Zinke Linked to Real Estate Deal With Halliburton Chairman

By Ben Lefebvre and Nick Juliano, Politico

19 June 18

In the interior secretary’s hometown, a development brings together the head of the nation’s largest oil-services company and a foundation created by the man who regulates it.

foundation established by Interior Secretary Ryan Zinke and headed by his wife is playing a key role in a real-estate deal backed by the chairman of Halliburton, the oil-services giant that stands to benefit from any of the Interior Department’s decisions to open public lands for oil exploration or change standards for drilling.

A group funded by David Lesar, the Halliburton chairman, is planning a large commercial development on a former industrial site near the center of the Zinkes’ hometown of Whitefish, a resort area that has grown increasingly popular with wealthy tourists. The development would include a hotel and retail shops. There also would be a microbrewery — a business first proposed in 2012 by Ryan Zinke and for which he lobbied town officials for half a decade.

The Whitefish city planner, David Taylor, said in an interview that the project’s developer suggested to him that the microbrewery would be set aside for Ryan and Lola Zinke to own and operate, though the developer told POLITICO that no final decisions have been made.

Meanwhile, a foundation created by Ryan Zinke is providing crucial assistance. Lola Zinke pledged in writing to allow the Lesar-backed developer to build a parking lot for the project on land that was donated to the foundation to create a Veterans Peace Park for citizens of Whitefish. The 14-acre plot, which has not been significantly developed as a park, is still owned by the foundation. Lola Zinke is its president, a role her husband gave up when he became interior secretary.

The Zinkes stand to benefit from the project in another way: They own land on the other side of the development, and have long sparred with neighbors about their various plans for it. If the new hotel, retail stores and microbrewery go through, real estate agents say, the Zinke-owned land next door would stand to increase substantially in value.

Lesar, who also served as Halliburton's chief executive until last year, is providing money to back the hotel and retail development, according to business records and officials at Whitefish city government and Halliburton. He also has a longstanding relationship with the Zinkes. In 2014, he and his wife, Sheryl, gave $10,400, the maximum allowed by law, to Zinke’s first House campaign. His only other federal contributions that year were to Halliburton’s PAC and the campaign of Rep. Liz Cheney, whose father, Dick, ran the company before becoming George W. Bush’s vice president.

Ryan Zinke did not respond to a list of specific questions but said in a statement that he “resigned as president and board member” of the foundation “upon becoming secretary.”

The foundation’s 2018 annual report to the state of Montana, however, lists Ryan Zinke as an officer, with Lola Zinke as president and their daughter as treasurer. Zinke said the report was in error and he would seek to amend it.

In his statement, Zinke declared: “The mission remains to provide a children’s sledding park and community open space in a setting that recognizes the contributions of the railroad and the veterans to the community. ... The subject LLC you mention has been in contact with Lola with the intent of expanding their parking requirements on park property. I understand a concept was provided but no formal proposal or documents have been submitted or agreed upon. I also understand by reading the paper is their proposal is supported by the City Council.”

He did not respond to questions about the microbrewery, the involvement of Lesar or Lesar’s status as chairman of Halliburton.

Lola Zinke did not respond to questions left on her Facebook page or messages left at the family’s Montana home. Neither Jennifer Detlefsen, the Zinkes’ daughter and the foundation’s treasurer, nor the foundation’s law firm of Frampton Purdy Law, responded to questions.

In Whitefish, the plan to use land that was donated to the Zinkes’ foundation as a public park to further a private development strikes residents as a surprise.

“I’ve never been clear exactly what his intentions are for the place,” said Steve Thompson, who lives near the park and supported Zinke early in his career but has since grown disillusioned with him. He described the current state of the land as “sort of a big puddle, a mudhole puddle.”

The involvement of the interior secretary’s family in a multimillion-dollar project funded by the chairman of an energy-services giant — revealed here for the first time — is rife with conflicts of interest, ethics experts say, especially since Zinke’s job as interior secretary makes him the custodian of more than 500 million acres of public land and head of a department that sets technical and safety standards for pipelines and drilling.

