08:13 PM CDT on Wednesday, October 27, 2004

Associated Press

ST. LOUIS — Democratic gubernatorial candidate Claire McCaskill says her husband will stop seeking state tax credits and loans for his business developments to avoid a potential conflict of interest if she is elected governor.

McCaskill's husband, Joseph Shepard, has built millions of dollars worth of low-income housing projects with the help of loan interest loans and tax credits from the Missouri Housing Development Commission.

As governor, McCaskill would sit on the commission and appoint some of its members. To avoid any conflict, McCaskill said Shepard would stop developing low-income housing projects in Missouri.

"He hasn't applied for credits in a number of years and will never apply for a project again," McCaskill told the St. Louis Post-Dispatch. "He will not develop any projects in Missouri because we don't think it's appropriate.

"If he is not applying for and competing for development incentives in the state, I think that removes any conflict or appearance of a conflict," McCaskill said. "It's a sacrifice on the part of him and his business."

Democratic Gov. Bob Holden, whom McCaskill defeated in the Aug. 3 primary, and Republican gubernatorial candidate Matt Blunt both have made an issue of Shepard's business interests. They especially have criticized some nursing homes, which were cited for deficiencies by inspectors or sued with allegations of poor care, sexual abuse or wrongful death.

Shepard's wealth enabled McCaskill to loan her campaign more than $1.6 million in the primary. Republicans complain that McCaskill's campaign finance reports do not list when the loans will be repaid, which is required under state law.

McCaskill's campaign uses a twin-engine, eight-seat Piper airplane registered to Sunset Cove Associates, one of Shepard's companies. Its pilot is one of Shepard's employees. In addition, the $1.5 million house that McCaskill and Shepard occupy in Ladue is owned by Seventeen West Lockwood Associates, another one of Shepard's companies.

Although no longer seeking state development tax credits, Shepard will continue his other business interests that are unrelated to government, McCaskill said.

Shepard's other interests include a small family shoe business and companies that provide various health care services, including in-home health care, medical equipment and physical, occupational and speech therapy. McCaskill said Shepard also plans to begin buying and selling tax credits, which businesses use to reduce tax liabilities.

McCaskill married Shepard on April 27, 2002, after both had divorced. McCaskill's personal finance disclosure statement filed this year shows that Shepard is a partner in five companies and involved with 131 limited partnerships, limited liability companies and closely held corporations. He is director, board member or officer in 18 corporations.

Shepard also is a defendant in a lawsuit filed by current and former residents of the Heritage-Dunbar apartment complex in Berkeley. The lawsuit alleges the apartments for the elderly were marketed as being equipped with pull cords that could notify staff when residents were in trouble.

But the lawsuit contends some residents died or were injured through negligence when the emergency notification system did not work. Shepard is a general partner in the Heritage apartments. The alleged problems with the apartments took place before Shepard and McCaskill were married.

Shepard also had been chief executive officer of Reliant Care Group LLC, which owns or operates six nursing homes in Missouri. McCaskill said her husband has sold his interests in the nursing home operating companies, but he still owns some of the buildings.