MONTPELIER — Gov. Phil Scott has sold his share of a construction business and will be paid $2.5 million by the firm over a 15-year period.
Scott, pledging to be transparent and open about the sale, briefed reporters Friday on its terms. Scott had been a half partner in the company, Dubois Construction, which bids on state contracts, before the sale close on Dec. 30.
“I signed a sales agreement and sold my shares back to Dubois Construction,” Scott said.
Scott said he chose to sell his share back to the company and finance it himself. He will be paid the $2.5 million, plus 3 percent interest, over a 15-year period. There was no downpayment in the sale agreement, according to Scott. The company will eventually pay Scott more than $3.1 million, with interest included, at the end of the 15-year loan.
Scott and his cousin, Don Dubois, purchased the company about 30 years ago from family members after Scott attended college. They paid for the company over a 20-year period.
During the campaign, Scott promised to separate himself from the company after political opponents raised questions about potential conflicts of interest related to the country’s business with the state. He said the sale will separate him from the business and allow the company to continue bidding on state contracts.
Jaye Pershing Johnson, Scott’s legal counsel in the governor’s office, said the administration will be following Administrative Bulletin 3.5, which provides documentation of the bidding process for state contracts.
“It provides for a fair and open competitive process for all service contracts. The intent is to guard against favoritism and fraud. It provides all vendors seeking to do business with the state a level playing field and decisions are made with respect to service contracts with the best interests of the state,” she said.
Scott said the bidding process Dubois Construction will continue to use is public, and Vermonters will be able to compare bids to see if the company is receiving any preferential treatment.
“It’s a transparent process. Anyone who has been through the bid process, understands that. It’s very rigorous,” he said.
Pershing Johnson said “the governor’s office doesn’t see contracts” and “doesn’t participate in the bidding process.”
“The governor doesn’t sign on off on contracts. The governor doesn’t participate in the contracting process. That’s all done at the agency level,” she said.
Scott said the company, valued at $5 million, is mostly assets like equipment and property, with little cash on hand. He chose to finance the sale because taking out a traditional loan from a bank would have been a disadvantage to the company.
Construction firms that complete contractual work are required to take out a bond to cover the projects, he said.
“They want first position. They’re the ones that get paid first, so to speak, so if you failed to complete a particular job, the company is pretty much out of business because they take all of your assets. They take everything within the company,” Scott said.
Any lending institution used by Dubois Construction to buy out Scott’s half of the company would also want first position if something went wrong.
“If you’re attempting a loan with typical financing from the bank they like to come in first. They want a first position as well. So, if you allow them to have first position, you wouldn’t have the bonding capacity and you wouldn’t be able to continue work,” Scott said. “To complete a sale of this nature, for me to get my 50 percent share immediately, would have meant selling, having an auction selling off the business and then selling off the real estate because the business couldn’t survive with half of that.”
Additionally, the company was not in a position to simply write Scott a check for his half because “most of the assets of the business were tied up in the equipment and land and businesses.”
“Some would say why not just write a check if you’re getting out of the business? Why not write a check for $2.5 million and be done with it?” he said. “There’s no cash in the business. It’s all in assets and buildings and equipment and bulldozers and excavators and trucks and so forth. That’s it.”
Scott acknowledged that he still has some financial stake in the company until he is fully paid for his share. “Dubois Construction owes me money. Yes, I do,” he said.
If the company were to fail, Scott said he “would be there trying to get my money,” and the company “would have to liquidate” to settle its debts.
“They would have to do whatever they could to come up with the resources to pay everyone off, just like any other business,” he said.
Still, Scott said he came into the business “without anything” and is prepared to lose it if something goes wrong.
“I wouldn’t want this to happen, but I’m not going to live or die over getting paid. Money isn’t everything to me. I came into that business with nothing, if I left that business with nothing I could live with the consequences,” the governor said.
An existing code of ethics for executive branch officials states that no full-time appointee “shall be the owner of, or financially interested, directly or indirectly, in any private entity or private interest that is subject to the supervision of his or her respected department or agency.” Scott said his arrangement with Dubois Construction falls within the code’s parameters.
“I believe it does,” he said.
Not everyone agrees, however. Vermont Democratic Party spokesman Christina Amestoy criticized Scott’s arrangement with the company Friday, saying it does not eliminate potential conflicts.
“When Governor Scott agreed to sell his shares in Dubois Construction, he did so because of concern over the blatant conflicts of interests that would exist if he was elected. It was the understanding then and remained our hope that this sale would be done in a way that completely removed Scott from the interests of DuBois, including financial interests,” Amestoy said. “This is, unfortunately, not the case under his plan to finance the sale of his 50 percent share over a 15-year term. Transparency and faith in government were key planks in Governor Scott’s campaign, and moving forward we hope he and his administration take all available steps in promoting these goals.”
Scott also disclosed Friday that he will rent a two-car garage for storage that is owned by Dubois Construction for $250 per month.
“I have stuff that I need to put somewhere,” he said.