Halliburton is the largest American oil-services company, drilling wells and building rigs. It stands to benefit from any new oil and gas exploration on public land or offshore — something the Trump administration has promised to promote — and the company has frequent dealings with the Interior Department in its regulatory capacity.

For example, federal disclosures show that Halliburton’s in-house lobbyist met repeatedly with Interior officials to discuss the department’s policies on hydraulic fracturing, the oil extraction procedure that some studies have linked to groundwater contamination and earthquakes. Under Zinke, the department last year rescinded Obama-era rules that restricted fracking on federal land, a decision that directly benefited Halliburton, one of the world’s leading fracking companies.

Marilyn Glynn, who was acting director of the Office of Government Ethics under former President George W. Bush, said the foundation’s involvement in a deal backed by the chairman of Halliburton is clearly inappropriate and, at minimum, should force Zinke to recuse himself from any policy decisions affecting Halliburton.

“That Halliburton’s chairman would almost be a business partner of Zinke or his wife, he would have to recuse himself from anything involving Halliburton,” said Glynn, adding that the relationship clearly crosses ethical lines.

She suggested the Trump administration should set a higher ethical standard.

“In a previous administration, whether Bush or Obama, you’d never run across something like this,” she said. “Nobody would be engaging in business deals” with executives whose companies they regulate.

Amy Myers Jaffe, a longtime energy analyst now working at the Council on Foreign Relations, said the Interior Department, in setting specifications for rig equipment and how much methane can leak from pipelines, has the power to make Halliburton’s business more or less profitable.

“They spend a tremendous amount on R&D to comply” with government regulations, Jaffe said of oil-service companies. “You wouldn’t want Interior to change specifications and make that equipment no longer commercially viable.”

She added that Zinke’s conflicts could extend to investigations of accidents involving Halliburton’s equipment.

“One thing that is most concerning is if Interior would be called upon to investigate the procedures of a service company offshore” in case of an accident, said Jaffe. “A tight relationship [between the interior secretary and the company] would be problematic.”

Executive branch officials such as Zinke are subject to conflict-of-interest rules requiring that they recuse themselves from government decisions involving people with whom they or their close relatives have a financial relationship.

Craig Holman, a specialist in federal ethics laws for the advocacy group Public Citizen, said Lola Zinke’s efforts to help the development backed by Lesar would amount to a financial relationship.

“Entering this type of business relationship could very clearly open the doors [of government] to business interests that have stakes before the office holder,” Holman said. “Clearly, any substantial development project next to the vacant lot owned by Zinke’s foundation would significantly boost the value of the lot. The conflict-of-interest statute would be invoked if even the nonprofit on which Zinke or his spouse serves as an officer, as either paid or unpaid officers, derives a financial benefit.”

***

After 23 years as a Navy SEAL, Ryan Zinke retired from the military in 2008 and returned to Whitefish, the mountain city of roughly 6,000 people where he grew up and where his father and grandfather ran a plumbing business.

It was, however, a changed community, increasingly popular with tourists and second homeowners for its pristine isolation and proximity to Glacier National Park.

A city that began as a stopping place for freight trains carrying lumber from the state’s thriving timber industry was fast becoming an upscale resort. In 2009, the year after Zinke’s retirement, about 17 percent of households were making more than $100,000 a year, according to the U.S. Census Bureau. By 2016, 23 percent of Whitefish households were making that much, adjusted for inflation.

Whitefish is a particular magnet for California tech entrepreneurs and oil barons from Canada and Texas who have built homes valued at more than $1 million each. Lesar is one of them. He currently has a home behind a gate on a private road looping up one of the nearby mountains.

As the then 46-year-old Zinke planned his future, he began laying the groundwork for business and political careers more or less simultaneously, and sometimes on parallel tracks. Launching a nonprofit foundation to build a park in Whitefish was one of the first things he did to reintroduce himself to the community, which helped bolster his credentials for office.

The foundation’s first big donation was from BNSF Railway, the nation’s largest freight railroad, with more than 32,500 miles of track. The railway is one of the state’s biggest landowners, with extensive business before the state government.

