By Dan Christensen, FloridaBulldog.org
For two terms, Florida’s feeble blind trust law has let Gov. Rick Scott stash his tens of millions of dollars in stocks, bonds, hedge funds, and oil and gas partnerships mostly out of sight and in friendly hands.
The law, enacted by an accommodating Legislature and “gladly” signed into law by Scott himself in May 2013, was supposed to eliminate conflicts of interest by “blinding” the governor to information about his vast holdings. That didn’t happen.
As Florida Bulldog reported in 2014, the law didn’t prevent Scott from taking direct control of stock held in his blind trust and selling it for a huge profit.
Nor did it impede Scott from establishing a cozy relationship with his “independent” trustee, New York-based Hollow Brook Wealth Management. Hollow Brook’s chief executive is Alan Lee Bazaar, who was Scott’s long-time employee and portfolio manager at Richard L. Scott Investments before Scott decided to run for governor in 2010.
Likewise, the blind trust served to hide Scott’s financial stake in Spectra Energy, builder of the controversial Sabal Trail natural gas pipeline, even as Scott signed two bills in 2013 designed to speed up permitting for the pipeline project and his appointees on the Public Service Commission approved its construction.
Today, as his governorship winds down, term-limited Scott is expected to run against incumbent U.S. Sen. Bill Nelson, a Democrat, in 2018. But should he become a candidate – and he must decide by noon on May 4 – Scott will face tougher federal financial disclosure rules that promise to expose more details about the size and scope of his enormous holdings.
Nation’s wealthiest senator?
If elected, Republican Scott would likely be the nation’s wealthiest senator – a distinction held today by Sen. Mark Warner, D-VA, with an estimated net worth of $238 million, according to The Center for Responsive Politics.
Scott’s state financial disclosure form for 2016, filed in June 2017, reported the governor’s net worth as $149.3 million, including $130.5 million held in his blind trust. Those numbers are certainly low.
For example, they don’t include Scott’s January 2017 take from the $825 million sale of the biggest asset in his blind trust – Michigan-based Continental Structural Plastics (CSP) – to a subsidiary of the Japanese conglomerate Teijin Ltd. In 2014, Scott publicly valued his CSP holdings at just $43.9 million. Scott’s estimated gross from the sale: $200 million.
Scott’s reported net worth likewise does not include the value of assets held in his wife’s name. Florida doesn’t require disclosure of a spouse’s assets, but U.S. Senate rules do.
First Lady Ann Scott’s net worth isn’t known. Shortly after taking office, however, Gov. Scott transferred his controversial $62 million investment in Solantic, operator of a chain of walk-in medical clinics, to her F. Annette Scott Revocable Trust. Ann Scott reportedly sold the family’s Solantic stake in June 2011.
The F. Annette Scott Revocable Trust and the governor’s blind trust also made in excess of $17 million between December 2012 and January 2014 from the coordinated sales of hundreds of thousands of shares of Argan Inc. Gov. Scott reported his beneficial interest in his wife’s Argan shares to the U.S. Securities and Exchange Commission. But to protect himself back home, he added a short disclaimer stating that his reports should not be construed as an admission that he is actually a beneficial owner.
The Scotts, via the governor’s blind trust, the First Lady’s revocable trust and a separate family partnership, made other multi-million dollar stock sales, records show. For example, in February 2014 they received $2 a share for each of their five million shares of NTS, an internet access firm acquired that year by a Connecticut private investment firm.
SEC records also reveal that Ann Scott is heavily invested in G. Scott Capital Partners, a Connecticut-based “family” investment firm she co-owns. Scott Capital, which specializes in making direct private equity investments, reported to the SEC in 2015 that it had $291 million under management.
Investments for “one family”
Much of that $291 million – and possibly more – appears to be Rick Scott’s money, directly or indirectly. “We only invest the capital of one family,” Scott Capital stated in a January 2016 interview with InvestmentBank.com.
