A businessman is elected chief executive. Rather than divest from his company, he keeps an active interest in it, puts close family members in charge and makes policies and decisions that could benefit the firm.
Consider Maryland Gov. Larry Hogan (R). Just as Trump kept his ownership of the Trump Organization when he became president, Hogan kept his ownership of the Hogan Companies, a multipurpose real estate brokerage with assets throughout Maryland, when he became governor in 2015. Trump left his children in charge of his company; Hogan left his brother in charge of his. Both entered into unconventional trust agreements that allow them to be apprised of their companies’ investments and assets.
In Hogan’s first term, he initiated a major change in the state’s transportation policy, putting more money into roads, highways and bridges at the expense of mass transit. He canceled a planned $2.9 billion rail line through Baltimore, freeing up hundreds of millions to spend on road projects.
As I recently reported in the Washington Monthly, several of those road projects — including a new $58 million interchange and $23.5 million in road and sidewalk improvements in Prince George’s County — were near properties that his business owns, which means the road development could boost the value of those holdings. Hogan didn’t publicly disclose his ownership stake in those properties before the legislature voted in 2015 and 2017 to approve the infrastructure spending, although Maryland law requires officials to recuse themselves from decisions that could benefit them or close family members financially. As a result of my story, Maryland House of Delegates Speaker Adrienne A. Jones (D-Baltimore County) announced that a subcommittee will be asking “tough questions” about the governor’s transportation decisions and business dealings.
Hogan’s real estate business has grown since his inauguration. Acccording to his financial disclosure forms, he had an ownership stake in 30 real estate limited-liability companies in 2014, the year before he became governor. Today, he has a stake in 43. The business has been lucrative: During his first three years as governor, Hogan made $2.4 million in total, according to his tax returns for those years, which he released during his 2018 reelection campaign. His annual government salary is roughly $180,000.
Hogan has refused multiple requests to release his tax returns for the years before he took office, giving the public no way to compare his earnings before and after he was elected. According to John Willis, a historian of Maryland politics, Hogan has made more money as governor than any other in state history.
In a news conference, Hogan dismissed my story as a “blog thing” and said he complied with state ethics law. “Nobody has been as transparent,” he told reporters. “No elected official has disclosed as much as I have.”
Hogan isn’t the only governor who appears to have profited during his time in office. In Florida, former governor Rick Scott entered into a blind trust that ethics experts have said wasn’t so blind: It was run by a financial adviser who was also managing his wife Ann Scott’s equity investments. (Craig Holman, a lobbyist with Public Citizen, a good-government nonprofit group, says a blind trust should be run by an individual or entity with which the official has had no prior relationship.) Later, a New York Times report found that 91 percent of the 89 equity investments in Rick Scott’s trust were identical to Ann Scott’s holdings — meaning he could know where his trustee was directing his own investments simply by looking at his wife’s.
Even more disconcerting, Scott’s adminstration gave a $287 million contract to a company partly owned by a hedge fund in which the governor’s trust had invested at least $5 million. The link was revealed when he filed financial disclosure forms for his U.S. Senate run in 2018. Scott also required random drug testing for state workers when he owned a chain of 32 urgent-care clinics around the state that stood to benefit from the new mandate.
In 2013, Florida’s Republican-controlled legislature passed a bill that said simply setting up a blind trust acted as an absolute defense against conflicts of interest, no matter how blind the trust really was. The Times reported that Scott’s office was “heavily involved” in creating the legislation, citing a person familiar with the bill. Four months after Scott signed that measure into law, the state ethics commission ruled that his arrangement complied with the new statute.
Scott has denied ever taking an official governmental action for his own financial benefit. “I have never made a single decision as governor with any thought or consideration of my personal finances,” he told the Times in 2018. “I will not apologize for having success in business.”
