Kemp campaign gets big bucks from the people he regulates

Secretary of State Brian Kemp is in a July 24 runoff against Lt. Gov. Casey Cagle for the GOP nomination for governor. HYOSUB SHIN / HSHIN@AJC.COM

Secretary of State Brian Kemp is in a July 24 runoff against Lt. Gov. Casey Cagle for the GOP nomination for governor. HYOSUB SHIN / HSHIN@AJC.COM

In April, a chiropractor who owns two massage clinics that have been the subject of a series of sexual assault complaints got a visit from his industry’s highest-ranking state regulator.

Secretary of State Brian Kemp hadn’t come with tough questions, though. He came with an outstretched hand.

Dr. Patrick Greco and his partner hosted a fundraising gala for Kemp’s gubernatorial campaign at their lavish estate in the heart of Madison, in a renovated antebellum home called the Honeymoon 1851 Mansion.

Meanwhile, the two Massage Envy clinics Greco owns face at least four allegations of therapists groping women during massages. The Board of Massage Therapy, under Kemp’s purview, looked into one woman’s complaint, but none of the accused therapists’ licenses has ever been sanctioned or revoked.

Kemp has also found support on the campaign trail from others under the oversight of his licensing or securities divisions. Such companies and individuals have donated more than $325,000 to his gubernatorial campaign, an analysis by The Atlanta Journal-Constitution found.

Critics say such donations could undermine the credibility of one of the state’s top regulators, and in interviews, two previous secretaries of state said they returned similar donations to comply with the law and avoid the appearance of a conflict of interest.

The legality of some of these donations is in question, and the head of the state ethics commission said he expects the panel to soon decide whether these types of contributions are permissible. Atlanta attorney Simon Bloom has filed an ethics complaint against Kemp and his campaign, citing nine examples of contractors, investment advisers and an auctioneering firm that donated.

“You can’t curry favor with your wallet in elections when you are directly regulated by that person,” said Bloom, who supports Kemp’s opponent, Lt. Gov. Casey Cagle, in the July 24 runoff for the Republican nomination.

Kemp declined an interview request for this story through a campaign spokesman, who said in an email that even though the rules are unclear, the candidate has gone “above and beyond” what the law requires by refunding donations given in the names of companies that fall under his regulation.

“Given that Kemp is a man of integrity,” spokesman Ryan Mahoney’s email said, “he decided to not take contributions from regulated businesses. Our legal and compliance team spend a lot of man hours to screen these checks. We’ve refunded hundreds of thousands of dollars because of Kemp’s character.”

But the law sets up a legal loophole, making a distinction between donations from regulated companies, which aren’t permitted, and donations from individuals at those companies, which are.

Company ownersofficers, employees, their relatives and related businesses have given Kemp hundreds of thousands of dollars. The AJC's analysis found contributions from investment firms, used-car dealers, engineers, chiropractors, veterinarians, funeral directors, electricians and nurses, among others.

The biggest portion by far has come from residential and general contractors, who have collectively given Kemp almost $200,000.

"This is yet another example of the type of pay-to-play nonsense that Georgia taxpayers are sick and tired of," said state Sen. Elena Parent, an Atlanta Democrat who sits on the Senate's Government Oversight Committee. "Georgians want their government to be responsive to them, not moneyed interests who can try to buy the officials that oversee them."

What’s legal, what’s ethical

The AJC’s analysis found about $38,000 donated in the names of companies under Kemp’s regulation or connected to licensees. A Kemp spokesman said refunds totaling $5,500 will be given to four of those donors, which will be reflected in an upcoming campaign finance report.

The campaign disputed that other companies on the AJC’s list count as regulated entities since they aren’t directly registered or licensed.

So while the campaign refunded $6,600 to Williams & Associates Land Planners, it kept $10,500 from J. Williams Investments, which has the same address and is registered by company CEO Jon Williams. The campaign also accepted $10,500 from Parrish Development Group, though its registered agent is the CEO of Parrish Construction Group, David Cyr, a licensed qualifying agent.

Bloom's ethics complaint is likely to push the state's Government Transparency and Campaign Finance Commission to interpret myriad gray areas in the law — such as whether it matters that Kemp is running for governor, who doesn't directly oversee industries. Some interpret the law as saying he would only have to return company donations if he were running for another term as secretary of state.

Bloom says what matters is that Kemp remains in the post for now.

Donors who spoke to the AJC said they aren’t expecting anything in return.

“Brian has always been upfront and straight and honest,” said Ed Hutter, a licensed general contractor whose company, Hutter & Associates, donated $3,000, which the Kemp campaign now says it will refund. “He understands what business is all about and what we go through as business people.”

There’s little doubt that licensees and regulated businesses have benefited from a faster licensing process instituted under Kemp. He often says he brought a “chain-saw” mind-set to the Secretary of State’s Office by reducing regulations, and in one of his campaign ads, Kemp wields an actual chain saw and promises to continue the policy if elected governor.

