“It is clear that my actions have become a distraction from the important and critical work of the secretary of state’s office.”
By Julia Shumway, Oregon Capital Chronicle
Secretary of State Shemia Fagan (D) will resign next Monday, a little less than a week after news broke of her moonlighting for a troubled cannabis company that played a key role in an audit conducted by her office.
Fagan’s emailed announcement on Tuesday followed a tearful virtual press conference on Monday during which she apologized for breaking trust with Oregonians and said she couldn’t survive on her $77,000 state salary. She has also ended her $10,000-a-month contract with La Mota, a cannabis company whose co-owner donated $45,000 to her campaign.
The Oregon Government Ethics Commission began investigating Fagan’s contract on April 28 in response to a written complaint and has since received a second complaint, Executive Director Ron Bersin said in an email. There’s a 60-day preliminary review process for complaints before the commission decides whether to dismiss or launch a full investigation.
Gov. Tina Kotek (D) urged the commission to investigate and asked the Department of Justice to analyze the recent secretary of state audit of the cannabis industry for any influence Fagan had had on that. It indicated that looser regulation would help the industry.
“While I am confident that the ethics investigation will show that I followed the state’s legal and ethical guidelines in trying to make ends meet for my family, it is clear that my actions have become a distraction from the important and critical work of the secretary of state’s office,” Fagan said in a statement.
“Protecting our state’s democracy and ensuring faith in our elected leaders—these are the reasons I ran for this office,” she continued. “They are also the reasons I will be submitting my resignation today.”
Deputy Secretary Cheryl Myers will oversee the agency until Kotek appoints a new secretary to serve through the 2024 election. The secretary of state’s office is in the midst of overseeing the May 16 special districts election, with ballots already in voters’ hands.
“This is a resilient agency, with strong division leadership and internal systems that can withstand change,” Myers said in a statement. “We are ready to continue the important work of the Secretary of State’s office during this transition.”
Kotek said in a statement that she learned Fagan would resign on Tuesday morning and that she supported the decision.
“It is essential that Oregonians have trust in their government,” she said. “I believe this is a first step in restoring that trust.”
The secretary of state is next in line for the governorship because Oregon doesn’t have a lieutenant governor.
House Speaker Dan Rayfield of Corvallis, Senate President Rob Wagner of Lake Oswego, House Majority Leader Julie Fahey of Eugene and Senate Majority Leader Kate Lieber of Beaverton, all Democrats, said in a joint statement that Fagan’s decision to resign will allow the state to move on and build trust.
“As elected leaders, we know that our work depends solely on our ability to hold the trust of the people we serve and represent,” they said. “Secretary of State Fagan’s severe lapses of judgment eroded trust with the people of Oregon, including legislators who depend on the work of the Audits Division for vital information on public policy.”
See below for a story on earlier developments…
Oregon Secretary Of State Quits Marijuana Consulting Job
“I owe the people of Oregon an apology. I exercised poor judgment by contracting with a company that is owned by my political donors and is regulated by an agency that was under audit by my audits division.”
By Ben Botkin and Julia Shumway, Oregon Capital Chronicle
Oregon Secretary of State Shemia Fagan (D) announced Monday she has resigned from her $10,000-a-month consulting side job and tearfully apologized for her “poor judgment” in moonlighting with a politically-connected cannabis company regulated by a state agency her office was auditing.
Fagan also released a copy of her contract with Veriede Holding LLC, an affiliate of La Mota cannabis dispensary chain. Fagan began the contract February 20, while her office was auditing the state’s regulation of the cannabis industry.
Fagan recused herself from the audit in early February when she was aware she may start moonlighting for the company. By that point, the audit was largely completed.
“I owe the people of Oregon an apology,” Fagan said in a press call with reporters. “I owe the diligent professionals in my agency an apology. I am truly sorry. I exercised poor judgment by contracting with a company that is owned by my political donors and is regulated by an agency that was under audit by my audits division. I am sorry for harming the trust that I and so many others have worked so hard to build, and I will begin working to build that trust back today.”
