Florida Zika emergency funds went to partner of Ann Scott’s aerial spray businesses

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott and First Lady Ann Scott

Gov. Rick Scott has used his emergency authority to spend $33.3 million to combat Zika, some of which went to pay for aerial spraying done by a company that is partnered with his wife’s mosquito spraying businesses in another state.

Florida Bulldog reported in August 2016 that Scott, via First Lady Ann Scott, had an undisclosed financial interest in Mosquito Control Services (MCS) of Metairie, LA. The company describes itself on its website as a “fully-certified team of mosquito control experts – licensed throughout the Gulf Coast, including Louisiana, Georgia, Mississippi, Alabama and Florida.”

Further examination of Louisiana corporate records, however, shows the Scotts are also tied to eight other active mosquito control firms all at the same Metairie address. Several have lucrative, multi-year contracts to provide aerial spraying and other services to local parishes and cities.

The nine are not on Florida’s list of state vendors. Records show, however, that at least four of them, including MCS, conduct aerial spray operations in Louisiana using planes owned by one of Florida’s largest Zika-fighting subcontractors, Dynamic Aviation Group of Bridgewater, VA.

Dynamic Aviation contracts with the Scotts’ companies to handle their aerial bug spraying because those companies have no planes of their own, according to Federal Aviation Administration records.

Dynamic is partnered in Florida with Illinois-based Clarke Environmental Mosquito Management, the principal vendor to more than a dozen Florida counties, cities and independent mosquito control districts, including Miami-Dade. FAA records list Dynamic or its affiliates as the registered owners of dozens of aircraft, including a fleet of turbine-powered Beechcraft King Air spray planes.

A Dynamic Aviation spray plane

“The Clarke and Dynamic Aviation Partnership is the leading provider of mosquito control application services to federal, state and local governments throughout the United States,” Clarke boasted in a bid document submitted to Ocala in August 2015.

Today, the Florida Department of Health reports that there are “no areas of ongoing, active transmission of Zika by mosquitos in Florida.” In February 2016, however, public anxiety in the state about Zika was on the rise.

Public health emergency

That month, Gov. Scott declared a Zika public health emergency in 23 counties and directed Florida’s surgeon general to decide how long the emergency declaration should last. It has continued this year in a hodge-podge of counties across the state, including Miami-Dade. Late last month, Surgeon General Dr. Celeste Philip re-declared a Zika public health emergency in Broward and Palm Beach counties citing travel-related cases. Emergency spending also carried over into 2017 in Miami-Dade and Broward.

 Gov. Scott led last year’s high-profile anti-Zika campaign. He also politicized it. From August through early November, during the height of the presidential campaign, Republican Scott’s office issued a dozen press releases attacking Washington, specifically the Obama administration and Florida Democratic Sen. Bill Nelson – who many believe Scott will run against next year – about the lack of immediate Zika funding.

Florida Surgeon General Dr. Celeste Philip

On Sept. 22, Gov. Scott wrote an op-ed article for USA Today in which he denounced Obama, called the “entire” federal government” incompetent and alleged that federal inaction against Zika was “sad, sick proof that Washington isn’t just broken, it must be completely overhauled from top to bottom.”

Scott’s article doesn’t mention how under Scott state money for mosquito control programs was cut 40 percent – from $2.16 million to $1.29 million – in 2011. Politico had reported that in a story published one month earlier. Likewise, Scott didn’t mention that he’d cut a special $500,000 appropriation for a public health “mosquito lab” in Panama City Beach, effectively shutting it down and “causing the state to lose half of its mosquito researchers,” according to Politico.

In response to an inquiry by Florida Bulldog, Florida Department of Health spokeswoman Mara Gambineri said the state has to date expended $52.8 million in Zika emergency funds, including nearly $9 million this year. Of that, Scott’s emergency order caused $33.3 million to be sent to 69 counties and mosquito control districts “to increase their capabilities and to prevent and respond to Zika,” she said.

State records also show the Department of Health paid Clarke $783,572 directly to supply mosquito traps and monitoring services in 2016-2017.

How much emergency money went to pay for aerial spraying is not known. “Decisions on the mechanism for vector control, whether it be aerial, truck, etc. were made by the mosquito control districts. We do not track the funding specifically each method,” Gambineri said.

Tracking spending on the county level is problematic.

For example, Miami-Dade spokeswoman Gayle Love said the county has paid Clarke/Dynamic $175,000 for aerial spraying since the governor’s February 2016 emergency order. Yet in May the county commission ratified its acceptance of $1.2 million in state emergency funds to pay for last year’s aerial spraying services. The balance was diverted into another pot of $22 million in emergency funds that paid for truck spraying, Love said.

‘Aviation solutions’

Privately owned Dynamic provides what it calls “special-mission aviation solutions” to customers that include “national defense, military intelligence, federal agencies, state and local governments, nonprofit research organizations and private companies.”

Records show the Scott’s nine mosquito control companies – all Louisiana limited liability companies with names like Mosquito Control Services, Mosquito Control, Terrebonne Mosquito Control and St. John Mosquito Control – are led by two officer-managers, Gregory Scott and Steven Pavlovich. The companies make most of their money exterminating mosquitos for local governments in Louisiana.

Gregory Scott, CEO of G. Scott Capital Partners

Gregory Scott is also the managing director of G. Scott Capital Partners, the Connecticut private-equity firm in which Ann Scott is a substantial investor-owner. Its investment program “aims to generate high financial returns by making direct control investments in established, U.S.-headquartered lower middle market companies,” according to paperwork filed with the Securities and Exchange Commission.

Also known as Scott Capital, the firm boasts on its website of its ownership of MCS as well as investments in other companies owned or formerly owned by Gov. Scott, including Continental Structural Plastics. Florida Bulldog reported in June that Gov. Scott apparently pocketed $200 million earlier this year after the $825 million sale of CSP to the Japanese conglomerate Teijin Ltd.

Gregory Scott has said he is no relation to Gov. Scott, but SEC records show that from 2000 to 2012 he led the private-equity group at the governor’s Richard L. Scott Investments. He previously told Florida Bulldog that Ann Scott is a “passive investor” in Scott Capital.

The governor and other Florida state officers are not required by law to disclose assets held in the name of their spouses or other close relatives.

Gov. Scott, a multimillionaire, maintains his personal investments in a state “qualified blind trust” that’s ostensibly independent, but is in fact overseen by another of the governor’s former business cronies, Alan Bazaar of New York’s Hollow Brook Wealth Management. Bazaar also serves as an advisory board member of Scott Capital, according to SEC records filed last year.

The governor’s office regularly cites the blind trust in declining to answer questions or comment on the known business dealings of Gov. Scott and the First Lady.

“After Governor Scott took office in 2011, he put all 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,” the office said on Friday.

Dynamic Aviation was likewise silent in response to written questions.

“Dynamic Aviation declines to comment on the questions below,” said company spokeswoman Avis Foster in an email last week.

MCS manager Steven Pavlovich did not return phone messages seeking comment.

A lucrative business

The business of spraying mosquitos from the air can be lucrative. For example, MCS has a five-year mosquito abatement contract with Louisiana’s Jefferson Parrish that’s worth $4.3 million a year – or $21.5 million in total. The latest contract runs until Jan. 31, 2023.

A screenshot from MCS’s home page showing what it says is its “fleet” of mosquito spray planes

A bid document submitted by Scotts’ company in January shows how it cultivated goodwill with local politicians. An affidavit by company manager Pavlovich says MCS contributed $25,000 to the campaigns of 15 Jefferson Parish elected officials in 2015-2016.

Bid documents also disclosed that MCS passes its aerial spraying work in the parish to Dynamic Aviation, the same subcontractor that sprays in Florida.

MCS’s home page features a photo of what its literature calls “our fleet of Beechcraft King Air” spray planes. In fact, the photo is at least six years old, and FAA records show that the planes it depicts were owned or formerly owned by Dynamic Avlease, a member of the Dynamic Aviation Group.

Some agencies in Florida’s decentralized mosquito control scheme, like Broward County, own their own planes or helicopters and do their own aerial spraying. The Clarke/Dynamic partnership has mosquito control contracts with Miami-Dade, Orange, Osceola, Seminole, Martin, Henry, Volusia and Alachua counties, among others.

