Before being confirmed as Trump’s Secretary of Transportation, Elaine Chao signed an ethics agreement in 2017 pledging to divest of all interests in Vulcan Materials Co., one of the country’s largest suppliers of asphalt materials used for paving and building roads, such as crushed stone, sand, and gravel, the Wall Street Journal reports.
According to the ethics agreement Chao signed, Chao “would receive a cash payout in April 2018 in exchange for the deferred share units she earned while serving on the board, effectively severing her financial ties to the company” and until that payout she “will not participate personally and substantially in any particular matter that to my knowledge has a direct and predictable effect on the financial interests of Vulcan Materials.”
This was the deal Chao agreed to for her confirmation and what was told to the US Senate, but according to the Department of Transportation (DOT) spokesman now, “the ethics agreement was flawed, because Vulcan’s policy calls for directors’ deferred share units to be paid out in shares of company stock,” which Vulcan confirmed was paid to Chao last year.
The DOT’s top ethics official has determined that owning the shares doesn’t present a conflict of interest for Ms. Chao, who has disqualified herself from participating in matters involving Vulcan and will continue to do so, the DOT spokesman said. The spokesman said the language of the 2017 ethics agreement “is being clarified to avoid confusion.”
Ms. Chao’s decision to retain the shares and recuse herself from matters that might affect Vulcan stands in contrast to the way previous transportation secretaries have handled potential conflicts of interest.
“The Vulcan spokesman said the company discussed whether to accelerate the distribution of shares to Ms. Chao, which would have enabled her to sell her stake as soon as she was confirmed to the DOT, as other officials have. The company’s lawyers advised that was discouraged by tax laws. The company hasn’t lobbied DOT since Ms. Chao was named to head the agency, he said.”
Ms. Chao’s decision to retain the shares and recuse herself from matters that might affect Vulcan stands in contrast to the way previous transportation secretaries have handled potential conflicts of interest.
For instance, former Transportation Secretary Ray LaHood, who served under President Barack Obama, sold stakes in Caterpillar Inc. and Ford Motor Co. upon being confirmed to lead the department.
“I basically sold everything,” Mr. LaHood said. “The ethics police told me to do it, so I did it.”
Jeffrey Rosen, who was Ms. Chao’s top deputy before becoming deputy attorney general, sold stakes in 16 companies upon joining the DOT, including Chevron Corp. , United Technologies Corp. and Home Depot Inc., according to ethics filings.
Federal Railroad Administrator Ronald Batory canceled stock awards from Consolidated Rail Corp., his previous employer, and sold his shares in Norfolk Southern Corp. and Union Pacific Corp. upon his confirmation to the job.
Walter Shaub, who headed the Office of Government Ethics until July 2017, when he resigned amid disputes with President Trump and members of his cabinet over divestments and other ethics issues, said Ms. Chao’s control over spending levels at DOT likely wouldn’t represent a legal conflict of interest given her shares in Vulcan. But he said cabinet-level officials should strive to avoid any appearance of conflict.
“If you look at her ethics agreement, it provides for a complete disentanglement of her interest from Vulcan Materials, and that’s what was represented to the Senate,” Mr. Shaub said. “For the head of the DOT to have a financial interest in an asphalt company, that is not sending a message to employees of DOT that she is making ethics a priority.”
Vulcan, who produces materials critical to road-building and heavy construction, says that “45% to 55% of its shipments have been used in projects that are funded by the government, including highways and airports,” though those payments are “not usually” paid directly to the federal government, but to those who contract with them, according to Vulcan SEC filings.
American Public Media reported in 2017 that Vulcan’s shares rallied repeatedly when Ms. Chao or Mr. Trump spoke about the president’s plans for a $1 trillion infrastructure package, which has not materialized.
In briefings for investors, Vulcan executives have said government spending on roads has been good for business.
“As the leading aggregates producer in the U.S., serving many of the most attractive markets, we are well-positioned for continued top line growth, particularly as federal, state and local governments increase spending on public infrastructure construction,” the company said in a securities filing.
The New York Times reported Sunday that Elaine Chao and her family’s ties to China run deep, and that their family shipping business and profits focuses primarily into China.
At the time of Chao’s nomination hearings, she “did not mention her family’s extensive ties to the Chinese maritime industry. She also did not disclose several accolades she had received in China — including a role as an international adviser to the city of Wuhan — though the Senate questionnaire requires nominees to list all honorary positions.” A transportation official “described that as an oversight.”
The Chao family’s connections to the Chinese state go back decades
James S.C. Chao, 91, Ms. Chao’s father, studied navigation at a university in Shanghai before fleeing the mainland ahead of the Communist takeover in 1949. His schoolmate for a time was Jiang Zemin, who would become China’s president.
As China was emerging from decades of turmoil in 1984, the Chao family took a stake in a state-owned Chinese manufacturer of marine electronic equipment, documents show. The company targeted sales to China’s military, among other sectors, and was closely affiliated with a ministry run by Mr. Jiang. After Mr. Jiang came to lead the Communist Party a few years later, Mr. Chao met with him at least six times, including in August 1989 in Beijing — inside the party’s secretive leadership compound. Chao family members said they could not recall this investment.
For further content and context, read NYT‘s – For the Chao Family, Deep Ties to the World’s 2 Largest Economies.
And yet, there is more. h/t to cbeliever for this addition.
THREAD: DOT officials sent hundreds of emails and spent months planning a trip to China for ELAINE CHAO. They even designed a logo for the luggage Elaine Chao took a particular interest in picking out gifts for officials she would meet in China.
As the folks who were assigned to redact emails missed one fact, that @PekingMike spotted. The FAX number for FOREMOST headquarters in New York was left on an email sent by someone at FOREMOST as someone from the company coordinated with DOT about Chao’s planned trip. pic.twitter.com/r1UWmx4P5l
— Eric Lipton (@EricLiptonNYT) June 3, 2019
And of course, here is the story. READ AND SHARE. This took four reporters, working in NY, DC, China over a period of months, as well as NYT legal team to sue to get the documents. This is an investment in news reporting. Thank U subscribers https://t.co/fsMdwZsPMp
— Eric Lipton (@EricLiptonNYT) June 3, 2019
A ‘Bridge’ to China, and Her Family’s Business, in the Trump Cabinet – Elaine Chao has boosted the profile of her family’s shipping company, which benefits from industrial policies in China that are roiling the Trump administration; New York Times.