Tim Michels says he will divest from his family business if he's elected governor. Experts say that will be a difficult task

Wisconsin Republican gubernatorial candidate Tim Michels.
Wisconsin Republican gubernatorial candidate Tim Michels.

Tim Michels, Wisconsin's Republican candidate for governor, is pitching himself as a successful businessman who can turn around state government.

But if he gets to the governor's mansion he'll have to figure out how to untangle his interests from his family's construction business, which has received more than $1 billion from state road contracts and has ties to a pipeline project that is awaiting a key environmental study.

Michels, co-owner of Michels Corp., the state's largest construction company, has said he'll divest himself from the business but has not provided any details.

Experts say his task won't be easy.

State records show the Brownsville-based Michels Corp. has received more than $1.1 billion from Wisconsin for construction projects since 2014.

When Tim Michels entered the governor's race in April, he said he hoped the company would continue to compete for state work if he won the race for governor.

He estimated his company had made about $1.3 billion in state road contracts since 2008, during an April 25 interview with conservative host Jay Weber on WISN-AM (1130).

"But I'd like to share how we won every single one of those dollars in contracts," Michels told Weber. "Every single one of those contracts was won through a transparent competitive bidding process, where we were the low bidder."

More: Governor candidate Tim Michels criticizes Foxconn deal after making millions on the project

Under state law, governors must sign road construction contracts worth more than $1,000. State law also bars public officials from taking actions that would benefit them financially.

With less than a month to go before the midterm elections, the Michels campaign and company have not answered questions from the Milwaukee Journal Sentinel about how Michels would handle state road contracts.

The campaign and company also would not answer questions about if Michels' plan to divest includes selling shares of his business to his brothers or another family member. Or, if he'll have a chance to buy back ownership of the company in the future.

“Tim will divest himself of interest in the company and there will be no conflicts of interest," said Anna Kelly, campaign spokeswoman. "Unlike Tony Evers, he will work hard and with integrity and will be transparent.”

Michels Corp. has grown into multi-billion dollar business

Michels Corp. employs 8,000 workers and had a projected revenue of nearly $3 billion in 2018, according to BizTimes Milwaukee. 

The company was founded in 1959 by Tim Michels' father, Dale, who had two business partners. Michels' mother, Ruth, drove the dump truck.

Today, the business is run by Dale's sons, Pat, Kevin and Tim, who is the vice president. Dale and Ruth Michels have both died. Members of the third generation are beginning to join the business, according to BizTimes.

Tim Michels' daughter, Sophie, plans on joining the infrastructure division of Michels Corp. when she graduates Babson College, a private business school in Wellesley, Massachusetts, in May 2023.

Michels is grounding his campaign in terms of his success in business.

During campaign stops, Michels speaks proudly about his business, saying he started working at the company at 9 years old and later rejoined the business after serving 12 years in the military.

"And it's what I've been doing for the past 25 years. Standing shoulder to shoulder with my brothers and growing Michels Corporation, from a few 100 employees to today over 8,000," Michels said during a Labor Day appearance in Milwaukee.

"And these are great paying jobs. Our average annual wage at Michels Corporation is $97,000. And on top of that, there's great benefits, great health care. That is taking care of people. That's what people want today," Michels said.

Michels has positioned himself as an outsider who "doesn't throw out political promises."

"They want someone who has walked the walk, not just talked the walk, and I have created jobs, thousands of non-union jobs and thousands of union jobs," he said on Labor Day. "That is unique in government today. That is unique in politics today. That is why we are going to win in November and replace Tony Evers."

Tim Michels and his wife, Barbara, own more than $30 million in properties in New York and Connecticut that were purchased between 2015 and 2020.

These properties include a $17 million Long Island Sound home in Greenwich, Connecticut, and a penthouse in Manhattan, according to a report from Wisconsin Right Now. 

Michels regularly reports more than $1 million in state income taxes. That payment level suggests he has an income of up to tens of millions of dollars a year.

More: GOP governor candidate Tim Michels says he is open to a flat income tax for Wisconsin

If Michels wins it will be the first time in recent decades Wisconsin has had a millionaire as governor.

The salary for Wisconsin governor is $152,756 a year.

A clear conflict of interest

Anne-Marie Rhodes, a professor at the Loyola University Chicago School of Law and a specialist in estate planning, said a traditional answer would be for Michels to create a blind trust.

A blind trust is a financial arrangement where a person in public office gives up the administration of private business interests to an independent trust in order to prevent conflict of interest. Under the trust, the owner does not know how the assets are managed.

But Rhodes said because Tim Michels' family is involved, a blind trust would be difficult.

Another option for Michels would be to sell his portion of the company, but Rhodes said she doesn't know who, outside of family, would want to buy it.

"I'm not saying that in an uncharitable way, but it's highly unlikely in the context of a family business," Rhodes said. "There could very well be an agreement among shareholders that all transfers have to be within the family."

Regardless of the option Michels chose, Rhodes said there would be practical problems.

"There are a lot of layers — so you just have to look at the fundamental policy of does Wisconsin accept conflicts of interest," Rhodes said. "I'm not saying there is not a path through this. But if there is, it's a really narrow one along a very steep cliff."

Former President Donald Trump, who endorsed Michels, said he would divest from his businesses and put them in his children's names but instead kept doing business, creating accusations throughout his presidency about his policy decisions being beneficial to his personal wealth and possible violations of law. 

Gov. Tony Evers campaign spokeswoman Kayla Anderson called Michels a "walking, talking conflict of interest," who is running for office to further enrich his family’s company.

"Tim Michels already said he wants Michels Corp to continue receiving major contracts from the state if he’s governor. He can’t give a straight answer on how he would avoid a conflict of interest as governor, because he doesn’t plan to," Anderson said.

Enbridge pipeline decisions ahead

In January, Enbridge Inc. signed a letter of intent with Michels Pipeline Inc., to be the mainline contractor to reroute Enbridge's Line 5 pipeline from western Canada through Wisconsin and Michigan into eastern Canada.

Michels Pipeline is part of Michels Corp.

More: Enbridge Line 5 pipeline reroute would employ as many as 700 union workers during construction, company says

The Enbridge project has been the subject of lawsuits for years. If Michels is elected governor, he could appoint a new Department of Natural Resources secretary.

DNR employees have been working to put together environmental impact statements for the Enbridge rerouting project and are unlikely to complete that work and make a decision on permits before the November election.

A newly appointed secretary could potentially influence the decision made by the department in Enbridge’s case – therefore assuring that Michels Corp. would be able to move forward with the construction of the pipeline.

The Michels campaign did not respond to questions about a potential conflict of interest Michels would have related to the Enbridge project.

Anthony Chergosky, an assistant professor of political science at the University of Wisconsin-La Crosse, said the situation illustrates how a governor can influence policy.

“I mean, there are ethical safeguards in place, but they’re not perfect,” Chergosky said. “Tim Michels really has an opportunity to stack the levels of power and government with allies, not only the DNR secretary who is surely influential but all of those appointees who have not been confirmed by the state Senate.”

Corrinne Hess can be reached at chess@gannett.com. Follow her @corrihess

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This article originally appeared on Milwaukee Journal Sentinel: Tim Michels' company fortune intersects with Wisconsin contracts