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Tuesday, October 2, 2018

Watchdog Flags Ethical Issues With Scott's 2016 Business Sale

Posted By on Tue, Oct 2, 2018 at 5:43 PM

click to enlarge Gov. Phil Scott - FILE: JEB WALLACE-BRODEUR
  • File: Jeb Wallace-Brodeur
  • Gov. Phil Scott
Updated on October 4, 2018.

Gov. Phil Scott appears to be in violation of the state's ethics code because of the way he structured the sale of his stake in DuBois Construction, the Vermont State Ethics Commission said in an advisory opinion released this week.

During his 2016 campaign for governor, Scott acknowledged that it could create ethical problems for a sitting governor to own a stake in a company that regularly wins state contracts. When Scott won the election, he sold his stake for $2.5 million. But Scott himself financed the sale, which means that he retains a large financial stake in DuBois. He receives monthly loan payments from the firm that totaled $75,000 in 2017.

Paul Burns, the executive director of the Vermont Public Interest Research Group, said Scott’s attempt to solve one ethical problem created another.

"The governor acted in this situation as the bank himself, which means that he will have an ongoing financial interest in this business for at least 15 years” as DuBois pays off its debt, Burns said.

Since the governor appoints the commissioner of the Department of Buildings and General Services, which handles state contracting, Burns said it’s inappropriate for Scott to have a financial relationship with any state contractors.

“When you’ve got a state official who receives payments from a business and that same state official appoints people who can then turn around and give large contracts to that business, it is de facto a conflict of interest,” Burns said.

In August, Burns formally requested a ruling from the state’s ethics commission about whether Scott’s arrangement with DuBois is ethical.

In the advisory opinion issued Monday, the commission said the governor seems to be violating Vermont’s ethics rules.

The commission said Burns’ request for an opinion is evidence of “the appearance of [a] potential or actual conflict of interest,” and said that appearance is “well founded” given the governor’s power to hire and fire the commissioner of Buildings and General Services.

Because the commission's finding doesn't come with any enforcement mechanism, Burns said it's up to the governor to solve the problem.

“The question now comes: Is he still serious about trying to eliminate that conflict of interest?" Burns said.

Rebecca Kelley, a spokesperson for Scott, disputed the commission's finding and said Scott had to finance the deal himself or it would have hurt the company.

"The governor is not involved in the business in anyway — he sold his share," Kelley wrote in an emailed statement. "He took an unprecedented step by selling his company of 30 years, in the only way possible without forcing the company to shutter its doors or lay off employees, and he did so in a completely transparent manner."

Scott isn’t the only one facing scrutiny. Burns pointed out that rules for state contracts say explicitly that contractors can’t give “anything of substantial value” to state officials.

The $75,000 in loan payments from DuBois Construction to the governor in 2017 seem to violate that rule, Burns said. The ethics commission said that issue is better addressed by the Attorney General’s office, and Burns said he contacted that office on Tuesday regarding DuBois’ payments to Scott.

“I don’t see how the plain meaning of that is not in conflict with the situation that we know … the business has,” Burns said.

DuBois Construction president and owner Jeff Newton did not immediately respond to a request for comment Tuesday afternoon.

In her statement, Kelley said there are no issues with the contracting process, calling it "the most transparent process in state government and is strictly followed by the administration."

"Any concerns are completely nullified by the strict and transparent procedures and documentation in place," she said.

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