In its bid for a multi-year contract with the city of Ocala in 2015, Dynamic identified five planes that it said were “registered here in the State of Florida to perform mosquito control services.”

Online flight records indicate that the Scotts’ Terrebonne Mosquito Control, in addition to using the same aerial spraying subcontractor, may also have used that Florida-registered mosquito control plane.

In July one of those planes, tail number N72J, flew back and forth four times between Sarasota/Bradenton International Airport and Houma-Terrebonne Airport in Houma, LA, the records say.

Rick Scott, Mike Pence: When campaign fundraising met tax incentives for Scott’s company

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott, left, accompanies then Indiana Gov. Mike Pence to a Feb. 5, 2016 fundraiser for Pence at the Fort Lauderdale office of the Tripp Scott law firm. Photo: Conrad & Scherer law firm

Two months after Florida Gov. Rick Scott helped then-Indiana Gov. Mike Pence fundraise in Fort Lauderdale last year, Pence announced a $650,000 incentives package for a company owned in large part by Scott.

Pence’s offer of Indiana taxpayer subsidies for Continental Structural Plastics came as Scott’s Florida contributors poured more than $125,000 into Pence’s gubernatorial re-election campaign. Scott kicked in another $5,000 personal check to fellow Republican Pence’s campaign.

The Tampa Bay Times called Scott’s personal contribution to Pence “unusual” because Scott “has never given more than $500 to a Florida candidate other than himself.” It also noted that Pence had “picked up more campaign cash from Florida than any other state, except Indiana and Washington, D.C.”

Pence’s gubernatorial campaign ended abruptly on July 15, 2016 when Donald Trump tapped him as his vice-presidential running mate. But before that the vice president had been in a tight re-election fight amid sagging approval ratings.

The Feb. 5, 2016 fundraiser for Pence was held at the office of the Tripp Scott law firm. Among those present was prominent Fort Lauderdale lawyer William Scherer, a Scott supporter and frequent donor to Republican candidates. Scherer could not be reached for comment. (Disclosure: Scherer, managing partner of Conrad & Scherer, is a donor to the nonprofit Florida Bulldog.)

Conrad & Scherer’s website includes a brief press release with photos of Pence and Scott at the fundraiser. The site says Scherer and Gov. Scott discussed “creating new jobs for Florida residents.”

Indiana election records show that for the first six months of 2016, until Trump chose Pence, nearly two dozen Scott supporters sent checks to Pence. They include two affiliates of Charters Schools USA; Jupiter investor Lawrence DeGeorge; prison operator The Geo Group, its political action committee, chief executive officer George Zoley and several other company executives; Next Era Energy PAC, run by the owner of Florida Power & Light; the Tripp Scott law firm and five of its attorneys.

Indiana’s incentives deal for CSP

On April 11, 2016, back in Indiana, Gov. Pence disclosed that the Indiana Economic Development Corporation – a group he chaired – had offered Continental Structural Plastics (CSP) $600,000 in conditional tax credits and $50,000 in training grants. CSP was to expand its 323-worker operation in the city of Huntington and add 80 jobs by 2020. CSP makes lightweight composite materials used in cars and airplanes.

“CSP’s growth speaks volumes about this company and its talented Hoosier employees,” Pence said in his announcement. “As CSP grows its operations here in Indiana, Hoosiers can rest assured that this administration will continue to pursue the kinds of policies that make our state a destination for investment and growth.”

But instead of adding jobs, CSP recently notified Indiana workforce officials of a “temporary” mass layoff of 164 workers at its Huntington plant after one of its customers planned to be idle, according to local news accounts. The layoffs are to start July 31.

Pence’s announcement did not mention that his friend, Rick Scott, owned a substantial stake in CSP, or that Florida First Lady Ann Scott had an additional large investment through the Connecticut-based investment firm G. Scott Capital Partners.

Before he became governor, Scott headed Naples-based Richard L. Scott Investments. His firm and CSP management bought the company together. “We acquired CSP in early 2005 with the belief that there was an opportunity to build a great company,” Scott said in a statement published in 2006 in Automotive News.

After he became governor, the mega-wealthy Scott put his assets – including CSP – into a Florida blind trust that put his assets under the control of an allegedly independent trustee and gave him legal immunity from conflicts of interest his diverse investments might pose. The arrangement is problematic, however, because the chief executive of the trustee, Hollow Brook Wealth Management, is longtime Scott crony Alan Bazaar.

As governor, Scott has disclosed his financial interest in CSP on several occasions, most recently in 2014 when he shuttered his first Florida approved blind trust and opened a second one while qualifying for re-election. He valued his shares in the CSP investment partnership then to be worth $43.9 million. The value of the First Lady’s CSP investment, via G. Scott Capital Partners, was not disclosed. In March 2016, CSP said in court papers that most of its stock was privately held by G. Scott Capital.

CSP sold

On Jan. 3 of this year, CSP was sold for $825 million to a subsidiary of Teijin Ltd. Florida Bulldog reported in June that Gov. Scott appears to personally have pocketed $200 million in the deal.

When CSP’s sale was announced, the Japanese conglomerate further identified RLSI-CSP Capital Partners LLC – Rick Scott’s partnership entity – as owning two thirds of CSP’s common stock. The governor owned 37 percent of RLSI-CSP Capital Partners.

Gov. Scott has declined to be interviewed about CSP, and his spokespersons have said that because his investments are in a blind trust he “has no knowledge of anything that is bought, sold or changed in the trust.”

Gov. Rick Scott at May 17, 2016 groundbreaking ceremony for United Technologies’ Center for Intelligent Buildings in Palm Beach Gardens. As part of the deal to bring the project to Florida, Scott approved $4.9 million in tax incentives for Carrier, a United Technologies subsidiary.

Vice President Pence was involved in a similar, but larger incentives package that attracted national attention last November when he and President Trump announced a deal with Carrier to keep its gas furnace plant in Indiana. The company was going to move the plant and about 800 manufacturing jobs to Mexico – a job export plan Trump used during the campaign – but changed its mind after talks with Trump and Indiana’s pledge of $7 million in tax breaks over a decade.

While some Republicans – notably former Alaska Gov. Sarah Palin – label such taxpayer-funded incentives “special interest crony capitalism,” they are the centerpiece of Gov. Scott’s plan to create jobs in Florida.

Interestingly, Scott, like Pence, spearheaded a large cash incentives deal for Carrier. That $4.9 million agreement via the Governor’s Quick Action Closing Fund involved development of United Technologies’ showcase “Center for Intelligent Buildings” in Palm Beach Gardens. The deal with Carrier, a subsidiary of United Technologies, was inked in June 2015, but needed local approvals that didn’t come for months. Gov. Scott attended a groundbreaking ceremony for the project on May 17, 2016.

Gov. Scott doesn’t let politics get in way of investing in firm that believes in climate change

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott and First Lady Ann Scott Photo: CNN

When Rick Scott ran for governor in 2010, he told a reporter he wasn’t convinced that global warming was real. In 2015, the Scott Administration was reported to have told state employees to lay off using “climate change” and “global warming” in official communications.

Today, the governor’s office dodges questions about Scott’s position on the use of those terms, saying instead, “Governor Scott is focused on real solutions to protect our environment.”

Still, the ultra-wealthy Scott hasn’t let his politics get in the way of making money. Through First Lady Ann Scott, the governor has a substantial financial stake in a sizable mosquito control company that recently declared on its Facebook page that “mosquitos will only get worse thanks to #climatechange” and “#globalwarming.”

The company is Mosquito Control Services LLC, and it had a banner year in 2016.

The Scotts’ big bet on the Zika fighter MCS is via G. Scott Capital Partners, a Connecticut investment firm in which Ann Scott is a major investor. The firm is run by Gregory Scott, no relation to the governor, and two other men who worked for the governor’s old Naples-based private equity firm Richard L. Scott Investments (RLSI) – and obscured that connection by omitting it from their online biographies until after Florida Bulldog disclosed it three years ago.

Gregory Scott has described Ann Scott, an interior decorator and owner of AS Interiors LLC, as a “passive investor” in G. Scott Capital Partners.

Mosquito Control Services’ Facebook page from April 27, 2017

Florida Bulldog first reported on Gov. Scott’s indirect and undisclosed ownership interest in MCS last August. Scott’s office would not comment on Ann Scott’s ownership interest in MCS.

