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Kotek demands ethics investigation following Shemia Fagan revelations; Fagan says she welcomes the inquiries

Tina Kotek at a podium in front of a bookcase.
Dirk Vanderhart
FILE: Gov. Tina Kotek addressing reporters to mark 100 days in office on April 19, 2023.

Some of Oregon’s most powerful elected officials expressed alarm Friday after news broke that Secretary of State Shemia Fagan hadaccepted a job as a cannabis industry consultant, even as her office prepared an audit arguing for more lax regulation of the industry.

Gov. Tina Kotek called for two investigations — one by the Oregon Government Ethics Commission into Fagan’s actions and another by the Department of Justice into the newly released audit. The Legislature’s top two Democrats both said they were deeply concerned by the situation.

Meanwhile, legislative Republicans called for Fagan to step down.

But Fagan offered no suggestion she was rattled. In a Friday evening statement — her first since Willamette Week broke news of the arrangement on Thursday — the secretary offered the most details yet about what her consulting work entailed. Fagan also suggested she embraced the mounting scrutiny.

“I welcome Governor Kotek’s request to DOJ to review the audit because it will simply highlight the professional work of Oregon’s auditors,” Fagan’s statement said. “I am relieved that the Governor has asked DOJ and the Government Ethics Commission to engage in fact finding because the facts will restore trust in our audits division and in me as your Secretary of State.”

The cascading fallout over Fagan’s consulting work left Oregon politicos on both sides of the aisle speculating Friday about her future.

In February, Fagan signed a contract with a company called Veriede Holding LLC which has ties to the prominent Oregon cannabis chain La Mota.

“I do non-legal consulting work gathering information and resources on the cannabis industry outside of Oregon,” Fagan said Friday evening, offering a clearer picture of her duties. “The company contracted with me and others to review the landscape for expanding their operations outside of Oregon. The nature of the contract and the work does not create a conflict of interest under Oregon law or ethics rules.”

But Fagan has not responded to requests that she share a copy of the contract, along with how much she’s earning on the side. Fagan’s Secretary of State salary is $77,000 per year.

The secretary’s decision to moonlight as a cannabis consultant came at a notable time. Auditors she oversees had been working for months on a report about hurdles members of the cannabis industry face. That audit, released Friday, strongly suggested that the state’s regulations on recreational cannabis businesses have been overly onerous.

Fagan said Friday that she ordered the audit two years ago “at the request of numerous industry professionals in Oregon.”

“Auditors followed their standard practice and periodically updated me about the audit,” she said. “In all the agency’s audits, auditors speak with dozens of sources, never relying on any one individual source and ultimately they decide the scope of any audit and its findings.”

Records show Fagan suggested in December that her auditing staff speak with Rosa Cazares, one of two owners of La Mota, for whom the secretary would later agree to perform work. Auditors eventually did speak with Cazares.

Fagan alerted staff on Feb. 15 that she would be recusing herself from the audit. Her contract with Veriede Holding took effect five days later, the Secretary of State’s Office has said. By that point, the audit was nearly complete — so much so that the Oregon Liquor and Cannabis Commission had already had a chance to issue aninitial response.

Shemia Fagan at a podium
Kristyna Wentz-Graff
Secretary of State Shemia Fagan gives her acceptance speech after winning the race for Oregon's secretary of state, Nov. 3, 2020. Fagan revealed this week she has taken on outside employment as a consultant for an Oregon cannabis company.

Fagan’s office has said she consulted with the Oregon Government Ethics Commission about taking on the outside work, and that the body did not alert her to a conflict of interest in the arrangement during phone conversations. Fagan did not seek a written opinion on the specific contract she was planning to sign.

Fagan told staff in her Feb. 15 email that she didn’t see any conflict in the arrangement “because any action required [as a result of the audit] would be taken by the legislature or OLCC and any benefit could flow to all cannabis companies in Oregon, not this specific company. However, because my mission is to build trust with Oregonians. I am imposing the most restrictive limitation on myself…”

In her statement Friday, Fagan said she recused herself “as soon as I contemplated the contract and learned that recusal was an option (it is not for legislators) ...”

The audit released Friday contained recommendations about potential changes to Oregon’s recreational marijuana industry — both for the OLCC and for Gov. Tina Kotek and members of the Legislature.

Kotek on Friday said the entire situation deserved immediate scrutiny.

“It’s critical that Oregonians trust their government,” the governor said in a statement. “That is why I am urging the Oregon Government Ethics Commission to immediately investigate this situation. Additionally, I am requesting that the Oregon Department of Justice examine the Secretary of State’s recently released audit of the Oregon Liquor and Cannabis Commission (OLCC) and its cannabis program.”

The top two Democrats in the Legislature made clear they also were taking the secretary’s situation seriously.

“These allegations are bad, it’s difficult to see them any other way,” said House Speaker Dan Rayfield, D-Corvallis. “It has obviously impacted the credibility of the secretary of state’s audits.”

Senate President Rob Wagner, D-Lake Oswego, has “significant concerns” about Fagan’s actions based on news coverage, spokesman Connor Radnovich said.

“He knows that Oregonians expect transparency from their elected officials, and that they deserve to know if there is a conflict between an elected official’s public service and any other job or economic opportunity,” Radnovich said in an email.

Wagner has fewer concerns about the audit, Radnovich said. “The Legislative Assembly take audit recommendations very seriously because we know the independent, professional auditors who research and publish them care about Oregon state government working well.”

Like some other top Democrats, Wagner and Kotek received campaign contributions from Aaron Mitchell, one of La Mota’s owners. Mitchell also donated money to political action committees that support Democrats in the House and Senate.

Republicans, who had already been calling for an independent investigation of the OLCC and a new legislative committee that could launch its own investigation, were less restrained.

“She must resign,” Senate Minority Leader Tim Knopp, R-Bend, and House Minority Leader Vikki Breese-Iverson, R-Prineville, said in a joint statement. “This appears to be an ethics violation, and if it isn’t then Oregon’s ethics laws are broken.”

Fagan faces at least one complaint before the Oregon Government Ethics Commission. The secretary emphasized Friday the she had acted in the public interest in carrying out her duties.

“In my private employment, as a legislator and as Secretary of State,” she said, “I have held myself to the highest standard and treated the ethics guidelines as a floor, not a ceiling.”

Dirk VanderHart covers Oregon politics and government for KLCC. Before barging onto the radio in 2018, he spent more than a decade as a newspaper reporter—much of that time reporting on city government for the Portland Mercury. He’s also had stints covering chicanery in Southwest Missouri, the wilds of Ohio in Ohio, and all things Texas on Capitol Hill.
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