Transportation Secretary Elaine Chao speaks during a major infrastructure investment announcement in Washington in December.

Transportation Secretary Elaine Chao speaks during a major infrastructure investment announcement in Washington in December. Jose Luis Magana/AP

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Transportation Dept. Rebuts Report that Secretary Failed to Divest Stock

Chao’s retention of shares in Vulcan Materials was approved by ethics officer.

The Transportation Department has come down hard on news reports accusing Secretary Elaine Chao of unethically retaining shares in a building materials company on whose board she once served.

The Wall Street Journal on Tuesday reported that Chao’s just-released 2018 financial disclosure form—along with that of her husband, Senate Majority Leader Mitch McConnell, R-Ky.—indicated that Chao received stock shares in April 2018 as deferred compensation from Vulcan, the country’s largest supplier of crushed rock, sand and gravel.

The reporter’s interpretation of the ethics agreement she signed in 2017 was that she had promised to cash out shares and sever ties to the company upon her confirmation by the Senate to join President Trump’s Cabinet. By retaining stock, the Journal wrote, she has seen its value rise by $40,000 over the past year, to more than $400,000.

Chao has recused herself from any decisions affecting the Birmingham, Ala.-based Vulcan, which, if Trump and Congress were to agree on a much-discussed infrastructure spending program, could benefit as a supplier to highway builders.

But in a 2017 letter to the Transportation Department ethics officer that referenced her resignation from the company’s board, Chao said, “Pursuant to the terms of the company’s Directors’ Deferred Stock Unit Plan, I will receive a cash payout for all of my vested deferred stock units in April of the year following the year of my separation from service. The cash payout will be determined based on the closing price of the company’s common stock at the time payment is made that April. Until the deferred stock units are redeemed, I will continue to receive deferred stock unit equivalents, which track dividends on the company’s common stock.”

On Wednesday, a Transportation Department spokesperson told Government Executive in an email that the Journal story “is inaccurate, and we’ve reached out to the editor to have it corrected. Specifically, WSJ wrote ‘she promised to relinquish them’ regarding her Vulcan shares; and, in the headline, that Sec. Chao ‘pledged to divest’. That is not accurate. At no point did Sec. Chao’s ethics letter say she would divest from Vulcan.” 

The Transportation Department stressed that Chao had no control over the form of the payout she announced in advance, and that the language is now being clarified by ethics officials who approved her approach.

 “It is unfortunate that members of the news media have attempted to substitute their opinions for the decisions of senior career ethics officials of the department, who have determined there is no conflict of interest as the secretary remains disqualified from matters directly involving the company mentioned,” the department’s statement continued. “In her ethics agreement, the secretary agreed to resign from her board position and not participate in matters with a direct and predictable impact on Vulcan Materials, which she has followed.”

Chao’s retention of the stock shares drew criticism from Walter Shaub, the former director of the Office of Government Ethics, now an advocate with the nonprofit Citizens for Ethics and Responsibility in Washington. On Tuesday he tweeted: