ARNOLD RELEASES TAX RECORDS $55 MILLION EARNED FROM 2002-04.

Byline: HARRISON SHEPPARD Sacramento Bureau

SACRAMENTO - With his movie career on hold and his assets in a blind trust, Gov. Arnold Schwarzenegger earned almost $17 million in 2004 from royalties and investments in stocks and real estate, according to tax returns released Friday.

The governor's re-election campaign released his federal and state returns for 2002-04. It was the first time his forms have been released publicly since the recall election in 2003, when he released returns for 2000 and 2001.

Schwarzenegger earned about $14 million in 2003 and $24 million in 2002. He paid a total of $11 million in federal taxes and $4 million in state taxes over that three-year period. Meanwhile, the forms show he gave $2.5 million to charity, including his church and his children's schools, his after-school programs, St. John's Hospital and the Archdiocese of Los Angeles for building its new cathedral.

Schwarzenegger placed his extensive holdings in real estate, stock and other investments in a blind trust after he was elected in 2003.

At the time, his investments included numerous stock holdings, real estate throughout the Los Angeles region, part of a mall in Ohio, and an airplane leasing deal with Singapore Airlines. Through the trust, he continues to receive millions of dollars in back-end payments from movies, DVDs and video games.

Schwarzenegger's financial adviser, Paul Wachter, CEO of Santa Monica-based Main Street Advisors, said Schwarzenegger used to be highly concerned with his investment performance, but in recent years has been "uninterested" in tracking how much money he makes.

Instead, Wachter said, the governor relies on his advisers to manage his portfolio.

"He is completely disengaged," Wachter said. "It amazes me. I would expect once a year at least he would come in and say, `How much money did we make last year?' or `Are you doing well?' It's odd. But, you know - he's got other things on his mind."

Schwarzenegger has not yet filed his 2005 taxes - he typically asks for an extension and files in the fall, Wachter said.

Schwarzenegger has declined to accept the $175,000 salary for governor, but his form did list receiving $490 from the state of California, for which his financial advisers did not have an immediate explanation. He also paid relatively smaller amounts, in the range of thousands or tens of thousands of dollars, in taxes to Connecticut, Kentucky, Massachusetts, New York, New Jersey and Ohio, mostly for investments held in those states.

The release comes as Schwarzenegger faces a re-election battle against either Controller Steve Westly or Treasurer Phil Angelides.

Westly released a decade of returns last September that showed he earned $225 million since 1995 as an executive at eBay. He has shown a willingness to dig into his deep pockets for his primary campaign against Angelides.

Angelides last month released seven years of returns showing he earned a total of $11 million from 1998 to 2004. He was a real-estate developer and consultant in Sacramento before becoming treasurer in 1998 and continues to earn income from deferred payments for past services, dividends, interest and capital gains.

The Westly campaign criticized both Schwarzenegger and Angelides for not releasing a full decade of returns.

"Californians want to be sure there are not conflicts of interest with their leaders and prospective leaders," said Westly spokesman Nick Velasquez. "Releasing 10 years of taxes is a step on that path to making sure there aren't conflicts of interest."

But Schwarzenegger campaign spokeswoman Julie Soderlund said the campaign believes it is appropriate to release the returns focusing only on his time in office and immediately prior.

Similarly, Angelides spokesman Brian Brokaw said the seven years of returns representing the treasurer's public service were appropriate.

Political analysts say candidates for major public office are generally expected to release their tax returns to show the public they do not have financial conflicts of interest that might interfere with their official duties.

In Schwarzenegger's case, most of his assets are now in a blind trust to reduce the potential for a conflict.

Jack Pitney, government professor at Claremont McKenna College, said that same concern doesn't apply to his time as a private citizen.

"He was a private citizen, not holding public office. If you go back before even he considered running for office, it's hard to see the potential for conflict," Pitney said.

Schwarzenegger ran into controversy over his financial holdings last year when American Media Inc. disclosed it had a deal worth at least $5 million to Schwarzenegger for him to serve as a consultant and columnist for the company's fitness magazines.

He had vetoed a bill to regulate the dietary supplement industry, one of the magazines' key sources of advertising revenue. He ended the deal soon after it was disclosed publicly.

The AMI deal was not detailed specifically on Schwarzenegger's tax returns. His advisers said the magazine income, like income for his movie salaries and royalties, goes through Schwarzenegger's company, Oak Productions, which is part of the blind trust.

harrison.sheppard(at)dailynews.com

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