Candidate for Georgia governor Casey Cagle bought condo from lobbyist

Candidate for Georgia governor Casey Cagle bought condo from lobbyist

June 15th, 2018 by Associated Press in Breaking News

Republican candidate for Georgia Gov. Casey Cagle speaks to his supporters as he enters a runoff with Brian Kemp during an election-night watch party in Gainesville, Ga., Tuesday, May 22, 2018. (AP Photo/Todd Kirkland)

Photo by Todd Kirkland

ATLANTA -- The leading Republican candidate in Georgia's high-profile governor's race, Lt. Gov. Casey Cagle, bought a condominium in downtown Atlanta 10 years ago from a state Capitol lobbyist, seemingly at a discount, a New York Times investigation has found.

Real estate records show that Cagle, who faces a runoff for the Republican nomination on July 24, purchased the one-bedroom apartment at 24 percent less than its appraised value -- below comparable sales prices -- and sold it last year at a 29 percent profit. He was preparing for his first run for governor when, without an agent, he negotiated the deal with Terry E. Hobbs, a longtime lobbyist who represents the natural gas marketer Scana.

As lieutenant governor, Cagle presides over the Senate and controls the flow of legislation there. The direct financial transaction between him and a lobbyist with business before the government raises ethical questions comparable to those afflicting Scott Pruitt, the Environmental Protection Agency administrator. News reports in April revealed that Pruitt last year rented a Washington condo at a bargain rate from the wife of a lobbyist with clients seeking audiences with EPA officials. The arrangement is being investigated by the agency's inspector general.

Sara Henderson, executive director of Common Cause Georgia, a government watchdog group, said that such cozy relationships raised suspicions of pay-to-play.

"Lobbyists and elected officials should never be involved in business deals together," she said. "It gives the impression that the lobbyist and their interests will find favor with that official when it comes to awarding contracts and determining public policy that might financially benefit them."

In a telephone interview on Tuesday night, Cagle said that the deal did not show bad judgment, and that Hobbs had not lobbied him on any issue near the time of the sale.

"Let me just be very clear," he said. "This was a legitimate transaction, a purchase of real estate that was a willing buyer and a willing seller that had nothing to do with anything other than a willing buyer and a willing seller."

Cagle noted that the sale took place in an era of high volatility for real estate valuations, and disputed that his purchase price was out of line. He also argued that if it posed an ethical problem to enter a business transaction with a lobbyist, the same "ridiculous" logic could extend to consuming products sold by industries with state interests.

"So I can no longer purchase a car from someone who has representation at the gold dome, right?" he asked, referring to Georgia's gilded Capitol.

Cagle, who has been lieutenant governor for nearly 12 years, finished first in a crowded Republican primary last month but now faces a worrisome challenge from Georgia's secretary of state, Brian Kemp. The winner advances to a November general election against Stacey Abrams, a Democratic state representative who is drawing national attention and money as the first African-American woman to win a major party's nomination for governor.

The contest is seen as an important gauge of how quickly states like Georgia, with growing minority and immigrant voting strength, could shift from red toward blue. It may also provide clues about the cohesion of President Donald Trump's coalition in a Southern state that is both urban and rural, and about whether Democrats can win in the region by tacking left to energize their base.

The Cagle campaign suffered an embarrassment last week when one of the lieutenant governor's vanquished opponents released secretly recorded audio of their private meeting to discuss a possible endorsement. In the recording, Cagle explains a recent dispute over tax credits for private school scholarships in brazen political terms, acknowledging that he had supported legislation he considered "bad public policy" purely to undercut the fundraising of a former rival.

Cagle's leads in polling and fundraising have made him the candidate to beat in this race. At 52, he is running as a steady conservative with long experience in state government -- he first was elected to the Senate in 1994 at age 28 -- and as a small-business owner, entrepreneur and investor.

After leaving Georgia Southern University when an injury ended his football career, he returned to Hall County, an hour's drive northeast of Atlanta, where his family has lived for seven generations. He managed and then bought a tuxedo rental shop, founded a small bank (quadrupling his initial $50,000 stake when it was acquired by a larger bank five years later) and invested in rental property and other real estate.

