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Florida First Lady’s loan to accountant for governor’s blind trust may have broken state law

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott and First Lady Ann Scott

Gov. Rick Scott’s wife may have broken Florida law by loaning more than $100,000 to an accountant who works for the investment firm that manages the governor’s $215-million blind trust.

First Lady Ann Scott’s loan to Cathy Gellatly was disclosed in late July in a federal financial disclosure form filed by Republican Scott as he runs for the U.S. Senate seat now held by Democrat Bill Nelson. Because Senate disclosure rules are vague, the loan could have been for as much as $250,000.

Gellatly is an accountant at Hollow Brook Wealth Management, the New York boutique investment firm that acts as the trustee of Gov. Scott’s blind trust. Previously, Gellatly was for more than a decade the corporate accountant for Scott’s private investment firm, Richard L. Scott Investments.

Florida’s qualified blind trust law, passed by the Legislature and signed into law by Scott on May 1, 2013, prohibits public officers like the governor from attempting to influence the management of assets in the blind trust.

Likewise, the law generally forbids public officers or persons with a “beneficial interest” in the blind trust, in this case Ann Scott, from having “any direct or indirect communication with the trustee with respect to the trust.”

The governor’s campaign denied that the First Lady violated Florida’s qualified blind trust law by making the loan to an employee of the firm that serves as trustee of her husband’s blind trust.

Was the First Lady’s loan made to influence how the assets of the blind trust are managed? “Absolutely not,” said campaign spokeswoman Kerri Wyland.

The F. Annette Scott Revocable Trust

The federal disclosure records filed by Gov. Scott identify the asset source of the loan as the multi-million dollar F. Annette Scott Revocable Trust, for which Hollow Brook also serves as an investment advisor, according to U.S. Securities and Exchange Commission records. So far this year, the trust has received between $2,500 and $5,000 interest on the loan.

Cathy Gellatly

Ann Scott’s revocable trust is worth tens of millions of dollars, but how much is unclear because federal disclosure law requires only that its assets be valued within a broad range. What is clear, however, is that it is packed with more than a dozen investments in natural gas producers and transporters – companies whose shares are also held by the governor in his blind trust.

In 2014, Florida Bulldog reported that Scott’s blind trust was invested  in more than two dozen entities that produce and/or transport natural gas, including a firm then preparing to build the heavily regulated Sabal Trail gas pipeline in North Florida. The blind trust still owns stock in many of those same companies, as does the revocable trust, the federal filing shows.

The governor identified the First Lady as the owner of the revocable trust, yet he maintains control of its many assets. The trust is “revocable” because the grantor, in this case Gov. Scott, has the power to modify or terminate it at any time so long as he is not incapacitated, according to The Florida Bar.

As with his blind trust, the paperwork used to establish Ann Scott’s revocable trust has not been made public. But court papers filed in a Tallahassee lawsuit alleging that Scott has failed to disclose all of his assets as required by Florida’s Constitution, asserts without challenge that Scott is both the grantor and the trustee of the F. Annette Scott Revocable Trust. (SEC filings made a decade and more ago then identified the trustee as Ann Scott.)

If so, the loan to Gellatly would have been made at Gov. Scott’s direction in connection with his duties as trustee of that trust. Trustees manage assets pursuant to a fiduciary duty to the beneficiary, meaning Ann Scott likely approved the loan.

‘A friend for over 20 years’

“Cathy has been a friend for over 20 years and when she was in a situation where she needed help, I was glad to help her,” Ann Scott said in a statement first reported by Politico last month. “That’s what friends do for each other, and I would do it again.”

Still, many questions about the loan remain.

Why did Gellatly borrow so heavily from the spouse of a Hollow Brook client with a politically sensitive blind trust? Did Hollow Brook approve the arrangement? Was Gellatly unable to obtain a loan elsewhere? When was the loan made and what was its terms? Were they favorable to Gellatly? Were there other agreements between Gellatly and the Scotts in exchange for the loan?

Scott’s campaign declined to make public copies of the Gellatly loan documents or say when the loan was made or whether there were any related agreements between Gellatly and the Scotts.

Hollow Brook chief executive and co-owner Alan Bazaar declined to comment. “Our policy is we don’t speak to the press,” said a company spokeswoman.

Like Gellatly, Bazaar is a former employee of Gov. Scott, when he was managing director and portfolio manager at Richard L. Scott Investments from July 1999 to January 2010. Before that, Bazaar and the Scotts were members of a Delaware company that invested several million dollars in a small Deerfield Beach computer security company called Cyberguard, an investment that ultimately yielded tens of millions of dollars in returns.

Blind trust and Bazaar

Bazaar joined Hollow Brook upon leaving Richard L. Scott. Three months later, Rick Scott announced his candidacy for governor.

Shortly after Scott’s inauguration in January 2011, he established his blind trust and hired Bazaar’s firm to manage it.

The blind trust places a veil over Scott’s numerous financial assets and, under a state law enacted in 2013, also affords him immunity from prohibited conflicts of interest because the law presumes Scott’s assets are outside his  knowledge or control. In fact, as Florida Bulldog reported in 2014, the blind trust is ineffective in preventing disclosures of the governor’s assets and Scott himself has taken advantage of that to trade stocks held in his blind trust.

Scott chose Hollow Brook and Bazaar as trustee even though the blind trust is supposed to be independent of him. Florida’s blind trust law explicitly forbids a public officer from appointing “a business associate” as trustee.

Still, in response to reporters’ inquiries, Scott’s spokespersons continue to maintain that the blind trust “is managed by an independent financial professional” and that Scott has no involvement.

The Scotts’ tax returns show they have paid Hollow Brook hundreds of thousands of dollars in advisory and management fees. Recently, the firm moved to burnish its Republican image with the creation of a small advisory board that includes former New Jersey Gov. Thomas Kean. Kean, 83, is perhaps better known as chairman of the National Commission on Terrorist Attacks Upon the United States, more commonly called the 9/11 Commission.

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