Scott Capital, as it’s known online, manages several private funds and “family accounts” for a handful of extremely wealthy clients. The firm thoroughly vets potential company investments before negotiating a purchase. Likewise, the firm monitors the performance of the companies it acquires. Its investment program “aims to generate high financial returns by making direct control investments in established, U.S.-headquartered lower middle market companies” like MCS.

Taking control

As of January 2017, Scott Capital was holding approximately $102 million of its client assets.

GSCP MCS LLC was formed in Delaware in August 2014 to recapitalize and take control of MCS, according to reports filed by Scott Capital with the Securities and Exchange Commission. In March 2016, the fund was valued at just under $10 million. Twelve months later, the fund’s reported value had risen nearly 28 percent to $12,715,853.

Mosquito Control Services is an insecticide spraying company that’s based in Louisiana but does business across the Gulf Coast, including Florida, according to its website. It boasts a spraying “fleet of Beechcraft King Air turbine-powered twin-engine aircraft” and says the company’s primary customers are municipalities. MCS does not do business with the State of Florida.

MCS manager Steven Pavlovich did not return a phone message seeking comment.

The scientific consensus is that global warming and climate change will bring damaging sea-level rise that will create new mosquito breeding grounds and likely hike infection rates for mosquito-borne diseases like Zika, malaria and West Nile virus.

Like the Scotts and their advisors, stock market analysts see investor opportunity in the pest control services market, particularly the mosquito control segment. One recent report by Future Market Insights forecast solid industry growth over the next decade citing a variety of reasons including “prevalent weather conditions supporting insect growth.”

MCS, through its Facebook post, made clear its belief that global warming and climate change are very real concerns. It also shared an April 20 New York Times Magazine article with the ominous title, “Why the Menace of Mosquitoes Will Only Get Worse – Climate change is altering the environment in ways that increase the potential for viruses like Zika.”

Gov. Scott’s undisclosed interest – via First Lady – in Zika mosquito control company

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott and First Lady Ann Scott

Gov. Rick Scott and First Lady Ann Scott

Florida Gov. Rick Scott has an undisclosed financial interest in a Zika mosquito control company in which his wife, Florida First Lady Ann Scott, owns a multi-million dollar stake through a private investment firm she co-owns.

The company is Mosquito Control Services LLC of Metairie, LA. According to its web site, MCS “is a fully-certified team of mosquito control experts – licensed throughout the Gulf Coast, including Louisiana, Georgia, Mississippi, Alabama and Florida.”

On June 23, Gov. Scott signed an executive order allocating $26.2 million in state emergency funds for Zika preparedness, including “mosquito surveillance and abatement, training for mosquito control technicians and enhanced laboratory capacity.”

It is not known whether MCS, whose services include monitoring and aerial spraying, stands to benefit from Florida government funds. Company manager Steven Pavlovich holds an active Florida “public health applicator” license with the Department of Agriculture and Consumer Services through April 2019, but MCS is not a registered state vendor. The Department of Health contracts with two other two mosquito control vendors.

MCS did not respond to two requests for comment.

Ann Scott’s large stake in MCS is via G. Scott Capital Partners, an investment firm that boasts $291 million of client assets. The firm manages several private equity funds and various “family accounts primarily comprised of trusts and family entities,” according to U.S. Securities and Exchange Commission records.

The Florida Bulldog reported in 2014 that Scott Capital, as it is known online, is operated by a trio of men who once worked at Richard L. Scott Investments, the private equity firm where Gov. Scott made millions for himself and his family putting together big-money investment deals when he was in the private sector.

Scott Capital posts its portfolio online. All nine listed companies are current and former investments of the governor and/or Mrs. Scott, including Mosquito Control Services, described as providing “mosquito abatement services primarily to municipalities.”

The SEC requires investment companies like G. Scott Capital Partners to file periodic disclosure reports. The firm’s most recent report, filed in March, shows that the three-employee, Connecticut-based firm caters to a handful of high net worth individuals – less than 25 – who invest directly and through various pooled investment funds.

A mosquito control investment

The firm’s latest fund is GS MCS, LLC, a Delaware company formed two years ago this month to recapitalize and take control of Mosquito Control Services. The current value of the fund is just under $10 million and the fund has nine beneficial owners, SEC records say. The owners’ names were not disclosed.

The managing director of G. Scott Capital Partners is Gregory D. Scott – no relation to Gov. Scott. He directs the firm’s investments, as he did when he led the private equity group at Richard L. Scott Investments from 2000 to 2012.

A screenshot from the web site of Mosquito Control Services LLC.

A screenshot from the web site of Mosquito Control Services LLC.

Gregory Scott owns 50 to 75 percent of the Delaware holding company that owns 100 percent of G. Scott Capital, according to the SEC. The First Lady owns the rest through the Frances Annette Scott Revocable Trust, which owns Tally 1, a Delaware company that in turn owns 25 to 50 percent of G. Scott Holdings LLC.

Gregory Scott has described Ann Scott, an interior decorator and owner of AS Interiors LLC, as a “passive investor” in G. Scott Capital.

Gov. Scott has not disclosed his ownership interest in his wife’s investments. Florida law, unlike federal law, does not require state public officers to disclose the assets or income of a spouse or minor child.

The governor’s office on Tuesday declined to discuss the matter or make Gov. Scott or the First Lady available for an interview.

The Republican governor, a multimillionaire, puts his personal investments in a “qualified blind trust” that his office has described as being overseen by “an independent financial professional.” Florida public officers who use such a trust to “blind” themselves to the nature of their holdings get in exchange immunity from prohibited conflicts of interest under a law that Gov. Scott signed in 2013.

FloridaBulldog.org has reported, however, that the person overseeing Gov. Scott’s trust is yet another former employee at Richard L. Scott Investments and that the trust has been ineffective in keeping the governor’s assets secret.

When Gov. Scott opened his current blind trust in 2014 – the second of his administration – he was required to disclose the assets he put into it. His current mix of assets is not known, but the Florida Bulldog reported last year that the blind trust has in the past coordinated stock transactions with the First Lady’s trust a family partnership.

The Solantic transfer

When Gov. Scott took office in 2011, he transferred tens of millions of dollars in assets to his wife, including a $62-million investment in the walk-in clinic chain Solantic. Mrs. Scott reportedly sold the family’s stake in Solantic that same year.

Gov. Scott’s transfer of his Solantic shares came amid an uproar about perceived conflicts of interest. Florida ethics laws generally prohibit public officials from having an ownership interest in companies that do business with the state or are subject to state regulation.

In 2013, Gov. Scott had an undisclosed ownership stake in Houston-based Spectra Energy when Florida’s Public Service Commission – five members appointed by Gov. Scott – unanimously approved construction of the controversial $3-billion Sabal Trail natural gas pipeline by a joint venture of Spectra and NextEra Energy, parent of Florida Power & Light.

The governor’s investment in Spectra became known about a year later when he filed a lengthy list of his assets as of Dec. 31, 2013 when he closed his original blind trust and opened a new one while qualifying to run for re-election.

FloridaBulldog.org reported in July 2014 that Gov. Scott’s list included a $53,000 stake in Spectra Energy and a $55,000 stake in DCP Midstream Partners, a natural-gas limited partnership 50 percent owned by Spectra Energy.

The governor’s investments included numerous other oil and gas assets, including a $712,000 stake in Texas-based Energy Transfer and its affiliates and subsidiaries. Through other subsidiaries, giant Energy Transfer owns a 50 percent interest in the Florida Gas Transmission pipeline, which delivers nearly 65 percent of the natural gas consumed in Florida.

Gov. Scott has had other conflicting investments.

FloridaBulldog.org reported in February that in 2012 Scott owned a $210,000 stake in the private equity firm that owned 21st Century Oncology when the all-Republican governing board of taxpayer-supported Broward Health awarded the company an unprecedented 25-year, no-bid contract to supply radiation oncology services. The governor appoints Broward Health’s board members.

A Scott spokeswoman has said the governor wasn’t aware that 21st Century had sought the Broward Health contract prior to its award in January 2012 and that no one at the private equity firm, Vestar Capital Partners, or 21st Century had asked him to try to influence the hospital district’s selection process.

