By Dan Christensen, FloridaBulldog.org
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.
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.