Rick Scott signed a law to give politicians 'an easy way to avoid disclosing their personal finances,' Nelson says

Democratic U.S. Sen. Bill Nelson passed up the chance to run for governor against Rick Scott this year, but that doesn’t mean he’s done attacking the Republican incumbent.

Nelson went on the offensive against the governor, with a page on his website entitled "The public has a right to know," asking for people to sign up to protest Scott’s alleged lack of transparency. The message also went out via email.

"Last year, Gov. Rick Scott signed into law a bill giving Florida’s public officials and candidates an easy way to avoid financial disclosure of their assets," Nelson said in an email sent June 13, 2014. "Since then, Gov. Scott has been the only elected official to take advantage of this."

Did Scott really sign a bill making it easier to hide assets from his financial disclosure statements? We’ll take a look at Florida law so you won’t be coming into this debate blind.

Trusting disclosures

While we didn’t hear back from Nelson’s office about clarifying this attack, it’s pretty obvious he’s referring to Senate Bill 2, a 2013 law unanimously passed by the Legislature that allowed state elected officials to establish a blind trust for their financial holdings and investments in order to prevent a conflict of interest.

In essence, a blind trust is when someone turns over their portfolio to a third-party trustee, who then buys and sells stocks, bonds and other assets without the owner’s knowledge.

Nelson is right that Scott signed SB 2 into law in May 2013. And yes, Scott is the only elected official in the state to use this law to put assets into a blind trust. The question is whether the law makes it easier to hide assets from the public.

By definition, a blind trust makes it easier for a candidate to not disclose the investments that person owns. A blind trust allows Scott to declare a lump sum net worth without having to disclose the value of his vast portfolio of stocks, bonds and other investments, some of which are regulated by the state and whose value could be directly affected by Scott's policies.

But under SB 2, politicians must first disclose the assets they put into the blind trust. Scott did this in 2011, before the law was in place. It’s only after those assets are in the trust that they are not available to the public -- or the official who put them there.

Other officials have used a blind trust in the past. Alex Sink did it in December 2006 after she became the state’s chief financial officer, an issue that became a somewhat contentious element of her failed gubernatorial run against Scott in 2010, because she voted for a new bond sale process that included her former employer, Bank of America. Sink created a blind trust on her own, without an ethics law addressing it.

Scott did the same thing after being elected as governor, disclosing all his investments in 2010, then forming his own blind trust in 2011 to avoid a conflict of interest, he said.

For years, the state ethics commission advised the Legislature to pass a law allowing blind trusts to deal with official conflicts of interest. In 2013, both the House and Senate unanimously passed SB 2. The bill regulated blind trusts and set the powers and duties of appointed trustees, including prohibiting them from telling their clients, such as Scott, what assets are bought or sold. These rules had not been in place prior to the bill’s passage, leaving blind trusts unregulated by the state.

Jan Jacobowitz, director of the Professional Responsibility & Ethics Program at the University of Miami, says the problem in Scott’s case is more who is managing the portfolio.

In this case, the custodian of Scott’s $72 million portfolio is Alan Lee Bazaar, the chief executive of a New York investment advisory firm with ties to Scott’s business dealings.

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"If you sort of have an insider managing your blind trust, it doesn’t inspire a lot of confidence in the people," Jacobowitz said.

While the state law provides some safeguards against conflicts of interest drawn from similar federal regulations, there were more than a dozen federal guidelines the state’s law didn’t incorporate (a point reported by the website the BrowardBulldog.org). These included making trust agreements public, allowing the ethics commission to remove trustees for misconduct and requiring periodic trust performance reports to the commission.

Another problem with blind trusts is the while the owner may not manage the holdings, they still know what they own when they put those investments in the trust.

"If what you’re putting in has a conflict of interest, then there’s a problem. You still know what’s in it," Jacobowitz said.

In May, former Democratic legislator and constitutional law expert Talbot (Sandy) D'Alemberte filed a lawsuit brought by Jim Apthorp, challenging the constitutionality of the law. Apthorp, a Democrat and former chief of staff to the late Gov. Reubin Askew, said the law violated state requirements for financial disclosure. As of June 20, the court is weighing that claim.

On June 16, Scott disclosed all of his financials in order to run for governor. In addition to his 2010, 2011 and 2012 tax returns (he and wife Ann Scott filed for an extension on their 2013 return), the governor ended his blind trust and revealed all the investments in his candidacy filing. That move wasn’t required by the 2013 law, which only says he must disclose the value of the blind trust, not its contents.

Scott's net worth rose from $83.8 million in 2012 to $132.7 million last year, an increase of more than half, according to his financial disclosures. When he first ran in 2010, his net worth was a reported $218.6 million. He bankrolled his own campaign and has kept a campaign promise not to draw a salary from the state.

One of the notable things missing from Scott’s investments was any interest in French oil services company Schlumberger Ltd., which is involved in Everglades drilling. Scott had a $135,000 investment in 2011 when he formed the trust, but the stake was gone in his June 16 disclosure. The former holding has since drawn an ethics complaint.

After filing his paperwork, Scott put the investments into a new blind trust.

Our ruling

Nelson said "Scott signed into law a bill that gives Florida's public officials an easy way to avoid disclosing their personal finances."

In terms of historical context and content of the Senate Bill 2, that part is true. Blind trusts do let officials shield financial holdings from disclosure requirements, and Florida law now allows officials to use those trusts.

The broader implication of Nelson’s statement is that Scott is being dishonest about what he owns, and that it affects his ability to govern without creating conflicts of interest. After Nelson made the statement, Scott ended the trust and disclosed all his holdings, but he was following a law both recommended by the state ethics commission and approved unanimously by the Legislature.

That law requires any official to disclose the assets being put into the trust before being turned over to a manager. There is debate over the law’s rules regarding choosing that manager and whether assets in that portfolio may present a conflict of interest. What goes into the trust would be publicly disclosed, however, while how it is managed afterward would not.

That’s not the same as hiding assets from voters. In this case, Scott ended the trust to disclose the portfolio’s contents, anyway.

Nelson implied the blind trust law makes it easier to hide personal assets. They may be hidden, but only after they are listed and turned over to a trustee.

We rate the statement Half True.