Oregon is in the weeds of an ethics scandal over secretary of state’s paid consulting job with a marijuana firm

The matter came to a head Friday after Fagan’s office released an audit of the state’s marijuana regulators, the Oregon Liquor and Cannabis Commission. The audit called for the OLCC to “reform” some rules for marijuana businesses, saying they are “burdens” when combined with federal restrictions on interstate commerce, banking and taxation.

Fagan, a Democrat, recused herself from the audit because she is a paid consultant of an affiliate of marijuana retail chain La Mota, Fagan’s spokesman Ben Morris said at a virtual news conference about the audit’s release.

La Mota’s co-owner has hosted fundraisers for top Democratic Oregon politicians, including Fagan, while the co-owner, her partner and their business allegedly owe $1.7 million in unpaid bills and more in state and federal taxes, according to Willamette Week, a Portland newspaper.

Fagan didn’t appear at the news conference, which included her spokesman, deputy and the audits director. News of the consultancy was first reported Thursday by Willamette Week.

Morris denied Fagan’s outside work represented a conflict of interest and said Oregon Government Ethics Commission guidelines specifically allow public officials to maintain private employment.

But hours after the audit press conference, Republican legislative leaders, who are in the minority in the Legislature, called for Fagan to resign over the consulting job.

“This appears to be an ethics violation and if it isn’t then Oregon’s ethics laws are broken,” Senate Republican leader Tim Knopp and House Republican leader Vikki Breese-Iverson said in a joint statement.

Gov. Tina Kotek, a Democrat, indicated she had concerns later on Friday.

“It’s critical that Oregonians trust their government,” Kotek said in an emailed statement.

Kotek said she was urging the Oregon Government Ethics Commission “to immediately investigate this situation” and asked the Oregon Department of Justice to examine the audit.

The audit questioned the OLCC’s requirement that marijuana businesses keep their stash behind steel doors and have 24-hour video surveillance systems. The OLCC should make marijuana regulations more like those governing distilled spirits, which the agency also regulates, the auditors said.

The audit also said Oregon should prepare for the U.S. government eventually legalizing marijuana and position the state, with its huge stockpiles of the drug, as a national leader in the industry.

Oregon, long known for its potent marijuana, would be competing with other pot-producing states — particularly California, which also has a vast oversupply — for the export market if marijuana is ever legalized nationally.

“Now is the time for Oregon to prepare its system for a future when cannabis is legal nationally,” Oregon Deputy Secretary of State Cheryl Myers said at the news conference.

Oregon Audits Director Kip Memmott noted with a bit of envy that Canada legalized marijuana and is “a lot more proactive in looking at the benefits financially.”

Oregon can lead the way in the U.S. in how pot is regulated, while also offering its high-end strains of marijuana, Memmott said.

“We have kind of a signature commodity, along with … our timber and all the other great things that Oregon produces here. And there’s a real opportunity,” Memmott said.

Oregon’s auditors reminded the OLCC to follow its own strategic plan to position the state as a national leader by increasing the number of speaking engagements at national conferences, holding more statewide meetings and championing a nationwide framework for cannabis regulation.

OLCC Executive Director Craig Prins wrote in response that his agency is keen to move quickly if, and when, interstate marijuana commerce is permitted.

Prins said he expects “only the highest quality products from well-regulated systems, that have recognized testing, packaging, labeling, and traceability standards, will be allowed for sale into other states.”

Oregon has for years prioritized these standards, which are aimed at protecting consumers, Prins said.

A total of 21 states and Washington, D.C., have legalized recreational use of marijuana, but activists see little chance of the current Congress moving toward national legalization. Still, there’s hope the Biden administration will allow pot commerce among states that have legalized it.