Regulator, experts: State lawmaker’s explanation for incomplete ethics filing falls short

By: - January 23, 2020 1:34 pm

Law “is clear” Rep. Holly Grange should have reported on businesses owned by her husband even if they were inactive

Last week, Policy Watch reported that state Rep. Holly Grange (R-New Hanover) failed to disclose a business owned and operated by her husband on Statement of Economic Interest (SEI) forms for several years.

This week, as the North Carolina lawmaker offered a defense experts said is incompatible with the law, Policy Watch reviewed two more undisclosed Grange family businesses.

In 2015, Rep. Grange’s husband, David Grange, registered Coastal Osprey CCR LLC with the North Carolina Secretary of State’s office, listing himself as manager. The next year, he filed to change the name of the business to Coastal Osprey Holdings AAC LLC. David Grange filed paperwork to dissolve the business at the end of 2016. The business did not appear on Rep. Grange’s ethics disclosure forms in 2016 or 2017, as would have been required by law.

And in May 2016, David Grange registered Osprey Development Group with the North Carolina Secretary of State’s office, listing himself as its organizer and registered agent. He filed paperwork to have the business dissolved in September 2017. The business did not appear on Rep. Grange’s ethics disclosure forms in 2017 and 2018, as would have been required by law.

Rep. Grange has not responded to Policy Watch’s questions about any of these businesses or her failure to disclose them.

In North Carolina, public officials are required to disclose connections to all non-publicly owned companies they or their immediate family members own, operate, are employed by or in which they have an interest. The goal of SEI forms is to give the public as complete a view as possible of a candidate or official’s connections to businesses that could potentially cause a conflict of interests.

As reported by Policy Watch last week, David Grange registered his “consulting” business Osprey at Compass Pointe LLC with the state Secretary of State’s office in July 2015. Yet the business did not appear on Rep. Grange’s SEI form in 2016, when she was first appointed to a state House seat to replace incumbent Rick Catlin. She ran unopposed for the seat in that year’s election. Rep. Grange also did not list the business on her SEI forms in 2017 or 2018. In February 2018, the business was administratively dissolved by the Secretary of State’s office for failure to file an annual report.

Rep. Holly Grange

Rep. Grange, now a GOP candidate for governor, also did not disclose the business on her 2019 SEI form. As the law requires annual disclosure of connections to businesses through December 31 of the calendar year, it appears Osprey at Compass Pointe LLC should have been reported on Grange’s SEI forms from 2016 through 2019.

Rep. Grange did, however, respond when asked about Policy Watch’s initial story in a recent television interview with CBS17.

“This particular business never had any business conducted under it, nor did it have any assets,” Grange said of Osprey at Compass Pointe LLC. “I’m required to report in my SEI businesses that I, or a family member, have a material interest in. So, there was no material interest in this particular business, so I was justified in not listing it on my report.”

Grange’s description of the law does not, however, match what North Carolina statutes or the SEI forms say, ethics disclosure experts told Policy Watch this week.

“The Language is Pretty Clear”

Kathleen Edwards, interim director of the State Ethics Commission, said her office conducts investigations based on complaints. It does not generally comment on whether someone should have disclosed a business on their SEI forms. (As Policy Watch reported last week, the Commission has a small staff that is incapable of auditing all of the candidates it is charged with overseeing.)

However, Edwards did clarify that a business having assets or representing a ‘material interest’ to a candidate or public officials is not the threshold that determines whether a business should be disclosed.

“The language is pretty clear,” Edwards said. “The SEI provisions pretty clearly track to the statutory language.”

Edwards referred to North Carolina General Statutes, Chapter 138A – The State Government Ethics Act.

The applicable part of that act, Edwards said, is 138A-24(a). This subsection lays out the various things that should be disclosed with language that appears almost exactly on the SEI forms. While there are parts of the subsection that also require disclosure of businesses from which those filing draw salaries or from which they have made a certain amount of money, the most applicable item to Grange’s case is 138A-24(a)-15, which requires disclosure of:

“The name of each business with which associated that the filing person or a member of the filing person’s immediate family is an employee, director, officer, partner, proprietor, or member or manager.”

That language is almost exactly replicated on question 9(a) on the SEI long form.

