The news Monday that cryptocurrency heavyweight Digital Currency Group would be relocating to Connecticut — creating more than 300 jobs in the burgeoning financial technology sector — could be a major win for Gov. Ned Lamont’s Department of Economic and Community Development.
But it was quickly overshadowed by reports that Oak HC/FT, the venture capital firm founded by first lady Annie Lamont, was an early investor in DCG — though Oak HC/FT sold its stake earlier this year, before the state formalized its deal with DCG, according to state officials.
On Tuesday morning, Gov. Lamont was asked if he should have disclosed that his wife’s venture capital firm used to be an investor in DCG. “The issue is transparency,” Lamont said, according to The Hartford Courant. “We have a list of every single company that we’ve ever invested in.”
The Lamonts provided a “recusal” list to state agencies shortly after Lamont took office. The list has been periodically updated. DCG was on the January 2021 list but is not on the most recent list, updated on Nov. 15, Gov. Lamont’s spokesman Max Reiss said.
The current list includes the names of 134 portfolio companies of Oak HC/FT and Oak Investment Partners, mostly across the health care and financial technology sectors. (Annie Lamont is a co-founder of Oak HC/FT, which was spun off from Oak Investment Partners; she serves as a managing partner at both firms.) The list is broken into two sections: the 78 companies in Oak HC/FT’s investment portfolio and the 56 companies in Oak Investment Partners’ portfolio.
As next year’s gubernatorial election approaches, the public and Lamont’s political opponents are carefully scrutinizing major contracts and economic development deals the state enters into, looking for overlap with companies in which Annie Lamont holds an interest. Key to identifying those overlaps is the recusal list, which identifies potential entanglements for the Lamonts — especially if any of those companies does business with the state.
The first lady holds no director or officer role at the companies on the recusal list — stricter ethics rules apply to companies where government officials serve in director or officer positions, known as “associated businesses.” Companies on the Lamonts’ recusal list aren’t barred from bidding for and entering contracts with the state. If they were being considered, the governor would recuse himself from any decision on those contracts.
Digital Currency Group isn’t on the current recusal list.
DCG makes its way to Stamford
Oak HC/FT contributed in 2015 to a round of funding for then-nascent DCG, a conglomerate that today counts more than 200 blockchain companies among its holdings. DCG raised further funding in 2016, but it’s unclear whether Oak HC/FT contributed to that round.
DECD commissioner David Lehman said it wasn’t until after his department had already started efforts to recruit DCG to Connecticut, in late 2020, that he learned Oak HC/FT was among its investors.
“The town of Stamford brought us into the start of this relationship, then we ran with it. Subsequent to that, I became aware of the investment and that the governor and Annie would be recusing themselves,” Lehman said. “Neither Annie nor the governor were involved in the effort from a lobbying perspective.”
A person familiar with Oak HC/FT’s investments told the CT Mirror that the investment in DCG was less than $1 million (and equated to less than 1% of the company), and Oak HC/FT fully exited in April 2021 through a private secondary transaction.
Several months later, in August, the Connecticut DECD executed a Letter of Intent with DCG, which laid out the incentive the state was proposing: a grant of more than $5 million, contingent on the company bringing at least 300 new full-time jobs to the state.
This week, they announced they’d sealed that deal. Lehman said the company has two years to create the jobs it has promised before DECD will grant the $5 million in funding back to the company via tax rebate.
“The earliest DCG could get a dollar from the state of Connecticut, even with over 300 jobs they’re committing to, is in the first half of 2024,” Lehman said. “We’re not giving any money up front.”
Range of investments
The recusal list shows that both Oak firms have a broad range of investments, from a cannabis bank in California to behavioral health companies for children to an investment business called Ethics Inc. where Prince Harry is a fellow investor. The list includes health care startups, including several that store and analyze health care data and a number of home health care providers. There are also several companies exploring artificial intelligence and online delivery for medicines.
The only company on the list that has a state contract is Sema4, the Stamford-based genomic testing company that has received more than $25 million in COVID testing contracts from the state since May 2020. Sema4 is also the only company on the list currently headquartered in Connecticut.
Karen Hobert Flynn, the president of Common Cause, said formal gubernatorial recusals are relatively rare, especially one as comprehensive as Lamont’s.
In New York, Gov. Kathy Hochul attested in writing in October she would recuse herself from actions relating to Delaware North Cos., the hospitality and gambling company that employs her husband as general counsel.
In California, Gov. Gavin Newsom placed his significant business holdings, including wineries regulated by the state, in a blind trust. Lamont also has placed his investments in a blind trust.
The Office of State Ethics issued an advisory opinion in 2019 that stated the Lamonts’ recusal list would be provided by the governor and first lady to “better identify the need for any necessary recusal.”
“The Governor’s office would use that list as a checklist on a case-by-case basis to assist in identifying instances where recusal by the Governor or Mrs. Lamont would be necessary,” the opinion states.
Peter Lewandowski, the executive director of the Office of State Ethics, said, “According to the advisory opinion that we issued back in 2019, the recusal list would be shared with all pertinent agencies, the ones that enter into state contracts.”
In a brief interview last week, Lamont said his wife was focusing on investments out-of-state to avoid the perception of conflicts.
“Annie has helped create dozens of great companies representing thousands of good-paying jobs,” Lamont said. “And it’s a lot easier to locate those jobs out of state so there’s no optics, no perception, no problems. And that’s what we’re doing.”