Zinke proudly announced that the donated land would be used for what he dubbed “the Great Northern Veterans Peace Park.” In announcing the gift, he touted his own career in uniform and described the park as a gift to Whitefish. His intent was to combine the railway land and an adjacent city-owned hill into “a children’s winter sledding park in a setting that recognizes the contributions of the veterans and the railroad to the local community,” according to the nonprofit’s publicly available IRS forms.

"The theme of this park is to celebrate life — why veterans fight," Zinke told a local newspaper in February 2008.

That same year, he filed paperwork to run for the state Senate.

He won the race and, shortly after taking office, cast the deciding committee vote on a bill that strongly benefited BNSF. The bill would have pumped millions of taxpayer dollars into railroad construction through a publicly funded Montana Rail Authority.

Jeff Mangan, Montana’s commissioner of political practices, said the vote, coming so soon after Zinke accepted a donation of land from the railway, would have violated the Legislature’s code of conduct if he did not disclose the relationship. “If there’s an appearance of conflict of interest, they have a duty to disclose that conflict before a vote,” Mangan said. But enforcement of that requirement can be “fairly laid back,” he said.

There is no record of Zinke making a formal disclosure of his relationship with BNSF before the vote, and Zinke did not respond to questions on the matter.

Ultimately, then-Gov. Brian Schweitzer vetoed the legislation for the Montana Rail Authority, saying he was concerned “that public money will be targeted to build infrastructure that should be rightly financed by the private sector.”

BNSF continued to donate more land to the Veterans Peace Park with adjoining parcels being given to Zinke’s foundation in 2010 and 2013.

BNSF spokesman Ross Lane said in an interview, “We would firmly reject that there is any quid pro quo on the donations” for the Veterans Peace Park.

The land remains mostly in a natural state, and is only lightly utilized, except when local children use it for sledding, as they had before Zinke’s foundation acquired the land. On a recent spring day, the only inhabitants were a pair of Bufflehead ducks sharing a retaining pond that dominates the property with a discarded inner tube.

Nonetheless, even in an undeveloped state, the land is now valued at more than $500,000, according to the group’s 2016 tax returns, the most recent publicly available. The tax returns also show monetary gifts to the foundation, which increased as Zinke’s political career advanced.

In 2012, when Zinke launched an unsuccessful bid for lieutenant governor, the foundation took in $30,000, according to tax records. In 2014, when Zinke ran for the House, the foundation again received $30,000 in contributions and saw its cash holdings grow from $118 to $23,743 over the course of the year. The foundation raised $36,000 in 2015, before seeing its contributions fall to $5,000 the following year, the last before he became interior secretary.

The Zinkes reported that they gave the foundation $10,000 in 2012, but the source of the rest of the contributions is undisclosed. That lack of transparency is a common concern when politicians control their own charities, said Melanie Sloan, a senior adviser at government ethics watchdog group American Oversight.

“The main concern is it’s another way for donors and corporations to curry favor with politicians,” Sloan said. “If he’s doing something to benefit those making donations, it’s invisible to us. It undermines the whole interest of transparency.”

Even as the park continued to lie fallow, Ryan and Lola Zinke turned their attention to pieces of land that they own through various LLCs. In December 2012, while Ryan was preparing to leave the state Senate, the Zinkes announced that they wanted to turn his childhood home into a B&B called the Snowfrog Inn, and also to build a microbrewery on their development land across the street. They planned to call the brewery “Double Tap,” which is a Navy SEAL term for two gunshots.

Both proposals required public approvals, which put Zinke — one of the state’s rising political stars — in a position of arguing before local politicians. He was steadfast in calling for more commercial development in the face of neighbors’ complaints about traffic and noise.

The City Council appointed Zinke to a special steering committee of local residents to explore ways to develop the area where the Zinkes’ land was located. The committee included 13 residents of Whitefish, just two of whom lived in the neighborhood, Zinke and one other.

The committee recommended opening the area for greater commercial development. The City Council and mayor endorsed the plan.