Cagle aborted his first race for governor in 2009 after announcing he had a degenerative spinal condition that required surgery. His withdrawal left an opening for another Hall County resident, Nathan Deal, to run and become the state's current two-term governor.

Kemp, 54, who has served two terms as secretary of state, separated himself from the Republican primary pack with lighthearted ads that emphasized his political incorrectness. He has some momentum but is vulnerable to Cagle's attacks on competence. In 2015, Kemp, whose office oversees state elections, took responsibility for a data breach that resulted in the release of the Social Security numbers and birth dates of 6 million Georgia voters.

Kemp has also been named in two lawsuits by lenders who claim that he and other investors defaulted on $700,000 in loans for a canola-crushing business. Kentucky officials suspended the company's license to buy grain directly from farmers because it owed them millions of dollars. The Kemp campaign has responded that he is a minority shareholder of the firm, Hart AgStrong, and does not control its operations; financial disclosure forms show that Kemp owned 16 percent of the company last year and 24 percent in 2009.

Although both men promote their business acumen, they are each worth less than when they took statewide office. Kemp, who has interests in agriculture and real estate, reported a net worth of $5.2 million on his financial disclosure last year, down from $6.3 million in 2009. Cagle, who earns about $91,000 as lieutenant governor, reported a worth of $1.58 million, down from $1.74 million in 2005.

The Times' examination of Cagle's real estate holdings suggests he has consistently overstated their value in his disclosure filings.

For instance, he bought Hobbs' condominium, on the 12th floor of a 55-year-old high-rise called the Landmark, for $97,000 in 2008. But in both his 2009 and 2013 disclosures he valued it at $175,000, well above its county appraisal. By 2011, with Atlanta's real estate market in a deep slump, Fulton County assessors had dropped their appraisal as low as $44,900 before it started to rebound. Cagle sold the unit last year for $125,000.

He bought a second Atlanta apartment in 2008 for $65,500 but valued it at $130,000 on his 2009 disclosure report. He sold it four years later to a family friend for $40,000, roughly its appraised value at the time.

In four quadrennial disclosure reports starting in 2005, the increase in Cagle's self-valuations relative to actual purchase prices had the effect of inflating his stated net worth by between 26 and 91 percent.

Cagle said that improvements made to each of his real estate investments accounted for the increased valuations on his disclosure reports. But he could not explain why, in the case of the Landmark condo, his valuations remained high even after its appraised value plummeted.

The lieutenant governor said he bought the apartment to house his three sons as they attended nearby Georgia State University. He said he liked the Landmark's location, posted a notice in the lobby and got a response from Hobbs. "He said he had a unit, take a look at it," Cagle said. "I did and I said, 'What's your price?' He said, '$97,000,' and I said, 'I'll take it.'"

The apartment had been appraised for four years at $127,800 by the Fulton County Board of Tax Assessors, according to county records. It remained at that level in 2009 even as the recession battered Georgia real estate.

There were not many sales in the building during the period, but Cagle paid less per square foot than other buyers -- $95.57 versus an average of $139.60 for the four other qualified sales between 2007 and 2009. The Board of Assessors labeled his purchase "unqualified" for appraisal purposes, meaning the price suggested it may have been influenced by factors other than market value.

Cagle pointed to other one-bedroom apartments that had sold for $2,000 less and $11,500 more than his. "I am well within the range of what the value was," he said. But property records reveal that those units are much smaller.

Campaign finance records show that Hobbs has donated about $240,000 to Georgia candidates, including nearly $12,000 to Cagle and $1,700 to Kemp. In 2008, shortly before selling the Landmark condo to Cagle, he reported spending $1,500 during the three-month legislative session to stock a "hospitality room" there for legislators.

Lobbyists and corporate interests have given generously to the lieutenant governor's political committees, and an outside nonprofit group supporting his campaign, Citizens for Georgia's Future, is led by two longtime Capitol lobbyists.

Reached by telephone, Hobbs, who has been a registered lobbyist in Georgia at least since 2006, acknowledged selling the property to Cagle but declined further comment.

"You have all the records there, and I have no interest in talking to the press about anything, thank you," he said before hanging up.