Gov. Kotek calls for investigation after Fagan recusal from cannabis audit

PORTLAND, Ore. (KOIN) – Governor Kotek is calling for an investigation after Secretary of State Shemia Fagan voluntarily recused herself from a state audit on the cannabis industry -- citing a potential conflict of interest with her paid consulting contract with Veriede Holding, LLC -- an affiliate of cannabis company La Mota.

In a statement to KOIN 6 News, Gov. Kotek said “it’s critical that Oregonians trust their government. That is why I am urging the Oregon Government Ethics Commission to immediately investigate this situation. Additionally, I am requesting that the Oregon Department of Justice examine the Secretary of State’s recently released audit of the Oregon Liquor and Cannabis Commission (OLCC) and its cannabis program."

In a statement, Fagan reiterated that she had not broken ethics laws and that she welcomes the investigation, as first reported by Willamette Week.

"I'm happy to share that I do non-legal consulting work gathering information and resources on the cannabis industry outside of Oregon. The company contracted with me and others to review the landscape for expanding their operations outside of Oregon," Fagan said in part. "The nature of the contract and the work does not create a conflict of interest under Oregon law or ethics rules. However, as soon as I contemplated the contract and learned that recusal was an option (it is not for legislators), I recused myself from my only work as a public official that touches the cannabis industry, the OLCC audit."

“I welcome Governor Kotek’s request to DOJ to review the audit because it will simply highlight the professional work of Oregon’s auditors," Fagan continued. "I am relieved that the Governor has asked DOJ and the Government Ethics Commission to engage in fact finding because the facts will restore trust in our audits division and in me as your Secretary of State.”

The audit was released on Friday by the Oregon Liquor and Cannabis Commission and concluded that Oregon needs to modernize cannabis laws to help the industry navigate federal laws against marijuana. The audit calls on the state to look at ways to ensure equitable opportunities for the distribution of marijuana licenses after a moratorium is lifted.

In her statement, Fagan said her office conducted the OLCC audit after hearing concerns about the agency from some cannabis businesses.

"At the request of numerous industry professionals in Oregon, two years ago I asked the Audits Division to audit the OLCC. Auditors followed their standard practice and periodically updated me about the audit.  In all the agency’s audits, auditors speak with dozens of sources, never relying on any one individual source and ultimately, they decide the scope of any audit and its findings," Fagan said.

In a February 15 letter to her staff announcing her recusal, Fagan stated, “I do not believe a real conflict exists because any action required would be taken by the legislature or OLCC and any benefit could flow to all cannabis companies in Oregon, not this specific company.”

The secretary added that she recused herself to avoid potential conflict of interest, her office said in a statement, which was first reported by Willamette Week.

In a statement to KOIN 6 News, a spokesperson for Fagan said “the Oregon Government Ethics Commission Guidelines specifically allow public officials to maintain private employment. The practice is very common among legislators."

The announcement of the recusal comes as a recent KOIN 6 News investigation found La Mota owns an abandoned squatter house in Portland.

This is a developing story.