If you have a $62 million investment, representing the biggest single chunk of your $218 million in wealth, and you put it in a trust under your wife's name, does that mean you're no longer involved in the company?
Florida Gov. Rick Scott says it does.
Scott has aggressively pursued policies like testing state workers and welfare recipients for drugs, switching Medicaid patients to private HMOs and shrinking public health clinics. All these changes could benefit that $62 million investment, but Scott sees no legal conflict between his public role and private investments.
And, experts say, under Florida law he is correct.
A few days before he took office in January, Scott moved his shares in Solantic Corp., a chain of 32 urgent care centers, to the Frances Annette Scott Revocable Trust. Scott co-founded Solantic in 2001 and was involved in its operation until last year. His wife's trust now holds enough stock in the private company to control it.
Solantic's walk-in clinics, clustered in mid-Florida and along the east coast, handle everything from stitches and sprains to school physicals and immunizations. Charges are posted like fast-food prices and there's a three-day feel-better guarantee — if you're not feeling better after three days, your follow-up visit is free. The company partners with hospitals in several markets, including Shands HealthCare in Gainesville.
By transferring the Solantic shares to his wife's trust, which is represented on the Solantic board by one of his former business associates, Scott maintains he is free from any possible conflicts.
"As I've told you, I'm not involved in that company," he said this week when asked why he didn't sell his shares.
Unless Solantic does business directly with the governor's office, there are no conflicts, says Tallahassee lawyer Mark Herron, an expert on Florida's ethics laws. Most states, as well as the federal government, forbid the kind of share shuffle Scott used.
But in Florida, nothing bars Scott from promoting policies that could benefit a company from which his family benefits financially.
Scott supports bills that would move nearly 3 million Medicaid recipients into private managed care plans. Solantic accepts traditional Medicaid at only one location but it contracts chainwide with several private Medicaid plans. If passed, the law would dramatically increase Solantic's potential patient base.
Would the company seek contracts with new Medicaid HMOs? "We don't have enough information at this time," said chief executive Karen Bowling.
Scott favors legislation that would require all adult welfare recipients — about 58,000 people — to have drug tests at their own expense. About 100,000 more would be affected by his plan to do random drug screenings of all state employees at a maximum cost of $3.5 million to the state. Bowling said Solantic would not bid on that job as long as Scott's shares remain in the trust.
"We don't have centers in Tallahassee and don't have plans to open one," she said. "I would think most of the state volume would be there."
Scott's budget slashes funding to public health departments, which handle checkups, immunizations and travel shots for many people who don't have private physicians. Solantic, which charges $50 for a basic physical and recently started catering to international travelers, could pick up some of this business.
Bowling said physicals and shots are a very small percent of Solantic's revenues; more than half its business is nights, weekends and holidays when most other providers (including health departments) are closed.
Scott appoints the heads of the Agency for Health Care Administration and Department of Health, which license, inspect and investigate complaints against providers such as Solantic. Herron, the ethics lawyer, said it's legal.
"It's counter intuitive to our understanding of how the world works, but that's the law, strictly construed," he said.
Bowling dismissed worries that state regulators would be influenced by Scott, saying both inspections and complaints are handled under a formal process, with inspection reports publicly available. In 60 inspections at Solantic clinics since 2005, Bowling said, the state found only seven deficiencies, all of which were quickly corrected.
Solantic has built a successful business without state help, relying on patients who have commercial insurance, Medicare or cash. Medicaid accounts for only 3.1 percent of all patient visits. (The company declined to reveal revenues but said it plans to open eight new locations this year.)
Payments by state agencies to the company have been limited mostly to payments from the health department for disability determinations. Solantic's return: $14 per patient.
Bowling said the disability work is subcontracted through a company that handles workers' compensation cases. "It's the smallest percentage of our revenues," she said.
But as Solantic has grown, so too have the number of state agencies using its services. And in the urgent care business, high volume, along with low overhead, is crucial to profits.
Bowling said Solantic billed state agencies $110,657 for services in 2010 and $20,061 so far in 2011.
