Japan’s Teijin buys biggest asset in Scott’s blind trust; Governor pockets $200 million

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott appears to have pocketed $200 million in January when the biggest asset in his blind trust – Continental Structural Plastics – was sold to a subsidiary of the giant Japanese conglomerate Teijin Ltd.

The proceeds would nearly triple Scott’s reported net worth of $119 million in 2015, the most recent year for which Florida’s wealthiest governor has filed a financial disclosure form.

Continental Structural Plastics (CSP), a manufacturer of lightweight composite materials used in cars, trucks and air-conditioning systems, was sold for $825 million in a deal that closed Jan. 3.

Gov. Scott’s exact windfall is not clear, and the governor and his representatives aren’t talking. The $200-million-plus estimate of Scott’s personal haul is based on numbers compiled from a variety of public records. The exact figure is difficult to discern, and could be less, because Scott’s assets are hidden in the blind trust and details are not made public.

First Lady Ann Scott had her own significant private investment in 3,300-employee CSP that was held outside the blind trust.

The governor’s apparent bonanza arose from his relatively modest investment in Michigan-based CSP 12 years ago via his then-private equity firm, Richard L. Scott Investments (RLSI). The purchase price in the leveraged buyout of CSP, as well as the governor’s initial investment, is not known. But public disclosure documents Scott filed later valued his personal ownership stake in RLSI-CSP Capital Partners LLC at $19.4 million at the end of 2009.

By April 2011, when Scott opened his first blind trust three months after his inauguration, Scott’s reported stake had dropped to $14,212,869.

But CSP shares exploded in value during Scott’s time in the governor’s mansion. At the end of 2013, the last year for which such information about Scott’s blind trust is available, Scott declared his RLSI-CSP stake to be worth $43.9 million. RLSI-CSP is the single-purpose limited liability company that Gov. Scott formed to facilitate his CSP investment.

Seeking ‘direct investment’ from Japanese

That same year, Gov. Scott led a high-profile mission to Japan to recruit more Japanese “direct investment” for Florida. Teijin, which boasts $8.6 billion in assets and twin headquarters in Tokyo and Osaka, struck its deal to buy CSP amid Scott’s continuing focus on that goal.

In papers filed with the Tokyo Stock Exchange when it bought CSP, Teijin identified RLSI-CSP as owning 66.7 percent of CSP, meaning that the 13 investor-partners in RLSI-CSP – as stated in Securities and Exchange Commission filings – were due about $550 million.

A comparison of financial data filed in 2014 by Gov. Scott and, separately, by Scott Capital, valuing RLSI-CSP at $120 million, reveals that Rick Scott owned about 36.5 percent of RLSI-CSP. If he owned the same percentage when the company was sold, as it appears he did, it was worth about $200.75 million.

Scott’s aggressive push to convince Japanese businesses to invest and create new jobs in Florida began in earnest on Jan. 1, 2013. That’s the day Enterprise Florida, the state-supported business organization Scott chairs, opened its first economic development office in Tokyo. A phone message for director K. Sam Tabuchi was not returned.

That November Scott led a delegation of 20 Florida business leaders to Japan on an economic development mission. The group stopped in Tokyo, Nagoya and Osaka. The governor later reported in a financial disclosure form that the value of his CSP shares had by then rebounded to $43.9 million.

Florida officials released few details about whom the governor met with during his Asian travels. Official statements say only that Scott met “with more than a dozen leading Japanese companies and spoke to more than 350 business leaders.”

But the governor’s six-day mission produced little benefit for Florida. Scott’s office and Enterprise Florida announced no new jobs or investments by high tech or other industries.

At a press conference, Scott highlighted a meeting with Aderans, a Japanese “hair-related business” that in 2012 purchased the Hair Club of Boca Raton for $163 million. The governor praised Aderans, saying it was next looking to invest “in in-house salons of cancer centers where patients undergoing chemotherapy will be able to receive custom styled wigs.”

No jobs for Floridians

While Teijin bought Gov. Scott’s company, it created no jobs for Floridians. Instead, Teijin announced in November 2016 that it would build a “state-of-the-art” carbon fiber manufacturing plant in Greenwood, S.C. State officials boasted the project would bring $600 million in new capital investment and 220 jobs. The plant, on 440 acres, is slated to begin production by early 2019.

Teijin said six states competed and South Carolina was chosen because of its “pro-business atmosphere and proactive support from Governor (Nikki) Haley and her team. Enterprise Florida communications director Nathan Edwards said Florida was not one of the six states that competed to land the project. The governor’s office declined to comment.

A highlight of Scott’s 2013 Japan trip was a Tokyo luncheon hosted by the politically influential Japanese Business Federation (Keidanren), The group’s active members include top executives of Teijin and Mitsubishi Heavy Industries, another reported bidder for CSP.

At the time, Gov. Scott showed a keen interest in Mitsubishi. He toured a Mitsubishi manufacturing plant in Nagoya followed by a luncheon with Mitsubishi executives. Four months earlier, Scott visited the New York headquarters of Mitsubishi Heavy Industries America “to promote further job creating partnerships in Florida.”

Scott’s interest in Japan has continued. He’s twice dispatched Florida Secretary of State Ken Detzner to follow-up economic development missions arranged by the Japan-U.S. Southeast and Southeast U.S./Japan associations in Tokyo and Birmingham, AL. And in May 2015, the governor traveled to Broward to announce that Tokyo-based SATO Holdings had opened a subsidiary, SATO Global Solutions, in Fort Lauderdale and would create 35 jobs.

“Japan has been a great partner in our work to continue Florida’s economic growth and we are excited to welcome another Japanese business to the Sunshine State,” Scott said, according to a press release about SATO.

