Tom Gallagher: GOP candidates run the financial spectrum
The wealthiest candidate in the field downplays the fortune he built in real estate.
By KRIS HUNDLEY
Published July 9, 2006
TALLAHASSEE - Tom Gallagher, the wealthiest candidate in the governor's race, has proved that a lifelong career in politics is no obstacle to getting rich.
Florida's chief financial officer, who is seeking the Republican nomination for governor, has seldom earned more than $100,000 a year while holding a range of elected positions over the past three decades. Yet he has amassed a net worth of nearly $2-million.
Along the way, Gallagher's two vocations - public official and private businessman - have sometimes overlapped:* Gallagher the private investor has owned stock in publicly traded companies with matters pending before Gallagher the Cabinet member.* Gallagher the landlord pays a state employee to moonlight as his property manager.* Gallagher the statewide officeholder has appointed private business partners to play lucrative roles in state government.
Gallagher, 62, makes no apologies. Though his stock trades are the subject of a state ethics investigation, Gallagher said his holdings were too small to create a conflict of interest. He has defended his use of state employees for outside work and his recommendation of business partners for public posts.
And though he boasts about his entrepreneurial success - he campaigns as the lone businessman among three lawyers running for governor - Gallagher plays down his wealth.
"I've made enough to take care of my wife and child," said Gallagher, who has a 7-year-old son with his second wife, Laura. "My goal has never been to see how much money I could have. My dad used to say there are no Brinks trucks at funerals."
Gallagher's wealth has been built on real estate, with the proceeds from long-term rental properties enhanced by the occasional big score.
The eldest of eight kids from a prosperous Wilmington, Del., family, Gallagher attended the University of Miami on a partial swimming scholarship. After graduating in 1965 with a degree in marketing, he spent two years stateside in the Army. Then he returned to civilian life in South Florida, selling school and library furniture.
He moved into real estate when his father, who had a successful real estate business in Wilmington, brought his son into a Delaware deal with Florida ties. He turned a quick profit and moved on.
Then in 1977, Gallagher, by then a young state legislator, made an acquaintance that set the course for his prosperity: Ed London, a multimillionaire Key Biscayne developer. The two men shared a love of sailing and went in together on a pair of boats, first a 25-foot sailboat, then a 44-footer. By the 1980s, they were partners on properties as well.
Two of their deals hit big.
In 1982, the year he made his first, short-lived run for governor, Gallagher paid $60,000 for a 10 percent stake in a deal to buy 3,000 home lots in Highlands County. London and his wife owned the rest. London built a few houses, but their development plan never happened.
In 1996, during one of Gallagher's rare absences from public office, the state of Florida offered to buy the Highlands property, which was part of the environmentally sensitive Lake Wales Ridge. Though the state's interest in conserving that area had been discussed in Cabinet meetings when he was treasurer, Gallagher said he "had no idea" it included his property.
The Nature Conservancy bought the parcel on the state's behalf in 1996 and 1998 for a total of $3.5-million. Gallagher made $340,000 on his investment.
He also shared in a major charitable deduction after the property was appraised at more than twice the sales price - $7.6-million - right after the transaction. Gallagher was able to spread the $220,000 write off on his tax returns over several years. (In 2005, Gallagher reported charitable deductions of $4,525, including $2,600 to his church.)
Gallagher's second windfall with London came in 2001, while Gallagher was running for chief financial officer. Seventeen years earlier, Gallagher and a couple of doctors had bought an apartment complex in Hialeah from London, who held the $1-million mortgage. The building sold for $2.1-million. Gallagher, who put about $40,000 into the deal, reported a profit of $692,757.
The Gallagher-London relationship was always a two-way street. Over his career in public office, Gallagher has asked London to fill key roles in state-related ventures. As insurance commissioner in 1991, Gallagher recommended London to run a troubled life insurance company on behalf of the state. London's firm earned more than $340,000 for the work. In 2002, Gallagher put London on the board of Citizens Property Insurance, the state's insurer of last resort. After London resigned in August, it was revealed that he had discussed creating a take-out company to pull policies out of the Citizens pool. The company was never formed.