Scott worked with Bowling when he was chief executive of the Columbia/HCA hospital chain and she was a marketing executive there. In 1997, Scott was forced out amid a federal billing fraud investigation that resulted in the company paying a $1.7 billion penalty. Scott, who left with $10 million in severance and $300 million worth of stock and options, was never charged with any wrongdoing.
Four years later, Scott used part of that wealth to start Solantic with Bowling. Scott was active in the company and on its board until January 2010, when he began his run for governor.
Charles R. Evans, a retired HCA executive who worked with Scott, now represents Scott's wife's trust. He also is chairman of the Solantic board.
Said Bowling, "I have not discussed Solantic with Gov. Scott or his wife since he became governor."
Scott's ownership of Solantic, particularly his refusal to release depositions taken in a lawsuit involving the company, were heated issues during his gubernatorial campaign. But apparently it wasn't until after his election that Scott began tackling the question of how he was going to handle his biggest investment — and the one with the greatest potential for conflict — while in office.
In December, Scott's lawyers consulted informally on three occasions with representatives of the Florida Commission on Ethics about applicable laws and how public officials have dealt with their investments in the past, according to the commission. Philip Claypool, executive director and general counsel of the commission, was present at two of those meetings, one of which took place in his mother's living room during an unrelated trip Claypool made to Washington, D.C., on Dec. 10.
Claypool described the meetings as "attorney-to-attorney discussions," resulting in no public record. "Scott's lawyer (James Fuller from Williams and Connolly) had a stack of sheets of legal paper that apparently contained lists and lists of his investments, which he referred to occasionally," Claypool said of the meeting at his mother's. "I'm sure Solantic came up generally."
Scott's lawyers did not request a formal advisory opinion, which would have triggered a vetting of potential conflicts by the eight-member ethics commission and resulted in a recommendation that would be binding on Scott. Instead, Claypool and his staff only made suggestions.
"They asked us about precedents and basically there has not been much in the way of precedent," Claypool said. "That's been the extent of our interaction to date."
Florida's ethics commission is not allowed to initiate investigations, but it can respond if a citizen files a complaint.
"I can't tell you why or whether what Gov. Scott did was legal; only the ethics commission could make that determination," Claypool said. "So far he appears to be relying on the advice of his attorneys to comply with the law."
Kenneth Gross, a Washington lawyer and a nationally recognized expert on ethics laws, said Florida is one of the few states where a spouse's investments don't "tag the public official with conflict."
"It's an area that's crying out for attention," he said.
Gross said Scott retains interest in Solantic despite putting it in his wife's revocable trust, where it can be withdrawn at will. He said Scott should have sold his interest in Solantic.
"He may not be in on the day-to-day running of the company and that's nice," Gross said. "But if he has ownership interest by virtue of a revocable trust, he maintains an interest in the welfare of the company."
By continuing to hold it, Scott shows "he thinks it's a viable, thriving business that will continue to make money for himself or his spouse," Gross said.
Brian Burgess, the governor's spokesman, said it's not simple to sell stock in a company that's not publicly traded. "It's not like going onto E-trade and pushing a button," he said.
Scott was well aware that Solantic was unique among his assets in that it was the only one, Burgess said, which was directly regulated by the state. By putting it in Scott's wife's trust, the investment is "publicly visible," he said.
"All of Florida knows where Solantic is parked and how it's being treated right now," Burgess said. "He expects taxpayers to hold him accountable and do the right thing."
Mike Fasano, the Republican state senator from Pasco County, recently refiled a bill he has proposed for years that would require the governor and certain other elected officials to put their investments in a blind trust. He said Scott should have chosen that option for his Solantic shares.
Alex Sink, Florida's former chief financial officer who lost the governor's race to Scott, was heavily criticized for setting up what she called a blind trust, but she knew which assets were in it. And she used her husband's law partner as administrator. Fasano's bill would establish guidelines for blind trusts similar to federal standards.
"A true blind trust is to turn everything over to an independent trustee, without knowing whether the assets have been sold or where the dollars have been invested," Fasano said. "With all great respect to the governor, turning it over to your wife is nice, but it is your wife."