Gov. Phil Scott lays out the sale of his construction company.
Republican Gov. Phil Scott held a news conference Friday morning aimed at explaining the sale of his ownership stake in DuBois Construction. He outlined the steps his administration will take to ensure transparency and avoid ethical conflicts. But in the process, he all but acknowledged that the terms of the sale are in violation of the state’s Executive Code of Ethics.
The relevant portion of the code prohibits any “full-time appointee” from being “financially interested, directly or indirectly, in any private entity or private interest that is subject to the supervision of his or her respective department or agency.”
DuBois Construction is a frequent bidder on state construction projects. As long as Scott is governor, DuBois is “subject to the supervision” of his administration and his chosen officials.
On December 30, Scott sold his share in DuBois Construction to business partner (and cousin) Don DuBois for $2.5 million. There was no down payment; instead, Scott himself is financing a 15-year loan at 3 percent interest. The initial payments, for an unspecified period, will be interest only.
During the press conference, Vermont Public Radio’s Peter Hirschfeld asked the governor if he continues to have a financial interest in DuBois Construction.
Scott replied, “I do not have a financial — uh, I don’t have anything to do with the management —”
Hirschfeld interrupted: “It’s not about management. Do you have a financial interest in DuBois Construction?”
“Well, they will be paying me as they would any financial institution,” Scott replied.
Hirschfeld then read aloud the “financially interested” portion of the executive code and asked if the sale arrangement passed muster.
“I believe that it does,” Scott asserted.
Later on, Hirschfeld put the question more directly: “Just to be crystal clear,” he said, “you are acknowledging that you do retain a financial interest in DuBois Construction?”
“DuBois Construction owes me money,” Scott replied. “Yes, I do.”
Just to be crystal clear, the Executive Code of Ethics was promulgated by Scott’s predecessor, Peter Shumlin. It does not have the force of law. And it applies to “appointees,” not elected officials. There’s a perfectly valid argument that the sale does not violate the letter of the code.
That said, one would expect the state’s chief executive to set an example and abide by the code, especially given Scott’s oft-repeated dedication to transparency and ethics in state government.
To be fair, Scott and DuBois were between a rock and a hard place. The business is worth $5 million, but there’s virtually no cash. The value is in “equipment, buildings and land,” Scott said. “For the business to write me a check for $2.5 million would require liquidation of the business.”
“Some would ask why not bank financing?” he continued. “When you’re bidding for any work, there’s typically a performance bond that is issued. You have this bonding capacity so that you will perform the contract.” If a bank had financed Scott’s sale, it would substantially impair DuBois’ ability to gain bonding capacity for major projects. Which would make it almost impossible to stay in business.
It’s a tough spot, but still: The bulk of Scott’s net worth is now tied up in the 15-year loan. His financial security depends on the success of DuBois Construction, which depends in part on winning state contracts.
Scott and his legal counsel Jaye Pershing Johnson outlined the rigorous steps that will be taken to avoid ethical conflict. Scott promised strict adherence to Bulletin 3.5, “the rules which apply to state contracting,” said Johnson. “The intent is to guard against favoritism and fraud. It ensures a level playing field.”
Scott added, “For enhanced accountability, I have directed the secretary of administration to order strict adherence to Bulletin 3.5. I’m committed to transparency.”
Given Scott’s squeaky-clean image, he is unlikely to pay a political price for his ongoing entanglement with DuBois. Still, as one Statehouse observer put it, “Can you imagine the reaction if Shumlin had tried something like this?”