The ethics commission determined last Friday that Republican gubernatorial candidate Tom Gallagher may have violated ethics laws because he owned stock in two insurance companies while regulating the industry.
The commission found “probable cause” to believe a violation occurred and will later determine whether action should be taken against Gallagher because of stock he owned in Penn Treaty American Corp. and Conseco Inc.
Gallagher’s campaign disclosed the commission’s determination after a closed hearing. His lawyer, Richard Coates, said he was “dumbfounded” by the decision because the amount Gallagher owned was minuscule.
Gallagher owned up to 7,000 shares of Penn Treaty and made more than $7,200 trading it. He owned up to 3,000 shares of Conseco and lost more than $1,000 trading it. Both companies have subsidiaries in Florida that Gallagher regulated as insurance commissioner.
Gallagher is facing Attorney General Charlie Crist for the Republican nomination to replace Gov. Jeb Bush, who can’t seek re-election because of term limits.
Gallagher’s daytrading was revealed after he posted his tax returns on his campaign Web site. It showed Gallagher traded hundreds of thousands of dollars in stock through Ameritrade between 2002 and 2005. Gallagher served as insurance commissioner until 2003, when he was sworn in as the state’s chief financial officer. As CFO, Gallagher sits on the Cabinet which, along with the governor, oversees insurance regulation and several state agencies.
The commission also found that Gallagher probably violated ethics laws by owning stock in Nextel Communications Inc. and EMC Corp. while they contracted with agencies the Cabinet oversees, but didn’t find the need for further action against him. There was no reason to believe Gallagher knew about the agencies’ contracts, Coates said.
The campaign noted that the commission didn’t find enough evidence to suggest he misused his office or gave preferential treatment to any companies in which he owned stock.
The violations aren’t serious and probably won’t result in a large — if any — fine, said Pete Dunbar, a lobbyist and former commission member, who previous served as a lawyer in Gallagher’s office.
“There was no misuse of public office,” Dunbar said. “There is an embarrassing, inadvertent mistake.”
The commission’s finding is the opposite of a decision it made a year ago on a similar complaint, Dunbar said.
He questioned whether the vote was politically motivated.
Of the six commissioners voting that a violation likely occurred, Vice Chairman Kurt D. Jones Sr. of Pensacola, Richard Spears of Orlando and Albert P. Massey of Fort Lauderdale each gave Crist $500; Chairman Tom Scarritt of Tampa gave $5,000 to the Florida Democratic Party and $500 to U.S. Rep. Jim Davis, who is facing state Sen. Rod Smith for the Democratic nomination; and Commissioner Norman Ostrau gave Davis $250.
The only commissioners to vote against the findings have contributed to Gallagher’s campaign _ Christopher T. McRae of Tallahassee donating $500 and Mike Carr of Naples giving him $100.
Still, Mac Stipanovich, a lobbyist who supports Crist, said the ruling should concern voters.
“Tom and his staff’s view that this is an inconsequential matter illustrates exactly the kind of ethical blindness that led him to this disaster in the first place,” Stipanovich said. “I defy him to name one governor of Florida or one major candidate for governor of Florida to have been found by the Ethics Commission to have probably violated Florida’s ethics laws.”
Earlier this year, Gallagher said he didn’t think he was doing anything wrong when he decided to invest in the companies and that he was also unaware of a 1991 Ethics Commission opinion that said the state’s comptroller couldn’t invest in bank stocks because he also regulated banks.
Gallagher was campaigning in Fort Myers and didn’t participate in a conference call his campaign held to discuss the issue, but he released a prepared statement.
“I have earned the trust of the voters through almost three decades of work as a public servant, and I have always acted based on my experience, my principles, my understanding of complex issues, and my desire to serve the best interests of Floridians,” Gallagher said. “I will bring the same commitment and record of leadership to my work as Governor.”
Gallagher asked the commission to look into whether the stock ownership was an ethics violation. A separate complaint was filed against him alleging misuse of office.
Gallagher will not seek a hearing on the findings. That means he will enter into settlement discussions with the commission’s special advocate, which usually results in admission of a violation and an agreement to a penalty, said commission spokeswoman Kerrie Stillman.
The commission is not scheduled to meet again before the Sept. 5 primary.