As the wealthiest governor in Florida history, Rick Scott took office as a political novice with a problem: how to maintain and disclose his wealth, yet avoid conflicts of interests.
Scott had two major solutions to insulate himself from the inevitable criticism about profiting from state actions during his term: He could report all his assets on his state financial disclosure form and let the public see everything, a sunshine-is-the-best defense, or he could set up a so-called “blind trust,” an I’m-in-the-dark-about-my-investments defense.
Scott chose the second option.
“I put everything in a blind trust,” the governor said this summer. “So I don’t know what’s in the blind trust.”
But rather than put the controversy to rest, Scott’s decisions raise questions about the accuracy and completeness of his financial disclosures as well as the governor’s role in managing his vast personal fortune.
The governor, for instance, does not disclose the entire value of assets that reside in different trust and partnership accounts and for which he’s listed in federal records as the “beneficial owner,” according to an extensive Miami Herald/Tampa Bay Times review of hundreds of federal and state documents filed in Florida, Washington, Connecticut, Texas, Nevada and Illinois. The documents also show:
- Information about Scott’s income and investments provided on state disclosure forms differ from financial information he furnished to the IRS and the Securities and Exchange Commission.
- The various Scott family investment trusts and partnerships often act in tandem with his blind trust and involve Scott’s long-time financial advisors — raising questions about how independent the trust is from the governor.
- Between 2009 and 2013, the income reported on the governor’s state financial disclosure and the income reported to the IRS differed each year, fluctuating as much as $41 million in a single year.
- Scott’s call for more transparency from his campaign opponent has not extended to all of the trusts and family partnerships from which he and his household have profited.
- Though he says he’s “blind” to his trust, he has signed off on transactions involving some of its assets in recent SEC reports.
- Taken together, the trail of documents and financial instruments indicate Scott’s net worth for 2013 could be far higher than the $132.7 million he reported.
The Herald/Times asked to be briefed by the governor’s tax and investment advisers but were denied an interview. Earlier this week, the newspapers then supplied detailed written questions, as well as copies of related documents, to the governor’s lawyers. General Counsel Pete Antonacci said they distributed the questions to the financial experts but were unable to provide a response by the end of the day on Friday.
For nearly 40 years, the Florida Constitution has required state elected officials to annually make a “full and public disclosure of financial interests [via] a sworn statement showing net worth and identifying each asset and liability in excess of $1,000.”
But Scott has disclosed only a portion of his assets, in part because of the new state blind trust law that he signed, which is now being challenged in court.
Adhering to sunshine-in-government laws have been a challenge for Scott, a political newcomer and health-industry savant who came straight from the private sector where he wasn’t used to such public scrutiny.
Under Scott, the new governor’s transition documents were destroyed for the first time in modern history. The governor’s staff encouraged the use of private email and cell phone accounts to avoid creating public-records trails. And Scott’s lawyers have changed the way public records are retained and handled by staffers, creating new barriers to transparency.
Scott’s tight-lipped approach has long been a hallmark, extending to his days when he headed the Columbia/HCA hospital chain and then a chain of 32 walk-in clinics he founded called Solantic. In repeated depositions, Scott would refuse to answer basic questions. On the campaign trail in 2010, Scott also refused to comment on depositions he gave, such as one in a Solantic case that he settled just before filing to run for office. Scott’s refusal to release the deposition became a major campaign issue in the GOP primary and the general election.
After Scott won office, Solantic continued to vex him.
Solantic was Scott’s pride — a healthcare delivery system with transparent pricing and the customer in mind. And it was his greatest source of wealth: $62 million of his $218 million net worth he reported for the year ending in 2009.
But there were questions about how Scott’s policies and regulatory agencies would affect Solantic. So Scott transferred the investment to the Frances Annette Scott Revocable Trust just before he assumed office in January 2011, leaving him with $14.3 million of Solantic stock, his 2010 financial disclosure shows.
