One year after California Air Resources Board Chairwoman Mary Nichols decided to sell off some energy stocks that showed a potential conflict of interest with her role as a state regulator, records show her diverse investment portfolio still contains many energy interests.
Nichols also sold stock in a company that stands to profit from new diesel regulations that the ARB is set to adopt this fall, and other companies that have business before the board, according to financial disclosure documents filed with the Fair Political Practices Commission.
But FPPC records show that she and her husband, attorney John Duam, sold off some or all of her interest 30 companies, many of them after a San Francisco Chronicle story appeared last year. At the time, the couple held between $10,000 and $100,000 in each of those companies.
“She really did have to look at her holdings, and get rid of ones that could be considered a conflict,” said ARB spokesman Leo Kay. Kay says Nichols’ appointment last July was “ a whirlwind. It all happened very quickly. She just didn’t look at her financial holdings at the time.”
That changed after the Chronicle ran a story last August outlining Nichols’ stock portfolio, which included holdings in Chevron, BP, Shell and other energy companies. Nichols moved quickly to dump stocks in dozens of companies in which she and her husband held an interest.
The Sierra Club’s Bill Magavern says Nichols’ private holdings should not include companies that are regulated by the board.
“I think it’s important to avoid a conflict of interest, or even an appearance of a conflict of interest,” he said.
Nichols did divest herself of dozens of stocks to eliminate that appearance last year. And for that, she deserves praise, says Bob Stern, president of the Center for Governmental Studies and former general counsel for the Fair Political Practices Commission.
“I think she should get some credit for divesting,” Stern said. “That shows sensitivity to the questions that arose.”
Nichols’ divestitures were worth hundreds of thousands and, perhaps, millions of dollars. In all, she sold off stock in 30 different companies. She held more than $10,000 in stock in each of those 30 companies.
But the rules passed by the ARB effect many companies, some of which Nichols continues to hold an interest in. Companies like Wal-Mart and United Parcel Service, for example, have large diesel truck fleets that will fall under new regulations to be passed by the board.
So, how far should Nichols go to mitigate the appearance of conflicts? And does Nichols’ position as the state’s leading environmental champion come with some kind of higher standard, or need for ideological consistency, in her personal investments?
“I think it’s a legitimate question, but I don’t have a good answer to it,” said Magavern. “We haven’t gotten into saying what we want public officials to invest in beyond avoiding a conflict of interest. I don’t feel a lot of solid grounding in us telling people what they should do with their own money.”
Kay says Nichols’ job as ARB chairwoman should not negate her ability to hold stocks. “What she does in her capacity as chairwoman is tremendously important. But it would be unfair to intone that she couldn’t have a financial portfolio for her family and her children and her grandchildren so they can have a comfortable living later on in life. It’s not at odds with running the California Air Resources Board.”
Stern says the impacts of the Air Board on companies like UPS are removed enough to avoid any ethical conflict for Nichols.
“That’s a second- or third-tier connection,” said Stern. “There’s certainly not a direct conflict there. Every company is going to be affected by the actions of the Air Resources Board in some fashion.”
While Stern says public officials are held to a higher standard, he says that people with diverse and extensive financial holdings may have additional ethical barriers. “Do we want to disqualify people from serving because of their interests?” he asked.
Although Nichols has sold off hundreds of thousands of dollars worth of stock, she holds millions more in a wide variety of companies.
While she sold off stocks from oil producers like BP, Shell and Chevron, she purchased stock in Patterson Uti Energy. According to Patterson’s Web site, the company “provides onshore contract drilling services to exploration and production companies in North America. The Company has approximately 350 currently marketable land-based drilling rigs.”
Nichols also continues to holds stock in Knightsbridge Tankers, whose “primary business activity is international seaborne transportation of crude oil,” according to company documents.
Kay said Nichols sold her stock in Donaldson Inc., a company that manufactures filtration devices, called “particulate traps,” that reduce diesel emissions on school busses and other diesel vehicles. Donaldson is one of a handful of particulate trap makers whose devices will be required to be placed on older diesel engines under new regulations set to be adopted by the ARB in October.
Experts say the traps typically cost $10,000, or more.
Records indicate that Nichols held the Donaldson stock before she was named to the ARB in July 2007.
Nichols sold her shares of utilities like Edison International, but continues to hold stock in Oneok Partners LP. Oneok describes itself as “a leader in the gathering, processing, storage and transportation of natural gas in the U.S. and owns one of the nation’s premier natural gas liquids (NGL) systems, connecting much of the natural gas and NGL supply in the Mid-Continent with key market centers.”
She relinquished interests in two steel companies, but continues to hold stock in another, Schnitzer Steel Industries. She also holds stock in a timber company, Plum Creek Timber, and a copper and gold mining company, according to the records.
Among the stocks she disposed of was IndyMac Bankcorp, the Los Angeles company whose 33 banks were seized by government regulators earlier this month. Lydia Kennard, who sits on the ARB with Nichols is a member of the IndyMac Board of Directors.
Nichols also holds stock in a variety of other companies. Among them are Whole Foods, the Walt Disney Co., Home Depot, many large pharmaceutical manufacturers and Wal-Mart. Though it is impossible to know exactly how much stock she and her husband hold in each company, the documents indicate each of the holdings are worth between $10,000 and $100,000.
To download a PDF file of Nichols' stock portfolio, [click here]