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    Political allies manage Bush's not-quite blind trust

    Some of the governor's money is in a mutual fund that has investments in companies tied to Florida.

    By CRAIG PITTMAN, Times Staff Writer
    © St. Petersburg Times
    published October 26, 2002


    When Jeb Bush became governor he tried to avoid potential conflicts of interest over his financial holdings by taking the unprecedented step of turning his money over to a trust.

    But the trust is run by two close political confidants, and the governor now finds that he has a financial stake in companies with interests in Florida policy.

    The governor's money is handled by financier Phil Handy of Winter Park and Roberto Martinez, a Miami lawyer. They have chosen to invest in a mutual fund whose stock holdings include a company that wants to drill for oil off Florida's coast, as well Walt Disney Co. and Waste Management Inc.

    Handy, who has worked on both of Bush's previous campaigns, is a Republican fundraiser whom Bush appointed chairman of the new state Board of Education. Martinez, a prep-school classmate of the governor's who helped lead his transition team in 1998, represented the GOP during the 2000 presidential recount and was appointed by Bush to the board of Miami-Dade Community College.

    Last year the trust they control on behalf of Bush invested thousands of dollars in Longleaf Partners Fund. Longleaf is a mutual fund that is the largest investor in Pioneer Natural Resources, an oil company that drills in the Gulf of Mexico.

    Offshore drilling is Pioneer's major business, and the company even bid on a lease off the Florida coast -- a lease that became available after the governor crafted an oil drilling compromise with the federal government. Bush says he knew nothing about the investment and the company ultimately didn't win the bid.

    Bush and his two trustees say he had no control over his Longleaf investment. Asked if Longleaf's interest in offshore drilling affected his decision to allow new leases, Bush replied: "How could it? Come on."

    The governor referred all Longleaf questions to Martinez, whom he identified as the trustee of his investments. "He makes the decisions about what to invest in," Bush said. "I had nothing to do with making any decisions about where to invest."

    Martinez would not discuss Longleaf or the trust except to say it has "worked the way it was supposed to work." He said he works with a second trustee but would not identify him. The governor's press office identified Handy as the second trustee.

    Handy said he did not know that Longleaf is the oil company's largest stockholder until the St. Petersburg Times told him.

    "I'm flabbergasted by the nature of this inquiry," he said. "I don't think we have anything to be embarrassed, ashamed or apologize for."

    Generally Bush's personal worth declined last year, but his disclosure form shows he earned more than $33,000 in interest and dividends. The form does not specify how much of that came from his Longleaf investment, valued at $66,000 at the end of 2001.

    The John Ellis Bush Revocable Trust consists of cash, marketable securities and partnership interests that totaled $1.1-million on Dec. 31, according to the governor's most recent disclosure form.

    No other Florida governor has ever set up such a trust. Bush's work in real estate development and other areas was heavily scrutinized during his previous campaigns, and he vigorously denied that he capitalized on his family's political connections.

    After taking office in January 1999, Bush wanted to set a new ethical standard by setting up a blind trust, said Bush's former general counsel, Carol Licko.

    But a true blind trust, in which the investments are completely hidden, is not possible under Florida law. Once a year, Florida office-holders must read and sign financial disclosure forms that outline for the public where their money is invested.

    Licko said the trust that Winter Park lawyer Bob Saltsman designed, under her supervision, was as close to a blind trust as possible. (Bush's challenger, Tampa lawyer Bill McBride , has yet to say whether he will set up a similar trust should he be elected.)

    The governor's office would not release a copy of the approximately 20-page document drawn up by Saltsman, a business partner of Handy's. Instead, spokeswoman Katie Muniz provided three paragraphs that she said were from the document, and later read six pages aloud to a reporter.

    The June 1999 document says Handy and Martinez must not consult with the governor, his wife or their minor children about his investments, or disclose any information about them to Bush or the public. Saltsman said it was an oversight that the document did not mention grown children.

    Experienced trust attorneys who reviewed the language for the Times said Bush's trust is far from blind. They said Bush could direct investments through a third party or dismiss the trustees should they displease him.

    There also is no way to enforce the ban on consulting Bush. If the trustees called Bush "every day and told him what was in there, what would be the penalty?" asked Phillip Baumann, a Tampa trust lawyer with 23 years' experience.

    Saltsman said the trustees could be sued for such a violation, although he said the only person with standing to file such a suit would probably be Bush.

    Picking a trustee with no personal ties to Bush, such as a bank, would have given the public more assurance that the investments are handled without Bush's knowledge, the lawyers said.

    A bank "would be very strict about interpreting the rules," said Joel Bronstein, a St. Petersburg trust lawyer with 30 years' experience. "But when it's his friends, you just don't know, and nobody's going to know but them."

    The only thing that ensures a trust like Bush's works, said former Clearwater Bar president Larry K. Meyer, is "the honesty of the trustee."

    "I'm an honest guy," Martinez said. And Handy said they had been "very scrupulous about the way this trust has been managed."

    Handy said he and Martinez have avoided individual stocks so there could be "no taint of anything." Sometime last year, the trust bought 2,675 shares of Longleaf, which typically buys and holds big positions in just 20 to 30 stocks.

    Investors checking Longleaf's Web site can see that among its top five holdings is Pioneer Natural Resources, a Texas-based oil company involved in drilling in the gulf.

    Longleaf's other top holdings include Waste Management Inc., which once gave Gov. Lawton Chiles an airplane flight that turned into a political embarrassment when he failed to pay for the trip, and Walt Disney Co., which in December helped throw a Florida GOP fundraiser.

    Longleaf owns more than 26-million shares of Pioneer, or about 26 percent of the company.

    Pioneer's second largest shareholder, with about 6 percent of its stock, is Richard Rainwater, who was partners with the governor's brother, President Bush, in the Texas Rangers and who launched Pioneer in 1997.

    Longleaf began buying its stock a year later.

    Handy could not recall whether the Longleaf investment was made before or after the governor agreed to the offshore oil compromise last summer, and Martinez would not say. Handy said he and Martinez did not review Longleaf's holdings, but merely relied on the fund's strong past performance.

    Longleaf showed a gain of more than 10 percent in 2001. Pioneer's stock -- which increased by 120 percent in 2000 -- declined 2 percent last year, although it has steadily rebounded this year.

    When Bush first took office in January 1999, he was a staunch opponent of new offshore leases in the gulf. That put him at odds with his brother, who has pushed for opening new areas to oil and gas the eastern gulf called Area 181, just 30 miles from Pensacola.

    The U.S. House of Representatives voted against the Area 181 sale. But before the Senate could vote on blocking the sale, Bush and White House officials announced a compromise in July 2001. The governor agreed to drop his opposition to the sale of new leases in exchange for the White House agreeing to scale back Area 181 so no lease would be within 100 miles of Florida's beaches.

    When the leases went up for sale Dec. 5, Pioneer bid on them, but lost. Although Pioneer is working on other offshore wells with companies that were successful bidders, a company spokeswoman said Pioneer has no plans to form similar partnerships on any Area 181 projects.

    -- Staff writers Helen Huntley and Julie Hauserman and researchers Caryn Baird and Cathy Wos contributed to this report.

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