Gov. Gavin Newsom, whose investments in the hospitality industry made him a millionaire, put his holdings in a blind trust after winning last year’s governor’s race.
As a new officeholder, he issued an executive order forbidding state executive branch agencies from doing business with PlumpJack Group, the company he founded.
Ethics experts say Newsom, unlike President Donald Trump, has done all he can short of selling his holdings to insulate himself from potential conflicts of interest.
But as the California Legislature enters its final weeks of lawmaking for the year, Newsom will find himself faced with decisions about bills that could affect his bars, restaurants and hotels. Experts say he’ll still face potential conflicts as long as he owns them.
Among the bills that could affect Newsom’s businesses is one to extend the hours that bars in San Francisco and several other cities can serve alcohol.
PlumpJack Group, the company Newsom founded, has four bars in San Francisco that routinely stay open until 2 a.m., the latest California bars can serve alcohol. If Senate Bill 58 becomes law, they could extend those hours to 4 a.m.
Lawmakers will likely send the bill to Newsom’s desk before they leave for their fall recess Sept. 13. They passed a similar bill last year, but then-Gov. Jerry Brown vetoed it, saying California has “enough mischief from midnight to 2 without adding two more hours of mayhem.”
PlumpJack Group currently includes wineries, hotels and restaurants in San Francisco, Napa, Palm Springs, Lake Tahoe and Marin County and is run by Newsom’s sister.
The Legislature frequently passes bills that regulate alcoholic beverages, restaurants, hotels and other areas that would affect the businesses in the trust managed by attorney and Newsom family friend Shyla Hendrickson.
While Newsom is in office, she is legally barred from giving him information about those businesses, according to the governor’s office.
Yet a blind trust alone doesn’t dissolve ethical conflicts for Newsom, said Bob Stern, who helped write California’s conflict of interest laws.
The Democratic governor can’t recuse himself from decisions about bills the Legislature sends him. If he decides not to act on a bill, it will automatically become law without his signature.
“Just putting something into a blind trust doesn’t mean there are no more conflicts,” Stern said. To do that, the businesses in the trust that could pose a conflict would have to be sold off.
Still, Stern said, Newsom will likely only deal with bills that regulate the restaurant and hotel industries generally, which wouldn’t violate state conflict of interest law. To do that, he would have to take action on bills that deal specifically with his individual businesses.
“It sounds like he’s doing everything possible to be transparent and to make it clear to voters he’s taking his hands off the wheels of steering those businesses,” said Rob Stutzman, a Republican strategist who was a top aide to former Gov. Arnold Schwarzenegger. “There’s legitimate questions about the president right now on this issue, so I think it has put it in a different reference point for voters.”
Newsom is following a model used by Schwarzenegger, who put his assets in a blind trust run by his friend and financial adviser, Paul Wachter.
Newsom has promised to report his personal and business holdings and publicize his tax returns every year while governor. He recently signed a law to force candidates for president and governor to release their tax returns to appear on the California primary ballot, although it’s already being challenged in court.
Trump, on the other hand, was the first presidential candidate in decades who refused to release his tax returns. He also resisted calls to divest from his businesses or put them in a blind trust. Instead, he put his children in charge of his businesses when he took office. The former director of the U.S. Office of Government Ethics has said that the arrangement isn’t truly blind.
Newsom, meanwhile, has taken the right approach with his businesses, said Jessica Levinson, a professor and government ethics expert at Loyola Law School.
“Gov. Newsom has talked about the importance of transparency, has used a blind trust, has been pretty open about his holdings,” she said. “All of those things are absolutely not true when it comes to President Trump, who has not followed any of the standard protocols… He’s largely used the presidency as an infomercial for the Trump Organization.”
During his campaign, Newsom held several fundraisers at his businesses, but hasn’t reported doing so since he took office, according to campaign finance disclosures filed with the Secretary of State’s Office.