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California

Schwarzenegger Briefly Shows His 1040s

Acting accounts for the vast majority of the candidate's taxable income, despite his extensive investments.

August 11, 2003|Michael Cieply and Gary Cohn | Times Staff Writers

Arnold Schwarzenegger's campaign team opened a window on the film star-candidate's tax returns Sunday, but only for a little while.

In a hastily convened daylong session at Santa Monica's Fairmont Miramar Hotel, reporters were allowed to review -- but not photocopy or remove -- Schwarzenegger's federal and state returns for 2001 and 2000.

The documents showed that despite various deductions for business expenses and charitable donations -- including a house for Cardinal Roger M. Mahony in his capacity as archbishop -- the actor paid a substantial portion of his income not just to the U.S. government but to California, New York and Ohio as well.

His income tax bill was about $9.3 million on $26.1 million total income in 2001, and $11.2 million on $31.1 million income the year before. Of those amounts, California got $1.9 million in 2001 and $2.6 million the year before.

"Arnold likes paying taxes," Schwarzenegger's investment manager, Paul Wachter, told reporters at the session. "It's not that he goes out of his way to pay.... Arnold's philosophy is 'If I'm paying a lot of taxes, I must be making a lot of money.' "

Perhaps the biggest surprise in the 2001 and 2000 returns was that despite his vast financial holdings a large portion of the actor's income for those years came from his movie earnings. Schwarzenegger's portfolio includes securities, private investment funds and stakes in 100-plus business ventures.

In 2001, $22.4 million of Schwarzenegger's income came in the form of wages, most of that for acting in the film "Collateral Damage," released by AOL Time Warner Inc.'s Warner Bros., according to his advisors. The year before, wages accounted for about $22.8 million of his income, largely from "The 6th Day," distributed by Sony Corp.'s Columbia Pictures.

The heavy reliance on movie money came about as the actor kept a substantial amount of cash in interest-bearing accounts, had a rocky ride in a bearish stock market, waited for a return from some of his venture funds and kept what appeared to be some of his biggest investments in real estate projects that often increase in asset value without generating significant immediate cash returns.

On the charitable front, the most unusual donation listed on the returns was a December 2001 gift of a Santa Monica home to the Roman Catholic archbishop of Los Angeles. The home, valued at $2 million according to the return, had been purchased in 1982 for $760,721.

Sunday's voluntary disclosure provides a fuller but still incomplete picture of the financial dealings of a Hollywood superstar who has rocked California's gubernatorial recall election since announcing his candidacy last week.

Campaign spokesmen said they had intended to discuss the returns this morning. But they hastened the process after the Los Angeles County Registrar made Schwarzenegger's required financial disclosure statement public Saturday, along with those of other candidates.

The Schwarzenegger team said his 2002 tax return wasn't disclosed because it had not been filed yet. They said the actor, like many high-income individuals, typically files his complex returns in the fall under an extension from tax authorities.

While the actor's net worth can't be calculated from the tax returns and disclosure filings, his 2001 taxable interest income of $1.5 million suggests cash and taxable bond holdings in the neighborhood of $30 million.

Among the noteworthy features were lists of stock trades that often showed that the actor, or his advisors, weren't immune to the market's travails. In 2000, Schwarzenegger incurred losses on a number of stocks, including a $68,534 loss on shares of Global Crossing, $16,122 on AOL Time Warner and $22,606 on tobacco giant Phillip Morris.

At Sunday's briefing, Wachter and his partner Chris Fillo, who supervise many of Schwarzenegger's investments through a Santa Monica boutique called Main Street Advisors, provided new details about some of the many companies described in the state disclosure form.

The actor has been a significant investor in Cell Guide Ltd., an Israeli company that has patented technology through which cell phones can be located for emergency and commercial purposes, his advisors said.

They also said Schwarzenegger had been a major holder in Latin Communications, which owns Spanish-language TV and radio stations and newspapers, but didn't disclose that stake because the company was sold in 2000, making the investment exempt from California's disclosure rules.

A list compiled by Schwarzenegger spokesman Sean Walsh listed the actor's charitable contributions at $850,000 in 2002, $4.1 million in 2001 and $742,452 in 2000. Among the donations, Schwarzenegger gave a 1934 Bentley worth $41,500 and a 1996 Hummer valued at $85,969 to the Inner City Games Foundation in 2001.

Last year, according to Walsh, he also gave $551,641 to support the campaign for Proposition 49, a successful effort to win state funding for after-school programs.

Asked why the campaign insisted on collecting the tax returns after reporters looked at them, one official said they feared the documents "would end up on EBay."

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