Gov. Rick Scott’s purportedly “blind” trust isn’t supposed to tell him or anyone else what it does with his money. He’s not allowed to direct where it goes. But somehow Scott’s trust and his wife both invested in the parent company of a high-speed passenger rail firm whose projects the governor publicly supports.
Both also invested in a Michigan plastics firm that has made parts for the passenger train. The sale of that company yielded $550 million in windfalls to the Scotts.
And both invested, although separately, in a total of two dozen hedge funds registered in the Cayman Islands, a place often linked to tax avoidance.
The governor, who’s running for the U.S. Senate, wants voters to believe his “blind” trust and Ann Scott made these investments by coincidence. But that’s a heap of coincidence.
It’s also a lot more than Floridians would have known about his business dealings if he weren’t trying to defeat Democratic Senator Bill Nelson. Federal filing requirements include not just the details of a candidate’s holdings — mostly hidden until now by Scott’s “blind” trust — but also those of his spouse.
The Miami Herald-Tampa Bay Times capital bureau and the Florida Bulldog dug out the provocative details. What they prove is that Florida’s “blind trust” law is a sham and the state’s vaunted financial disclosure requirements are easily evaded.
The law, enacted by a pliant Legislature in 2013, is weaker than federal law in a dozen ways. That it covers the governor’s tracks is not its only defect. It also allows his longtime investment adviser to be his trustee. And there are no penalties for any violation.
A truly “blind” trust would be in an independent financial institution with which the officeholder has not had a relationship.
To be clear, there is no indication that the Scotts’ Cayman investments — at least $25 million and as high as $62 million, according to the federal disclosure — were intended to avoid taxes. But considering the Caymans’ reputation for that service, one can understand why the Scotts might not have wanted the people of Florida to know about it.
Here’s how Lauren Schenone, the spokesperson for Scott’s campaign, responded to the Herald-Times articles:
As to the rail-linked venture:
“The governor’s blind trust is managed by an independent third party to shield his investments from his direct control and to avoid any potential conflicts of interest. As such, the governor has no control of what is bought or sold in the blind trust.”
As to the Caymans:
“The governor had no role in selecting that investment. The blind trust is managed by an independent financial professional who decides what assets are bought, sold or changed.”
Neither of those statements addressed whether the governor or his wife knew where the trust was investing his money.
Conflict of interest is the issue raised by the governor’s financial investments and open support for All Aboard Florida. Operating under the aegis of Florida East Coast Industries, it’s the company that runs the Brightline passenger trains between West Palm Beach and Miami, and is proposing to extend the service to Orlando and from there to Tampa. Scott has supported the company at every stage and has pledged at least $200 million in state money for a rail station at the Orlando airport.
The Rick Scott and Ann Scott investments, totaling at least $3 million, are in a credit fund run by Fortress Investment Group, the parent of Florida East Coast Industries. As such, the Scott money Is not a direct investment in the rail project. But it makes the Scotts partners, in effect, with others who have a stake.
One of Scott’s first acts as governor, seven years ago, was to cancel a federally funded $2.4 billion true high-speed train from Orlando to Tampa. It was part of the stimulus program that Congress enacted at President Barack Obama’s request to recover from the 2008 recession.
Scott said the bullet train carried “an extremely high risk of overspending taxpayer dollars with no guarantees of economic growth.” The rail money Florida rejected went elsewhere. He was reminded of that fact on social media last week. It happened after he complained that Florida doesn’t get its fair share of federal transportation dollars.
Scott rationalizes that All Aboard Florida is a deserving project because it’s privately funded. But much of its financing comes from bonds exempt from Florida taxes, which have to be approved by a state agency. The tax exemption is as much a public subsidy as if it were paid directly from the treasury.
According to the newspapers, All Aboard Florida awarded a contract to the German conglomerate Siemens to build railroad cars for the Orlando-to-Miami route. Siemens imports some parts from a Chinese firm with indirect links to the Scotts. They were major owners in a Michigan plastics company that in 2014 formed a joint venture with the Chinese company. When the firm was sold to a Japanese conglomerate last year, the Scotts got more than $550 million from the sale. A former executive of the plastics company told the newspapers that it is not currently making parts for railroad cars.
The Herald-Times also reported that All Aboard Florida and its parent gave $212,750 to Scott’s 2010 campaign and his inauguration. He cancelled the federally funded rail project a month later. The letter rejecting the federal money was drafted by a transition team member who later worked for another subsidiary of Florida East Coast Industries and in May 2012 became Scott’s chief of staff.
Neither the governor nor Schenone would answer whether the governor’s public support for All Aboard Florida influenced Ann Scott’s decision to invest in the Fortress Investment Group.
Scott replied to the Herald-Times expose with a letter pleading he was poor before he became rich, and asserting that the federal project he killed would have ended up “costing families in our state.”
“I will not apologize for having success in business,” he said.
Since he raised the subject, it’s fair game. The giant hole in his rags-to-riches story is the $1.7 billion that his hospital company, Columbia/HCA, was fined for defrauding Medicare and Medicaid. Scott left the company with a golden parachute four months before the federal inquiry became public. He has claimed he had not known about its systematic overbilling and other frauds.
Throughout his two terms, Scott has frustrated the intent of the Florida Constitution’s “full and public disclosure” requirement. On occasion, he has briefly disclosed the trust’s assets long enough to appear to comply with disclosure and to persuade the courts to dismiss litigation over the issue. He has always chosen the alternative disclosure that allows him to withhold his income tax forms and submit a statement of assets instead. In one of those cases, though, Judge Brad Thomas of the First District Court of Appeal warned that the law “may likely be incompatible” with the Constitution.
Gov. Reubin Askew, the father of Florida’s financial disclosure code, intended ii to discourage conflicts of interest. The blind trust law covers them up. It should be repealed. Better to let everyone know where the money is than to hide it in a shell game.