Established in 1993, the trust is named after Scott’s wife. It’s called “revocable” because the person who contributes assets to the trust is allowed by law to “revoke” or withdraw the assets without the beneficiary’s consent. An irrevocable trust wouldn’t allow for such an arrangement and would mean the governor would no longer control the assets.
Federal documents submitted to the SEC in other transactions show the governor was the trust’s “beneficial owner” and therefore had a major say over its assets. Still, after Scott transferred the money to a trust to which he retained control, he said that he had nothing to do with Solantic any longer.
“I’m not involved in that company,” Scott said on March 29, 2011, while at the same time he huddled with his attorneys and helped negotiate the sale to a private-equity firm with which he had done business in the past. Two weeks later, he announced the pending sale.
He said at the time that he had sold it for less than $62 million.
SCOTT’S BLIND TRUST
On April 20, 2011, about seven days after news broke about the Solantic deal, Scott’s lawyers asked the Florida Commission on Ethics for an advisory opinion on setting up a blind trust. The letter said it would be “modeled on the model blind trust of the federal Office of Government Ethics.”
But, as the investigative Broward Bulldog publication reported earlier this year, there were key differences between the federal model and what became the state law — namely Scott’s blind trust uses a longtime business associate, partner and current financial manager for his wife’s investments. That arrangement isn’t considered “independent” or permissible for a blind trust in the federal system.
The letter to the ethics commission also outlined a few potential conflicts of interest that, Scott’s lawyers said, would be incidental. They ranged from natural-gas companies to a trash-hauling firm to at least one healthcare investment.
As he created the blind trust in 2011, Scott did not publicly disclose the specific assets it would hold. That information wasn’t publicly released until two years later — once the Republican-led Legislature created the new blind trust law.
The ethics commission, stocked with Scott appointees, signed off on the blind trust arrangements and legislation. But the commission’s former executive director, Phil Claypool, was critical of the blind-trust law.
“It’s a magic bag, a cloak of invisibility,” Claypool said, echoing open-government advocates who say full disclosure of politicians’ finances are the best way to discourage conflicts of interest.
The differences between Scott’s financial disclosures before and after the creation of the blind trust differ markedly.
The state disclosure document for 2010, called a Form 6, reflected a net worth of about $102.9 million and lists 84 individual assets and their values. But the 2011 state disclosure form lists only 14 assets because many were held by the newly created blind trust. The trust had an estimated value of $71.5 million, or 86 percent of his net worth of $82.7 million.
For 2012, Scott’s financial disclosure form indicated his net worth ticked up slightly to $83.6 million. He listed just 12 assets. The blind trust was the most valuable at $72.8 million.
For 2013, Scott reported that his fortunes rebounded and that his net worth was $132.7 million. But, amid the election year pressures and the lawsuit challenging the blind trust law, Scott established a new blind trust, and provided a more-extensive accounting of his individual assets, 100 in all. He also released — for the first time as governor — his tax returns 2010, 2011 and 2012.
Scott has yet to release his 2013 tax return and his office refused to say when he would do it.
At the same time Scott released his tax returns that he files jointly with his wife, Scott called on Democratic opponent Charlie Crist to do the same.
“I think Charlie Crist will follow our lead and disclose his and his wife’s tax returns for 2010, 2011 and 2012,” said Scott, who filed jointly with his wife Frances Ann Scott said. “I think he ought to do that right away so every citizen in the state can look at that and because transparency is good for everybody.”
A Crist spokesman accepted Scott’s challenge and called for more disclosure. But Crist’s wife, Carole Crist, has since refused to do it .
“It’s her decision,” Crist said, pointing out his tax and marital situation differs markedly from Scott’s.
The Crists file their taxes separately. Before their 2008 marriage, Carole Crist was independently wealthy from a family Halloween costume business. Crist’s disclosures show his trial-lawyer income has boosted his net worth to $1.3 million.
