PORTLAND, Ore. (KOIN) – On Monday, May 8, Shemia Fagan will officially resign as Oregon’s Secretary of State after raising ethical concerns sparked by her paid consulting contract for Veride Holding LLC — which is affiliated with the cannabis company La Mota — while her office was auditing the Oregon Liquor and Cannabis Commission.

The secretary voluntarily recused herself from the audit, which looked into the OLCC’s regulation of the state’s cannabis industry and concluded that Oregon’s laws are hindering cannabis businesses.

In a February 15 letter to her staff regarding her consulting contract with the company, Fagan stated, “I do not believe a real conflict exists because any action required would be taken by the legislature or OLCC and any benefit could flow to all cannabis companies in Oregon, not this specific company.”

The secretary added that she recused herself to avoid potential conflict of interest, her office said in a statement, which was first reported by Willamette Week.

According to the Secretary of State’s Office, the consulting contract began on Feb. 20, 2023, for projects that take place outside of Oregon. Documents signed in late February show that La Mota was paying the secretary $10,000 a month with the opportunity to make $30,000 in bonuses for her consulting work.

Following reports about her recusal, Fagan announced she ended the consulting contract in a May 1 press conference — citing ethics concerns.

“I owe the people of Oregon an apology. I exercised poor judgment by contracting with a company that is owned by my significant political donors and is regulated by an agency that was under audit by my Audits Division. I am sorry for harming the trust that I’ve worked so hard to build with you over the last few years, and I will spend the next two years working hard to rebuild it,” Fagan said.

During the press conference, Fagan said as a consultant she researched cannabis laws and the industry in other states as La Mota looked to expand business outside of Oregon.

The secretary said she spent 15 hours a week working for La Mota and also works at Willamette University Law School teaching a class for four hours a week. Fagan said as a single mother of two living in the Portland metro area, she struggled to make ends meet with her $77,000 yearly salary as secretary of state.

“To put it bluntly, my Secretary of State salary alone is not enough for me to make ends meet. That doesn’t change the fact that for many Oregonians, they make less than that,” Fagan said. “This is my financial reality and that’s why I followed Oregon Government Ethics guidelines and began earning supplemental income in my free time,” Fagan said.

She added, “I’m deeply honored to serve as Oregon’s Secretary of State regardless of compensation.”

Oregon’s elected officials make significantly less money compared to other west coast states.

In California, the secretary of state makes more than $168,000 and the Washington secretary of state earns nearly $137,000.

Fagan’s recusal led Governor Tina Kotek to call for an investigation into the audit, stating, “it’s critical that Oregonians trust their government. That is why I am urging the Oregon Government Ethics Commission to immediately investigate this situation. Additionally, I am requesting that the Oregon Department of Justice examine the Secretary of State’s recently released audit of the Oregon Liquor and Cannabis Commission (OLCC) and its cannabis program.”

The day after announcing the end of her contract, on May 2, Shemia Fagan announced her resignation as secretary of state effective May 8.

In her resignation letter, Fagan said “it’s clear that my actions have become a distraction from the important and critical work of the secretary of state’s office. Protecting our state’s democracy and ensuring faith in our elected leaders – these are the reasons I ran for this office. They are also the reasons I am submitting my resignation now.”

When asked about the safety concerns regarding the La Mota owned squatter house during her press conference announcing the end of her contract, Fagan said, “I’m here today to own my mistakes. It was poor judgment for me to engage in a contract with a company that was regulated by an agency that I was auditing. And that’s my mistake and that’s nobody’s fault but mine. And that’s what I’m here to do, is to own that mistake. The reporting that has been happening, I learned about it the same time that all of you did. I didn’t know about any of that when I took that contract.”

Lawmakers on both sides of the aisle support Fagan’s decision to step down, including Gov. Kotek who said “it is essential that Oregonians have trust in their government. I believe this is a first step in restoring that trust.”

Deputy Secretary of State Cheryl Myers will become interim secretary of state on Monday until Kotek names a replacement. In Oregon, the secretary of state is second in line to the governorship.

KOIN 6 News reporter Elise Haas was interviewing La Mota owners Aaron Mitchell and Rosa Cozares when the news broke that Fagan was stepping down. Haas was originally investigating a La Mota owned property that is now a squatter house — causing safety concerns among neighbors.

“I found out about this property because neighbors reached out to me in February asking about, you know, ‘There’s a squatter house in our neighborhood and it’s terrorizing us for years,’” Haas explained. “Property records clearly show that La Mota owned this property and had pulled permits to try to put a dispensary there.”

