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

By Dan Christensen, 

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.


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.


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 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.


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.

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  • OH, Sure, and all those illgotten-gain Republicans will BLINDLY VOTE FOR SCOTT ONCE AGAIN. Not at all concerned about his morals, ethics illegal and shady dealings, nor the rest of us for whom a more statesmanly governor would be a blessing!

    He’s a Crook and some Republicans SEE THAT AS A PLUS! Aren’t They Just So Sweeeeet?!

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