While the larger planning process was playing out, Zinke won approval in 2013 for the B&B without a microbrewery across the street, as he had initially proposed. The Snowfrog Inn website states that it is still under construction.

By 2015, Zinke was back before the City Council, this time in his first term as Montana’s sole representative in the U.S. House, arguing passionately for the committee plan to expand development, according to a video of the meeting. He cited his microbrewery proposal as the impetus for the changes to the planning process.

“In regards to a brewery, I’ve asked for a brewery because that’s what started this whole process,” Zinke declared at a contentious May 4, 2015, council meeting, referring to the changes to the city’s planning rules that he had helped orchestrate.

Neighborhood activists continued to raise objections, insisting that Zinke had done little in the 29 months since announcing his microbrewery proposal to assuage their concerns about noise and traffic. But Zinke told them they were outnumbered.

“The same people are going to be against it tomorrow as was at the beginning, but most of the strong majority of the steering committee, which represented every bit of the neighborhoods … all came to the same conclusion, that this [planning change] should stand,” Zinke said, according to a video of the meeting.

The changes to the planning process did not lead to approval of the microbrewery on the Zinkes’ own development parcel, but they opened the doors to a new proposal for a multiuse development on a much larger plot — a former timber-company lot — between the Zinkes’ land and the veterans’ peace park that they controlled.

The project, known as 95 Karrow, named for the avenue on which the land sits, was launched in September of last year. Two days after the partnership backing the development was established, Lola Zinke, in her capacity as president of the foundation controlling the peace park, signed an official letter of intent to allow the construction of a parking lot for customers of the microbrewery and other businesses on the parkland, which the developers included in their proposal. The letter said the specific terms of the agreement would be worked out by the parties.

Taylor, the Whitefish city planner, told POLITICO that the developers “certainly implied that they were working with [Zinke] to find a place for his microbrewery as well as a shared use agreement for parking on the peace park.”

At least two project maps submitted to the city mark off space specifically for a microbrewery adjacent to the parking lot. The letter Lola Zinke signed and submitted to Whitefish City Council states “it is the intent of the GNVPP Foundation to concur with the general design of the parking, micro-brewery, multiple use path, fence and other supporting elements” of the redevelopment project. Attached to that letter is a map with a handwritten notation indicating a “border adjustment” that would appear to carve out the microbrewery site from the rest of the property.

The parking lot is also meant to serve the park if the foundation ever does anything with the rest of the 14-acre parcel it owns.

The developers of the hotel, microbrewery and retail shops are a partnership known as 95 Karrow LLC, which itself is controlled by two individuals and three other entities, according to business registration records filed with Montana’s secretary of state. The two individuals are John and Katie Lesar, who are the son and daughter-in-law of Halliburton's chairman, according to a biography his wife, Sheryl, wrote for a local nonprofit, where she serves as a board member.

Two of the other entities, BADF LLC and KCM Enterprises Inc., are linked to Bruce Boody, a local architect who worked with the Zinkes on their B&B proposal, and a local developer named Casey Malmquist, according to Montana business records. The third, Greenstream Resources LLC, lists a Texas address but does not disclose any owners in records filed there. However, the P.O. Box it uses matches the address of another business, First Floor Properties LLC, that lists David Lesar as its “general partner” and other family members among its management.

Both Malmquist and a Halliburton official confirmed that David Lesar is a member of the Greenstream Resources LLC, which is expected to provide a significant portion of the financing for the 95 Karrow project.

Halliburton spokeswoman Emily Mir said the company had no comment on Lesar’s involvement in the project, calling it a private investment that Lesar was making outside his role in the company.

Malmquist, who is leading the development project, said that talk of Zinke owning a brewery on the site was premature, as no final decisions have been made on what type of businesses the redevelopment will contain.

“If and when we get to that point, Ryan Zinke, or anyone else that is interested, can purchase a parcel of property, properly located on the development by use and per zoning, and develop a project that is permitted from the standpoint of zoning designations that determine the permitted uses on the development parcel, as well as following the [covenants, conditions, and restrictions] that are yet to be developed for the property,” Malmquist said in an email.

