Shemia Fagan resigns as Oregon secretary of state following cannabis consulting scandal

Oregon Secretary of State Shemia Fagan will resign next week, a stunning fall from grace for a top Democrat who once looked like a good bet to climb to higher office.

The secretary announced Tuesday that she will step down May 8. The resignation is the swift reaction to a mounting scandal over her decision to accept lucrative side work as a cannabis consultant. Her deputy, Cheryl Myers, will step into the position until Gov. Tina Kotek appoints a successor.

Fagan’s announcement followed days of escalating fallout over revelations, first reported by Willamette Week, that she’d inked a $10,000-per-month contract with the owners of an Oregon cannabis chain at the same time her office audited state regulations on cannabis businesses. The cannabis entrepreneurs are also high-profile Democratic donors.

Related: What you need to know about Shemia Fagan's controversial consulting work

Fagan first sought to paint that arrangement as in line with state ethics rules — a position she continues to hold. But with major supporters privately signaling bewilderment at her decision, top Democrats calling the behavior into question and increasing scrutiny over the actual consulting work she’d performed, the secretary canceled the agreement over the weekend.

On Monday, she took questions from reporters after issuing a written apology.

Now she’s stepping down.

“While I am confident that the ethics investigation will show that I followed the state’s legal and ethical guidelines in trying to make ends meet for my family, it is clear that my actions have become a distraction from the important and critical work of the Secretary of State’s office,” Fagan said in a statement. “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 will be submitting my resignation today.”

Under state law, Kotek will name Fagan’s replacement. It was not immediately clear Tuesday when the governor plans to make that decision.

Fagan’s resignation is the final step in what had been a remarkable change in fortune for the Democratic secretary. A week ago, Fagan was hosting student essayists and photography contest winners in a sleepy, feel-good press event for the release of the latest edition of Oregon’s Blue Book almanac.

Two days later, her political future was in immediate jeopardy following revelations of her contract work. She never recovered — though the reality of her situation was not always clear to Fagan. Political allies said they spent the weekend informing Fagan of just how serious her blunder was.

That appeared clear to Fagan on Monday, during her 30-minute press conference to offer more details about the consulting work. The secretary maintained she had followed state rules, but acknowledged she had broken trust with the public.

“I am not here today to defend my rule-following,” Fagan said at the time. “I’m here today to own that there’s a difference between following all the rules and doing nothing wrong.”

Roughly an hour after the conference ended, Fagan’s chief of staff, Emily McLain, submitted her resignation. McLain offered to stay on through the end of the legislative session, but made clear she reserved the right to change her mind.

Allies jumping ship

Fagan partly owed her success in the 2020 secretary of state race to financial backing and strong support from the state’s three largest public-employee unions. In recent days, those allies questioned whether they could ever support her again in a run for office.

Melissa Unger, the executive director of SEIU Local 503, the state’s largest union, said Tuesday the scandal was taking attention away from important work being done at the state Capitol.

“Lawmakers need to pass a budget and make sure they are building housing and building affordable housing for this state and we hope the process moves quickly so Oregonians can get back to what is important,” Unger said.

Unions weren’t the only allies ringing alarm bells. Top Democratic lawmakers said they were deeply concerned about Fagan’s consulting work, and Kotek said she personally spoke with Fagan about the matter last week.

“I support this decision,” Kotek said in a statement Tuesday. “It is essential that Oregonians have trust in their government. I believe this is a first step in restoring that trust.”

The Legislature’s four top Democrats — House Speaker Dan Rayfield, House Majority Leader Julie Fahey, Senate President Rob Wagner and Senate Majority Leader Kate Lieber — said in a joint statement that the breach of trust brought on by Fagan’s actions “became too wide for her to bridge. Her decision to resign will allow the state to move on and rebuild trust.”

