond passion projects, such as his highly profitable annual Fitness Expo in Columbus, Ohio, or the far-flung real estate ventures for which he's long been known.

In addition to Schwarzenegger's widely publicized fitness industry interests and his personal jet-leasing business -- the actor for years has leased a Boeing 747 to Singapore Airlines -- the form shows that he owns stakes in movie theaters, an Internet software business and stocks in companies as varied as media giant Gannett Co., IBM, International Speedways, Roto-Rooter Inc. and Weight Watchers International.

Schwarzenegger's financial disclosure form shows a number of sophisticated investment ventures initiated in the last 10 years. Those occurred as the actor began to orient away from his more visible enterprises -- including his involvement with Planet Hollywood, with which he cut ties after the restaurant chain's Chapter 11 reorganization -- toward quieter but far richer investments.

$40 billion mutual fund

Schwarzenegger also holds a significant ownership stake in Dimensional Fund Advisors, a Santa Monica-based mutual fund company that manages some $40 billion.

The highly rated fund management is unusual in that it is overseen by academic theorists, including University of Chicago economist Eugene Fama and two Nobel Prize-winning economists, Myron Scholes and Robert Merton. The majority of Dimensional's clients are corporate pension plans, state and local governments, universities and charitable organizations.

Another major investment is Schwarzenegger's better-known involvement with Columbus, Ohio's Easton Town Center, a million-square-foot mall in which the actor is partnered with retailing giant the Limited and developer the Georgetown Co.

To calculate the net worth of Schwarzenegger and his Kennedy heir wife is virtually impossible based on Saturday's disclosure. The state only requires that candidates check boxes that provide a range to the amount of their investment, with the highest being "Over $1,000,000." The unexpectedly wide range of holdings makes previously published estimates of a fortune in the $200 million range seem conservative.

'Arnold bet on himself'

Clearly, the primary engine behind Schwarzenegger's fortune, whatever its size, was a huge upswing in his movie earnings, beginning with "Twins," released by Universal Pictures in 1988. The comedy, the action star's first, is a testament to his business instinct. In what was then a highly unusual deal, he decided to forgo any upfront fee in return for 15 percent of the studio's receipts -- an arrangement that boosted his take to an enormous $30 million when the audiences bought in.

"Arnold bet on himself," said producer Tom Pollock, who ran Universal at the time. "If the movie went out and bombed, he would have made much less."

Schwarzenegger appears to have received a total of at least $300 million from his next 13 films, culminating with this year's "Terminator 3: Rise of the Machines." If much of that money went to taxes and agents' and lawyers' cuts, the balance nonetheless provided capital for investments that have become a growing preoccupation.

Some who have done business with Schwarzenegger maintain that his grasp of complex numbers and deal points is impressive.

"He's not a Terminator when it comes to how he handles complex situations. He's more an analyzer than a Terminator," said Cox Castle and Nicholson's Mario Camara, a Los Angeles real estate attorney who has negotiated with Schwarzenegger several times on behalf of developers with properties for sale.

Camara is one of several people who said Schwarzenegger tends to restrict his non-Hollywood dealings to those with whom he is familiar. In Camara's words: "Arnold only does business with people that he's known for a while. It's a form of due diligence."

Thus, Schwarzenegger has remained involved with Jim Lorimer, a decades-long associate, with whom he operates Columbus' Fitness Expo. "Our 28-year partnership was made on a handshake, and we've never had a contract," Lorimer said.

Whether Schwarzenegger would take any of his longtime friends and advisers to Sacramento is likely be among many questions about his future.

Asked whether they had considered joining a Schwarzenegger administration, both Reiss and Wachter, among the star's closest advisers, said they had not.

But Reiss, a self-described liberal Democrat, was quick to add that for herself and fellow Democrat Shriver: "He'll probably be the first Republican we'll ever vote for."