On Monday, Secretary of State Shemia Fagan announced she would give up her $10,000-a-month gig as a consultant for Veriede Holding LLC, an affiliate of troubled cannabis dispensary chain La Mota — a side job she took because the former lawyer said she needed the money.
On Tuesday, the 41-year-old elected official — once a rising star in the Democratic party — resigned from her secretary of state job and her $77,000 government salary, saying she’d broken the public’s trust by working for the cannabis company while her office was auditing the state’s marijuana program.
And by Wednesday, as Fagan sought to regain her law license, legal ethics experts raised concerns, saying that new questions about Fagan’s character and fitness to practice law could delay or scuttle her reinstatement to the Oregon State Bar. The Oregon Department of Justice and the Government Ethics Commission have launched separate investigations into Fagan’s conduct in office.
“It’s not a good week,” said John Strait, an emeritus professor and ethics expert at Seattle University School of Law. “It could affect her ability to practice law.”
Here’s why.
Fagan worked as a lawyer for more than 11 years before becoming secretary of state in January 2021. Upon taking statewide office, she switched her status with the bar to “inactive,” meaning she wouldn’t have to pay the bar’s annual dues of $688 for an active license and $3,330 a year for required malpractice insurance. But as an “inactive” lawyer, Fagan was no longer permitted to practice law.
Fagan signed her contract with the affiliate of La Mota on Feb. 24. She submitted her reapplication to the bar on Feb. 27, writing that she wanted to perform “legal consulting for an Oregon LLC.” She did not name the company.
She started working for Veriede Holding before the bar reinstated her, a process that can take months and that remains ongoing.
On Friday, a day after Willamette Week broke the news that Fagan accepted a side gig with the cannabis company, Fagan phoned the bar to alert them to the news coverage. “Member called, provided information on recent articles re: ethics concerns,” read a note in Fagan’s reapplication file, which The Oregonian/OregonLive obtained in a public records request.
Fagan, in the press conference to acknowledge it was a mistake to take the side job, said her lack of an active law license wasn’t a problem, claiming the 15 hours of work per week she completed for Veriede Holding over two months was research not lawyering.
As the bar considers her reapplication, investigators could probe that claim.
Gov. Tina Kotek said she was “dismayed” by Fagan’s outside work and called on the state’s Government Ethics Commission and Department of Justice to investigate Fagan’s conduct.
On Wednesday, both agencies said they were moving ahead with their investigations despite the fact Fagan has resigned. She leaves office Monday, about a week before Oregon elections.
“We are moving quickly to engage neutral, external performance audit professionals,” said Roy Kaufmann, a spokesperson for Attorney General Ellen Rosenblum at the DOJ. “Secretary Fagan’s resignation will not impact our course of action.”
A spokesperson for the ethics commission said the agency had opened a 60-day preliminary review of Fagan’s actions.
The bar could wait until both investigations are complete before deciding on Fagan’s reapplication, said Strait of Seattle University. That could take months.
It also could expand its own examination of her reapplication. In either case, the outcome for Fagan is far from guaranteed.
Fagan’s contract with Veriede Holding included one potentially problematic clause:
“As compensation for successful acquisition of license(s) for Veriede Holding LLC or any affiliated companies into any state other than Oregon or New Mexico, Consultant will receive a bonus of Thirty Thousand Dollars ($30,000).”
That’s called a contingent fee and in some states including Connecticut, where Fagan admitted to reaching out to Lt. Gov. Susan Bysiewicz on behalf of Veriede Holding, it runs afoul of state lobbying rules that aim to curb corruption.
“A lobbyist whose fee is contingent on success has a greater incentive to ‘win at all costs,’” a 2006 article in the Cornell Journal of Law and Public Policy states, summarizing one argument against such payments.
Connecticut’s statute, for example, says, “No person shall employ, or be employed as, a lobbyist for compensation that is contingent upon the outcome of any administrative or legislative action.”
Oregon’s rule is similar, said Lucian Pera, a Tennessee-based lawyer and expert on legal ethics.
It states: “A person may not lobby or offer to lobby for consideration any part of which is contingent upon the success of any lobbying activity.”
And even though Fagan called herself a consultant and not a lobbyist, Pera said state lobbying rules could apply to her actions anyway.
Fagan, at her news conference, said she reached out to Bysiewicz, whom she described as a friend, “just to ask who, like, would be somebody for a cannabis company to talk to if they wanted to get the lay of the land.” A spokesperson for Bysiewicz said the lieutenant governor pointed Fagan to publicly available information.
Fagan said she never landed a bonus.
That may not matter to the bar, said Pera. If she violated lobbying rules, that could be a problem for her as a person seeking to practice law.
And the facts of Fagan’s situation are unusual enough, Pera said, that investigators with the bar won’t have other examples to consult. Generally speaking, investigators are cautious in high-profile public cases.
“If they haven’t seen something before, they move twice as slow and are twice as careful,” he said.
— Beth Slovic; bslovic@oregonian.com; 503-221-8551
Catalina Gaitán of The Oregonian/OregonLive contributed reporting.
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