Transportation Secretary Failed to Sever Financial Ties to Construction Company

WASHINGTON — Transportation Secretary Elaine Chao failed last year to cash out her stock options in one of the nation’s largest suppliers of highway construction materials, despite a promise she had made to do so in a signed ethics agreement when she joined the Trump administration.

Ms. Chao had served for about two years on the board of directors of the company, Vulcan Materials, an Alabama-based supplier of rock aggregate, which is used in road construction and many other building projects. The board position paid Ms. Chao $110,000 plus $151,000 in stock options in 2016, according to a filing by the company.

As part of her ethics agreement, Ms Chao said that by April 2018 she would take “a cash payout for all of my vested deferred stock units” from Vulcan, effectively ending her financial relationship with the company.

But a financial disclosure report released this month by her husband, Mitch McConnell, the Kentucky Republican who is the Senate majority leader, showed that Ms. Chao had somewhere between $250,000 and $500,000 worth of Vulcan stock. She owned this stock because in April 2018 Vulcan paid her for her stock options in the company’s stock instead of cash, the company said in a statement. Details of her continued ownership of Vulcan stock were reported on Tuesday by The Wall Street Journal.

A Transportation Department official said in a statement that the only change was that Ms. Chao was paid in stock rather than cash and that there was no ethics violation because Ms. Chao continued to recuse herself from any agency decisions directly related to the company.

Vulcan is frequently mentioned as one of the stocks that would benefit from any big increase in federal infrastructure spending, and the company’s stock price has risen about 20 percent since February after President Trump, in his State of the Union address, pledged to push for a “great rebuilding of America’s crumbling infrastructure.” Mr. Trump’s negotiations with Democrats on an infrastructure package broke down last week, in part because of objections from Republicans about the potential costs.

Vulcan generally contracts directly with highway builders in individual states, not the Transportation Department, which often helps finance road construction projects.

“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 Transportation Department said in a statement. “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.”

Robert Weissman, the president of Public Citizen, a nonprofit ethics group, said policy decisions Ms. Chao makes — even if they do not directly affect any contracts the company might hold with the agency — could still benefit the company in a significant way, especially any infrastructure program that increased road and highway construction. Vulcan makes crushed stone, sand and gravel as well as construction materials, including asphalt and ready-mixed concrete.

“The Department of Transportation has a lot to do with the building of roads in America, and the secretary ought not to be on both sides of the deal,” Mr. Weissman said. “Why didn’t she just cash out?”

Ms. Chao is not the first Trump administration official to face questions about assets still being held after joining the government. Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin have both faced their own questions about still-owned stakes in companies that might have some financial ties to the agencies they oversee.

In Mr. Mnuchin’s case, he sold a film production business to his wife, potentially creating a conflict of interest for an official who has been negotiating for expanded access for the movie industry as part of trade talks with China.