Oregon Secretary of State Shemia Fagan is stepping down amid calls for her resignation after she took a lucrative cannabis consulting job at the same time her office is conducting an audit of the state's cannabis industry.

Fagan signed a contract with private marijuana company Veriede Holding and was receiving $10,000 a month – and would have received $30,000 in bonuses – for "successful acquisition of license(s)" Veriede and its affiliates obtained outside of Oregon or New Mexico, according to the contract. One of the owners of the company also donated about $30,000 to Fagan's campaign fund.

Gov. Tina Kotek on Friday called for the Oregon Government Ethics Commission to investigate Fagan's actions and for the Department of Justice to look at the cannabis audit. The secretary of state is first in the line of succession for governor, meaning Fagan would have stepped in as governor if Tina Kotek vacated the position for any reason.

Shemia's office released a statement Tuesday casting her actions as a "distraction" and saying her last day will be May 8.

“While I am confident that the ethics investigation will show that I followed the state’s legal and ethical guidelines in trying to make ends meet for my family, it is clear that my actions have become a distraction from the important and critical work of the Secretary of State’s office," Fagan said in the statement. "Protecting our state’s democracy and ensuring faith in our elected leaders – these are the reasons I ran for this office. They are also the reasons I will be submitting my resignation today. It has been a true honor to serve the people of Oregon."

Kotek said she supported Fagan's decision to step down.

"It is essential that Oregonians have trust in their government. I believe this is a first step in restoring that trust," Kotek said.

Emily McClain, Fagan's chief of staff, has also resigned.

Contract behind the controversy

Willamette Week first reported Thursday that Fagan had entered a contract with Veriede Holding in February. The Oregon company is an affiliate of La Mota, a cannabis chain whose owners, Rosa Sazares and Aaron Mitchell, have reportedly failed to pay millions of dollars in cannabis and federal income taxes and faced workplace complaints.

Fagan announced Monday that she ended the contract and in a short news conference said her consulting work involved "research," compiling information about the laws and regulations in the industry in other states and territories. If the contract had continued beyond its early stages, and once Fagan renewed her bar status, she said, she would have performed legal analysis.

Fagan said Veriede never asked her to do anything other than research and did not expect her to use her position as secretary of state to benefit their business.

She admitted, however, that she had conversations "at lunch and stuff" about cannabis, including at least one with Connecticut's lieutenant governor Susan Bysiewicz about who a cannabis company should talk to "if they wanted to get a lay of the land."

Byseiwicz's office sent an emailed statement to the Statesman Journal in response to questions surrounding the conversation.

"It was a one-time communication by phone call," according to the statement. "Approximately three weeks ago, the lieutenant governor received a phone call from Shemia Fagan inquiring about Connecticut's cannabis license process for a client Fagan had as part of her consulting business. The lieutenant governor pointed Fagan to public information of the appropriate state agency contact to learn Connecticut's lottery process. There was no further communication beyond the one phone call."

In response to criticism, Fagan said "to put it bluntly, my secretary of state salary isn't enough to make ends meet."

Her salary from the state was about $77,000 a year.

She is "starting over financially" after a divorce, law school and as a renter and sole income earner in her household, she said.

Questions about recusal

Fagan recused herself from the audit the Secretary of State's Office was conducting into how the state is handling marijuana-related businesses five days before she reportedly began consulting work for Veriede Holding on Feb. 20.

According to the news conference, Fagan attended two meetings about the audit before her recusal, and the audit was substantially finished by the time she had recused herself.

Cannabis audit:Questions about Fagan's connections to marijuana industry overshadow audit

Meeting notes mention Fagan specifically asked the audit team if they had interviewed Cazares.

"I exercised poor judgment by contracting with a company that is owned by my significant political donors and is regulated by an agency that was under audit by my Audits Division," Fagan said in her statement Monday. "I am sorry for harming the trust that I’ve worked so hard to build with you over the last few years."

The road to secretary of state

Fagan served in both chambers of the Oregon Legislature before becoming secretary of state. She joined the House of Representatives in 2013, then defeated a longtime Democratic incumbent in a contested primary to make her way to the Senate in 2019.

During her Senate campaign, she promised to champion progressive housing laws. She also shared stories of her childhood, including visiting her mother, who was homeless in East Portland and struggling with addiction issues.

Fagan, raised by her single dad and two older brothers, grew up in the small towns of Dufur and The Dalles.

Once elected to the Senate in 2020, she chaired the first-ever Housing Committee at a time when the Legislature approved first-in-the-nation statewide rent control. She also was one of the more vocal critics of the Republican walkout during that session.

Republican Bev Clarno was the secretary of the state at the time, appointed by then-Gov. Kate Brown to replace Dennis Richardson, who died in 2019 of brain cancer while in office. Brown appointed a Republican under the agreement they would not run in 2020.

Fagan defeated longtime Republican state Sen. Kim Thatcher to reclaim the office for her party, the only statewide office the Democrats did not hold at the time.

Her term was to expire in January 2025.

Lawmakers react: 'severe lapses in judgment'

Following Fagan’s resignation from office, Speaker of the House Dan Rayfield, Senate President Rob Wagner, House Majority Leader Julie Fahey, and Senate Majority Leader Kate Lieber issued the following statement:

“As elected leaders, we know that our work depends solely on our ability to hold the trust of the people we serve and represent. Secretary of State Fagan’s severe lapses of judgment eroded trust with the people of Oregon, including legislators who depend on the work of the Audits Division for vital information on public policy. This breach of trust became too wide for her to bridge. Her decision to resign will allow the state to move on and rebuild trust.”

Statesman Journal reporter Capi Lynn contributed to this report.