Wagner As Governor Spurs Question Of Business Conflicts

Apr 30, 2018

If he wins the race for Pennsylvania governor, Scott Wagner would become the state's only chief executive in at least a half-century who took office with a deep financial interest in a business heavily regulated by the state.

Wagner, 63, the Republican Party's endorsed candidate to take on Democratic Gov. Tom Wolf in November, maintains he will be focused strictly on a business-friendly platform of cutting spending and regulations, not helping the York County-based waste hauler he owns.

Wagner, who founded Penn Waste Inc. in 2000, has served in the state Senate since 2014, where he has advanced his view that a feckless government bureaucracy gets in the way of businesses and economic growth.

But being governor would put Wagner at the controls of a state government that issues permits for the trucks of Penn Waste, as well as its competitors, and sets safety and environmental standards for collecting and transporting municipal waste.

Not only that, but watchdogs question whether rank-and-file state employees in charge of enforcing violations would quietly give the governor's company a pass for fear of crossing the state's chief executive.

Landfill space and recycling costs are also constant sources of attention from the waste-hauling industry, while Penn Waste is a member of a trade group that actively makes the industry's case before state agencies, lawmakers and the courts. Plus, Penn Waste's bread-and-butter is landing contracts with municipalities that rely on state aid for things like roads and civic projects. It even has a few state contracts.

Wagner, who is running in a three-way Republican primary election May 15, maintains that he will not sell his assets or put them into a blind trust.

"I'm not required to do that, and my family, the board of directors and the senior managers of all the companies that I'm involved in will operate those companies," Wagner told a Pennsylvania Press Club audience in February. "I'm going to have my hands full across the street. I'm not going to have time to worry about what's going on at Penn Waste."

Wagner's campaign said the idea of him using the governorship to benefit Penn Waste is contrary to the reason he is running: to free state government from the grip of special interests.

"Scott will be a governor on the side of the people for a change," the campaign said.

But David Thornburgh, president of the Philadelphia-based ethics in government group Committee of 70, said Wagner's business holdings provide "fertile ground" for serious conflicts of interest.

Wagner's assurances aren't good enough to build confidence that he is adequately safeguarding the line between public responsibility and private gain, said Thornburgh, who is also the son of former Gov. Dick Thornburgh.

There is no law in Pennsylvania — or any other state — that requires a public official to divest an asset that might present a conflict.

Rather, Pennsylvania's ethics law requires public officials to disclose their outside sources of income and makes it a felony for a public official to use their authority to financially benefit themselves, a family member or their business.

That conflict-of-interest provision, however, does not apply to actions that equally affect an entire industry, effectively freeing a Wagner administration to take action to benefit the entire waste-hauling industry.

Ideally, say ethics watchdogs, a public official manages potential conflicts of interest by selling their assets and putting the money into a blind trust managed by a financial professional with whom they have no pre-existing relationship.

Wagner, who has refused to release his tax return, has reported more than 30 sources of income in disclosure statements. Those income sources include holdings in hotels, freight hauling and his 80 percent stake in Penn Waste, which reported $75 million in revenue last year.

Wagner has battled suggestions that he can use his position, either as a senator or governor, to sway municipal contracts toward Penn Waste. The lowest bidder wins, leaving no room for conflict, he says.

State law would not bar Penn Waste from continuing to win state or municipal contracts should Wagner become governor.

The last and nearest comparison to Wagner's situation in Pennsylvania might be the stakes in coal-related industries held by family members of former Gov. Bill Scranton, who served from 1963 to 1967, political analysts said.

Wagner's holdings put him "in largely unprecedented territory" in Pennsylvania, said Christopher Borick, a political science professor at Muhlenberg College in Allentown.

States have seen similar controversies because so many have elected rich people as governor. In Wagner's case, handing over day-to-day control of Penn Waste makes little difference to watchdogs.

The potential for a conflict remains if he maintains a financial stake in the company, said Brendan Fischer, a lawyer for The Campaign Legal Center in Washington.

Aside from a governor's ability to sway regulations or enforcement, there will be conflicts for state employees who deal with their boss' company, Fischer and others say.

"Even if the governor never expressly intervenes in matters affecting his company's interests," Fischer said, "can we really expect that the governor's subordinates would fail to award a contract to the governor's company, or penalize the governor's company for environmental violations?"