Around Oregon, Special Reports

Smith reports $1 million annual household income – but some sources aren’t clear

State Rep. Greg Smith and his wife are making $1 million a year from sources he doesn’t have to entirely disclose to the public.

Smith, a Republican from Heppner, reported that as his household’s income during a recent investigation by the Oregon Government Ethics Commission. He was absolved of violating Oregon’s disclosure requirements.

But an investigation by the Enterprise raises questions about the source of roughly half a million dollars a year for the Heppner entrepreneur.

Smith’s primary source of income is the consulting company he established just as he took office as a state representative in 2001.

Greg Smith & Company LLC, based in Smith’s home in rural Morrow County, has a long practice of obtaining contracts from government agencies that benefit from state appropriations. At the Legislature, Smith is a powerful force on the budget committee that maps out how state money is spent.

His company’s public contracts give some insight into the firm’s income. Until mid-2022, that included contracts in Malheur County paying his company $180,000 a year.

Under Oregon ethics law, however, he doesn’t have to disclose his consulting clients that have an interest in government business. That means voters don’t have full information about who’s buying his company’s services and whether that could conflict with his service in the Legislature.

He didn’t respond to questions from the Enterprise or to excerpts of this story sent to him ahead of publication to review for accuracy.

“When a public official owns a business, the conflict of interest arises when that business is trying to work with the government.”

–Kedric Payne of the Campaign Legal Center

Smith will have to pull back the curtains on his company by April 15. That’s the deadline to comply with a new Oregon law that requires the most significant disclosure in the country for public officials.

Smith and thousands of other public officials each spring must disclose their major sources of income. They do so by filing a Statement of Economic Interest with the state ethics commission. They are not required to reveal the dollar figure.

The system relies on the honesty of public officials to fully report such matters. The ethics commission performs no audits and investigates only after a formal complaint.

“I have been proud to be a part of the legislative assembly that has put these reporting tools in place to keep the public informed about their elected officials,” Smith wrote the ethics commission last October.

Officials also are required to list on their ethics filing certain businesses to which they were connected. That could mean ownership, a seat on the board or a position as an executive. They have not had to disclose anything more about any such business.

With their next filing due in April, public officials for the first time will have to list certain major sources of income for their business. That requirement is narrow. The identity of a client paying money to a public official’s company doesn’t have to be disclosed unless the customer provides at least 10% of the company’s income and also has some business interest in the official’s government agency.

For example, if a mayor owns a landscaping company, the mayor would have to list any client that provides at least 10% of the company’s income if the client has a contract with the city.

Ethics experts say such disclosure is considered crucial to ensuring honest service by those working in the public sector. Experts spoke generally in interviews with the Enterprise about government ethics. They did not review Smith’s situation.

“When a public official owns a business, the conflict of interest arises when that business is trying to work with the government,” said Kedric Payne. He is vice president and general counsel for the Campaign Legal Center, a national group that works on accountability of public officials and their ethics. He spent five years as deputy counsel in the Office of Congressional Ethics.

“We entrust our public officials to make their decisions for the public interest and not based on personal financial interests,” said Robert Steringer, president of the Portland law firm Harrang Long that advises clients on ethics laws.

“The public intuitively understands the nature of corruption,” said Virginia Canter, chief ethics counsel for the national Citizens for Responsibility and Ethics in Washington. “What is corruption? Using public office for their own personal gain. When they see government officials using their public office for their own or somebody else’s gain, they lose faith. They lose faith in government.”

Smith’s responses to the ethics commission recently provided unusual insight into his personal finances.

He reported last fall that his household’s average gross annual income averaged $1,012,424 per year over the previous four years. The Enterprise reviewed his ethics statements and other public records for the year 2022.

In that year, Smith and his wife Sherri were paid $81,443 from the Oregon Legislature. Smith’s political action committee, funded by campaign donors, paid his wife an additional $20,902 and his consulting company paid her wages of $8,720.

In addition to running his consulting company, Smith also is a full-time employee of the Columbia Development Authority. That entity is helping redevelop a former military base near Boardman. It pays Smith a salary of $144,000.