Another governor who has maintained his private business interests is West Virginia’s Jim Justice (R), a former coal and agribusiness tycoon who, since taking office in 2017, has put only a few of the more than 100 companies he owns into a blind trust. In August, state lawmakers called for a reexamination of ethics laws after the Charleston Gazette-Mail and ProPublica found that West Virginia government agencies paid for more than $106,000 in meals and lodging at a luxury resort that the governor owns and that his adult children run. Justice has also denied any wrongdoing, and like Hogan, he has vilified the news organization that covered his conflicts. “I think the Charleston Gazette has become the Charleston Enquirer,” he said, seemingly referring to the National Enquirer tabloid. “. . . They’re a waste of time. They make no news. All they do is throw garbage.”
In all of these cases, governors have created financial arrangements that allow them to knowingly profit from their official decisions. That’s been possible, in part, because past efforts to hem in such behavior at the state level have been fitful at best. They began in the wake of Watergate, when Vice President Spiro Agnew, a former Maryland governor, resigned from office after pleading no contest to a tax-evasion charge stemming from a bribery and kickback scheme involving highway contractors dating to when he was Baltimore County executive and then governor.
Maryland — and most other states — responded to the Watergate and Agnew scandals by passing legislation that established standards of behavior for state officials, including governors. Many of these laws also created state ethics commissions to conduct oversight, offer guidance and monitor financial disclosures to guard against undue influence, including bribes, and conflicts of interest.
Before 1973, only a few states had ethics commissions, according to Nicholas Birdsong, a policy specialist for the National Conference of State Legislatures (NCSL). By the end of the decade, more than half did. The Watergate scandal “was pretty much the point when it became a priority for states to rebuild trust in government institutions, because it had been eroded a bit by what had happened,” Birdsong said.
But many states were prodded by their own ethics emergencies to tighten their laws, Kathleen Clark, a government ethics expert and law professor at Washington University in St. Louis, told me. In 2004, for instance, Connecticut legislators passed stronger ethics laws and created a Citizen’s Ethics Advisory Board to oversee enforcement after then-Gov. John Rowland (R) resigned amid a federal corruption investigation, in which he eventually pleaded guilty and went to prison.
Still, none of the state ethics laws are particularly robust. A 2015 Center for Public Integrity examination gave only three states a grade higher than D-plus for the systems they use to prevent corruption; 11 states flunked. The biggest problems in America’s statehouses, the report said, were secrecy, questionable ethics and conflicts of interest. For example, 11 states don’t require government officials to recuse themselves when their public duties could affect their personal financial interests, according to data from the NCSL.
And where states do have stronger ethics laws, they often have enough loopholes that officials with conflicts can operate with little scrutiny. The same report found that ethics commissions regularly fail to probe or sanction violations because they don’t have the authority to initiate investigations without first receiving a complaint. The states, therefore, are relying on a kind of honor system to ensure that elected officials are making decisions on behalf of the public and not their own bottom lines.
That means it’s up to governors to hold themselves accountable. Many do. Mark Warner (D), now a U.S. senator, put the vast fortune he made as a venture capitalist into a blind trust when he became governor of Virginia in 2002. Sen. Joe Manchin (D) likewise put his assets into a blind trust when he was governor of West Virginia from 2005 to 2010. (Both have kept their money in those trusts since they entered the Senate.) And J.B. Pritzker (D), whose family owns the Hyatt hotel chain, did the same last year when he became governor of Illinois. Most of his immense wealth — roughly $3.2 billion, according to Forbes — is in brand-name equity stocks, managed by a blind trust that he discloses to the public once a year on his financial disclosure form.
Litigation claiming that Trump’s profits from his hotels, restaurants and golf courses violate the Constitution’s emoluments clause has drawn attention to the issue at the national level. But while emoluments may seem like a problem unique to this president, the phenomenon of government executives benefiting financially from private holdings via their policy or spending choices extends far beyond Pennsylvania Avenue.
Just as the Watergate scandal once spurred ethics reforms across the country, the Trump presidency and similar behavior by governors could do the same soon. This administration has generated enormous energy from policymakers and ordinary Americans nationwide who want to protect the integrity of government. It’s high time that the same measure of scrutiny is applied at the state level.