Oregon Secretary of State Shemia Fagan is embroiled in a scandal over her decision to take on outside consulting work for a big player in the cannabis industry – and a big Democratic donor – while her staff finished an audit suggesting looser regulation on cannabis businesses.
Fagan apologized for her decision to moonlight on Monday, terminated her contract with the cannabis company and promised to work to rebuild trust with Oregonians.
Still, she’s under intense political pressure and this story continues to develop. Here’s a rundown of the basics:
Oregon Secretary of State Shemia Fagan poses for a photo.
Courtesy of Oregon Secretary of State's office
Who is Shemia Fagan?
Fagan is a former state legislator and private attorney who was elected to the state’s second-highest executive office in 2020. She’s a progressive Democrat who helped push the Oregon Senate to the left and appeared poised for a future campaign for governor.
In explaining her decision to take an outside consulting gig, Fagan said she simply could not pay her bills on her $77,000-a-year state salary.
Fagan, a single mother with two children, grew up poor. On the campaign trail, she’s talked about watching her mother grapple with substance addiction and homelessness. In her apology press conference on Monday, she noted that when she opted to leave a retail job she took after college for law school, her father could not understand why she would give up work that paid $63,000 a year.
And she said she recently took outside work, including the cannabis consulting contract and a teaching gig at Willamette University because she needed the money.
“I’m starting over financially after a divorce. I have two young kids. I have student loans and other bills,” she said. “I’m a renter in the expensive Portland metro area, and I’m the sole income earner in my household.”
Willamette Week, which broke the news of her consulting contract last week, reported over the weekend that Fagan had faced significant financial problems in recent years.
What outside work did she take on?
Earlier this year, Fagan signed a contract with Veriede Holding LLC, a subsidiary of La Mota, one of the state’s most active and growing cannabis companies.
The contract is vague on details, but Fagan said she agreed to help Veriede understand cannabis regulations and the pathways to licensure in states outside Oregon. She said the bulk of her work involved research, something she felt uniquely qualified to do given her background as a lawyer.
In the contract, La Mota’s owners pledged to pay Fagan $10,000 a month in base pay and $30,000 for each license she successfully helped them land in any state other than Oregon and New Mexico.
That means La Mota agreed to pay Fagan the equivalent of at least $43,000 more than her annual state salary for what she said amounted to about 15 hours of work a week. Fagan said on Monday that she viewed the amount as reasonable and in line with the typical going rate for consultants with her background.
It’s unclear whether La Mota executives expected more from Fagan down the road. She said on Monday that she gave up her Oregon Bar Association membership when she became secretary of state but has filed the paperwork to be reinstated so she can practice as a lawyer.
Fagan told reporters on Monday that she had spoken to the lieutenant governor in Connecticut as part of her research.
“I talked to a friend of mine in Connecticut just to ask who would be someone for a cannabis company to talk to if they wanted to get the lay of the land,” she said.
Fagan said it was “not an expectation” that she would tap her contacts in other states, and that she didn’t contact anyone in her official capacity. As secretary of state, Fagan is second to the governor in the line of succession. In her role, she has met both secretaries of state and lieutenant governors around the country.
Why is this controversial?
As secretary of state, Fagan oversees Oregon’s elections and a team of auditors who regularly examine state policies and agencies and recommend fixes or improvements. Auditors do not have the power to change state rules, but their findings are taken seriously by lawmakers, agency heads and the governor.
Her department’s most recent audit, which came out last week, strongly suggested Oregon needs to loosen regulations on the cannabis industry given the ways the market has changed since recreational cannabis first became legal here in 2014.
Fagan notes that she recused herself from the audit on Feb. 15, just days before she signed the consulting contract. At that point, auditors were in their final stages of work, and a draft of the audit had already been sent to the Oregon Liquor and Cannabis Commission – the agency that oversees cannabis in Oregon – for its response.
But Fagan also ordered the audit two years ago; she’s said she did so “at the request of numerous industry professionals in Oregon.” Records have shown that Fagan repeatedly asked aides whether they had spoken to a co-owner of La Mota earlier in the auditing process.
Who hired Fagan?
La Mota is owned by Rosa Cazares and Aaron Mitchell. They’re increasingly influential political donors who have hosted fundraisers for Fagan and other top Democrats and contributed hundreds of thousands of dollars to help elect Democrats over the past few years.
Fagan said she first met Cazares and Mitchell in 2020 after she’d announced her campaign for secretary of state. She knew the couple socially as well as politically because, among other factors, they had children around the same age.
Fagan said the idea of her working for Cazares and Mitchell came up earlier this year when she mentioned in passing that she was excited to begin teaching a Willamette University class because she needed supplemental income.
Cazares and Mitchell have been the subject of a string of stories by Willamette Week detailing their failure to pay millions of dollars in taxes and being accused of stiffing vendors even as they became influential political donors. A host of Oregon Democrats have given recent donations from La Mota to charity in recent weeks. On Monday, Fagan said she would give money donated by the couple to her campaign to the Oregon Humane Society.
What happens next?
Republican leaders have called on Fagan to resign. Fagan never directly addressed those calls but she said late Friday that she welcomed scrutiny of her decision-making, arguing she had done her due diligence researching the legalities.
Gov. Tina Kotek, a fellow Democrat, has asked for investigations by the Oregon Government Ethics Commission and the Oregon Department of Justice.
The ethics commission will examine Fagan’s actions to determine whether she violated any state rules regarding conflicts of interest or the use of government office for personal gain. The Justice Department will look at the audit and its findings.
Fagan is up for reelection in 2024.