Such known sources of income amount to just under $300,000.

That means Smith could be receiving profits of as much as $700,000 through his consulting company.

Relying on the known contracts of Gregory Smith & Company, the Enterprise estimated that half the payments represent profit. (That’s five times the profit level for all U.S. corporations in 2022, according to the U.S. Bureau of Economic Analysis.)

Based on that estimate, Smith’s profits from those contracts in 2022 would account for roughly $233,000.

That would leave approximately $490,000 in profits Smith is getting from his company that he doesn’t have to publicly account for in detail.

“When we elect officials or when they are appointed as public servants, we expect them to be serving the public interest.”

–Virginia Canter of Citizens for Responsibility and Ethics

Part of that could profit result from rental properties owned by his consulting company. The company also had a contract with a Hermiston-based utility that neither Smith or the utility will disclose.

The Enterprise provided Smith its detailed analysis leading to that figure. He was asked to provide any clarifying or correcting information. He didn’t respond.

“When questions arise, he owes it to the voters to explain the situation,” said Kate Titus, executive director of Common Cause in Oregon. “Maybe there are plausible explanations. It sure doesn’t look good.”

Oregon’s ethics laws rely on public officials disclosing information to help citizens judge their conduct.

Such disclosures in Oregon and across the country were mandated after the Watergate scandal of the 1970s. Ethics of public officials has drawn significant national attention in recent months, such as the expulsion of former Congressman George Santos and with reports on potential ethical lapses by U.S. Supreme Court Justice Clarence Thomas.

In Oregon, Shemia Fagan resigned as secretary of state in May 2023 while under investigation for taking consulting contracts from a company whose industry was under state audit.

Canter has been working as an attorney in government ethics roles in Washington for 20 years, including at the U.S. Treasury Department and the White House in the Clinton administration.

“When we elect officials or when they are appointed as public servants, we expect them to be serving the public interest,” she said. “That’s what the public is electing or paying them to do.”

Payne of the Campaign Legal Center concurred.

“If you have a person that is supposed to serve your interests that is concerned with their own financial well-being, you are not going to get the public service you deserve,” he said.

Ethics experts say that when public officials manipulate their position, public doubt about government increases.

“If voters had any idea or belief that their elected official does not prioritize the public’s needs, they slowly chip away at their trust in government,” Payne said.

Canter said many federal officials have been prosecuted for failing to fully disclose their interests or conflicts.

“By holding these individuals accountable, this discourages others from engaging in the conduct. It acts a deterrent,” she said.

The Oregon Government Ethics Commission in its guide for public officials notes that the state’s prohibition on officials using their position for personal gain is the “cornerstone” of Oregon ethics laws.

“Also prohibited is using or attempting to use the public official’s position to obtain financial benefits for a business with which the public official, a relative or a member of the public official’s household is associated,” the guide states. “They must keep a separation between their public positions and their outside employment or private business interests.”

Common Cause promotes effective government, lobbying for strengthened ethics laws.

“Elected office is a public trust,” said Titus, the executive director. “Transparency is critical to this.”

A Republican legislator’s business holdings triggered a reform to that disclosure taking effect this year.

In 2017, Democrats accused then-state Rep. Knute Buehler of failing to report all his income sources to state officials. A subsequent ethics investigation established that Buehler was paid $96,000 through a company he owned for consulting and other work for a medical device company. The company reportedly had state contracts.

The Ethics Commission concluded Buehler was required only to report his association with his company, not its sources of income.

Last year, the Legislature reformed the ethics law to address situations such as Buehler’s, passing House Bill 2038. Officials such as Smith now in certain circumstances will have to reveal who is paying their company.

Susan Myers, ethics commission executive director, said officials now will have to report any source of at least 10 percent of company’s income if the source has an interest in doing business with the government over which the official has some say.

The new law allows officials to assert they are prohibited by other laws from disclosing such a business relationship. Myers said that would involve such matters as attorneys who must safeguard client information. She said other state laws might also restrict what client information public officials can disclose.

Contact Editor Les Zaitz by email: [email protected].

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