***

The Zinkes’ mixing of their nonprofit role as stewards of the Great Northern Veterans Peace Park Foundation with their role as landowner and developer echoes other ethical concerns raised about the couple.

In 2012, Ryan Zinke formed a super PAC called Special Operations for America, through which he raised money from donors to attack then-President Barack Obama’s reelection campaign for taking credit for the death of Osama bin Laden. Over the following year, the group paid nearly $40,000 to an LLC established by Ryan and Lola Zinke called Continental Divide International for “strategy consulting” and “fundraising consulting” and to reimburse travel expenses.

Only $7,000 of the more than $180,000 the group raised in 2012 went to efforts to influence the election, according to the group’s FEC filings.

The super PAC was Zinke’s foray into a world of political fundraising that would carry through to his time in the Trump administration. Less than a month after being sworn in as interior secretary, he appeared at a fundraiser in the Virgin Islands for another PAC that has been criticized for spending vastly more on administrative expenses than on campaign activities.

The Virgin Islands GOP PAC has raised $5.7 million since its inception in February 2015. It has spent $76,000 — just 1.3 percent — on congressional candidates, including $3,500 to Zinke’s campaign and SEAL PAC, a subsequent group he launched after his election to the House.

Meanwhile, two of Zinke’s top aides at Interior, chief of staff Scott Homell and counselor Vincent DeVito, were previously on the payrolls of Special Operations for America and SEAL PAC, respectively.

Earlier this year, the Interior Department’s internal watchdog criticized Zinke for obscuring his personal interest in some ostensibly official duties — an incident that involved another Whitefish resident, Fidelity National Financial Chairman Bill Foley, who was one of Zinke’s biggest political donors.

Zinke charged taxpayers more than $12,000 last June for a late-night charter flight from Las Vegas, where he had spoken to a National Hockey League team Foley owns, to Whitefish for meetings at the Western Governors Association that were being held there the following day.

Speaking to the Las Vegas Golden Knights was a favor to a friend and donor. He “first mentioned during his initial ethics briefing in March 2017 that he wanted to speak to a friend’s hockey team,” according to a report from the IG. He did not mention any specific aspects of his job as interior secretary during the speech, which focused on his time as a Navy SEAL. After Zinke and his staff made plans for the speech, the Interior Department started to schedule an event for him to announce Payment In Lieu of Taxation grants, routine business that is typically handled with a news release.

The IG’s investigation found that the charter flight could have been avoided with better scheduling, and that Zinke’s prior relationship with Foley should have been disclosed in advance to ethics officials who had reviewed the trip.

Foley, a West Point graduate who grew up in the Texas panhandle, has been a major presence in Whitefish since buying a home there in 2005. That same year, he purchased a majority share in Winter Sports, the company that runs the Whitefish Mountain Resort in the town. He soon bought Glacier Jet Center, a private airport about 20 minutes outside the city.

Foley’s development projects, like David Lesar’s and the Zinkes’, are signs of just how far Whitefish has come since Zinke’s childhood. The Pastime Pool Hall and Bar, which Zinke fondly remembered in his autobiography as where his grandfather used to socialize, has been renamed “The Bulldog,” although not much else about it has changed. But the city also boasts a crepiere, an artisanal olive oil shop and a camping store that sells “overnight yurts.” A new yoga studio stands about a minute’s walk down the block from Zinke’s boyhood home.

“It's gone from a dirty ski town to pretty bougie,” said Cale Knox, a Whitefish native and employee at the Red Caboose coffee shop downtown. In a sign of the times, tech venture capitalist Michael Goguen recently bought the Red Caboose, and there is rumor that it will become a wine bar.

Only a mile away is the open land that Zinke dubbed his Veterans Peace Park. Ten years after the railroad donated the first piece of land, locals are as flummoxed as ever about what will happen to it. The situation has left some residents worried that what was pitched as an attempt to provide a green space dedicated to children and veterans was instead used to build Zinke’s political profile.

“It was something to put on his résumé,” Whitefish City Council member Richard Hildner said of the park during a visit there. “Now, it just sits here.”