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

By Dan Christensen, BrowardBulldog.org 

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.