La Mota’s reputation in the cannabis industry is spotty, with media reports of unpaid bills and tax liens, even as it seeks to shore up its political influence.
Fagan said she was paid for two months of the consulting contract.
Records show she informally consulted with the Oregon Government Ethics Commission about the issue and decided to recuse herself from the audit. Fagan and commission staff exchanged phone calls and emails between February 9 and February 15, documents from her office show.
Commission staff sent her past guidance and Fagan decided to take the step of recusing herself rather than seek a formal written opinion, which many officials have done.
“An opinion would have gotten me out of recusing myself,” Fagan said. “I chose instead to voluntarily take the most restrictive limitation on myself.”
While there’s no indication that Fagan broke any laws, the arrangement raised eyebrows in Salem. Republican lawmakers called on Fagan to resign, while Gov. Tina Kotek (D) called on the Oregon Government Ethics Commission to investigate the issue.
Fagan said she looks forward to the commission investigating the matter because “they will confirm that I faithfully followed Oregon’s ethics rules and laws.”
At the same time, Fagan said, simply following the law isn’t enough.
“I am not here today to defend my rule following,” Fagan said. “I’m here today to own that. There’s a difference between following all the rules and doing nothing wrong. And I broke your trust. And that was wrong. And I am truly sorry.”
Fagan’s contract with the company was to research the cannabis industry in states outside Oregon as it eyes possible expansion opportunities.
The three-page contract includes the following:
- A $10,000 monthly salary, with no hourly rate or minimum number of hours required.
- Fagan was not to use government resources, time or her position as an elected official to help the company.
- Fagan also was eligible for a $30,000 bonus if the company landed a marijuana license outside Oregon or New Mexico.
Fagan said she will not be eligible for the $30,000 bonus based on her work for the first two months. She said she spent about 15 hours a week on the consulting work, working out to about $150 to $175 an hour.
The deal came together, Fagan said, when she was catching up socially with Rosa Cazares, chief executive officer of La Mota and mentioned in February she was teaching a class at Willamette University’s law school. That work is about four hours a week and pays the rough hourly equivalent of what she made as a consultant.
“Rosa mentioned that her company was looking to expand outside of Oregon and looking for contractors to do research on the industry in U.S. states and territories,” Fagan said. “This opportunity interested me because it was something I was highly qualified to do having gone through law school and been an attorney for a decade.”
Fagan is no longer a registered attorney with the Oregon State Bar and her work was not legal advice, she said.
The lucrative consulting job paid her more than her $77,000-a-year state job.
Fagan said it was difficult to survive on her state salary. She made $105,000 in 2009, her first year as a lawyer, she said.
“Fourteen years later, I’m starting over financially after a divorce,” Fagan said. “I have two young kids. I have student loans and other bills. I’m a renter in the expensive Portland metro area, and I’m a sole income earner in my household. So to put it bluntly, my secretary of state salary alone is not enough for me to make ends meet.”
At least 25 nonelected agency heads earn base salaries of more than $200,000 a year, according to the Department of Administrative Services. Even Deputy Secretary of State Cheryl Myers earns much more than Fagan: $238,164 a year.
Andrea Chiapella, a spokeswoman for the Department of Administrative Services, said elected officials have a different pay scale.
Timing of audit
Fagan had put the state’s regulation of cannabis into her audit plan in 2021, two years before the consulting agreement.
Willamette Week, which first reported on the consulting agreement, also broke the news that Fagan had suggested auditors talk to Cazares.
“I suggested Rosa along with another person who I knew personally,” Fagan said, saying it’s “customary.”
“I believe they interviewed about a dozen people,” Fagan said. “I wasn’t in the interviews. I didn’t follow up after the interviews. My role is very much as a high level overseer of the audit.”
The audit made several recommendations, including that Oregon better track demographic data about marijuana licenses and prepare for the federal government to approve marijuana, which is currently ranked as a Schedule I substance. That means federal authorities consider it has no medical value and has a serious potential for abuse.