Unlike Scott, Crist has publicly disclosed his 2013 tax return. Like Scott, Crist drew fire for his disclosures because his consulting company, Charlie Crist LLC had a profit of $255,330 in 2013, yet Crist listed the company only as an asset worth $128,884.
The Scotts, married for more than 40 years, file jointly. But Scott reports his income separately to Floridians in his public disclosure forms every year. He reported more net income on his state disclosure forms in 2009 and 2010.
After assuming office, he reported more income to the IRS in 2011 and 2012 than he did on his state disclosures. Scott’s income swelled in 2011 with the sale of Solantic and Drives, LLC, an Illinois-based manufacturer of drive chains, which sold for $92 million. In 2008, the company reported Scott “had taken a majority ownership position” via a $60 million injection of cash.
With the obvious gains in income from the sale of Solantic and Drives, Scott and his wife reported a net income for 2011 of more than $67 million on their joint federal tax return. But on the financial disclosure form sent to the state, the governor reported a net income of less than $26 million.
Scott’s money has a major political dynamic. He spent $75.1 million of it in 2010 to win election as an unknown. And while he hasn’t spent his own money this year, he has told allies he’s ready to drop millions more.
Complicating Scott’s financial picture is the fact that for decades he has relied on a complex system that divided his investments among at least eight different trusts and partnerships. The governor’s blind trust is only one of them. Documents show he’s listed as the “beneficial owner” of the stock held by several of the other trusts, including the one in his wife’s name.
The SEC requires that anyone who profits from a security is considered a beneficial owner and any beneficial owner who holds more than 10 percent of a company’s stock must fill out a report to the SEC.
“The SEC wants this information so they know who is considered the owner, who has the ability to control the shares,’’ said Michael Ryngaert, a professor of finance and chairman of the Warrington College of Business Administration at the University of Florida.
Some records exist about the trusts and corporations. But the entities are privately held. A request to allow the Herald/Times have copies of them was denied.
At least 28 companies report that Richard L. Scott and his family of trusts and companies have significant stock ownership.
Records filed with the SEC from four of these companies — Argan Inc., NTS Inc., Wireless Telecom Group, and Quepasa — report that Scott is the beneficial owner of the stock his trusts hold, a value of about $54.8 million as of December 2013. The governor reported controlling only $18.1 million for those stocks on on his Florida financial disclosure form.
A big potential discrepancy in Scott’s financial reporting involves a Maryland-based holding company, Argan Inc. Between 2011 and 2013, the documents show, Scott’s $6.3 million investment increased more than five-fold.
According to SEC documents, Scott reported on Feb. 15, 2011, that he was the “beneficial owner” of 1.6 million shares of Argan stock that was divided among three trusts.
Under state law, the value of the stock must be reported on the last day it was held. Argan was sold for $27.56 per share in 2013, making Scott’s shares worth $36.4 million. Scott disclosed owning $14.7 million.
The transactions weren’t blind to Scott, anyway. Because the activity involved so much stock, it triggered SEC reporting requirements that required the company to disclose who the beneficial owner of the stock was. The Form 4 filed by Argan with the SEC bore “Richard L. Scott’s” electronic signature, indicating the governor technically signed off on it.
Another example of the governor’s inconsistent disclosures involves a company known as Xfone, which later changed its name to NTS. Scott reported to the SEC in 2011 that he owned 5 million shares of the Nevada-based company but in merger documents released this year, the Scott household’s ownership is divided into three trust accounts: the Scott Blind Trust, Scott Family Partnership and Scott Revocable Trust.
Scott’s longtime investment advisor, Alan L. Bazaar of New York, has voting authority over all the shares held by Scott’s blind trust but the governor remains the beneficiary. All together, Scott and his partners controlled 11.5 percent of the company by the end of 2013.
According to NTS, Scott’s ownership in the company is valued at $10 million. Scott’s financial disclosure form, filed in June, reported only $2.4 millionof those assets, leaving out the portion held by the family trusts.
