Conflicts of Interest with Own Business Interests
By Craig Holman
Feb. 19, 2020
Dear Ethics Commission:
Public Citizen requests that the Maryland State Ethics Commission investigate whether Gov. Larry Hogan has been, and continues to be, in violation of sections 5-501 (“Restrictions on participation”) and 5-502 (“Employment or financial interests – General restriction”) of the Maryland Public Ethics Law and 19a.02.02.05 (“Disclosure requirements”) of the Code of Maryland Regulations for:
- Participating in official actions directly and substantially affecting the personal financial interests of himself and immediate family;
- Failing to establish an adequate blind trust to properly distance his office from his financial interests; and
- Neglecting to disclose the conflicts of interest on a timely basis.
Public Citizen, Inc. is a nonprofit corporation exempt from federal income taxation under Section 501(c)(4) of the Internal Revenue Code.
Founded in 1971, Public Citizen, Inc. is one of the leading nonprofit public interest advocacy organizations in the country, conducting federal and state policy advocacy and litigation to strengthen ethics and accountability involving unchecked government and corporate power. Public Citizen has more than 500,000 members and supporters nationwide, including more than 13,000 members and supporters in the state of Maryland. Our Maryland members are harmed by lax ethics rules and by the violation of existing ethics laws and norms, as exemplified by the conduct described herein.
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Governor Lawrence J. Hogan, Jr.
100 State Circle
Annapolis, MD 21401-1925
Conduct Violating Maryland’s Public Ethics Law
Under the state’s Public Ethics Law, Maryland recognizes “that our system of representative government is dependent on maintaining the highest trust by the people in their government officials” and that “the people have a right to be assured that the impartiality and independent judgment of those officials and employees will be maintained.” Section 5-102. Furthermore, “the people’s confidence and trust are eroded when the conduct of the State’s business is subject to improper influence or even the appearance of improper influence.” Id.
One of the most important rules in the existing Public Ethics Law states that “an official or employee may not participate in a matter if…the official or employee or a qualifying relative of the official or employee has an interest in the matter.” Section 5-501. A “qualifying relative” includes a brother. Section 5-501(gg). An “interest” is “a legal and equitable economic interest that is owned or held wholly or partly.” Section 5-501(t). A “financial interest” includes an “interest…in which the owner…is currently receiving…more than $1,000 per year” or owns “more than 3% of a business entity.” Section 5-501(n).
Respondent Governor Lawrence J. Hogan, Jr. appears to have violated the state’s Public Ethics Laws through his personal participation in official State decisions that conflicted with and would benefit his own economic and financial interests. Specifically, contrary to the law and explicit written guidance from the State Ethics Commission, Governor Hogan directly participated in making a major change in the 2015-2020 Capital Transportation Program and related 2015 transportation budget that benefited his own personal financial interests, i.e. expediting construction and designating $58.2 million in new funding for an interchange and park-and-ride lot in Brandywine, Maryland. The Governor’s decision predictably enhanced the development value of several parcels of land that he and his HOGAN companies accumulated in the immediate vicinity of the new State transportation project. The Governor did not recuse himself from this matter, and did not inform the Maryland General Assembly of his financial conflict of interest in seeking approval of the new taxpayer funding for the State project.
Respondent was elected governor of Maryland on November 4, 2014. In November and December, 2014, according to “a source familiar with the situation,” Governor-Elect Hogan personally participated in meetings where the decision was made to make a major change in the Capital Transportation Program to expedite construction of a new $58.2 million interchange in Brandywine, Maryland. Previously, when former Governor Martin O’Malley released the DRAFT CONSOLIDATED TRANSPORTATION PROGRAM FY 2015-2020, the Brandywine interchange project was in the Development and Engineering phase and was not mentioned. This project apparently was the ONLY project moved by Governor Hogan from the Development & Engineering phase into Construction from the draft plan released months earlier.
