As a state senator, Ralph Northam began expanding his financial portfolio to include stock in companies that do extensive business in Virginia. In early 2013, he reported owning between $10,000 and $50,000 of stock in Dominion Energy, Virginia’s largest utility and the top corporate donor to local campaigns.
Later that year, Northam voted on eight Senate bills Dominion lobbied on. As lieutenant governor in 2015, he praised legislation that suspended audits of Dominion by state regulators, a measure denounced by consumer advocates but touted on Wall Street as a boon to shareholders.
And if Northam, a Democrat, is elected governor next month, he probably will approve or veto bills that affect the utility — and very likely the value of his personal investment. The same is true for the other companies active in Virginia in which he owns stock: AT&T, Bank of America, Norfolk Southern, Kraft Heinz, DuPont, Verizon, Johnson & Johnson and Mondelez International.
Northam and his Republican opponent in the race, Ed Gillespie, have had extensive financial or business relationships with companies active in Virginia, raising questions about how those ties could influence their governance of a state known for unusually lax ethics laws. Northam’s investment in Dominion — although apparently permissible under Virginia’s ethics laws — already has opened him up to accusations that he has put the company’s bottom line ahead of the public’s interests.
In particular, he has come under attack from environmentalists for not opposing a 600-mile natural gas pipeline Dominion is planning to build with several smaller partners.
Environmentalists say the Atlantic Coast Pipeline would damage some of the state’s most naturally pristine areas, while proponents — including Gillespie and Democratic Gov. Terry McAuliffe — say it would curb energy costs and create 8,800 jobs. Northam has tried to stake out middle ground by calling for a “rigorous and transparent” review of the pipeline’s environmental impact.
Northam says that if elected governor, he would put his stock investments in a blind trust managed by a trustee who could sell or purchase stock without his knowledge. The campaign notes that he has backed some policies opposed by Dominion, including McAuliffe’s veto of a 2016 bill that would have extended tax credits for coal plants.
“I have always put the interests of those I have served first, and I promise to do that as governor,” Northam, a pediatric neurologist, said in a statement to The Washington Post.
But some pipeline opponents argue that Northam can’t help but be influenced by his Dominion investments.
“Your personal investments and campaign contributions weigh on decisions, that’s just reality, and Dominion is such a force in Virginia politics,” said David Sligh, conservation director of Wild Virginia, a nonprofit group that opposes the pipeline.
Gillespie has mutual funds and partnership interests in three investment funds but no stock holdings, according to his campaign disclosure form. Last year, he advised four companies with vast interests in the state — AT&T, Bank of America, Microsoft and Anthem. If elected governor, Gillespie would almost surely face legislative or policymaking decisions affecting his former clients’ interests.
Virginia’s conflict-of-interest laws generally allow lawmakers and state officials to vote on legislation affecting a company in which they own stock if colleagues own stock in the company and so also would be affected. For example, the law seems to permit Northam’s votes on bills affecting the utility in 2013 because several other state senators also had holdings in Dominion.
If the rules were more stringent, ethics experts say, an administration and part-time “citizen legislature” made up of doctors, bankers, developers and lawyers would be prevented from acting on innumerable bills and policies.
“Public officials should not profit from their government service, but the reality is that people are going to have investments, and a relatively small interest shouldn’t affect their decision-making,” said Paul Nick, president of the Council on Governmental Ethics Laws, a nationwide association. “It’s similar to the idea that accepting a cup of coffee shouldn’t affect your decision-making, but an all-expense paid trip will.”
Anna Scholl, executive director of Progress Virginia, a liberal advocacy group that pushes for higher ethics standards, said she thinks Northam has “complied with the letter and spirit of the law.”
“The challenge is, how do you balance ethics restrictions with a citizen legislature in which they all have outside business interests?” she said.
Northam’s campaign said his stock purchases were recommended by a financial adviser, “independent of anything going on in state government.”
Most of the eight Senate bills Northam voted on after listing the Dominion stock on his disclosure form were technical and not controversial. Of the bills Northam voted to support, Dominion favored five and ultimately did not object to three, a company representative said.
Northam is not alone in state government in investing in Virginia companies; 10 lawmakers reported owning Dominion stock last year, according to the Virginia Public Access Project, or VPAP.