Fagan’s May 8 departure will occur roughly a week before a May 16 election she would typically oversee as the state’s top elections official. Fagan said county elections officials and Myers, her deputy, are well prepared to carry out a smooth election.

“This is a resilient agency, with strong division leadership and internal systems that can withstand change,” Myers said in a statement. “This is an unfortunate situation, but a change of leadership will allow agency staff to continue their good work with less distraction moving forward.”

It’s now up to Kotek to choose a replacement for Fagan. She must choose a Democrat.

In 2019, then-Gov. Kate Brown’s office reviewed more than 20 people when Brown was tasked with replacing former Republican Secretary of State Dennis Richardson, who died in office. Brown personally interviewed three people, and made clear she would only select a “placeholder” secretary who had no interest in running for election. Brown wound up naming Bev Clarno, a former Republican House speaker, to the office.

Kotek’s office did not immediately respond to questions about how she would conduct her selection process. In a statement Tuesday, Brown urged Kotek to appoint a replacement who does not want the job long-term.

“Going forward, I believe that Governor Kotek should follow the standard I set and appoint someone who will not put their personal political interests ahead of the administration of the 2024 Presidential Election,” Brown said. “This will be the most consequential election of modern history and any appointee must be solely focused on restoring Americans’ faith in our electoral system and not on their own election to the secretary’s office.”

Friendly relationship led to contract

The beginning of the end for Fagan’s political life, it seems, came when she met Rosa Cazares and Aaron Mitchell, the owners of the La Mota chain of cannabis dispensaries. The pair has since been the subject of a string of stories by Willamette Week, which detailed how they have failed to pay taxes and been sued by vendors, even as they became major Democratic donors.

Fagan said Monday she met the couple in 2020, as she ran for secretary of state. She soon began seeing Cazares and Mitchell socially, and the pair donated a total of $45,000 to her political campaign.

In February, Fagan has said she mentioned to Cazares that she started teaching at Willamette University Law School to pad her $77,000 salary as secretary of state. Cazares offered up another side gig: Helping her cannabis company expand beyond Oregon’s borders.

The contract Fagan signed was remarkably vague about her duties. In exchange for $10,000 a month, Fagan was to “serve as a Consultant of the Company.” Fagan could earn a $30,000 bonus any time La Mota was awarded a license to operate in another state, other than Oregon and New Mexico.

Fagan said Monday she spent roughly 15 hours a week researching cannabis regulations around the country. But she also acknowledged calling Connecticut Lt. Gov. Susan Bysiewicz, whom she knew through her official duties, to inquire about that state’s cannabis rules. Fagan made that call on behalf of Cazares and Mitchell’s company.

Crucially, Fagan’s decision to accept consulting work came as her office handled an audit with a potential major upside for La Mota’s owners. That audit of Oregon Liquor and Cannabis Commission regulations, released last week, was highly critical of the state’s current regulatory landscape. It urged policymakers to consider relaxing rules.

Fagan recused herself from oversight of the audit prior to accepting the contract. By that time, however, the report was all but complete. It’s clear from public records that the secretary urged auditors to speak with Cazares as the auditors set to work dissecting and critiquing OLCC rules.

Despite a widespread acknowledgment that Fagan’s actions were ill-advised, the secretary has not been found to have broken any rules. The Oregon Government Ethics Commission, which enforces ethics laws, has received two complaints into Fagan’s conduct and is likely to weigh in with a formal decision. And the Oregon Department of Justice, at the urging of Kotek, is planning to look into the OLCC audit the secretary of state’s office released last week for signs of bias.

Auditors have been adamant that, while Fagan was able to order them to conduct audits, she had no role in their ultimate findings.

Fagan’s resignation marks the second time in a decade that one of the state’s top elected Democratic leaders was forced to resign in an influence peddling scandal.

In 2015, then Gov. John Kitzhaber stepped down in the face of a ballooning scandal that involved consulting work accepted by his fiancée, who also worked as an unpaid adviser in the governor’s office.