You don’t need X-ray vision to see through Gov. Rick Scott’s blind trust

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott, right, and blind trust executive Alan Bazaar

Gov. Rick Scott, right, and blind trust executive Alan Bazaar

Governor Rick Scott keeps his $127.8 million stock portfolio in a blind trust intended, by law, to prevent him from having knowledge or control of his investments and to eliminate conflicts between the governor’s public responsibilities and his private interests.

But Florida’s qualified blind trust statute, a little-noticed part of the large 2013 ethics reform bill signed into law by Scott himself, isn’t doing its job. While veiling the governor’s assets from the public, the blind trust fails to keep him blind to his investments.

There are at least two reasons why: disclosure requirements in federal securities law that can undercut blind trust secrecy, and weak conflict-of-interest rules in Florida that don’t require public officers like the governor to disclose assets they own or control when held in their spouse’s name.

For example, on June 25 Scott and the trustees of his blind trust told the U.S. Securities and Exchange Commission that Scott had sold 122,653 shares of Argan (NYSE:AGX) earlier that month for $4.87 million. Argan is a publicly traded holding company whose Gemma Power Systems subsidiary builds and operates power plants in Florida and elsewhere.

The report filed by Scott and his trustees at New York-based Hollow Brook Wealth Management also disclosed that the governor continued to own 4.2 percent of Argan – or 606,124 shares – worth nearly $23.7 million at Tuesday’s closing stock price of $39.06.

The public report says, “No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of common stock that are the subject of this filing.”

This wasn’t the first time Scott made millions on a private stock deal while in office.

In March 2014, FloridaBulldog.org reported that the governor and First Lady Ann Scott recently had collected $17 million selling hundreds of thousands of shares of Argan held by the blind trust and other entities. The story also reported about other large transactions involving several other companies whose stock Scott owned.

Scott’s Argan stock sales included at least 140,000 shares held by the blind trust – then worth $2.5 million – which also retained 523,000 shares. The two other selling entities: the F. Annette Scott Revocable Trust and the Richard L. and F. Annette Scott Family Partnership, in which Scott has acknowledged he was a beneficial owner.

Scott’s June filing does not break down the number of Argan shares sold then by each entity in five trades made June 15-19. But on more than one occasion the blind trust, the first lady’s trust and the family partnership have coordinated transactions – buying or selling large numbers of shares on the same day, at the same price or in similar proportions.

SCOTT ‘HAS NO KNOWLEDGE OR CONTROL’ OF BLIND TRUST

Scott’s office would not elaborate. Spokeswoman Jackie Schutz released a statement Tuesday saying the blind trust is “under the control of an independent financial professional” and that the governor “has no knowledge or control of anything that is bought, sold or changed in the trust.”

Nevertheless, trustee Hollow Brook Wealth Management’s chief executive is Alan Bazaar who worked for Scott from July 1999 to January 2010 as managing director and portfolio manager at Richard L. Scott Investments. Hollow Brook is also an “investment adviser” to the Scott family partnership and the revocable trust in Mrs. Scott’s name.

Further, Scott and Bazaar were partners in a company that in 1999 invested in Cyberguard, a Deerfield Beach computer security firm. The company’s board of directors included then-Broward Sheriff Ken Jenne, who later went to prison for corruption, and Fort Lauderdale lobbyist and Scott confidant William D. Rubin.

To date, Gov. Scott is the only public officer in Florida to use a state qualified blind trust to shield his assets and obtain the safe harbor it provides from prohibited conflicts of interest, according to the Florida Commission on Ethics.

Keeping his securities portfolio in the blind trust means Scott does not have to identify his individual securities on his annual financial disclosure form. Instead, his form describes his biggest single asset as simply “Governor Richard L. Scott 2014 Qualified Blind Trust.”

While the state form does not detail his blind trust holdings, mandatory reports he must make to the SEC about his large stock transactions do. But they aren’t the only way information about Scott’s stock holdings have gone public.

Companies must file reports identifying their biggest shareholders. For example, Argan’s May 16, 2015 report to the SEC in advance of its annual meeting listed Richard L. Scott as a principal stockholder who then owned 965,255 shares, or 6.6 percent of the company.

pipelineGov. Scott also has made public information about the contents of his blind trust.

In June 2014, while qualifying to run for re-election, Scott closed his original blind trust, made public a list of his blind trust assets, then immediately put those assets back into a new blind trust.

The maneuver presented a snapshot of Scott’s stock holdings as of Dec. 31, 2013. Among other things, it revealed Scott was heavily invested in energy companies, including those that control the two existing natural gas pipelines serving Florida.

Also disclosed was Scott’s $108,000 investment in Spectra Energy and its affiliate DCP Midstream Partners.

Spectra is currently seeking regulatory approval to build the $3 billion Sabal Trail Transmission, an approximately 500-mile pipeline to run from Alabama and Georgia into North Florida and south to Orange County. The underground pipeline would supply fuel to the state’s new gas-fired power plants.

The Florida Public Service Commission, whose five members were appointed by Scott, unanimously approved Sabal Trail in the fall of 2013, before Scott’s stake in Spectra was publicly known.

Last month, the Florida Department of Environmental Protection said it intended to award a key environmental permit and easement for the controversial Sabal Trail project that’s majority-owned by Spectra Energy.

FP&L and Duke Energy, also partners in the project, have contributed $1.4 million to Let’s Get to Work, the political committee branded with Scott’s campaign slogan, according to federal records. They also gave a combined $5.8 million to the Republican Governors Association in 2013-14, which in turn contributed $18.3 million to Let’s Get to Work last year.

Rick Scott and allegations of corporate spying and theft by a company he helped oversee

By Dan Christensen, BrowardBulldog.org 

Rick Scott celebrates his Republican primary victory over Bill McCollum at the Hilton Fort Lauderdale Marina on Aug. 24, 2010. One month earlier, Envestnet, a company where Scott was an investor and board member, settled civil charges of corporate espionage and theft.

Rick Scott celebrates his Republican primary victory over Bill McCollum at the Hilton Fort Lauderdale Marina on Aug. 24, 2010. One month earlier, Envestnet, a company where Scott was an investor and board member, settled civil charges of corporate espionage and theft.

Most Floridians know that before Rick Scott was governor he headed a hospital chain that paid an unprecedented $1.7 billion to resolve criminal and civil charges of Medicare and other healthcare fraud.

Much less known is the story of Scott’s involvement as an investor, director and paid consultant at another company that settled civil claims of corporate spying and theft a month before Scott’s 2010 victory in the Republican gubernatorial primary propelled him toward the governor’s mansion.

The company is Envestnet, a Chicago based firm that sells financial software to clients like giant Fidelity Investments.

Scott and his aides did not respond to written requests to discuss the governor’s involvement with Envestnet, or the 2009 federal breach of contract lawsuit brought against it by a Denver, Colorado company called Fetter Logic.

Records, however, show that Scott began investing in Envestnet at its inception as a privately held company 14 years ago. He served on Envestnet’s board of directors from 2001 until March 2010. In 2009, Scott was on the board’s compensation committee.

On his 2010 financial disclosure, Scott valued his Envestnet shares at $2.1 million. That didn’t include his beneficial interest in another $1.2 million in Envestnet shares acquired by First Lady Ann Scott’s revocable trust between 2001 and 2008. Florida law does not require state office holders to declare assets owned by a spouse.

The disclosure form, filed six months after Gov. Scott took office, also says that Envestnet paid Scott $10,100 that year for unspecified consulting work.

A 2008 DEAL GONE BAD

The litigation, including a countersuit filed by Envestnet against Fetter Logic, arose out of a December 2008 deal in which the two companies had agreed to work together to integrate their separate software applications and to develop and sell joint data management products to brokers and investment advisors.

Envestnet invested $5.7 million in the much smaller Fetter Logic as part of the agreement.

But the deal quickly soured, and in November 2009 the companies sued each other in federal courts in Denver and Chicago for breaching their agreement. Fetter Logic did not accuse Scott, or any individual Envestnet board member, of wrongdoing or name them as defendants.

Envestnet, with reported total revenues of $77.9 million in 2009, claimed the much smaller Fetter had failed to disclose serious financial problems that would have kept it from investing in Fetter. In opposing court papers, Fetter said that instead of working with it, Envestnet planted an executive in Fetter’s office who proceeded to steal Fetter’s copyrighted software and “trade secrets” and handed them over to Envestnet.

“Envestnet used its position of trust to raid Fetter Logic and to steal Fetter Logic’s proprietary business information and intellectual property,” says the company’s amended complaint. “Once Envestnet had what it need from Fetter Logic, it severed all ties.”

