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Politics

Panel likely to drop Gallagher ethics case

Complaints were raised about stock trading by the former candidate for governor.

By STEVE BOUSQUET
Published June 8, 2007

TALLAHASSEE -- A stock-trading ethics case that hobbled Tom Gallagher's campaign for governor last year is expected to be dismissed in his favor today by the Commission on Ethics.

A dismissal of charges, nine months after Gallagher's landslide loss to Charlie Crist in the 2006 Republican primary for governor, would be a measure of vindication for the ex-chief financial officer. He served in various posts for more than three decades and ran for governor four times.

Gallagher's campaign was rocked by a St. Petersburg Times report in January 2006 that over several years he traded stock in companies in which he exercised oversight as a state official. He used an online investment account and did the trades from his Capitol office.

Those revelations triggered two ethics complaints, but Gallagher maintained he did nothing wrong by investing in two insurance companies, Conseco Inc. and Penn Treaty American Corp., while he was Florida's insurance commissioner.

Both companies owned subsidiaries that sold policies in Florida in 2002 and were regulated by the insurance department Gallagher headed at the time. His lawyer asked the Commission on Ethics to rule on the propriety of those holdings.

Gallagher declined to comment until the commission votes today.

"I think I'll wait and let them do what they're going to do before I comment," he said.

In the end, what spared Gallagher further legal trouble is what's known as "the 1 percent rule."

Past interpretations of Florida's ethics laws, which often guide future rulings, have concluded that a potential conflict of interest only arises when a public official owns at least a 1 percent stake in a company doing business with the state.

Gallagher never owned more than 3,000 shares of Conseco stock, which equated to 0.009 percent of the firm's outstanding shares, according to the ethics commission investigation. The value of his holdings in Conseco ranged between $9,630 and $13,000, based upon data on the stock price while he owned it.

His 7,000 shares of Penn Treaty stock amounted to 0.036 percent of that company's outstanding shares. The value ranged between $121,000 and about $182,000, based upon historical data.

Gallagher lost $1,020 on the Conseco shares and made $7,206 on the Penn Treaty stock, the investigation found.

As the case swirled about through last year's campaign, then-Gov. Jeb Bush said that the 1 percent threshold was too high and that elected officials should put their assets in a blind trust.

Indeed, a 1 percent stake in Conseco at the time would have been worth about $13-million, and in Penn Treaty, nearly $4-million.

In the final statewide debate between Crist and Gallagher last August, Crist told viewers Gallagher was "awaiting trial" on ethics charges.

In response, Gallagher's campaign manager accused Crist, a lawyer and state attorney general at the time, of misrepresenting the facts of the case.

Like Gallagher, Crist declined to comment Thursday, pending an ethics commission vote.

"I will await their decision in fairness to them," Crist said.

The proposed agreement between Gallagher and the agency, to be voted on by the nine-member ethics commission, recommends the case be dismissed for three reasons.

They are that the values of Gallagher's stock in the companies was "minimal," that he disclosed them on financial disclosure forms and that no evidence existed to show Gallagher gave preferential treatment to the firms or the subsidiaries.

"Respondent's Gallagher's ownership of the referenced stocks did not involve an abuse of his position," the recommendation states.

The bipartisan commission has the power to reject the recommendation, but that's not likely because Gallagher no longer holds public office.

"The public interest would not be served by proceeding further," the report states.

The panel's chairman, Fort Lauderdale lawyer Norman Ostrau, while not commenting directly on Gallagher's case, said he believes the 1 percent rule should not necessarily be applied so rigidly in ethics cases.

"It should be an index to look at. It should not be absolute," said Ostrau, a former Democratic state legislator.

Last July, the ethics commission dismissed one complaint involving Gallagher's stock holdings in three publicly traded stocks: AES, AirTran and Brown & Brown.

As part of that decision, the watchdog agency found probable cause that Gallagher's purchase of Conseco and Penn Treaty shares may have violated state law.

Gallagher's attorneys challenged that decision, saying the ethics commission exceeded its authority by reinterpreting earlier advisory opinions without adopting them through a process known as administrative rulemaking.

Settlement talks between the two sides ensued, resulting in the stipulation awaiting today's approval.

The settlement document noted that even Gallagher agreed that, "in hindsight," he should have asked for legal advice on "the ethical propriety of owning stock in companies whose subsidiaries are regulated by the Department of Insurance prior to the purchase of the stock."

Steve Bousquet can be reached at bousquet@sptimes.com or (850) 224-7263.

[Last modified June 8, 2007, 00:45:45]