That disclosure is required, Edwards said, regardless of how active the business is, whether it has any assets or has made any money. Having disclosed businesses that have assets, made money or from which a candidate or their family draws a salary does not mean they do not have to comply with the law.

“There’s no monetary threshold,” Edwards said.

Not for candidates to decide

Jane Pinsky, N.C. Coalition for Lobbying & Government Reform

Jane Pinsky has been director of the nonprofit N.C. Coalition for Lobbying & Government Reform since 2007. She said she’s never before heard a public official assert, as Grange does, that they do not need to disclose a business unless they themselves determine it to have important business, assets or monetary value.

“That’s not what the statute says and I don’t think that’s the purpose of the law,” Pinsky said. “It says tell us about everything, basically. Whether something has a value or has done business that could be a conflict – that’s for the (state) ethics commission to decide. It’s not for candidates or elected officials to decide ahead of time what is worth telling the public about.”

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People with complicated business lives may have businesses that are registered but don’t do much or any business, Pinsky said, but that doesn’t mean they never will. Constituents need to be able to see all of the businesses with which a public official or their immediate family are associated however successful they are, Pinksy said, in order to independently determine whether a conflict or inappropriate business relationship exists.

“If they make the decision whether to disclose something, on whether they think it’s important or not, you’d just have to hope they’re going to make the right decision,” Pinksy said.

Pinsky said she thinks of Paul “Skip” Stam, a former Republican House member, as “the gold standard” in terms of ethics disclosures. He would rather recuse himself from a vote on the entire state budget than have the appearance of impropriety if a part of the budget might benefit him financially, Pinksy said.

During his time in the North Carolina House, Stam co-sponsored a number of bipartisan bills on ethics reform – including proposals to expand disclosure requirements.

Reached by Policy Watch this week, Stam said he has not followed Grange’s case closely but believes candidates and public officials of all political stripes should disclose everything they possibly can to avoid conflicts or the appearance of conflicts.

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“The purpose of the requirement is to see everything,” Stam said. “It certainly does not require that the entity make money. It may look like there’s no real purpose in knowing about paper shell companies that didn’t do anything, but just because something didn’t make any money or didn’t have any assets doesn’t mean it didn’t do anything.”

It can be easy to be confused by what should be disclosed o,r confused about what counts, Stam said, particularly for those whose families have a complex business portfolio. As an attorney in private practice, Stam said, he sees that all the time.

“Part of the problem is, while many of us have fairly simplified lives, other people who are in different parts of business might have to spend a long time filling those out accurately,” Stam said. “I do have clients who, in discovery, we have to list all their companies or something. They’ll tell me about three or four and later I’ll find out about three or four others and they’ll say, ‘Oh, we never did anything with that.’”

“I think that’s a human thinking thing,” Stam said. “That if it wasn’t significant to them, they don’t think about disclosing it.”

Paul “Skip” Stam, a former Republican House member (Photo courtesy of the Locke Foundation)

That’s not an excuse for Grange or anyone else to fall short on disclosures, Stam said – including Gov. Roy Cooper, who Stam pointed out has faced his own accusations regarding ethics disclosures involving family members.

“But it’s understandable why somebody might think they don’t have to disclose certain things,” Stam said. “I would guess [Grange] will be advised to the contrary and will fix it.”

Fixing it

Mistakes and oversights do happen, Edwards said.

“I think it’s pretty clearly set out in the form what needs to be disclosed,” Edwards said. “But it’s a lengthy form, it changes gears quite a bit – there are standards that are financial in scope and some that aren’t, there are different time periods covered. So people do have to pay pretty close attention to the form. But that’s the nature of the statute.”

The State Ethics Commission makes it as easy as possible to correct them, she said, however they occur.

“Our staff here at the ethics commission are always available to answer questions about whether something fits or should be disclosed,” Edwards said. “If people overlook something or they don’t disclose what they should, we try to facilitate the amendment of these disclosures.”

“If you file electronically and you believe you need to disclose something or you’ve overlooked something, you can log on and amend your form that way,” Edwards added. “If you file manually, which many people still do, you just need to contact the staff here and they’ll provide a supplement to the form.”

At press time, Grange had not yet availed herself of any of those options.

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Joe Killian
Joe Killian

Investigative Reporter Joe Killian's work examines government, politics and policy, with a special emphasis on higher education, LGBTQ issues and extremism.