“The result…was catastrophic for Fetter,” Chief Executive David Fetter said in court papers.

Envestnet officials celebrate the company's IPO at the New York Stock Exchange, July 29, 2010.

Envestnet officials celebrate the company’s IPO at the New York Stock Exchange, July 29, 2010.

Despite the seriousness of the allegations, the case settled quickly. It came in July 2010 as Envestnet was poised to conduct an initial public stock offering, and by now former Envestnet board member Rick Scott was locked in a tight primary campaign against Florida Attorney General Bill McCollum.

Envestnet went public July 29, selling 7 million shares at an initial offering price of $9 a share. Scott defeated McCollum on Aug. 24th.

ENVESTNET WALKS AWAY FROM $5.7 MILLION FETTER LOGIC STAKE 

The settlement agreement was not made public. But Envestnet’s 2011 annual report filed with the U.S. Securities and Exchange Commission states that the settlement caused it to relinquish its $5.7 million ownership interest in Fetter.

In an interview Monday, David Fetter confirmed that his company kept Envestnet’s $5.7 million investment as part of the settlement deal. He also said he did not know what role, if any, Scott may have played in Envestnet’s actions.

“I think he was involved in approving the agreement, but I don’t have any specific knowledge of his participation,” said Fetter, adding that he only now was learning that former Envestnet board member Richard L. Scott was in fact Florida Gov. Rick Scott. “I didn’t meet him.”

Gov. Scott stopped publicly disclosing information about his stake in Envestnet after April 30, 2011, the day he placed all financial assets in his name or the name of his revocable trust in the newly created Richard L. Scott Blind Trust. He valued his approximately 123,700 Envestnet shares at $1,639,233 – a reported $500,000 decline in value from just four months earlier, Dec. 31, 2010.

Scott later became the beneficiary of a new state statute, which he signed into law in May 2013, that gave him and other public officials who place their assets in a “qualified” blind trust immunity from prohibited conflicts of interest.

The law was intended to eliminate conflicts in his official duties by “blinding” public officers like the governor, and the public, to the nature of their holdings. But as BrowardBulldog.org reported last March, the law has been ineffective in preventing public disclosure of Scott’s investments.

Scott raised the curtain on his stock holdings again briefly in June of this year when he dissolved his blind trust and filed “full and public disclosure” of his financial interests to ensure that he qualified to run for re-election. Florida’s Constitution requires such disclosure of candidates for public office.

The governor then opened a new blind trust to hold his assets.

At the same time, Scott released his joint income tax returns for 2010-2012. Last week, following a six-month extension to file, he made public his joint 2013 return.

SCOTTS BEGIN UNLOADING ENVESTNET STOCK

The tax returns show the Scotts began unloading their Envestnet stock in 2011. Mrs. Scott’s trust – the Frances Annette Scott Revocable Trust – reported collecting $1.2 million by disposing of nearly 97,000 shares in 21 transactions between May and December of that year. The trust acquired those shares between 2001 and 2008. The total gain was $480,000.

The couple’s 2012 tax return showed an even better rate of return for shares held in the governor’s name. In 35 transactions between January and May, Scott sold more than 127,000 shares for nearly $1.6 million – a reported gain of more than $900,000. Scott acquired those shares between May 2000 and February 2010.

The Scotts’ 2013 tax return does not report any transactions involving Envestnet shares. The governor’s financial disclosure form for 2013 likewise does not report any Envestnet assets or income.

In 1997, Scott resigned as chief executive of hospital giant Columbia/HCA, a company he founded, several months after FBI and IRS agents raided a company facility in Texas as part of a sweeping federal investigation into suspected Medicare and Medicaid fraud. The investigation focused on allegations of overbilling, fraud, kickbacks to physicians and other illegal practices. The company later changed its name to HCA.

The investigation lasted six years. Along the way, HCA subsidiaries pled guilty to substantial criminal conduct and paid more than $840 million in criminal fines, civil restitution and penalties, according to a 2003 Department of Justice press release.

Other litigation later brought the government’s total recovery from HCA to $1.7 billion, “by far the largest recovery ever reached by the government in a health care fraud investigation,” the release said.

Scott was not charged with any crime; nor was he questioned during the criminal investigation.

But in 2000, while that investigation was ongoing, Scott asserted his Fifth Amendment right not to testify against himself 75 times in a deposition taken in a civil case involving Columbia/HCA. He did so on his lawyer’s advice.

Scott’s current opponent, former Gov. Charlie Crist, has sought to use that to score political points with voters in advance of the Nov. 4th election.

Gov. Scott, his investments and the ‘temptation to dishonor’

 

By Dan Christensen, BrowardBulldog.org pipe

When Gov. Rick Scott set up his first blind trust in April 2011, his lawyers asked Florida’s ethics commission whether he had any conflicts of interest because of his investments in companies doing business in Florida.

Topping their list of concern was Texas-based Energy Transfer Equity – the multi-billion dollar parent of various limited partnerships and subsidiaries engaged in natural gas operations, including pipelines and retail propane sales.

The lawyers wanted a conflict ruling about Energy Transfer’s propane business and its 35 Florida outlets potentially subject to state regulation, not its pipelines. The company and its affiliate, Energy Transfer Partners, had pipeline operations in “Arkansas, Arizona, California and several other states,” but not Florida, the lawyers told the ethics commission.

The commissioners, all political appointees of the governor, the senate president and the house speaker, saw no conflict.

“The (propane) business operation that exists in Florida is a small portion of the entire business activities of the (ultimate) parent organization, which is the organization in which the governor has invested,” said the commission’s May 2011 opinion. “Given the scope of the governor’s investment portfolio” his nearly $600,000 investment in Energy Transfer wasn’t “so proportionately large as to provide a particular “temptation to dishonor.’”

Less than two months later, however, Energy Transfer announced it would acquire Southern Union Company and its 50 percent interest in Citrus Corp., owner of the Florida Gas Transmission (FGT) pipeline. The $9.4 billion deal closed in March 2012.

“FGT is the principal transporter of natural gas to the Florida energy market, delivering 64 percent of the natural gas consumed in the state,” Energy Transfer’s web site says. The pipeline runs from south Texas through the Florida Panhandle and south to Miami-Dade.

Also in 2012, Energy Transfer Partners purchased Sunoco and its pipeline, refining and retail businesses for $5.3 billion.

GOV. SCOTT’S BETS ON ENERGY TRANSFER

Gov. Scott’s most recent financial disclosure form, filed in June, shows that as of Dec. 31 he continued to own a stake in Energy Transfer that he valued at $311,000. Additionally, he owned two other entities in the “Energy Transfer family of partnerships” – Regency Energy Partners and PVR Partners, which Regency acquired in March for $5.6 billion.

The governor valued his Regency stake at $194,000 and his PVR units at $207,000 as of Dec. 31. The total of all three of the governor’s Energy Transfer investments: $712,000.

BrowardBulldog.org reported last week that the governor’s portfolio at the end of 2013 included several million dollars worth of investments in the securities of more than two-dozen entities that produce and/or transport natural gas, including several that control Florida’s two main natural gas supply pipelines.

One investment, Spectra Energy, is in a $3 billion joint venture with Florida Power & Light to build Florida’s third large natural gas pipeline, the Sabal Trail Transmission in north Florida. Gov. Scott signed legislation last year to speed up permitting for the project and his appointees on the Public Service Commission approved it last October.

Many of Gov. Scott’s natural gas investments, including Energy Transfer Equity, are publicly traded master limited partnerships. Such partnerships pay no federal or state income taxes and are required to pay out all earnings to their limited partners – investors like Gov. Scott – that aren’t needed for current operations and maintenance. The investors are then taxed on those earnings.

Florida ethics laws generally prohibit public officials from having an ownership interest in companies that do business with the state or are subject to their regulation.

The governor holds his personal investments in a so-called “qualified blind trust” that by a state law the governor signed in 2013 allows public officials to hide their investment activity from the public while giving them immunity from illegal conflicts of interest.

The law seeks to “blind” the governor, a multi-millionaire, to the nature of his many holdings by requiring that he turn over control of his assets to a disinterested trustee. But BrowardBulldog.org has reported that the person overseeing the trust is a former longtime employee of Scott at Richard L. Scott Investments and that federal records show the trust has been ineffective in keeping the governor’s assets secret.

