BANGOR – Capital Seven’s staffing choices are raising concerns among city and state government officials about potential and perceived conflicts of interest.

During the short period Hawaiian businessman Shawn Scott, who owns Capital Seven, has been doing business in Maine, his firm has:

. Named Bangor City Councilor David Nealley Capital Seven’s executive vice president;

. Hired state lottery commission member Kathleen Newman to help derail a competitor’s project at Scarborough Downs.

Capital Seven also hired the Portland law firm Pierce Atwood and its consulting arm. The firm employs Robert Baldacci, brother of Gov. John Baldacci. Capital Seven and Pierce Atwood have since parted ways.

The potential for conflict has some in Bangor and Augusta calling for those hired by Capital Seven to choose between that job and their government positions.

Bangor Mayor Dan Tremble said that since Nealley was named Capital Seven’s executive vice president last week, growing numbers of city officials and members of the public have questioned whether he can maintain his objectivity, especially his statement this week that Capital Seven might sue some of his council colleagues if they don’ t stop trying to “undermine and discredit” Bangor Historic Raceway and Capital Seven’s efforts to become licensed.

“I think it puts him in a very difficult position,” Tremble said. “I think it would be in the best interest of David Nealley, Capital Seven and the city if he chose to resign from Capital Seven or to resign from the City Council.”

Although it has led to some concern, Nealley’s post with the racino developer is not prohibited by the city’s ethics code.

Nealley has complied with all aspects of the code. As required, he disclosed his financial interest in the project and relationship with the developer the day he started work in February.

It then was up to fellow councilors to determine if he had a conflict of interest, which the council decided he did. As a result of the conflict, Nealley cannot take part in deliberations or votes related to the project or represent or negotiate for Capital Seven in front of the council.

On Thursday, Nealley acknowledged that Capital Seven had hired several sitting officials, including himself, but said doing so was good business on the company’s part.

“I think they’re smart enough to understand the interconnections between business and politics,” Nealley said.

He also denied his job affected his ability to perform his duties as a councilor, noting that the council dealt with dozens of matter each week, only a fraction of which involved the racino.

“It’s what I’ve said before – if you don’t like the project, kill the developer, and if you don’t like the message, kill the messenger,” he said.

“I’m not going without a fight,” he said. “One way or another, I will do what I can to make Bangor move forward. That is why I ran for council in the first place. People voted me in because they knew I was committed to business and economic development.”

While Nealley’s ties to the company have worried some in the city, Capital Seven’s recent hiring of a sitting state lottery commissioner caused considerable consternation at the highest levels in state government.

Among the most vocal critics is Lee Umphrey, spokesman for Gov. Baldacci. On Thursday Umphrey called the company’s apparent practice of hiring government officials to advance its agenda “a troubling pattern.”

“It’s another example of Capital Seven trying to co-opt people in the process,” said Umphrey, specifically referring to Newman, whose hiring by Capital Seven to help derail a competitor’s project at Scarborough Downs he said “seemed inappropriate.”

For his part, the governor on Thursday reiterated his objections but stopped short of asking for Newman’s resignation. Instead he suggested that Newman need not ask his office to reappoint her when her tenure expires in April.

“I think she has just a few months left on her term,” said Baldacci, explaining Newman’s apparent dual alliances contradicted his vision of tapping some lottery commission members to serve on his as-yet formed Maine Gambling Regulatory Commission, which would oversee operations such as Capital Seven’s.

Newman, appointed by former Gov. Angus King, said Thursday that if Baldacci made the lottery commission a division of the gambling commission, as has been suggested, she would resign.

Until then, however, she said she saw no present conflict working for Capital Seven.

“The lottery commission does scratch tickets. They do not do harness racing and they do not do slot machines,” she said, adding that if forced to choose, she would continue with Capital Seven. “Honestly, my client pays a lot more than the lottery commission.”

After meeting with Newman, Sen. Ken Gagnon, a Waterville Democrat and chairman of the legislative committee that oversees the lottery commission, said that he did see a potential conflict with Newman’s dual roles should, for instance, slot machines cut into lottery revenues, as expected.

“But she’s a professional and she’ll do the right thing when the time comes,” he added.

Jeff Tuttle of the NEWS staff contributed to this report.