Asked if her position led to the deal—given her lack of a background in the cannabis industry, Fagan said she has other qualifications as an experienced researcher.
“They’ve never asked me to do anything but look at the regulations in the area,” Fagan said. “It is something I’m qualified to do as a person generally representing businesses. You know, you don’t have to be an expert in any particular piece of it. I was often looking at rules and regulations.”
Fagan said her contact with La Mota started through her work and social life.
“I’ve met many, many people in the cannabis industry, including the owners of La Mota,” Fagan said. ”They became donors to my campaign in 2020. We have kids the same age and since we met in 2020. I’ve seen them socially from time to time.”
Co-owner Aaron Mitchell has contributed $45,000 to Fagan, beginning with a $10,000 contribution in September 2020, shortly before she was elected secretary of state. Fagan hasn’t received any contributions from La Mota itself Cazares, both of whom have given thousands of dollars to other Democratic politicians.
Fagan’s campaign for secretary of state reimbursed her about $20,000 for personal expenditures.
Fagan said that reimbursement was for costs she paid upfront for political events and travel, including airfare, food and lodging. Some of that is out-of-state travel, including to California and Alaska.
Salaries for public service
Fagan’s salary appears to be equivalent to other elected agency heads. Treasurer Tobias Read (D) and Commissioner Christina Stephenson of the Bureau of Labor & Industries also earn $77,000 a year, according to a spokeswoman at the Department of Administrative Services. Attorney General Ellen Rosenblum (D) earns $82,200 a year, and Gov. Tina Kotek (D) has an annual salary of $98,600.
They don’t have side jobs, nor do most staff agency heads, according to a Capital Chronicle survey of agencies. Agency directors without side jobs include: Oregon Health Authority, Department of Human Services, Business Oregon, Department of Environmental Quality, Department of Employment, Oregon Parks and Recreation, Bureau of Labor & Industries, Department of Consumer and Business Affairs, Department of Revenue, Department of Transportation, Department of Administrative Services, Department of Forestry, Water Resources Department, Department of Corrections, Aviation Department and the Oregon Lottery.
“I am deeply honored to serve as Oregon secretary of state regardless of the compensation,” Fagan said.
Asked if she would release her tax returns given questions about her outside work, Fagan said: “It’s not customary for me to release my tax returns.”
“I am here because I am owning a mistake that I made,” she said.
Ethics commission rules
It’s common for public officials to request written advice from the Oregon Government Ethics Commission as they navigate ethical issues around outside employment—a review of the commission’s public database shows more than 80 requests for advice on conflicts of interest during the past five years, about half of the nearly 170 total requests.
That includes requests from state agency heads—James Schroeder, the former director of the Oregon Health Authority, asked for assurances that his past employment at various health organizations and the retirement plans he contributed to while employed didn’t create conflicts of interest.
Legislators have also sought guidance. New state Rep. Ben Bowman, D-Tigard, co-owns a company, Oregon 360 Media, that publishes podcasts and a weekly newsletter on state politics. He asked for and received a letter from the ethics commission in February specifying that he could continue to hold both jobs, but that he can’t use state resources for his company.
In 2022, Sen. Sara Gelser Blouin, D-Corvallis, received advice that she would likely have to declare a potential conflict of interest on legislation affecting the gambling industry, as her father and brother work in the industry and she holds shares in their company. In 2021, the commission advised Sen. Elizabeth Steiner, D-Portland, that it was OK to sublease an office from lobbyists because she paid more than the fair market rate and didn’t try to get a discount on rent because of her position.
And Rep. Greg Smith, R-Heppner, has asked for and received six letters since 2017 affirming his outside employment, including owning an economic development firm that has had contracts with Harney County and the Umatilla Electric Cooperative. Each time, the commission’s director advised him that holding the job didn’t constitute a conflict of interest, but that he must be mindful of any conflicts that could arise.