INVESTMENTS DISCLOSED

Gov. Scott made public his investments last month when he closed his original blind trust, then opened a new one into which he placed his investments.

The governor’s office has declined to explain that maneuver, but it was the first time since 2011 that Scott has released information about his investments.

Gov. Scott and First Lady Ann Scott’s 2012 federal income tax forms show the couple claimed a gain of $75,884 that year selling shares of Energy Transfer Equity and its principal subsidiary, Energy Transfer Partners. Total proceeds from those sales: $500,000.

Most of the Scotts’ 2012 gains on Energy Transfer, nearly $48,000, resulted from the sale of Energy Transfer Equity units that the couple reported had cost them nothing. A spokesman for the governor declined to elaborate.

The Scott’s tax returns list the sales of their Energy Transfer units separately from securities sales by the governor’s blind trust that netted about $1.3 million, but are not further identified. That accounting suggests the Energy Transfer units listed on the form were held in Mrs. Scott’s name.

The couple’s tax returns for 2013 have not yet been made public.

Gov. Scott and his staff would not be interviewed about his investments, including Energy Transfer. But a spokesman for his re-election campaign said via email that the governor has “no knowledge” of the contents of his blind trust.

Dallas billionaire Kelcy Warren, number #257 on Forbes’ list of the richest people in the world, is the chairman of both Energy Transfer Equity and Energy Transfer Partners, and chief executive of ETP. He has a reported net worth of $5.8 billion.

Warren is a big political supporter of Gov. Scott. Last November, two days after former Gov. Charlie Crist filed to run against Scott, Warren contributed $50,000 to Let’s Get to Work, a political committee backing Scott.

In March 2012, Energy Transfer subsidiary LaGrange Acquisition LP gave $25,000 to Let’s Get to Work.

Federal election records show that Warren has given more than $500,000 to mostly Republican candidates and causes since 2008.

Florida revenue department files, then yanks tax lien against Gov. Scott and First Lady

By Dan Christensen, BrowardBulldog.org 

Gov. Rick Scott

Gov. Rick Scott

Like 96,413 other Floridians, Gov. Rick Scott and First Lady Ann Scott were hit last year with a lien for unpaid taxes by the state Department of Revenue.

Unlike most other taxpayers, however, the Scotts’ tax warrant was voluntarily withdrawn, and the lien released, by state revenue officials one week after it was recorded with the court clerk.

The lien, filed at the Collier County Courthouse in the Scotts’ hometown of Naples, demanded $421.64 to cover interest and fees regarding delinquent intangible taxes that the lien document indicates were imposed following an audit. It was withdrawn on Feb. 11, 2013.

“The department has now determined this warrant was filed in error,” the document says.

The Department of Revenue administers a variety of taxes, including the collection of the intangible tax that was largely repealed in 2007. Department spokeswoman Renee Watters said nine warrants seeking payment of delinquent intangible taxes were filed last year, and that one was voluntarily withdrawn due to error – the governor’s.

Department officials declined a public records request seeking access to its file on the matter, citing the confidentiality of taxpayer records.

Watters, however, offered some additional information about what happened. She said tax warrants are signed through an automated processing system, and not individually by hand. She said the Scotts’ warrant was signed by general tax administration program Director Maria Johnson and that Ben Azu, manager of the department’s Naples service center, signed the release of lien.

“The warrant was withdrawn because we made a payment processing error,” said Watters. “Payment had been timely, but there was a lag in the deposit of the payment that made it appear that it was late and therefore, $421.64 interest was improperly charged.”

Azu declined comment.

The governor’s office said Gov. Scott spoke to no one at the Department of Revenue about the tax warrant before it was withdrawn.

“The governor’s office was not aware of DOR’s error, or the work to correct DOR’s error. The matter was handled by private counsel at the time, and DOR corrected its error,” said spokesman John Tupps.

Florida law allows taxpayers to authorize the department to divulge specific information about their account. But the governor, through his office, declined a request by BrowardBulldog.org that he authorize the disclosure of records regarding the issuance and withdrawal of the tax warrant.

The governor’s private counsel, named in the tax lien, was Cummings & Lockwood, a law firm with offices in Connecticut and Florida, including Naples.

The firm’s chairman and managing director is Jonathan B. Mills. He did not return a phone message seeking comment.

Why the Scotts’ were assessed intangible tax is not known. Florida’s intangible tax on personal property such as stocks and bonds was repealed on Jan. 1, 2007. The repeal, however, did not include a nonrecurring assessment levied on taxpayers who lend money secured by a mortgage on Florida property.

At the time the lien was filed and withdrawn last year, the top job at the Department of Revenue was up for grabs. Among numerous applicants was interim executive director Marshall Stranburg.

Gov. Scott and the three elected Cabinet members named Stranburg as the department’s full-time executive director on April 23, 2013.

Through a spokeswoman, Stranburg was asked whether the governor or a representative of the governor contacted him about the tax lien.

Stranburg did not respond.

 

Gov. Scott chose a familiar face to manage his $72 million blind trust

 

By Dan Christensen, BrowardBulldog.org 

Alan Lee Bazaar, left, and Gov. Rick Scott

Alan Lee Bazaar, left, and Gov. Rick Scott

Most Floridians have never heard of Alan Lee Bazaar. Yet as chief executive of the New York investment advisory firm that serves as trustee of Gov. Rick Scott’s blind trust, Bazaar is the keeper of an important public trust for Florida’s citizens.

Bazaar and the company he runs, Hollow Brook Wealth Management, oversee Scott’s $72 million portfolio of stocks, bonds and other investments on the governor’s behalf. Their duty is to decide when to buy or sell the governor’s assets without telling him – in effect “blinding” Scott to his holdings and, by law, immunizing him from prohibited conflicts of interest.

Trustees of qualified blind trusts in Florida are supposed to be disinterested fiduciaries. Relatives of the governor, his political allies, state employees or any “business associate or principal” need not apply.

The governor’s office describes Bazaar and Hollow Brook as “independent” of Gov. Scott. Bazaar and Scott, however, are intimate, longtime associates at Richard L. Scott Investments, according to a variety of public records.

Bazaar was a principal at the governor’s Naples-based investment firm for nearly 11 years, serving in positions of responsibility and trust until shortly before the governor announced his candidacy in April 2010. Bazaar joined Hollow Brook shortly after leaving Scott’s firm.

Bazaar worked for Scott from July 1999 to January 2010 as managing director and portfolio manager. He “co-managed the public equity portfolio and was responsible for all aspects of the investment decision-making process, including all elements of due diligence,” according to a biography on file at the U.S. Securities and Exchange Commission.

DEEPER TIES

Scott’s relationship with Bazaar is deeper than employer-employee, and he and his family’s financial ties to Hollow Brook go beyond the blind trust.

SEC records show that more than a decade ago the two men were members of a Delaware company that invested several million dollars in a small Deerfield Beach computer security company – an investment that later yielded tens of millions of dollars in returns.

SEC records also show that today Hollow Brook is “investment adviser” to two other large entities in which Gov. Scott owns a beneficial interest, – “a family partnership controlled by Richard L. Scott’s spouse (the Scott Family Partnership) and a revocable trust for the benefit of Mrs. Scott’s spouse (the Scott Revocable Trust).”

Bazaar declined to discuss Hollow Brook or his work, past or present, for Gov. Scott. “We don’t speak to reporters,” he said.

The governor’s office was asked why Gov. Scott chose Bazaar to oversee his blind trust given their long-standing business relationship. A spokesman cited the state ethics code’s definition of business associate: “Any person engaged in or carrying on a business enterprise with a public officer….as a partner, joint venturer, (or) corporate shareholder where the shares of such corporation are not listed on any national or regional stock exchange.”

“Mr. Bazaar does not fall within that definition,” spokesman John Tupps said in an email.

The past relationship between Gov. Scott and the man who oversees his blind trust is nevertheless troubling, according to Dan Krassner, executive director of the nonpartisan government watchdog group Integrity Florida.

“The relationship certainly stretches the concept of an independent third-party making disinterested investment decisions,” said Krassner. “When the legislature said don’t use business associates, you would think that would prohibit involvement of someone’s portfolio manager.”

