WASHINGTON – In a public move presaging his run for the White House, Jeb Bush resigned from corporate positions at the end of last year. Less noticed: One of the companies where he served on the board, Florida timber company Rayonier Inc., faced a flurry of lawsuits not long before his exit.
One case alleges that a plant in Georgia violated the Clean Water Act and contaminated the Altamaha River, and five other suits from investors contend the company made false and misleading statements that caused them losses. All are active in court.
Bush is not named as a defendant in the cases, but he is listed among Rayonier board members in court papers filed in the Georgia environmental case, raising the possibility he could be called to testify. In a larger sense, the lawsuits could renew questions about the former Florida governor’s stewardship in the corporate world as he aspires to step back into public office. At least four times, Bush served on the board of companies sued by investors or the government.
It can be difficult to hold board members liable in such cases, even though directors ultimately oversee corporations.
“It is far too hard to hold a board member liable for oversight failures when the board member has simply been asleep at the wheel,” said Elizabeth Nowicki, an Albany Law School professor and former Securities and Exchange Commission lawyer. “You are not going to find with board members a lot of successful lawsuits.” Still, she added, “The buck stops with the board members.”
Bush is “proud of his service on Rayonier’s board,” said his spokeswoman, Kristy Campbell. “He stepped down at the end of last year to focus on increasing his political engagement.”
A spokesman for Rayonier, Mike Bell, said there was no environmental harm. Both Bell and Campbell said the company’s board took immediate and decisive action when the financial issues surfaced.
Bush, appointed to Rayonier’s board in 2008, resigned effective Dec. 31 with no disagreements between him and the company, according to a securities filing. Bush earned nearly $198,000 in compensation from Rayonier in 2013, $99,750 in cash and $98,149 in stock value and dividends, the company said.
Just before his departure, investors filed the first of five securities cases alleging Rayonier made public misstatements that caused them significant losses and damages. The five cases — filed in November and December — have been consolidated into one class-action lawsuit in federal court in Jacksonville, Florida, where Rayonier is based.
The Clean Water Act case, filed in federal court nearly a year ago, contends that a Rayonier paper mill in Jesup, Georgia, a small city four hours downstate from Atlanta, fouled the Altamaha River. The mill, which produces a “specialty cellulose product,” discharges its waste effluent directly into the river, the lawsuit said.
Altamaha Riverkeeper Inc., a Georgia environmental non-profit, filed the lawsuit and alleged company operations harmed a waterway that is home to 120 species of rare or endangered animals, including the southern bald eagle, wood stork and shortnose sturgeon. The small group, founded to protect the river, lists annual contributions of just over $200,000. It is a part of the Waterkeeper Alliance, a New York clean water organization whose staff includes environmental lawyer Robert F. Kennedy Jr. Waterkeeper Alliance is not part of the case.
In 2008, responding to fishermen and others complaining of a smelly brown discharge from its mill, Rayonier entered into a pact with state regulators to spend millions on anti-pollution controls. A spokesman with the Georgia Environmental Protection Division, Kevin Chambers, said Rayonier is in compliance with the consent order and a new state permit will strengthen protections.
Yet the lawsuit cited an “ongoing environmental calamity” and accused Rayonier of discharging over 50 million gallons daily of “highly discolored, inescapably foul-smelling effluent” into the river. It said the plume is visible from space and smells for miles.
The company has asked a federal judge to dismiss the lawsuit. No decision has been made, though the judge said in September her inclination was not to grant the company’s motion, signalling that the case is likely to move forward.
The other cases involve investors — including the Lake Worth Firefighters’ Pension Trust Fund in south Florida and others — who said Rayonier’s financial statements in 2014 overstated the company’s timber inventory and income from operations.
Rayonier restated its financial statements in November 2014, citing errors, and a company senior vice-president resigned. The day the news broke, company shares fell almost 15 per cent.
Rayonier and several executives, but not Bush, are defendants.
“The board, with management and independent advisers, moved quickly to conduct its review and took swift and decisive actions to realign Rayonier’s strategy and operations, as was addressed in the disclosure filed by the company last November,” said Campbell, Bush’s spokeswoman.
The lawsuits are not the first time Bush has served on the board of a private company sued by investors in federal court.
Bush earlier served on the board of Swisher Hygiene, a sanitation company that faced lawsuits from investors who accused Swisher of making false statements that plunged the company’s market value. Bush was named as a defendant in some of the cases. In February 2014, Swisher Hygiene agreed to pay $5.5 million to a settlement fund. Bush earned $92,500 in compensation from Swisher in 2012, the company said.
In the 1990s, Bush served on the board of credit card protection company Ideon Group Inc., where investors said company executives manipulated stock for their own benefit. That case was settled for $15 million in 1998 — six months before Bush won his first election as Florida governor. At the time, Bush said any misdeeds occurred before he joined the board and said he was dragged into the case because of his name.
More recently, Bush served on the board of InnoVida Holdings, a Miami Beach company that won a $10 million loan from the government’s Overseas Private Investment Corp. to help build prefabricated housing for victims of the 2010 Haiti earthquake. Bush served on the board when the loan was approved in January 2010.
Federal prosecutors and the SEC later charged that InnoVida’s owner, Claudio Osorio, defrauded investors, including OPIC. Osorio pleaded guilty in 2013 to wire fraud and money laundering and got a 12 1/2-year prison sentence.
Osorio used investor money to help bankroll a Miami Beach mansion, a mountain home in Colorado, a Maserati and country club dues, the SEC said.
Bush left InnoVida’s board later in 2010 and was not accused of wrongdoing. But his name may have helped InnoVida build business. “To add an air of legitimacy to his company, Osorio assembled a high-profile board of directors that included a former governor of Florida, a lobbyist, and a major real estate developer,” the SEC said in 2012.
InnoVida had paid Bush’s company, Jeb Bush & Associates, $15,000 a month for consulting work — paying $468,902 from December 2007 to September 2010. In a settlement filed in March 2013 in bankruptcy court related to the company’s collapse, Bush agreed to return $270,000.