Respondent Governor Hogan presented the Brandywine project as part of his 2015 Budget to the Maryland General Assembly during the 2015 Legislative Session, apparently never disclosing his personal financial conflicts of interest and involvement. As reported: “Multiple legislators said they were not informed of the governor’s nearby real-estate interests before voting on his transportation budget. ‘I certainly had none of this information when working on the budget committees or in discussions, said [Maryland Senator] Bill Ferguson….Had I known this information, I think there would have been much more targeted and purposeful questions about the necessity of projects that appear to have a financial benefit to the governor.’’ The Governor’s Budget – with the final $55.7 million in taxpayer funding for the Brandywine project – was approved by the Maryland General Assembly in April, 2015.
Respondent, including through his HOGAN business, has had “a history of investing in the area surrounding the Brandywine project that dated back to 2003.” See, e.g., Hogan Companies Deeds in Brandywine, MD (Appendix A). On March 9, 2015 – months after Respondent expedited the Brandywine project and a month before the Legislature approved new $55.7 million in funding for it – HOGAN real estate lawyer Bryan Hyre chartered the Brandywine Crossing Realty Partners, LLC.  This LLC “bought 12.5 acres on Matapeake Business Drive, behind the Brandywine Crossing shopping center,” close to the Brandywine project that Governor Hogan expedited into construction and budgeted for $58 million in new funds.
In addition to the Brandywine interchange, Respondent and his appointees have “advanced a number of other improvements in the same vicinity, including the construction of embankments, exit ramps, and median piers; pavement upgrades; a new park-and-ride lot, and a bridge.” A HOGAN vice president reportedly conceded that the state’s Brandywine project and other improvements “are incredibly important to facilitating new development” and contributes to land value, contributes to access, of course.” HOGAN – in which Respondent maintains his ownership interest – has increased its holdings to take advantage of the Brandywine project and improvements, including a $2.2 million investment in early 2017 and a $1.2 million purchase of 14 additional parcels of lands in the area.
Respondent founded and served as president and CEO of The Hogan Companies (now HOGAN), which describes itself as “the leading land firm in the state of Maryland” and is based in Annapolis. After his election, Governor Hogan maintained his financial and development interests in HOGAN, appointed his brother Timothy as president and earned more than $2 million in income from these investments during just the first three years of being Governor.
Respondent’s wide-ranging real estate development and permitting financial interests lead to frequent conflicts of interest and concerns about impartial and independent judgment by him and his appointees with respect to the duties of the governor of Maryland concerning transportation, environment, affordable housing and other development decisions. After his election, Respondent sought and was granted informal guidance by the State Ethics Commission (hereafter Commission).
On January 22, 2015, the Commission wrote to counsel for Governor Hogan that because it might take several months to “address potential conflicts relating to his business interests,” the Commission would issue interim guidance. The Commission then specifically instructed the Governor’s counsel that the Law, in relevant part, prohibited an official from participating in a matter in which he or his sibling has a financial interest. The Letter then states: “Given these limitations, the Governor should not personally participate in any matter that may come before him or a State agency that involves the businesses, or any matter in which he or any of his qualifying relatives or a company that employs them have an interest.” The Letter also states: “The Commission has determined that participation includes supervision of others involved in a matter.”
The full force of Maryland’s Public Ethics Laws – as stated clearly and specifically in the Commission’s Letter to counsel for the Governor dated January 22, 2015 – applied to Respondent’s participation and to his supervision of others concerning the conduct in this Complaint, which occurred during late 2014 and well into 2015. It was not until September 10, 2015, that the Commission “granted Governor Hogan a financial interest exception,” which the Commission confirmed on April 22, 2016.
Public Citizen further requests that the Maryland State Ethics Commission re-evaluate its “financial interest exemption” granted to Hogan based on the trust arrangement. Maryland Public Ethics Law posits that “blind trusts” may be a means for an officeholder to help ameliorate conflicts of interest. Section 5-608. The problem is that this exemption is being used by Governor Hogan to continue down the course of taking official actions that appear to pose ongoing and substantial conflicts of interest. Hogan’s trust is anything but blind. The trustees chosen by Hogan to run the enterprise are close business associates, while Hogan’s brother, Timothy, remains in charge of the company. Governor Hogan is kept abreast of all investments and financial interests of the trust – knowledge that can be used to shape official actions in his own interest – and the Governor remains in close contact with the trustees.
