Oregon Secretary of State Shemia Fagan ends contract at center of ethics questions

Oregon Secretary of State Shemia Fagan announced Monday she has terminated her contract with private marijuana company Veriede Holding — a contract that will be the focus of an ethics investigation demanded by Gov. Tina Kotek.

Fagan in a statement said she owed the people of Oregon an apology and welcomed any investigations.

"I look forward to the findings of the Oregon Government Ethics Commission because they will confirm that I followed Oregon ethics rules and laws," she said in the statement. "I am also eager for the Department of Justice’s review of the OLCC audit because the review will verify that hard-working auditors in the Oregon Audits Division conducted their work with independence and integrity."

New: Oregon Secretary of State Shemia Fagan resigns amid cannabis controversy

Top Republicans called for Fagan's resignation Thursday.

“She must resign,” Senate Republican Leader Tim Knopp and House Republican Leader Vikki Breese-Iverson said in a joint statement. “This appears to be an ethics violation, and if it isn’t, then Oregon’s ethics laws are broken. An elected official cannot take funds for personal use from someone they regulate.

Late Friday, Kotek called for the Oregon Government Ethics Commission to investigate Fagan's actions and for the Department of Justice to take a look at the newly released cannabis audit.

“It’s critical that Oregonians trust their government,” Kotek said in a statement. “That is why I am urging the Oregon Government Ethics Commission to immediately investigate this situation. Additionally, I am requesting that the Oregon Department of Justice examine the Secretary of State’s recently released audit of the Oregon Liquor and Cannabis Commission (OLCC) and its cannabis program.”

Details of the contract

Fagan on Monday released the contract she signed with Veriede Holding.

According to the contract, Fagan was receiving $10,000 a month and would have received $30,000 in bonuses for "successful acquisition of license(s)" Veriede and its affiliates obtained outside of Oregon or New Mexico.

Further specifics about the consulting work was not clear from the released contract but Fagan in a short news conference Monday said her consulting work involved "research," compiling information about the laws and regulations in the industry in other states and territories.

Fagan's Oregon state bar status is inactive but Fagan said she is actively in the process of becoming an active bar member again. If the contract had continued outside of its early stage and once she was an active member of the bar, she would have performed legal analysis, she said.

Veriede never asked her to do anything other than research and did not expect her to use her relationships as secretary of state to benefit their business, she said.

Fagan admitted, however, that she had conversations "at lunch and stuff" about cannabis including at least one with Connecticut's lieutenant governor Susan Bysiewicz about who a cannabis company should talk to "if they wanted to get a lay of the land."

Byseiwicz's office sent an emailed statement to the Statesman Journal in response to questions surrounding the conversation.

"It was a one-time communication by phone call," according to the statement. "Approximately three weeks ago, the lieutenant governor received a phone call from Shemia Fagan inquiring about Connecticut's cannabis license process for a client Fagan had as part of her consulting business. The lieutenant governor pointed Fagan to public information of the appropriate state agency contact to learn Connecticut's lottery process. There was no further communication beyond the one phone call."

Campaign contributions

Willamette Week first reported Thursday that Fagan had entered a contract with Veriede Holding in February. The Oregon company is an affiliate of La Mota, a cannabis chain whose owners, Rosa Sazares and Aaron Mitchell have reportedly failed to pay millions of dollars in cannabis and federal income taxes and faced workplace complaints.

Fagan said she was not aware of the "troubling allegations" about the owners before signing the contract and announced she would be redirecting remaining political contributions made by La Mota's owners. Fagan said she would empty her PAC and donate its entire balance to the Oregon Humane Society.

Campaign records show Mitchell in 2020 and 2021 donated $30,000 to the Committee to Elect Shemia Fagan. The account currently has bout $16,000 in it.

Sazares and Mitchell have become major Democratic funders.

According to Fagan, she met the owners of La Mota at a breakfast when she first began her campaign for secretary of state. She and the couple both have children around the same age and the two have met socially since the initial 2020 meeting, she said.

She became a consultant, she said, after a social catch-up in February where she mentioned she was excited to teach a class at Willamette University for supplemental income and Sazares mentioned the company was looking for contractors as they explored expanding outside the state.

Salary 'isn't enough'

In response to criticism surrounding Fagan's decision to take on a consulting gig outside of her commitment as secretary of state, Fagan said "to put it bluntly, my secretary of state salary isn't enough to make ends meet."

Her salary from the state is about $77,000 a year.

She is "starting over financially" after a divorce, law school and as a renter and sole income earner in her household, she said.

She emotionally repeated her apology for exercising "poor judgment."

"Clearly this contract raises questions and upon painful reflection, taking that contract was poor judgment. I made a mistake and I own it," she said

Questions about recusal

Fagan recused herself from an audit the Secretary of State's Office was conducting into how the state is handling marijuana-related businesses five days before she reportedly began consulting work for Veriede Holding on Feb. 20.

In the email she sent to staff Feb. 15, Fagan announced her deputy secretary, Cheryl Myers, would oversee the audit as she would "soon be consulting for a company involved in the cannabis industry in multiple states." And while Fagan has said the ethics commission did not advise her of any actual or potential conflict, the Oregonian reported that she did not ask for anything in writing surrounding the position.

Fagan during the news conference said she didn't seek a written opinion from the ethics commission because staff had told her to do so if she wanted to avoid recusing herself.

"An opinion would have gotten me out of recusing myself. I chose instead to voluntarily take the most restrictive limitation on myself and to recuse myself from the OLCC audit," she said.

According to a news conference Friday, Fagan attended two meetings about the audit before her recusal, and the audit was substantially finished by the time she had recused herself.

Meeting notes mention Fagan specifically asked the audit team if they had interviewed Cazares.

"I exercised poor judgment by contracting with a company that is owned by my significant political donors and is regulated by an agency that was under audit by my Audits Division," Fagan said in her statement Monday. "I am sorry for harming the trust that I’ve worked so hard to build with you over the last few years, and I will spend the next two years working hard to rebuild it."

When asked if rebuilding trust would include releasing her tax returns, Fagan said the move was "not customary" for the secretary of state.

"I've released the contract and I'm letting you know that I was paid for two months of it," she said. "I am here because I'm owning a mistake that I made and that's why I'm here today."

The news conference was ended after thirty minutes even as reporters still attempted to get questions answered.

Dianne Lugo covers the Oregon Legislature and equity issues. Reach her at dlugo@statesmanjournal.com or on Twitter @DianneLugo.

This article originally appeared on Salem Statesman Journal: Oregon Secretary of State Shemia Fagan ends consulting contract