A representative of Mitsubishi Hitachi Power Systems serves today on the board of Enterprise Florida.

In March 2016, CSP and Mitsubishi Rayon Co. agreed to work together to research and develop innovative, lightweight carbon fiber structural components for the U.S. auto industry.

Did Gov. Scott discuss CSP with Mitsubishi? Did he meet with officials of Teijin, a major supplier of high performance composites, to discuss Teijin’s interest, expressed publicly in December 2012, to expand in the U.S. to meet growing demand?

Gov. Scott’s office says no.

Recycled statement

Scott, however declined to be interviewed. And his office would not discuss Scott’s CSP investment, his profit or his plans for re-investing. Instead, a statement that’s been released several times before was recycled:

“When Governor Scott took office in 2011, he put all of his assets in a blind trust so they would be under the control of an independent financial professional.  As such, the Governor has no knowledge of anything that is bought, sold or changed in the trust.”

An independent professional, however, does not run Scott’s blind trust. Rather Hollow Brook Wealth Management, whose chief executive officer is longtime Scott crony Alan Bazaar, runs it.

Florida’s qualified blind trust law was enacted by the Legislature and signed into law by Scott in 2013. Its purpose was to eliminate conflicts of interest by “blinding” office holders to the nature of assets placed in a blind trust. Thus, public officials who place their assets in a blind trust can avoid disclosing them publicly.

But Florida’s blind trust statute has been ineffective in keeping tens of millions of dollars worth of Scott’s investments hidden from either Scott or the public. Florida Bulldog has for several years used SEC records to report about Scott’s large investments – those held in his blind trust and others beneficially owned by Scott but held in his wife’s name.

Teijin announced its purchase of CSP in a filing with the Tokyo Stock Exchange in September. Teijin said that by acquiring CSP, which had $634 million in sales in 2015, it “will benefit from CSP’s established sales channels in the North American automotive market.”

The filing identified CSP’s “major shareholder” as RLSI-Capital Partners, saying it owned 66.7 percent of CSP. Further, the filing identified the manager of that private equity fund as Gregory D. Scott, who runs the Connecticut-based private investment firm G. Scott Capital Partners, also known as Scott Capital.

Scott Capital’s SEC filings say there were 13 beneficial owners of RLSI-Capital Partners. They include Rick and Ann Scott. Greg Scott, who served on the board of directors of CSP, owned a maximum of one percent. Other partners are believed to be the governor’s family and a handful of his close associates.

Scott and Scott Capital

Scott Capital is closely tied to both Rick and Ann Scott. Greg Scott has said he is not related to Rick Scott, but he led RLSI’s private equity group from 2000 to 2012 when the governor, then a venture capitalist, created RLSI-CSP for the purpose of acquiring Michigan-based CSP.

SEC records show that First Lady Ann Scott is invested heavily in Scott Capital. She controls Tally 1, a limited liability company incorporated in Delaware that owns as much as 50 percent of Scott Capital.

Further, Scott Capital has an interlocking relationship with Alan Bazaar, who runs the governor’s blind trust. Bazaar is another former employee of Gov. Scott who is today chief executive officer at New York-based Hollow Brook Wealth Management. Hollow Brook’s SEC filings state that Bazaar “is an advisory board member of G. Scott Capital Partners.”

Attorneys for Gov. Scott have said Florida’s blind trust law is modeled on the federal blind trust statute and that “an independent trustee” controls Scott’s assets “to avoid the appearance of any conflicts of interest.” Florida Bulldog, however, has reported that the Florida law omits numerous safeguards found in federal law, including one that appears to disqualify Bazaar and his firm from serving as trustee for the blind trust.

Florida law says public officers who place assets in a blind trust “may not attempt to influence or exercise any control over decisions regarding the management of assets in a qualified blind trust” or “make any effort to obtain information with respect to the holdings of the trust.” Trustees face similar restrictions in their management of the trust. For example, Bazaar is generally prohibited from communicating with Scott about his holdings, but trustees are permitted to notify public officers when holdings like CSP are sold.

Under Florida law, blind trusts “may not contain investments or assets the transfer of which by the trustee is improbable or impractical without the public officer’s knowledge.”

The $825-million CSP deal was huge, significantly larger than the other sales of stock by the blind trust, including some that SEC documents show the governor was directly involved in despite statutory prohibitions.

Decision making

The intriguing scenario raises a question: Did Alan Bazaar and Greg Scott make the decision to sell Scott’s interest in CSP, the largest holding in the governor’s blind trust, without discussing it with Gov. Scott?

Bazaar declined to comment. Greg Scott did not respond to detailed phone and email messages. The governor’s office likewise did not respond to emailed questions.

Nine years ago, however, Rick Scott indicated he wanted to grow CSP over the long haul as part of an announcement that Continental Structural Plastics was not for sale despite overtures at the time.

“Our goal with CSP over the next 20 years is to continue to complete strategic acquisitions where our customers and suppliers believe our management expertise will be beneficial,” Scott said.

Gov. Scott has scored political points with voters over the years by refusing to accept the governor’s annual state salary that in 2016 was $130,273. Nevertheless, he’s had other large paydays while in office.

For example, Florida Bulldog reported in March 2014 that since Dec. 20, 2012 Scott and the First Lady made in excess of $17 million selling hundreds of thousands of shares of Argan Inc., a company whose subsidiary, Gemma Power Systems, does business in Florida. SEC records showed the blind trust sold many of those shares. Many other shares were sold by entities in which the governor has acknowledged a beneficial interest, such as his wife’s F. Annette Scott Revocable Trust.

Florida law does not require public officers to disclose assets held in the name of a spouse or certain other relatives.