The Commission should return to its cautionary advice on how an exemption should not set the stage for further abuses. “Even when the Commission grants an exception or exemption, all of the other provisions of the Ethics Law continue to apply,” the commission wrote in an August 2019 memo to state workers. “For example, the employee or an official may not participate in any matters on behalf of the State relating to the employee’s secondary employer or entity where the ownership interest lies even if the Commission grants an exemption or exception.”
In the Commission’s specific guidance to Governor Hogan for not running afoul of the exemption, the Commission stated that Hogan could, and should, identify “a specific person within the Governor’s Office to act in his place on any such matters that come to the Office while he continues to retain his financial interest in his businesses.” Yet, Hogan has not recused himself from any official actions to date.
Based on the foregoing available evidence and reasons, Complainant respectfully requests that the Commission investigate the potential conflicts of interest described in this Complaint. If the Commission determines that the Governor’s conduct violates Maryland’s public ethics laws, Complainant respectfully requests that the Commission provide appropriate sanctions and inform the public of all possible conflicts of interest. This will help assure the public that Governor Hogan and the state officials he supervises will from hereon carry out their duties impartially, with independent judgment and without actual or perceived improper influence affecting state decisions.
Craig Holman, Ph.D.
Government affairs lobbyist
1600 20th Street, N.W.
Washington, D.C. 20009
 Eric Cortellessa, Who Does Maryland’s Governor Really Work For? Washington Monthly (Jan/Feb/March 2020), at https://washingtonmonthly.com/magazine/january-february-march-2020/who-does-marylands-governor-really-work-for/
 Compare DRAFT CONSOLIDATED TRANSPORTATION PROGRAM (September 2014) at p. A-3 and CONSOLIDATED TRANSPORTATION PROGRAM (January 2015), http://www.mdot.maryland.gov/newMDOT/Planning/CTP/Previous_CTP_Index.html at p. A-4.
 Cortellessa, op.cit.
 Cortellessa, op.cit.
 See Appendix B and Note 1.
 See Edward Ericson, Jr., What Gov. Hogan’s Ethics Disclosures Tell Us – and What They Don’t. Maryland Matters (Feb 27, 2018).
 Cortellessa, op.cit.
 Cortellessa, op.cit.
 Cortellesa, op.cit.
 According to its website, HOGAN has completed more than $2 billion in real estate transactions, including getting Maryland state and local governments to issue permits for its clients. http://hogancompanies.com/about_us/
 See Luke Broadwater, While he’s been governor, Larry Hogan’s real estate business has continued to thrive – prompting questions, Baltimore Sun (Feb 27, 2018) at https://www.baltimoresun.com/politics/bs-md-ci-hogan-business-20180708-story.html
 See Letter to Robert Scholz, Esq, Office of the Governor from Michael W. Lord, Executive Director of the Commission dated January 22, 2015 (Appendix C).
 Letter to Robert F. Scholz, Chief Counsel, Governor’s Legal Office from Jennifer K. Allgair, General Counsel for the Commission, dated April 22, 2016 (Appendix D). While Complainant disagrees with the resolution of this matter, it is irrelevant to this Complaint which involves conduct that occurred during the time of the Commission’s explicit interim guidance and before even the September 2015 granting of a conditional “financial interest exemption.” To preserve the argument for now and in the future, Complainant believes the Commission erred in providing a financial interest exemption; in not requiring divestment or a blind trust; in relying upon a Trust Agreement overseen by Respondent’s close business associates; in permitting Respondent to know the location of property investments and identity of investors; in apparently relying upon a non-monitored self-enforcement scheme; and in keeping from Marylanders, policy makers and the media important matters of public interest by using a confidential “informal advice request” process. See Letter to Michael W. Lord, Commission Executive Director, from Governor Larry Hogan dated April 11, 2016 (Appendix E).
 Cortellessa, op.cit.
 The financial disclosures provided to date by Respondent to the Commission do not provide the location of real properties, identity of investors or other sufficient detail underlying his financial interests to disclose Respondent’s possible conflicts of interest. See https://ethics.maryland.gov/enforcement/ and Purpose 1 of Financial Disclosures, at https://ethics.maryland.gov/wp-content/uploads/filebase/state-employees/General-Information-Ethics-Law.pdf
 See Title 5, Subtitles 4 and 9 of the Public Ethics Laws.