Another company, Wireless Telecom, listed Scott in June as the largest owner of 1.8 million of the company’s outstanding shares. Based on the stock’s value at the end of 2013, Scott’s investment in the company would have been worth $3.9 million. But the governor’s financial disclosure reports only $944,383.
Scott’s assets have also been reported differently regarding his holding in an Internet-based company once called Quepasa and renamed to MeetMe. At the end of 2013, Scott’s total investment in MeetMe was worth $4.5 million. But the governor did not list the company as an asset, but only reported taxable interest of $428,752 on his state disclosure.
CONFLICTS AND DISCLOSURES
Scott’s decision this spring to temporarily disclose the objects of his blind trust led to renewed scrutiny about the overlapping nature of his role as private investor and public servant.
- ▪ Sabal Trail Transmission. This controversial 474-mile natural gas pipeline of Florida Power & Light, a Scott campaign contributor, is being built by Spectra Energy, in which Scott had a $53,430 investment he reported as of Dec. 31, Broward Bulldog first reported. Scott also owns $55,385 in another Spectra asset called DCP Midstream Partners. Scott signed legislation in 2013 that would speed up construction of the pipeline, which was approved by the Public Service Commission, whose members Scott appoints.
- ▪ General Electric. Scott has $246,400 invested in two energy firms — Crestwood Midstream Partners LP and Crestwood Equity Partners LP — that do business with this division of GE called General Energy Financial Services. Last week, Scott hailed news of a GE Oil & Gas energy facility to be built in Jacksonville, with $5.4 million in state financial incentives approved under Scott.
- ▪ Schlumberger Ltd. Scott’s $135,000 investment in this oil-services company led to criticisms from environmentalists who opposed an oil-drilling deal in the governor’s home county of Collier. Schlumberger helped apply for a Department of Environmental Protection permit for oil driller Dan. A. Hughes on land owned by the powerful Collier family, who are Scott contributors. DEP fined and sued Hughes over its extraction procedures. And Scott’s most-recent disclosures
- ▪ 21st Century Oncology. In April, Scott toured the center in Fort Myers and promoted a plan he was pushing in the Legislature to provide $20 million in grants for cancer-treatment centers like this. Meanwhile, Scott at the start of this year held $210,928 in Vestar Executives V, an investment fund that, Scott’s lawyers told the ethics commission in April 2011, had a controlling interest in 21st Century Oncology’s parent company, Radiation Therapy Services.
In all of the cases, Scott has insulated himself from any claims and criticisms of a conflict of interest by saying the investment decisions have all been made without his knowledge — a talking point that appeared on his campaign website when he disclosed his taxes and opened his blind trust.
“This blind trust was established to protect the people of Florida from having an elected official make decisions in his or her own self-interest,” the online statement said. “The trust ensures that the Governor has no knowledge or control over his assets while governing and avoids even the appearance of any conflict of interest.”
Gov. Rick Scott’s taxes, state financial disclosures
2009: Scott reported $1,420,257 more net income on his state disclosure forms than he reported to the IRS.
2010: Scott reported $4,007,451 more net income on his state disclosure forms than he reported to the IRS.
2011: In this year, when the Solantic sale happened and greatly swelled the family’s bottom line, Scott reported $41,891,063 more in net income to the IRS than he disclosed on his state forms.
2012: Scott reported $4,195,586 more in net income to the IRS than he reported on his state forms.
Source: Florida Commission on Ethics, Herald/Times research
Gov. Rick Scott’s trusts, partnerships
Based on a review of state and federal records, the governor’s assets reside in at least eight of the following publicly disclosed entities:
- Richard L. Scott blind trust
- Columbia Collier Management LLC
- Richard L. Scott Investments LLC
- Richard and Frances A. Scott Family Partnership
- Richard L. Scott Revocable Trust
- Scott Family Florida Partnership Trust
- F. Annette Scott Revocable Trust
- Richard L. Scott Florida Trust
Source: IRS, Securities and Exchange Commission, Herald/Times research