This story was a result of a partnership with APM Reports.

U.S. Secretary of Transportation Elaine Chao, a leader in the Trump administration’s effort to inject $1 trillion into America’s crumbling infrastructure, chose to hold on to more than $300,000 of deferred stock awards in a transportation construction company after resigning from its board when she was confirmed to the Cabinet position.

Shares in the company — Vulcan Materials — climbed to a 10-year high in the days following Trump’s election and have hovered there since, reflecting investors’ optimism that the company’s business and the construction sector will benefit from a federally funded infrastructure package.

Because of Chao’s Cabinet position and the company’s business, the stock awards present a conflict of interest.

Here’s why: Chao could by turns propel an infrastructure plan in the company’s best interest and gain financially when she sells her shares, assuming the price climbs if an infrastructure package gets through Congress.

Since Inauguration Day, Chao and Trump have spoken publicly at least 20 times about infrastructure. Each time, the share price in Vulcan jumped in the days afterward. Vulcan, which generated $3.5 billion in revenue last year, is among the nation’s largest producers of construction aggregates — crushed stone, sand and gravel. It also produces asphalt and ready-mixed concrete.

Cabinet nominees and political appointees, in compliance with various laws and ethics guidelines, resign positions in the private sector and divest assets that could be affected by policy matters or legislation they’re involved in. Some will separate from all outside interests to avoid any perceived conflicts.

In fact, when Chao was confirmed, she promptly resigned from Vulcan and other non-profit and corporate board positions, including News Corp. and Ingersoll Rand. She also sold her compensation-related stock holdings from the boards and said she’ll follow the compensation plan of Wells Fargo, gradually cashing out her stock awards through 2021.

But with Vulcan, instead of requesting a clean break from the company, Chao opted to hold on to the stock awards through April 2018 — the soonest she can sell them — according to her financial disclosure form. In Chao’s ethics letter to the Senate confirmation committee, she cited the company’s compensation agreement with directors as the basis for her decision.

“Until I receive the cash payment of my vested deferred stock units, I will not participate personally and substantially in any particular matter that to my knowledge has a direct and predictable effect on the financial interests of Vulcan Materials, unless I first obtain a written waiver,” Chao wrote in the January letter.

Despite Vulcan’s guidelines regarding director pay, ethics experts and people experienced in corporate board matters say it would have been easy for Chao to separate financially from the company upon her confirmation. Vulcan’s guidelines also allow for a director’s compensation agreements to be modified, “if it determines in its sole discretion that such action would be in the best interest of the company.”

The amount of the cash payout will be determined based on the closing price of the stock at the time the payout is made, according to disclosure records. Chao could also keep the shares, betting the price goes up.

A spokesperson for Vulcan wouldn’t comment on whether Chao requested to cash out when she was confirmed. As to her stock awards, Vulcan Materials sent a statement saying “all of the company’s actions have been in accordance with the provisions of our plan and applicable IRS regulations.”

Richard Painter, a University of Minnesota law professor who served as the top ethics lawyer in the White House under President George W. Bush, said Chao used poor judgment. “I don’t think it’s possible for Elaine Chao to do her job as Secretary of Transportation without participating personally and substantially in a matter that’s going to have a direct and predictable impact on Vulcan Materials,” he said.

Chao’s decision to keep her stock awards in a company that could profit from her policy decisions is the latest in a string of now publicly known decisions by Trump’s Cabinet secretaries that raise questions about their attention to ethical behavior.

Four of Trump’s Cabinet secretaries are under investigation for using chartered aircraft when commercial travel was a cheaper option. Key among them are Secretary of the Treasury Steve Mnuchin and Health and Human Services Secretary Tom Price. Mnuchin requested the use of a government jet for his honeymoon and traveled with his wife on another government plane to Kentucky on the day of the solar eclipse.

And Price used chartered aircraft 26 times since May, according to a review by Politico. The costs of such chartered flights can cost tens of thousands of dollars per flight. Price apologized Thursday, says he will reimburse the government for his portion of the chartered flights and has pledged to fly commercial airlines in the future.

At a meeting on infrastructure at Trump Tower in August 2017, Elaine Chao stands with (left to right) Director of the National Economic Council Gary Cohn, Treasury Secretary Steve Mnuchin and President Donald Trump.

Ethics experts say when subordinates flout long-held guidelines, they’re usually taking the lead of their boss. Trump, for example, in a departure with his immediate predecessors, has refused to release his tax returns. He also hasn’t fully divested from his businesses and has given preferential treatment to his Trump-branded properties for vacations and events during his time as president.

An Securities and Exchange Commission filing shows that Chao’s stock awards came in the form of 3,041 deferred stock units in Vulcan Materials.

Chao served on Vulcan’s board of directors in 2015 and 2016 and, in addition to an annual salary of $110,000, she received $150,982 in deferred stock compensation — the stock units — for each year she served as director. She resigned her position on the board after the U.S. Senate voted on Jan. 31 to confirm her.

While ethics officials question Chao’s conflicts in her role as a Cabinet secretary, corporate governance experts say delayed transactions are commonplace to protect investors.

Charles Elson, a corporate governance expert at the University of Delaware, said companies create such plans to prevent a director from cashing out before investors learn of any potential bad news. “If she were allowed to sell immediately, that would defeat the whole point of the company’s plan,” he said.

