Gov. Tina Kotek Calls for Investigation, Republicans Demand Fagan Resign
Oregon Secretary of State Shemia Fagan is under fire since news broke on April 27 that she had been moonlighting as a cannabis industry consultant while her office was conducting an audit that proved favorable to that industry.
The audit results essentially call to loosen regulation of the cannabis industry and encourage the state to provide financial assistance to help it grow.
Fagan claims she recused herself from the audit of the Oregon Liquor and Cannabis Commission (OLCC) before taking the contract. However, the recusal allegedly occurred after the audit was substantially finished.
The issue comes on the heels of two other controversies involving Fagan, including an investigation into $500,000 in campaign contributions from an entity connected with FTX founder Sam Bankman-Fried to the Democrat Party of Oregon—with some of those funds going to the campaigns of Gov. Tina Kotek and Fagan—and another scandal related to OLCC, which Fagan oversees.
DOJ and Ethics Commission Investigate
According to an April 27 report in Willamette Week, a Portland-based newspaper, Fagan worked as a contract consultant to Veriede Holding LLC, an Oregon affiliate of the cannabis chain La Mota.
The owners of the company, Aaron Mitchell and Rosa Cazares, have millions in unpaid federal and state taxes and have been sued repeatedly by vendors for not paying their bills, the paper reported.
Meanwhile, they donated generously to Democrat candidates and threw lavish campaign fundraisers for Fagan and Kotek in 2022.
The breaking news brought a swift reaction.
Oregon Gov. Kotek immediately called for two investigations—one by the Oregon Government Ethics Commission into Fagan’s actions and another by the Department of Justice (DOJ) into the newly released audit.
Fagen quickly responded with a statement to the media.
“I welcome Gov. Kotek’s request to DOJ to review the audit because it will simply highlight the professional work of Oregon’s auditors,” Fagan’s statement said. “I am relieved that the governor has asked [the] DOJ and the Government Ethics Commission to engage in fact-finding because the facts will restore trust in our audits division and in me as your Secretary of State.”
But on April 28, Fagan issued a second statement through her office saying she was contracted by the Oregon-based cannabis company to “review the landscape for expanding their operations outside of Oregon.”
“The nature of the contract and the work does not create a conflict of interest under Oregon law or ethics rules,” Fagan wrote. “As soon as I contemplated the contract and learned that recusal was an option, I recused myself from my only work as a public official that touches the cannabis industry, the OLCC audit.”
Recusal is not an option for legislators, and Kotek said the situation deserved scrutiny.
“It’s critical that Oregonians trust their government,” Kotek said in a statement.
Widespread Condemnation
Democrat legislators are concerned.
“These allegations are bad. It’s difficult to see them any other way,” said House Speaker Dan Rayfield. “It has obviously impacted the credibility of the secretary of state’s audits.”
Republican leaders, who were already calling for investigations into an unrelated OLCC scandal, are calling on Fagan to resign.
“The Secretary of State oversees audits for the State of Oregon. In no way could the top elected official ethically work a ‘side gig’ for a company engaged in the industry in which the Secretary is responsible for auditing and regulating,” wrote Senate Republican Leader Tim Knopp and House Republican Leader Vikki Breese-Iverson in a joint statement issued April 28.
“She must resign,” the letter said.
“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.”
“We have been continually calling for oversight into the OLCC and this industry. And yet, another turn of government misuse is apparent today,” added Breese-Iverson.
For the past three months, state Republican and Independent congressional leaders have been urging the governor to launch independent, nonpartisan investigations into the OLCC for potential favorable treatment for land acquisitions, allegations of rare liquor distribution, and the process of granting retail licenses.
The OLCC distributes all liquor sold within the state and represents Oregon’s third-largest source of revenue after income taxes and the lottery.
According to an internal agency investigation last year, five top OLCC managers used their positions to reserve bottles of hard-to-find bourbons, which they purchased for themselves or saved for others.
The Oregon Department of Justice has launched a criminal investigation into the matter.
Kotek said that the DOJ’s investigations would suffice. Republicans disagree.
Washington legislators will hold their first Oversight and Accountability Committee meeting on the matter on Thursday, May 4.
Meanwhile, Democrats are distancing themselves from La Mota, which contributed more than $200,000 in recent years to top Democrats, including U.S. Rep. Val Hoyle’s (D-Ore.) congressional campaign.
Kotek is pledging to give $75,000 to the Oregon Food Bank—approximating La Mota’s contribution to her gubernatorial campaign.
State Treasurer Tobias Read made a $2,000 donation to the Portland Community College Foundation, purging La Mota’s July 2021 contribution to his failed gubernatorial campaign.
Senate President Rob Wagner pledged $12,500 to Habitat for Humanity to offset earlier contributions from La Mota.
