Transportation Secretary Elaine Chao continues to hold stock in one of the nation’s biggest construction-materials suppliers despite pledging to divest from the company in the 2017 ethics agreement she signed before being confirmed to the Trump cabinet, the Wall Street Journal reports. Chao had served on the board of Vulcan Materials Co. before going to Washington and, in April 2018, received shares in the company as deferred payment for nearly two years on the company board worth nearly $400,000.
“Ms. Chao’s 2017 ethics agreement, which she signed before her confirmation, said she 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,” the Journal notes. Here is the portion of Chao’s ethics agreement that pertains to Vulcan:
Upon confirmation, I will resign from my position with Vulcan Materials. I hold vested deferred stock units with Vulcan Materials. I do not hold any unvested deferred stock units, stock options, restricted stock or common stock. Pursuant to the terms of the company’s Directors’ Deferred Stock Unit Plan, I will receive a cash payout for all of my vested deferred stock units in April of the year following the year of my separation from service. The cash payout will be determined based on the closing price of the company’s common stock at the time payment is made that April.
Instead of divesting however, Chao, who is married to Senate Majority Leader Mitch McConnell, kept the stock, which has since appreciated. This puts the Secretary of Transportation in the ethically dubious position of overseeing a broad portion of America’s infrastructure, including its highway system, while also owning a portion of a company that profits from government contracts to build that very infrastructure.
“The federal government pays for about one quarter of annual spending on highways, according to the Congressional Budget Office, with state and local governments picking up the remainder. Most of the DOT’s $86 billion budget is spent on grants to states and municipalities, whose spending on road projects is a major source of business for Vulcan, according to the company,” the Journal reports. “Vulcan sells products including asphalt and crushed stone that are critical to road-building and paving, as well as other heavy construction, and says that 45 percent to 55 percent of its shipments have been used in projects that are funded by the government, including highways and airports.”
“Chao’s decision to retain the shares and recuse herself from matters that might affect Vulcan,” the Journal notes, “stands in contrast to the way previous transportation secretaries have handled potential conflicts of interest.”