A multi-millionaire who’s served business and government

Chao, who is married to Senate Majority Leader Mitch McConnell, did not respond to repeated requests for an interview. Her spokeswoman did not respond to six detailed questions about Chao’s holdings, but in a written statement said that Chao is following applicable ethics requirements and federal law. She also said a department ethics official determined Chao’s holdings presented no conflict.

Chao reported assets between $11 million and $48 million on her financial disclosure form.

Chao has been active in corporate and nonprofit circles and held several positions in the government. She served as Secretary of Labor from 2001 through 2009 under George W. Bush and Deputy Secretary of Transportation from 1989 to 1991. She also was president and chief executive of the United Way of America and director of the Peace Corps. Chao has also served on several corporate boards, including Protective Life Corp., Centerra Group and Dole Food Co.

Departing the boards, keeping some pay

When Elaine Chao was confirmed as U.S. Transportation Secretary in January, she quit four corporate boards, but kept a financial relationship to two. One was Vulcan Materials, a transportation construction company. Chao could still benefit from her compensation as a director there for nearly two years — $300,000 in deferred stock awards — if she helps push an infrastructure bill through Congress.

ORGANIZATION POSITION START DATE LEFT POSITION

UPON CONFIRMATION? COMPLETE

FINANCIAL SEPARATION? News Corporation Director Oct. 16, 2012 Yes Yes Wells Fargo & Company Director June 28, 2011 Yes No Ingersoll Rand Director June 4, 2015 Yes Yes Vulcan Materials Director Feb. 13, 2015 Yes No

Chao, 64, is an immigrant who arrived in the U.S. at age 8 and became a citizen at 19, according to a questionnaire she submitted to the U.S. Senate. Her father — James Chao — founded a shipping company. In 2008, he gave Chao and McConnell between $5 million and $25 million, according to Politico.

She has been a leading advocate for the infrastructure plan, a role she naturally assumed as head of the Transportation Department.

Since she took office, she’s discussed infrastructure in House and Senate committees, met with city and state officials at the White House, traveled to Kentucky and Nebraska to pitch the plan and appeared by Trump’s side at infrastructure-related events. “The president has made this his top priority,” Chao told CNBC in May. “He has said that he’s challenging our country and his advisers that he wants $1 trillion in investments over the next 10 years.”

The findings from the APM Reports investigation come as Trump is trying to win general support for an infrastructure plan. For months, the White House has pushed for increased private investment — such as public-private partnerships, referred to as P3s — to pay for the public projects. But this week, Trump started to back away from that approach.

The shift occurred for a number of reasons: rural lawmakers openly worried that private investment wouldn’t land in their districts, a privately financed project in Indiana faced significant delays, and the Texas Legislature rejected efforts to authorize additional private investment for roads.

“Just like with any new policy, there are legitimate questions about how P3s can best be incorporated into our nation’s infrastructure program,” said a White House official who asked not to be named. He added that public-private ventures were not “the silver bullet for all of our nation’s infrastructure problems.”

An APM Reports analysis in May found that states, cities, unions and infrastructure consultants submitted more than 500 projects to the White House for consideration.

Then in July, APM Reports found that the bulk of the requests considering private investment were primarily in urban areas around the country.

The White House has not released any specifics about its plan, and Congress has shown little interest in taking it up. House and Senate leaders have been focused on a new federal health care law and a plan to cut taxes. Some congressional leaders have said it’s unlikely Congress will consider the infrastructure bill until early next year.

Construction stocks at the mercy of infrastructure plan

The stock market rallied after Election Day as investors grew excited about the prospects of a Trump presidency and a Republican-controlled Congress. Companies tied to the construction industry fared particularly well, boosted by Trump’s pledge to inject $1 trillion into roads, bridges and airports.

In the days following Trump’s election, Vulcan Materials’ stock price spiked 14 percent, from $119 a share on Election Day to $136 a share two days later. The increase signaled optimism that the company would capitalize on Trump’s plan.

The word ‘infrastructure’ and Vulcan share prices

Whenever U.S. Secretary of Transportation Elaine Chao or President Donald Trump talk about infrastructure, shares of Vulcan Materials stock jump. Red dots below indicate events that may have affected the share price.

During a conference call in February with investors, Vulcan’s chief executive Tom Hill said the country “desperately needs” a federal infrastructure bill to pass. “When it happens, there’s nobody better positioned to serve these projects than we are. It’s what we do. It’s who we are,” he said.

Vulcan has spent $630,000 lobbying Congress and the U.S. Department of Transportation over the past two years, according to disclosure records filed with the U.S. Senate, though a spokesperson for the company said it hasn’t lobbied Chao or her department since she was nominated to the position.

In a written statement sent to APM Reports this week, the company downplayed the impact of an infrastructure bill on Vulcan’s bottom line. “While Vulcan Materials joins numerous experts in our belief that infrastructure investment is needed in our country, the company has noted on numerous occasions that it is well positioned for growth with or without a $1 trillion federal infrastructure bill.”

While share prices for many construction-related firms surged in anticipation of an infrastructure bill, they’ve dropped as Trump’s plan is yet to materialize. On Thursday, Vulcan shares closed at $119.12 a share, down 7.7 percent since Inauguration Day.

Kathryn Thompson of Thompson Research Group advises managers of hedge funds, mutual funds and pension funds on the construction and industrial sector. She said some investors anticipated quick action on an infrastructure bill but were disappointed with the lack of action in Congress. Thompson said, though, that she expects construction-related stocks, including Vulcan Materials, to jump again when Trump releases his plan. “It would certainly be a psychological boost to the stocks,” she said.