“So, my biggest question was at that point, how is it that one of Oregon’s largest cannabis companies can’t afford to take care of this problem property for three years? That didn’t make sense to me. So, I started looking into what’s going on behind the scenes and that’s when I found millions of dollars in tax liens and then all of this litigation dating back to 2015 that showed there are a lot of people taking them to court accusing La Mota of not paying their bills or not paying these businesses for their goods and services. That was a red flag to me,” Haas said.

Haas then asked Portland’s Bureau of Development Services about the property and the city’s interaction with the company.

“They said ‘We have put liens on this property of theirs, we have issued all of these violations, but we can’t get them to do what they need to do and it’s a problem,’” Haas said.

About a month later, Willamette Week reported on the cannabis industry and La Mota’s tax liens and litigations and pointed out the company’s financial donations to Oregon politicians.

Campaign finance records show that between September 2020 and April 2021, Mitchell donated $45,000 to Fagan’s campaign. After admitting she made a mistake in agreeing to work for Mitchell and Cazares, Fagan said she plans to donate what remains of their campaign contributions and the rest of the money in her political action committee to the Oregon Humane Society. 

KOIN 6 News has discovered that Mitchell, Cazares, their company La Mota and a political action committee run by Cazares called the Progressive Business PAC have collectively donated $70,865 to now-Gov. Tina Kotek; more than $21,000 to U.S. Rep. Val Hoyle, who was formerly the Oregon labor commissioner; $2,000 to Multnomah County District Attorney Mike Schmidt; and $1,000 to now Multnomah County Chair Jessica Vega Pederson. 

Since the news broke of Fagan’s involvement with Mitchell and Cazares, some elected officials who accepted donations from the couple have issued statements. 

Hoyle said, “Seeking campaign donations is not a part of the process I like, but when you have working class people running for office, you can’t just write yourself a check. That means we have to rely on contributions to fund campaigns. We need a different system, which is one reason I support campaign finance reform. I’ve returned all campaign contributions from La Mota owners and won’t be taking any additional funds from them.” 

Vega Pederson said, “I am appalled at the allegations made against Mr. Mitchell, and as a resident of the Hazelwood neighborhood I’m outraged at the conditions of his property in my neighborhood. As a result, I am donating each of the $500 campaign contributions from Mr. Mitchell and Ms. Cazares to the Hazelwood Neighborhood Association, and I will do all in my power to ensure that Mr. Mitchell is held accountable.” 

Meghan Cavanaugh, Kotek’s former campaign manager said, “The contributions from La Mota were made legally during the course of the campaign for Governor, but in the interest of transparency and reducing any distraction from the work of the people, the Governor has made a contribution in the amount of $75,000 to Oregon Food Bank for food acquisition.”

Schmidt’s office, meanwhile, says the district attorney is donating around $2,000 to the Urban League of Portland.

“I worked really, really hard at that point to get in touch with the [La Mota] owners themselves. And it took weeks and weeks,” Haas said. “But eventually, they called me and when they called me on Thursday morning when my investigation on this problem property was set to air, they’re like, ‘By the way, Shemia Fagan works for us and she’s a consultant and she’s going to continue to be a consultant and as a result of that she’s recusing herself from an audit that comes out tomorrow.’”

During an interview with La Mota’s owners, news broke about Fagan stepping down.

“I was stunned in that moment and that was partly because of the circumstances I found myself in. La Mota had just told me a few days prior that ‘By the way Shemia Fagan works for us.’ And here we are sitting one-on-one in an exclusive interview and we’re all finding out this together in real time as cameras are rolling,” Haas said.

As La Mota owners learned about the resignation, Mitchell said, “I definitely feel horrible for any negative light that has been shined on anyone that has worked with us or that we’ve donated to. We haven’t done anything wrong and they haven’t done anything wrong. There’s absolutely nothing for anyone to find. We don’t understand why we are being scrutinized or Shemia would be scrutinized for working with us. I don’t think this would be an issue if we were running a different kind of business, say chain restaurants. I think Oregon lost a great, great leader.”

On Friday, KOIN 6 News learned that Fagan shared a draft of the 2021-2022 OLCC audit with Cozares to get feedback on it. The secretary of state’s communication’s director says no state agency was aware that Secretary Fagan let Cozares have input on the audit.

The Oregon Audits Division clarified Fagan’s role in the OLCC audit on Friday and said the secretary’s consulting contract put their division in a “difficult situation.”

Oregon Audit Division Director Kip Memmott added that the audit is undergoing a third-party review which he hopes will validate its integrity and help to rebuild trust with Oregonians.

“The Secretary of State is Oregon’s chief auditor,” said Memmott. “The Secretary sets the direction for the Audits Division in an annually published plan and provides high-level input into the work of the team. Secretaries do not, however, direct what findings or conclusions go into an audit.”

The audit plan that Fagan published, Memmott stressed, is not the audit. He said that the actual audit was handled independently by his team.