For the first time in a generation, Oklahoma’s next governor won’t be coming into office directly from another elected office, meaning the winner could have to separate himself from business and financial arrangements before taking office.
The separation – a kind of divestiture, which typically refers only to the sell-off of business assets or holdings – doesn’t have any defined steps and is not specifically required under state ethics rules. But ethics laws apply when candidates and spouses’ investments, business relationships and ownership of companies pose potential conflicts of interest in which the officeholder or family members would benefit personally from official acts or decisions. Even the appearance of a conflict could raise political issues. And divestment can be a gray area, with debate arising over the degree of separation.
Republican businessman Kevin Stitt, former Attorney General Drew Edmondson, a Democrat, and Libertarian Chris Powell face each other in Tuesday’s gubernatorial election. The winner will have the authority to appoint boards, commissions and some agency heads and sign or veto legislation, some of which could have dramatic effects on their business interests or former professions.
Former Gov. Frank Keating, who was elected to the first of two terms in 1994, was the last governor who came from private life – working only in the private sector – immediately before he won office. Even then, Keating had been an FBI agent, state lawmaker and an associate attorney general in the Reagan administration before a brief stint in private life. He was deputy secretary for the Department of Housing and Urban Development until early 1993.
Outgoing Gov. Mary Fallin was elected in 2010 and came from a seat in Congress. But she faced questions about her husband’s work as a workers’ compensation attorney. Fallin sought an attorney general’s opinion and advice from the state Ethics Commission, both of which cleared Wade Christensen to keep practicing in that area. However, he voluntarily agreed in 2014 not to take cases before the new Workers Compensation Commission, formed under a key policy change pursued by Fallin and Republican legislators.
Oklahoma’s new governor will have to file a personal financial disclosure statement with the state Ethics Commission within 30 days of taking office on Jan. 14. All material sources of income or ownership stakes above a certain threshold have to be disclosed. The state disclosure form is less detailed than those used for federal executive positions and congressional office and doesn’t require assets to be disclosed.
In July, Oklahoma Watch requested financial information and tax returns from all candidates for statewide office. Edmondson released two years of state and federal income tax returns in August, and Powell released returns in October. The Stitt campaign declined to release any financial details or returns.
Should Stitt win the governor’s office, he’ll likely have the most complicated road to divestiture. Stitt founded Jenks-based Gateway Mortgage Group in 2000 and has grown the company to more than 1,200 employees with operations in 40 states.
Oklahoma has not had a governor who has come directly from owning and running a company of Gateway’s size. One of the closest examples is former Gov. Robert S. Kerr, who came from a thriving oil and gas company, which later became the Kerr-McGee Corp., to win the governorship in 1942.
Stitt stepped down as CEO of Gateway on Aug. 1 but remains as chairman of the board. A week later, Gateway said its owner, a private trust comprised of Stitt, his wife and children, will acquire a Cherokee-based bank, Farmers Exchange Bank. The transaction will fold Gateway into the existing regulatory structure of the state-chartered community bank, with the new company to be called Gateway First Bank.
The Gateway bank conversion is pending before the Oklahoma Banking Department and the Federal Deposit Insurance Corp. and is expected to close in the first quarter of 2019, said Gateway CEO Stephen Curry. The new bank would be among the state’s top five banks in terms of employees and net income, Gateway said in a press release announcing the deal.
Should Stitt win the governor’s mansion and the Gateway merger gain approval, he could be in the unique position of picking the people who will regulate his bank. The banking commissioner and members of the seven-person Banking Board are appointed by the governor with the consent of the Oklahoma Senate. Four of the seven members of the board have their terms expiring during the next four years.
“Should Kevin be elected governor, we will take the steps necessary to comply with all state laws and regulations regarding conflicts of interest and disclosure, and we are seeking guidance on what additional steps may be necessary to ensure avoidance of conflicts of interest,” Stitt campaign spokeswoman Donelle Harder said in a statement.
In a separate statement to Oklahoma Watch, Curry said oversight and examination of state-chartered banks switches from year to year, with the state leading it one year and the FDIC or Federal Reserve leading it the next. For larger institutions like Gateway, both the state and FDIC are represented, he said.
“However, we are aware of the optics of the perceived conflict of interest that you raise,” Curry said. “If regulatory approval is received and this perception cannot be changed, Gateway will apply to become a national bank, and the regulatory regime will be entirely at the federal level. You can rest assured we will do everything in our power to ensure there is not a conflict of interest.”
A similar situation would have arisen had Gateway remained a mortgage company and been regulated by the Oklahoma Department of Consumer Credit. That department’s 10-member oversight commission is also appointed by the governor. Seven of those commissioners have terms that expire in the next four years.
Since leaving the attorney general’s office in 2011, Edmondson has been an attorney in private practice. In April 2017, he became “of counsel” at the law firm of Riggs Abney in Oklahoma City. The Stitt campaign has criticized his association with the law firm, which is among those he hired as attorney general to work on the state’s behalf on lawsuits against tobacco and poultry companies.
Under Edmondson’s “of counsel” position at Riggs Abney, he doesn’t draw a salary or receive benefits. The firm provides him with office space and administrative assistance in exchange for a third of his billing. Edmondson is in charge of bringing in his own clients to the firm.
“Should I be elected governor, I will consult with ethics counsel regarding any necessary divestitures,” Edmondson said in a statement. “I have no ongoing legal matters or clients because all of my time and energy for more than a year now have been spent on this campaign.”
Nothing to Divest
Powell, the Libertarian in the race, initially refused to release his tax returns, then released them to KWTV News 9 in Oklahoma City in October, although the station did not put the returns online. Powell works for the Oklahoma City Police Department and his wife works for a law firm.
In a statement to Oklahoma Watch about potential divestitures, Powell said like the vast majority of Oklahomans, he wouldn’t need to divest to avoid conflicts of interest.
“It has always seemed odd to me that a member of the political establishment or someone with great wealth can sell off some of their holdings and be considered to no longer have a conflict of interest when they will clearly retain the attitude and viewpoint that put them in the position to have those investments and properties in the first place,” Powell said.
“They may make it so that they will not personally profit from a particular policy choice, but their friends, associates, and family members likely will,” he added. “In my view, candidates who don’t have those entanglements to remove are generally preferable.”
Reach reporter Paul Monies at firstname.lastname@example.org or (571) 319-3289.
Correction: This story has been updated 11/5/18 to clarify the employment of Chris Powell’s wife.