With proceeds from the Hialeah sale, Gallagher bought a 12-unit apartment building in Tallahassee, one of six rental properties he owns in that city. A state fire marshal moonlights as Gallagher's property manager.
Gallagher also lent $52,000 to Ralph Torres, a friend and husband of Tami Torres, spokeswoman for Gallagher's office, who was starting a car repair business. Torres closed the business in 2004 and repaid the loan, but Gallagher immediately reinvested $60,000 in Torres' next venture, a shrimp farming business.
Gallagher also funneled some real estate profits into the stock market. His short-term trading led to more than $57,000 in losses in 2004 and triggered an investigation by the Florida Ethics Commission when it was revealed that he invested in companies with business matters before the state. That investigation is pending.
Ed Slott, a certified public accountant from Long Island who has analyzed politicians' taxes for national publications, was asked by the St. Petersburg Times to review all four candidate's recent tax returns.
"His day trading must have been a horror for his accountant," Slott said of Gallagher. But when it comes to Florida real estate, Slott said the candidate has done everything right.
According to Gallagher's tax filings, tenants cover the holding costs of the properties. Meanwhile, Gallagher accrues passive losses that will offset capital gains taxes when he sells the properties.
"The average person on a salary gets wiped out in taxes," Slott said. "But he shows you can invest in property and build up a nice tax shelter besides your retirement account."
The private sector
Though primarily in real estate, Gallagher has done other things. During his longest break from politics - 1995 through 1998 - Gallagher was involved in several enterprises that leveraged the contacts and experience he gained as the state's powerful insurance commissioner after Hurricane Andrew. But not all his contacts proved beneficial.
After losing the 1994 gubernatorial primary to Jeb Bush, Gallagher took the top job at a Clearwater testing company. The owner was James Bax, a longtime friend whom Gallagher had appointed only a few years earlier to run the state's Joint Underwriting Association. The JUA, created by Gallagher when he was insurance commissioner, was the forerunner to Citizens.
Bax's company, National Assessment Institute, developed state licensing exams for everyone from cosmetologists to contractors. Gallagher joined NAI at $125,000 a year, with an option to buy the company from Bax within five years for $5-million.
"My goal was to clean it up, get it in great shape and sell it in 18 months or so for $10-million," Gallagher said.
But Bax was being investigated for possible misappropriation of funds and bid-rigging while he ran the JUA. The investigation spilled over to NAI, which had its own problems with internal theft and concerns about mail fraud. Nine months after Gallagher took over, law enforcement raided the company. A week later, in November 1995, Gallagher resigned.
No charges were filed against Bax or the company, though Florida officials determined that NAI overbilled the state $155,673 for contractors' exams. The company disputed the claim and it was never pursued in court.
"That was not a whole lot of fun," Gallagher said recently. "There were a lot of politics being played."
Bruised by the NAI affair, Gallagher started Celtic Consulting Inc. in 1997. Lobbying and consulting turned out to be lucrative for Gallagher, who reported his highest income ever, $268,000, the following year.
Still, Gallagher couldn't stay away from politics. By 1999, he was back in office as state education commissioner.
Pete Dunbar, a former Pinellas County legislator and longtime friend of Gallagher's, said he remembered when Gallagher said he wanted to return to politics.
"My response was, 'Are you out of your mind?' " Dunbar said. "When he was out of office he probably made more money with less aggravation than when he was in."
Information from Times researcher Carolyn Edds, Times wires and Times files was used in this report. Kris Hundley can be reached at email@example.com or (727) 892-2996.
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Net worth for 2005: $1.9-million
Assets: $2.6-million includes $1.88-million in eight properties and one yacht, $160,694 in retirement accounts
Chief Financial Officer salary: $127,771
Adjusted gross income: $148,584
Charitable deductions: $4,525