One of Scott Capital’s biggest assets was Continental Structural Plastics, the manufacturer of lightweight composite materials used in cars and trucks that was sold for $825 million in 2017.
Paperwork filed with the Tokyo Stock Exchange announcing the sale identified CSP’s “major shareholder” as RLSI-Capital Partners, saying it owned 66.7 percent of the company. The manager of that private equity fund – RLSI stands for Richard L. Scott Investments – was identified as Gregory D. Scott, no relation to the governor, who co-owns and runs Scott Capital. He has described the First Lady as a “passive investor.”
RLSI-CSP’s 66.7 percent ownership of CSP was worth $550.3 million. Florida Bulldog has reported that Scott, via his blind trust, likely owned shares worth $200.75 million. The rest would have gone to 13 investor-partners, Scott family members and close associates, including Greg Scott.
Scott’s office has declined to discuss the sale, saying that because the governor’s assets are in a blind trust he doesn’t know anything about them.
Scott’s reported net worth, his proceeds from the CSP sale and his wife’s other assets – including a company that owns the Cessna Citation jet that Gov. Scott uses to travel around Florida and elsewhere at his own expense, but with little public accountability – add up to a huge, yet unknown number that Scott would have to account for should he run against Sen. Nelson.
So what are the governor’s options for disclosure should he launch a campaign?
The easiest move would be to close his current blind trust and roll over its contents into a federal blind trust – tossing in his wife’s assets and, of course, disclosing a list of the trust’s current assets. Scott did similar to that in 2014 when he closed his original blind trust and opened a new one while qualifying to run for a second term. The move revealed Scott’s multi-million dollar bet on natural gas, via stock purchases and investments in limited partnerships.
Federal blind trust drawbacks
From Scott’s point of view, however, a federal blind trust has several drawbacks. Most notably it requires the trustee to “be completely independent” and approved in advance by the Senate Ethics Committee. That would appear to exclude the likes of Hollow Brook and Alan Bazaar.
Blind trusts are also expensive. Senate rules encourage independent trustees managing a blind trust to liquidate its assets and reinvest them so the owner won’t know what he or she owns.
“Assets initially place in the QBT, because they are known to the grantor, continue to pose a potential conflict of interest until they have been sold or reduced to a value of less than $1,000. New assets purchased by the trustee will not be disclosed to the grantor, so they will not pose a conflict,” says an Ethics Committee booklet about qualified blind trusts.
The blind trust is not a popular option on Capitol Hill. Only five senators currently have a Senate qualified blind trust (QBT). The Democrats: Tammy Baldwin of Wisconsin, Dianne Feinstein of California and Joseph Manchin of West Virginia. The Republicans: Orrin Hatch of Utah and Johnny Isakson of Georgia, the current chairman of the Ethics Committee.
“People with a lot of money don’t like to give up control,” said a Washington, D.C. attorney and campaign finance expert who spoke on condition he not be identified by name.
Instead of putting his assets in a blind trust, Scott could sell off problematic assets and re-invest in mutual funds, bonds or money market funds before listing everything on the Senate’s 16-page Public Financial Disclosure Report. In 2014, Scott’s list of assets – not counting his wife – was three pages long, single-spaced.
It’s also noteworthy that, as part of disclosure, the Senate has a two-year look back on sources of compensation that could be revealing.
While Senate disclosure rules are tough, its conflict of interest rules are loose.
The Senate Ethics Manual says “Paragraph 4 of Rule 37” prohibits individuals from “using their legislative power to advance their personal financial interests.” Yet other rules narrow the scope of that prohibition.
“Legislation may have a significant financial effect on a Senator because his holdings are involved, but if the legislation also has a broad, general impact on his state or the nation the prohibition of the paragraph would not apply,” the manual says.
“It’s hard to have a conflict in the House or the Senate,” said the Washington attorney and campaign finance expert. “If you own five million shares of Lockheed, you can still sit on the Appropriations Committee or the Armed Services Committee and vote on appropriations for Lockheed.”
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