BLIND TRUST CREATED TO HIDE THE GOVERNOR’S ASSETS

Gov. Scott’s blind trust was created in 2011 to place a veil over Scott’s many financial assets and any transactions involving them. Under a state law enacted last year, the arrangement immunizes Scott from any prohibited conflicts of interest because those assets are considered to be outside Scott’s knowledge or control.

Last week, however, BrowardBulldog.org reported that the trust has been ineffective in preventing disclosures of the governor’s assets. Information about stock purchases and sales by the blind trust are a matter of public record elsewhere.

For example, U.S. Securities and Exchange Commission records show that since December 2012 the blind trust has sold millions of dollars worth of shares of Argan Inc., a company that does business in Florida through its power plant construction subsidiary, Gemma Power Systems. Scott continues to be the beneficial owner of approximately $27 million in Argan shares.

The law does not require Scott to make public the agreement he signed with Hollow Brook that created the blind trust, and his office declined BrowardBulldog.org’s request to release a copy.

Instead, Bazaar certified to Florida’s Commission on Ethics last July that the blind trust met the law’s requirements. There is no way to verify Bazaar’s assertion.

Gov. Scott picked Hollow Brook and Bazaar, who turns 44 this weekend, to manage his blind trust when it was created in April 2011. It was a comfortable selection for both men. Bazaar’s duties were similar to his former job at Richard. L. Scott Investments where he helped research and choose Scott’s investments.

SCOTT’S EYES AND EARS

At the firm, Bazaar was Scott’s eyes and ears when serving as a director on the boards of corporations in which Scott had taken a large investment stake.

A decade ago, for example, Bazaar was named to the board of directors of a company called Media Sciences International. Federal records state that Bazaar’s board membership was part of a deal in which Scott invested $1.25 million in exchange for a million shares of Media Sciences stock directly from the company.

Alan Bazaar, third from right, with other members of the board of directors of NTS communications

Alan Bazaar, third from right, with other members of the board of directors of NTS communications

As trustee of the governor’s blind trust, Bazaar continues to serve on boards of companies in which Scott is heavily invested.

One example is NTS, a broadband services provider. Bazaar joined the board of directors in 2012 in the wake of a settlement between management and dissident shareholders looking to make changes in order to maximize shareholder value.

Last month, Lubbock, Texas-based NTS merged with another company and its stockholders received $2 for each share they owned. SEC reports show that Scott’s blind trust owned 1.25 million shares worth $2.5 million. Scott was also the beneficial owner of an additional 3.7 million NTS shares held by the Scott Family partnership and the First Lady’s trust. The total value of the Scott’s NTS shares: $10 million.

In 2013, Bazaar also became a director at Wireless Telecom Group of Parsippany, N.J.

Two years before, Gov. Scott’s blind trust reported its initial assets included $434,000 in Wireless Telecom stock. When Bazaar joined Wireless Telecom’s board on June 12, 2013, the company disclosed that Gov. Scott was the beneficial owner of 1,872,265 shares, or 7.9 percent of the company. The market value of those shares was $2.26 million.

How many of those Wireless Telecom shares were assets of the blind trust is not known. The governor typically owns shares indirectly via trusts or partnerships and Wireless Telecom did not identify the entity or entities holding Scott’s shares.

Hollow Brook, whose employees also include Scott’s longtime corporate accountant Cathy Gellatly, charges its clients fees based on a percentage of assets under management and performance, according to SEC records.

SCOTT FAMILY’S ENORMOUS ASSETS

In the case of the Scott family, those assets are enormous. The governor’s blind trust alone holds assets valued at more than $70 million. The Scott family partnership and the First Lady’s revocable trust are worth upwards of tens of millions of dollars more, SEC records show.

SEC records reveal something else: an apparent coordination of transactions among those three entities, each of which owned huge parallel interests in some of the same stocks.

On more than one occasion, the blind trust, Ann Scott’s trust and the family partnership bought or sold large numbers of shares on the same day, at the same price and in the same or similar proportions.

Gov. Scott filed reports with the SEC disclosing two such transactions.

The first report states that on Nov. 2, 2011 the blind trust, Ann Scott’s trust and the family partnership each bought shares of NTS for which they paid a total of $750,000. The second filing reported proportional sales by those entities of 350,000 shares of Argan on Dec. 20, 2012. The sales grossed $6.3 million.

SEC records also disclose Bazaar’s personal investments in stocks that Scott owned.

For example, Bazaar was a member of Fernwood Partners II, a Delaware investment company that Scott and his wife, Ann, used in 1999 to invest $3.7 million in Cyberguard, a Deerfield Beach computer security firm.

As part of that deal, Cyberguard added Scott’s brother, William Scott, and former Columbia/HCA Healthcare executive David Manning to its board. Gov. Scott was Columbia/HCA’s chief executive until 1999 when he resigned amid a federal Medicare fraud investigation.

Others who later joined Cyberguard’s board included Gov. Scott’s longtime friends, Broward Sheriff Ken Jenne, who later went to prison for corruption, and Fort Lauderdale lobbyist William D. Rubin. For their board service, both men were granted Cyberguard shares worth hundreds of thousands of dollars.

Gov. Scott quietly rakes in millions from stock sales; Florida’s blind trust law ineffective

By Dan Christensen, BrowardBulldog.org 

Gov. Rick Scott Photo: Joe Burbank, Orlando Sentinel

Gov. Rick Scott
Photo: Joe Burbank, Orlando Sentinel

Over the last 15 months, Gov. Rick Scott and his wife, Ann, through various entities, made more than $17 million selling hundreds of thousands of shares of Argan Inc., a publicly-traded company whose subsidiary, Gemma Power Systems, does business in Florida.

The Scotts’ Argan profits were magnificent, more than quadruple their investment.

Gov. Scott’s blind trust sold 140,976 of those Argan shares worth $2.54 million on Dec. 20, 2012. After the sale, the blind trust retained more than 520,000 Argan shares worth $9.43 million.

You aren’t supposed to know that. Gov. Scott isn’t supposed to know it either.

Not long after taking office in 2011, Scott put his personal portfolio of stocks including Argan, bonds and other financial assets into the blind trust that’s managed by others. The idea was to eliminate any appearance of a conflict of interest between the governor’s financial assets and his official duties by “blinding” him  – and the public – to the nature of his vast holdings.

Yet an investigation by BrowardBulldog.org has found that the governor’s blind trust, and Florida’s qualified blind trust law, have been ineffective. They have not prevented public disclosure of Gov. Scott’s personal riches.

MILLIONS IN BLIND TRUST ASSETS VISIBLE 

Millions of dollars of assets placed in the Richard L. Scott Blind Trust – securities, partnership interests and the like – are not veiled as the law intended. They are visible to Scott or anyone else who knows where to look. They are a matter of public record.

The reason: Florida’s blind trust law is trumped by the public reporting requirements of the U.S. Securities and Exchange Commission.

“The public is not benefiting from Florida’s so-called blind trust policies. It’s really not a blind trust. It’s more like a removable blindfold,” said Dan Krassner, executive director of the nonpartisan watchdog group Integrity Florida.

No one in the governor’s office, including General Counsel Peter Antonacci, would be interviewed for this story.

Gov. Scott and First Lady Ann Scott

Gov. Scott and First Lady Ann Scott

In response to emailed questions, Scott spokesman John Tupps said, “The governor’s blind trust is controlled by an independent trustee by law. He has no knowledge of any blind trust activity or transaction since his assets were placed in the blind trust on April 30, 2011.”

Still, publicly available SEC records show that just two weeks ago the governor and the First Lady cashed out another $10 million from the stock market when their five million shares in the publicly traded telecommunications firm NTS, held indirectly through several entities they control, were acquired in a merger. NTS changed is name from XFONE in 2012.

Gov. Scott’s blind trust accounted for a quarter of that total, or $2.5 million, the records show. Half of the Scotts’ stake, including the blind trust’s shares, were acquired at a bargain basement price directly from NTS on Nov. 2, 2011 – nearly one year to the day after Scott’s election.

The governor voluntarily created his blind trust about four months after his inauguration. Because public officials in Florida are not required to report spouses’ holdings, only financial assets owned directly in Scott’s name, or by the Richard L. Scott Revocable Trust, went into the trust.

Florida’s qualified blind trust law, signed by Gov. Scott last May 1, allows public officers to find legal safe harbor from prohibited conflicts of interest by using such trusts to hold their assets outside their knowledge or control.

