Fagan Apparently Did No Consulting Work Before La Mota and Did Not Seek Written Ethics Commission Advice

Fagan’s moonlighting as a consultant for La Mota’s owners is made even more peculiar by three oddities.

THE DECIDER: Oregon Secretary of State Shemia Fagan in April of 2022. (Brian Brose)

On April 27, Secretary of State Shemia Fagan acknowledged in response to questions from WW that she has been a paid consultant since February for Veriede Holding LLC, an affiliate of the embattled cannabis dispensary chain La Mota.

The revelation is striking for several reasons.

First, Fagan oversees the Oregon Audits Division, which scrutinizes state agencies. On April 28, the division is releasing the results of an audit of the Oregon Liquor and Cannabis Commission, which has issued the owners of the La Mota chain, Rosa Cazares and Aaron Mitchell, more than 50 licenses.

Documents show Fagan recused herself internally from the audit Feb. 15, telling subordinates in an email: “I will soon be consulting for a company involved in the cannabis industry in multiple states.”

Although legal in certain circumstances, it is highly unusual for a statewide elected official to moonlight. Elected officials do sometimes recuse themselves from matters; however, it is usually because their present duties would conflict with some action they took or interest they represented in the past rather than because they’ve been presented with a new opportunity to make money. In effect, Fagan declined to perform one of the central duties of her office, overseeing the Audits Division, because of a new opportunity to make outside income.

One way of looking at the result: The politician to whom state’s auditors report put the interests of La Mota’s owners ahead of the interests of the people she was elected to serve.

Former Oregon Secretary of State Phil Keisling, who held the position between 1991 and 1999, says he’s troubled by the actions WW has reported. The job, he says, “requires not only the highest levels of ethical standards but also the credible appearance of it. When that gets clouded, it runs the risk of undermining the good, brave work of staff.

“What appears to be the case,” he adds, “is that some basic principles of due diligence as well as full public disclosure about relevant information were not as carefully followed as I think most Oregonians would expect them to be.”

Second, the people Fagan has chosen to work for are coming under increased scrutiny.

WW reported in a March 29 cover story, and in a series of follow-up stories since, that the Internal Revenue Service and the Oregon Department of Revenue have in recent years issued more than $7 million in tax liens against Cazares, Mitchell and the companies they control. The couple and their companies have also been named in 30 lawsuits in Oregon circuit courts, many alleging nonpayment of bills to vendors. And all of it took place as the couple climbed the ladder of political influence and contributed more than $200,000 to top Democrats, including Fagan and Gov. Tina Kotek.

Since then, the political training academy Emerge Oregon has kicked Cazares off its board of directors. On April 26, the city of Portland removed Cazares from its Cannabis Policy Oversight Team. Two Oregon elected officials have pledged to accept no further campaign contributions from Cazares and Mitchell.

The combination of those two factors merits attention. But Fagan’s moonlighting as a consultant for La Mota’s owners is made more peculiar by three oddities.

1. It’s standard practice for public officials considering outside employment or faced with potential conflicts of interest to seek guidance in writing from the Oregon Government Ethics Commission. Fagan did not.

In September 2022, for example, Metro President Lynn Peterson asked the agency in what scenarios it would be appropriate to mention a new book she had written on transportation policy—because using her official position to promote sales could violate ethics laws. In April 2022, Sen. Sara Gelser Blouin (D-Corvallis) sought guidance on whether her appointment as co-chair of the Special Joint Committee on Gambling Regulation created a conflict of interest given that she holds shares in a family company that provides technology to casinos. Both officials received written advice that became public at Ethics Commission meetings.

Yet Fagan, by her own account and that of OGEC director Ron Bersin, only spoke on the phone about the Veriede Holding LLC contract with an unnamed commission staffer. She never asked in writing for advice. (No notes are available from the call. Fagan says she spoke three times with the commission; Bersin says the staffer cannot recall how many calls took place.)

Emails provided by the Secretary of State’s Office show that after Fagan’s call to an Ethics Commission investigator, that investigator emailed Fagan on Feb. 9 to follow up.

“Should you wish to request advice or an opinion specific to you and your situation, we would be happy to provide one. We would just need a detailed description of the circumstances (the contract you are developing and the private employment activities you would be engaging in),” the commissioner staffer wrote. “Please note, your request for an opinion or letter of advice and the Commission’s response would be public record.”

Fagan responded five days later: “Thanks for the follow-up discussion today and clarity on conflicts of interest. I’ve appreciated your guidance and answers to my questions.” She did not submit a letter asking for formal advice.

The Oregon Department of Justice did not immediately respond to WW’s questions about whether Fagan had sought legal advice, and neither Fagan nor her office immediately responded to a similar question. (Fagan did mention in an internal Feb. 20 email to colleagues that she had communicated with the DOJ about posting a statement on the SOS website about her recusal.)

2. Public officials are required to file annual economic statements that disclose any income generated from outside their elected position.

None of the three reports Fagan has filled out since taking office note any outside income or employment, except for residual income from her former employer, HKM Employment Attorneys.

That means Fagan took no external work in her two and a half years in office. That is, until she agreed to work for Mitchell and Cazares in February, long after her audit team began scrutinizing the OLCC. Fagan has not yet provided a copy of her consulting contract or her compensation. It’s unclear why she took on the La Mota affiliate as a client. (Her spokesman notes that Fagan is also teaching a class at Willamette University College of Law.)

3. As a lawmaker and secretary of state, Fagan has often spoken of the need for accountability and transparency, but she’s been less than transparent about her consulting business.

“My mission is to build trust between the people of Oregon and their state government so that public services can make a positive difference in people’s everyday lives,” Fagan said in recent testimony to the Senate Committee on Rules.

And yet the consulting business Fagan established to do work for the affiliate of La Mota is invisible—absent from the Corporation Division business registry where most Oregon businesses record their existence. Such registration provides an important level of transparency, showing who is associated with any particular business, when it was founded, and where it is located.

Records show that Fagan has previously registered four different businesses with the Corporation Division. All are now inactive. Each of those businesses—three legal firms and one candidate school—list only one person associated with them: Fagan.

That makes her failure to register her new consulting firm with the Corporation Division—which she, as secretary of state oversees—puzzling.

Fagan spokesman Ben Morris says Fagan is an independent contractor for Veriede, not currently helping it with legal work and only doing consulting work in matters outside of Oregon. Meanwhile, Fagan is working to get readmitted to the Oregon State Bar; she allowed her law license to lapse when she took office.

Cazares and Mitchell have in recent years attempted to expand into at least two states: New Mexico and Michigan. They have two pending applications in New Mexico and a third license for a dispensary that’s been approved. It’s unclear if they’ve obtained any licenses in Michigan, but a report by the state’s Marijuana Regulatory Agency in April 2022 shows that Veriede Holding LLC was denied a retail application because “the applicant failed to disclose the sources and total amount of capitalization to operate and maintain a proposed marijuana facility,” among other application deficiencies.

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