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Stocks overlapped official duties

The CFO and candidate for governor didn't disclose financial stakes in companies doing state business.

By JONI JAMES
Published January 31, 2006

TALLAHASSEE - In his last year as Florida's elected insurance commissioner, Tom Gallagher invested millions of dollars in insurance-related stocks, his 2002 federal tax return shows.

And as a member of the Cabinet in 2004, Chief Financial Officer Gallagher voted to approve a natural gas pipeline for an energy company whose stock he traded to the tune of more than $1-million before and after the vote.

On the day Gallagher made the motion that AES Corp. of Virginia be permitted to lay pipeline under delicate coral reefs off Broward County, Gallagher held 1,000 shares in the company.

Gallagher's tax returns, posted on his gubernatorial campaign's Web site this month, show one of Florida's longest-serving politicians has had a penchant for short-term stock trading using an online brokerage account.

The records also show that along the way, Gallagher has not been shy about buying and selling stocks whose interests overlap with his role near the top of state government.

Gallagher said late Monday he felt no need to disclose his financial stake in AES before the Cabinet vote, because he said his investment at the time - $8,000 in an $11-billion company - wasn't significant. He saw the Cabinet action, which granted an easement for state-owned submerged lands, as a minor step in the project's vetting, as the federal and Bahamian governments had yet to sign off.

Gallagher said he bought the stock because he believed its worldwide exposure made it a good investment, not because of the Florida pipeline.

He noted that one of AES's competitors, Tractebel North America, also won Cabinet approval that day to lay a natural gas pipeline off Florida's coast.

"My understanding (of state law) is these are public companies and the amount of shares I owned were insignificant, and I didn't see any conflict," Gallagher said.

Under Florida law, no public officer can have any contractual relationship with a business entity that is subject to regulation by the officer's agency.

In a 1991 opinion, the Florida Commission on Ethics said it was a conflict of interest and against state law for the state's elected comptroller, who then regulated banks, to hold bank stocks he inherited.

Gallagher said Monday he was unaware of the 1991 opinion. He said he never contacted an attorney for advice concerning any limits on his investments.

Nor did he ever consider his investment in a handful of insurance companies a conflict of interest.

"There is no correlation between the investments I made or decisions I made," Gallagher said. "I never based a vote on anything I've owned."

Fifteen days after the Cabinet's pipeline vote, Gallagher bought 9,000 more AES shares, which would net a profit of more than $3,763 as he sold them over the next 90 days.

In 2002, Gallagher's last year as insurance commissioner, his investments ranged from a $3.2-million stake in Brown & Brown Inc. of Daytona Beach to a $12,225 stake in Mutual Risk Management of Bermuda. His short-term investments in the two companies resulted in nearly $6,600 in losses that year.

Starting in 2003, a voter-approved change in the state Constitution consolidated the treasurer and comptroller jobs into the chief financial officer post. State lawmakers then turned the insurance commissioner into a post appointed by the governor and the Cabinet, which includes the CFO, the attorney general and agriculture commissioner.

Gallagher was elected CFO in 2002 and took office in 2003.

Gallagher also invested heavily in AirTran, the Atlanta airline, which had a state contract at the time for state employees' travel. However, that contract was with the state Department of Management Services, which is under the governor's direction.

Details of Gallagher's stock ownership are listed in his tax returns, which he posted on his campaign Web site earlier this month. Gallagher said he wanted "transparency" in his campaign for governor.

The returns show Gallagher has been an active investor, trading millions of dollars in stocks annually, sometimes borrowing money to buy stocks on margin through his AmeriTrade account. He said he never was an active investor until the advent of online brokerages.

The tax returns do not show his full portfolio, but they offer a window into his trades in a given year. In 2002, his stock trading netted him $7,626; in 2003, nearly $18,000; in 2004, he lost $57,346. He said he made a "minimal gain" in 2005 before closing out all of his stock holdings to pay off debts.

Gallagher, 61, said he no longer is in the stock market. His returns also show heavy investment in real estate.

Gallagher, who is running against Attorney General Charlie Crist for the Republican nomination for governor, has served more than two decades in elected office and has won four statewide races.

A Miami-Dade legislator for more than a decade starting in 1974, Gallagher was elected state treasurer and insurance commissioner in 1988, education secretary in 1998, treasurer again in 2000, and chief financial officer in 2002.

He last ran for governor in 1994. Jeb Bush won the governorship four years later and is leaving office next year after two terms.

--Times researcher Caryn Baird contributed to this report. Joni James can be reached at 850 224-7263 or jjames@sptimes.com

[Last modified January 31, 2006, 00:31:49]