Over the summer, Scott sought a ruling from the ethics commission that his blind trust met the new law’s standards and that he was entitled to its protection. In September, after Scott’s lawyers disclosed a list of initial assets placed into the trust, the ethics commission ruled that “under the circumstances presented,” Scott’s blind trust complies with state law.

So far, the extremely wealthy Scott is the only public official in Florida to create a qualified blind trust to shield his assets, according to the Commission on Ethics.

‘SECRECY APPROACH FAILED’

Today, however, the governor’s safe harbor seems in jeopardy because of the blind trust’s inability to keep his assets hidden from public view.

Dan Krassner, executive director of nonprofit Integrity Florida

Dan Krassner, executive director of nonprofit Integrity Florida

“The secrecy approach to accountability has failed and full disclosure is the solution. Lawmakers should repeal the blind trust law and instead have a policy of full disclosure of private financial interests of public officials,” said Integrity Florida’s Krassner.

The blind trust’s shortcomings would appear to create an immediate potential problem for Gov. Scott in his oversight role as chair of the State Board of Administration.

The SBA, with more than $176 billion in public money under management, invests widely on behalf of the Florida Retirement System and other funds, including the Lawton Chiles Endowment Fund, which manages the state’s tobacco settlement monies. The funds are run day-to-day by SBA staff and an executive director who serves at the pleasure of the SBA’s trustees – Gov. Scott, Chief Financial Officer Jeff Atwater and Attorney General Pam Bondi.

The pension fund and the Chiles fund own stock in hundreds of corporations. We now know, however, that includes stock in companies in which the governor’s blind trust is also heavily invested. One example is Argan. At the end of 2013, the SBA reported the state funds owned $260,000 in Argan shares.

Do Scott’s large investments in corporations whose shares are also owned by the pension plan and the Chiles fund create a conflict for him as SBA chair?

“The interests in question were acquired prior to (Scott’s) holding office. Interests such as these, residing in an office holder’s blind trust, do not create any conflict of interest,” spokesman Tupps said in an email.

The SEC generally considers beneficial ownership of more than five percent of a publicly traded company’s shares to be significant enough to report to the public. Persons who acquire such a large stake must promptly disclose, then file updates to reflect material sales or purchases. Insiders who own more than 10 percent of a company are subject to additional reporting rules.

SCOTT’S NET WORTH $83.8 MILLION

Gov. Scott reported a net worth of $83.8 million in June. His stock holdings sometimes amount to hundreds of thousands, even millions of shares – stakes large enough to trigger SEC public reporting requirements.

Reports filed at the SEC detail a number of large transactions involving stock beneficially owned by the governor, including shares of Argan and NTS.

The reports bear Scott’s electronic signature as the person who filed them.

Asked about that, the governor’s office said Scott didn’t personally file those reports, adding they were filed by an authorized trustee on his behalf.

SEC regulations, however, require insiders and large beneficial owners like Scott who use an authorized representative to disclose. Representatives are instructed by the SEC to use their typed signature and then indicate that they are signing on behalf of the person they represent. Authorizing documents, such as a power of attorney, must also be filed publicly with the SEC.

SEC reports about the Argan and NTS transactions are signed by one person, Scott. And a review of related SEC records filed by Scott and his blind trust trustee, Hollow Brook Wealth Management, found nothing that authorizes others to sign government forms or schedules on the governor’s behalf.

$10.8 MILLION IN ARGAN SALES IN JANUARY

As recently as seven weeks ago, an ownership report filed under the governor’s electronic signature reported the sale of another 350,000 Argan shares in seven transactions from January 10 to January 22. The reported price per share was between $30 and $30.45. The gross sales price: $10.8 million.

The report lists Hollow Brook Chief Executive Alan L. Bazaar only as a “person authorized to receive [SEC] notices and communications.”

Scott’s report does not identify the specific accounts, trusts or entities involved in those most recent sales of Argan shares. But a prior insider report about the December 2012 Argan sales show the Scott family has used a trio of entities to buy and sell the company’s shares – the blind trust, the F. Annette Scott Revocable Trust, named for Florida’s First Lady, and the Richard L. and F. Annette Scott Family Partnership.

Together, those three entities grossed $6.3 million selling Argan shares at that time, Scott reported.

The Scotts remain large stakeholders in Argan. In January, following the latest sales, the governor disclosed that he remains the beneficial owner of 965,255 Argan shares, or 6.8 percent of the company. At Wednesday’s closing price for Argan stock of $28.10 a share, that’s $27.1 million.

While the federal government deems Scott to be a beneficial owner of his wife of 41 years’ revocable trust and her share of the family partnership, Florida does not require him to report that ownership interest or place it in the blind trust. To protect him back home, Scott’s reports to the SEC about his beneficial ownership include a small print disclaimer that they should not be construed as an admission that he is actually a beneficial owner.

According to its literature, Argan’s primary business is designing and building power plants through its wholly owned subsidiary, Gemma Power Systems.

In the early 2000s, before Argan acquired it, Gemma constructed plants in Bartow, Arcadia and Wachula for Progress Energy and El Paso International. After 2005, Gemma let its registration to do business in Florida lapse for several years. Gemma reinstated its registration with the Division of Corporations in March 2011.

NTS, recently acquired by affiliates of a Connecticut private equity firm, does not do business in Florida. NTS boasts obtaining $100 million in federal stimulus funds to bring its internet access services to rural areas in Texas and Louisiana.

THE SCOTTS DOUBLE DOWN

Records show that on Nov. 2, 2011, the Scotts doubled their substantial NTS stake by taking advantage of an offering to existing shareholders to buy additional shares directly from the company at a discount to the market. The blind trust, the First Lady’s revocable trust and the family partnership paid $750,000 to acquire more than 2.5 million shares, Scott reported. The shares cost 30 cents each. Open market trades of NTS shares that day ranged from 40 to 41 cents a share.

Last month, the Scotts received $2 a share for each of the five million NTS shares they began accumulating in 2007. Profit: $2.5 million.

But the Scott’s NTS gains are eclipsed by profits from their investments in Argan.

In February 2011, about two months before the blind trust was created, Scott reported he was the beneficial owner of 1,673,000 Argan shares. Records show he’d acquired those shares, about 14 percent of the company, in a half dozen transactions by a limited liability company called Argan Investments since 2006.

In the fall of 2010, Argan Investments was dissolved and its holdings distributed to its members: the First Lady’s trust, the family trust and the Richard L. Scott Revocable Trust, which was later placed into the blind trust.

The Scotts paid $9.5 million for their Argan shares. In little more than a year they’ve sold less than half their stake for $17 million while retaining nearly a million shares worth many millions more.

SEC files contain public information about other stocks that were listed as assets in the governor’s blind trust in 2011.

MeetMe is a social networking company known as Quepasa Corp. when it was based in West Palm Beach. It was registered to do business in Florida from 2007 until last September.

MRS. SCOTT BUYS A MILLION SHARES AS 2013 LEGISLATURE CONVENES

The blind trust document valued the governor’s Quepasa investment at $1.4 million. That translated to about 167,000 shares at the time the trust was established.

While no subsequent reports were filed with the SEC regarding Scott’s MeetMe investment, the New York City investment firm Scott hired to manage his blind trust, Hollow Brook, reported holding 331,628 MeetMe shares at the end of 2012.

Hollow Brook has other clients and its report does not identify the owner or owners of those MeetMe shares. Still, MeetMe reported a few months later that in exchange for $2.75 million Richard L. Scott Investments had acquired one million MeetMe shares on the first day of the 2013 Legislative session.

Richard L. Scott Investments, now run by Ann Scott, changed its name this year to Columbia Collier Management. Among its other assets: the nine-passenger Cessna Citation business jet Gov. Scott uses to fly around Florida at his own expense, according to Federal Aviation Administration records.

Hollow Brook’s quarterly holdings report for the period ending Sept. 30, 2013 listed 1,331,628 MeetMe shares. By year end, however, Hollow Brook reported holding no MeetMe stock.

What happened to the MeetMe shares owned by the governor’s blind trust and Richard L. Scott Investments, now known as Columbia Collier? Were shares sold, transferred or otherwise disposed of?

SEC records don’t say. Scott’s office said the governor doesn’t know, and Hollow Brook Chief Executive Alan Bazaar declined to comment.

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