Republican Sen. Frank W. Wagner owned stock in Dominion valued between $5,000 and $50,000 when he sponsored the 2015 law suspending biennial financial audits by state regulators through 2022. He sold the stock later that year because, he said, “I didn’t want what’s going on with Ralph Northam. I didn’t want any reproach like I was trying to help myself.”
VPAP records show that Wagner, who lost the GOP primary to Gillespie, later purchased $5,000 to $50,000 of stock in Dominion Energy Midstream Partners, a limited partnership formed by Dominion Energy with assets separate from the state-regulated utility.
Aside from Dominion, disclosure filings show, Northam owns stock worth between $5,001 and $25,000 in seven companies that do significant business in Virginia and are potentially affected by legislation and policy in the state: AT&T, Bank of America, Kraft Heinz, Mondelez International, Verizon, Norfolk Southern and DuPont. He owns between $50,001 and $250,000 in Johnson & Johnson, another company that has interests in the state.
Some of those companies directly interact with the governor’s office. McAuliffe unveiled a $1.9 million grant from a state economic incentive fund last March to help Norfolk Southern move 165 employees to Norfolk. A few months later, McAuliffe and other officials announced that DuPont would pay $50 million to settle claims that it contaminated 100 miles of river and flood plain. Northam's campaign said he was not involved in these decisions.
As lieutenant governor, Northam said he would not participate in tiebreaking votes on legislation affecting Dominion. None have come up. But the next governor’s administration will have to consider requests for air quality permits related to the pipeline, and continue monitoring the project.
In Securities and Exchange Commission filings, Dominion says delays in pipeline permits and negative publicity could have an “adverse impact” on company finances. An analysis by Credit Suisse, a financial services company, estimated the pipeline would add about 6 percent to the value of the $49 billion company.
If he becomes governor, Northam may also face legislation repealing the 2015 law that suspended Dominion audits. Northam has said he backed the law, signed by McAuliffe, because it increased the use of solar power and included assistance for low-income customers. But consumer advocates argue that it delays potential rate cuts and allows the utility to avoid paying millions of dollars in potential refunds.
After the Virginia Supreme Court rejected a challenge to the rate-freeze law brought by a group of utility customers, Goldman Sachs said that if not for the court decision, rate changes “could provide a head wind” of a 20-cent decrease in earnings per share.
Since his comments in 2015, Northam has steered clear of the debate.
“When an issue threatens a major donor, you don’t see a lot people stick their necks out,” said Sen. Chap Petersen (D-Fairfax City), who plans to try to overturn the rate freeze next year. “The lieutenant governor was no different than anyone else.”
The $5 billion pipeline would move natural gas extracted from shale by fracking in West Virginia through central and southern Virginia and into North Carolina, with a spur flung out to Hampton Roads. Northam’s leading challenger in the Democratic primary, former congressman Tom Perriello, made his opposition to the pipeline a signature issue.
On the defensive during a May debate, Northam touted a letter he wrote urging the state Department of Environmental Quality (DEQ) to “strongly consider” a more rigorous review that would analyze the pipeline’s impact on individual water crossings.
But a few weeks later, DEQ said it would not issue individual permits for every waterway crossed by the pipeline. Instead, state officials would rely on the U.S. Army Corps of Engineers’ water quality review. DEQ never responded to Northam’s letter, and he did not follow up, public records show.
“This is the most important environmental issue facing the state, and Northam failed to use his bully pulpit,” said Jonathan Sokolow, a Democratic activist who supported Perriello. “It seems improper to own stock in a company you’re supposed to be regulating, and even more troubling are the campaign contributions.”
Dominion has poured more than $10.8 million into Virginia campaigns over the past two decades, more than any other company, according to VPAP. Northam’s campaign and a political committee he controls received more than $88,000. Employees of and lobbyists for the company also contributed about $63,000. Northam has backed a ban on corporate contributions.
Gillespie also has received campaign donations from Dominion, although far less — $53,500, plus $20,500 from employees and lobbyists.
“Just like other companies and trade associations, Dominion is proud of the work we do every day in the communities where we live, work, and raise our families,” spokesman David Botkins said. “Why should we be excluded from the political process?”
This is the first of two stories examining how Virginia’s gubernatorial candidates could face challenges leading the state because of their financial dealings with companies that have extensive interests there. Tomorrow: Republican Ed Gillespie’s work as a lobbyist and a consultant
Fenit Nirappil contributed to this report.