His tenure has also seen enforcement efforts scaled back through budget cuts in the wake of the Great Recession. In 2008, before he took office, it drew about $42 million annually in state funds. This fiscal year, it got about $25 million.

Under Kemp, 40 boards that regulate professions as varied as veterinarians, electricians, massage therapists, plumbers, chiropractors and architects have been required to share a pool of 15 investigators.

The division responsible for enforcing rules on both securities and charities, once among the nation's best at catching cheats, now operates with three enforcement attorneys and a budget of less than $700,000sharing the same group of investigators. The year Kemp took office, that division received $1.6 million, and critics say the reduction has allowed fraudsters to proliferate.

In other fields, investigations languish, and cases reported in the news can slip through the cracks because no one is closely monitoring businesses that can cheat you out of money or jeopardize your health.

Money pours in

The campaign wouldn’t disclose how much money Greco’s fundraiser in Madison generated. Campaign finance records show he personally donated $1,000 last year. He did not return several phone calls seeking comment for this story.

Other licensees, and companies connected to them, have given far more. They include Coastal Industrial Contracting, a chemical plant subcontractor in Liberty County, which donated more than $92,000 through various channels, including two limited liability companies. CEO David Steverson is a licensed general contractor qualifying agent.

Cooper, Barnette & Page, a Statham-based environmental contractor whose managers hold licenses, gave $29,600. The Kemp campaign refunded $25,000, retaining a portion donated under the name of the company’s Florida division. Company officials donated an additional $13,200.

“It is a tremendous violation of the public interest, and it raises the question about who he’s going to serve if he’s elected,” said Max Cleland, a Democrat who served as secretary of state from 1983 to 1996 and was later elected to the U.S. Senate.

Cathy Cox, Georgia’s secretary of state from 1999 to 2007, said she largely avoided contributions from companies her office regulated when she ran for governor as a Democrat in 2006. She said she sought to restrict donations even from firms overseen by professional licensing review boards that her office had little direct authority over.

“We were very careful because perception was important,” said Cox, now the dean of Mercer University’s law school. “Even though legally there was no conflict, we knew that the heart of every campaign is trust — and you want to do everything you can to build up that trust.”

Ripping up regulations

The Kemp campaign brushed aside questions about another perception problem: The donations come on the heels of an 8 1/2-year tenure of office that saw consumer protections erode, to the benefit of some regulated businesses.

“What does fundraising for the governor’s race and funding shortages in the (Secretary of State’s) office have to do with each other? That’s a huge stretch,” his spokesman said in an email.

As secretary of state, Kemp has contended with constant calls from Gov. Nathan Deal to keep his budget flat, which he heeded. He did fight back against further cuts, telling lawmakers they would undercut his staff’s work. A letter he penned to Deal’s chief financial officer in 2014 was typical of his approach.

“Only about 3 percent of all investment advisor firms are being audited each year because of the drastically reduced workforce in the Securities Division,” Kemp wrote of a proposed reduction to that office.

The division nevertheless took a $165,000 cut.

Kemp never sounded a public alarm, though, about risks to consumers and investors the way he did potential voter fraud, which also falls under his office.

Some of his most popular initiatives have been aimed at making processes smoother for corporations and licensees. The streamlining he did in the licensing process cut wait times down from a month to a matter of weeks.

Hutter, of Hutter & Associates, said that’s something else he likes about Kemp.

“We’re licensed in several other states,” said Hutter, who has hosted two fundraisers for Kemp, “and the system that Georgia has is a lot easier than some of the other states to try to renew licenses and what have you. A lot more efficient, I can say that much.”

John Hadden, an electrical contractor, said the tug of friendship — not industry ties — motivated him to donate $500.

“I’ve known him personally for 15 years. I know his family and I respect him,” Hadden said. “He’s technically the head of our licensing board, but he’s not someone you’d ever deal with on a day-to-day basis.”

Rick Thompson, a former head of the state ethics commission, said he’s skeptical of restrictions on donations from regulated businesses, which can put candidates at a fundraising disadvantage. He said though the current law could be interpreted to restrict Kemp from receiving those donations, he makes no connection between the donations and Kemp’s performance as a regulator.

“Especially,” Thompson said, “because he would not be regulating them anymore.”

Big bucks could be bigger

The AJC’s analysis of Brian Kemp’s campaign donations identified more than $325,000 from donors who are either regulated by his office or are tied to licensees and companies regulated by his office. But the actual sum could be higher. Campaign finance disclosures don’t capture all the companies a donor owns, and no rule forces them to disclose all their business interests. Also, many donors use nicknames or maiden names, making them difficult to correlate with license records.

The AJC also didn’t include donations from companies or individuals who appear to require licensure through the Secretary of State’s Office — such as used-car dealers and construction contractors — but couldn’t be found in the state’s license verification system. Nor did the AJC include those whose state licenses lapsed before the date of their campaign donation.

— Coming Thursday: A look at Casey Cagle’s donations.