Obama nominee had funds in Cayman Islands
Two stories making headlines on President Obama’s nominee, Jack Lew, to be Secretary of the US Treasury revealed to have had investments in a capital fund in the Cayman Islands “notorious Ugland House!
By Talesha Reynolds and Rich Gardella , NBC News
Jack Lew, President Barack Obama’s Treasury Secretary nominee, previously held up to $100,000 in investments in an offshore hedge fund located in the Cayman Islands, according to financial disclosure forms.
Lew’s financial disclosure forms, filed in 2008 and 2010, showed that Lew had invested between $50,000 and $100,000 in a fund called Citigroup Venture Capital International Growth Partnership (Employee) II, L.P. — the very type of fund President Obama has repeatedly criticized.
The fund is an international venture capital fund for employees of Citigroup. According to his official White House biography, Lew served as managing director and chief operating officer of Citi Global Wealth Management and then Citi Alternative Investments (CAI) from 2006 to 2008.
Lew himself isn’t commenting, but a person familiar with Lew’s investment told NBC News that Lew invested a total of $56,000 and sold it at a loss for $54,418 in November 2010 after being confirmed as director of the federal Office of Management and Budget.
The source also told NBC News that Lew had no role in creating, managing or operating the fund, and that Citigroup had organized the fund in the Cayman Islands and made it available to other employees. The source said that many other Citigroup employees had investments in the fund.
According to the financial disclosure forms, the fund was registered at what has been called a notorious address in the Cayman Islands, located in the Caribbean in the British West Indies. Specifically, the fund’s address was a post office box in a building called Ugland House, in the capital city of George Town on Grand Cayman, the largest of the three Cayman islands.
In 2007 as a presidential candidate and in 2009 as president, Obama identified Ugland House as part of an outrageous tax scam, because according to filings, it housed 12,000 businesses that all claimed the building as their headquarters.
“For years, we’ve talked about shutting down overseas tax havens that let companies set up operations to avoid paying taxes in America,” Obama said in remarks about tax reform in 2009. “Either this is the largest building in the world, or the largest tax scam in the world. And I think the American people know which it is. That’s the kind of tax scam that we need to end.”
A political ad targeting Republican candidate Mitt Romney during the 2012 presidential campaign asked, “Why would Mitt Romney invest millions in the Cayman Islands?”
Tonight, after NBC News asked for comment, White House spokesman Eric Schultz issued a lengthy statement:
“Jack Lew paid all of his taxes and reported all of the income, gains and losses from the investment on his tax returns. The existence of Mr. Lew’s investment is not news to the Senate.
“Mr. Lew disclosed the investment in his prior confirmations, before three separate committees, for Deputy Secretary of State in 2009 and Director of the Office of Management and Budget in 2010, and he was confirmed by the Senate unanimously on both occasions.
“Twelve Members of the Finance Committee, including five Republicans, were members of the three committees that previously reviewed Mr. Lew’s nominations. All three committees reported Mr. Lew’s nomination to the Senate unanimously.
“Mr. Lew disclosed the investment to the Office of Government Ethics and to ethics officials at the State Department and OMB, including on his public financial disclosure forms, in connection with both of his previous confirmations. He played no role in creating, managing or operating the fund and he sold his investment in 2010 at a net loss.
“There are no new facts that provide a basis for Senators to reach a different conclusion about Mr. Lew’s nomination than they reached twice before in this Administration.”
A Democratic spokesman for the Senate Finance Committee, which will hold a confirmation hearing on Lew’s nomination on Wednesday, said that Lew’s investment had come up again through its current vetting process, raised by both Republican and Democrat members. The spokesman said once the committee had looked into the matter, it had determined the investment was not an issue. The spokesman said Lew had been completely transparent and forthcoming through any and all questions that have been posed.
But Iowa Sen. Charles Grassley, a Republican member of the Senate Finance Committee, disputed the Obama administration’s and the Democratic committee spokesman’s statements.
“It was disclosed only if you knew where to look and then were able to put the pieces together,” Grassley said in a statement late Friday. “To say this information was fully disclosed to the public is misleading, at best.”
Grassley noted Obama’s criticism of Ugland House-based investment funds came while Lew, now his Treasury Secretary nominee, had investments in one of those funds. Lew didn’t divest his Cayman Island investment until almost the end of 2010, when he was already working for the administration, and a year after the president publicly railed against such offshore accounts as tax havens.
“The irony is thick,” Grassley said.
NBC News’ Ali Weinberg contributed to this report.
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2. Lew’s Cayman Islands Fund a Likely Issue at Confirmation Hearings
By Jonathan Weisman, NY Times
As recently as 2010, Jack Lew, President Obama‘s nominee to be the next secretary of the Treasury, had $56,000 invested in a CitiGroup venture capital fund based in the Cayman Islands’ notorious Ugland House, a building whose mailboxes are home to nearly 19,000 corporate entities, many of them tax shelters.
The investment has been in public documents for years and drew no attention when Mr. Lew was confirmed to be deputy secretary of state in 2009 and director of the White House Office of Management and Budget in 2010.
But the fund is coming to light as Mr. Obama and Congressional Democrats are zeroing on taxes lost to off-shore entities, including hedge funds, as a way to stave off $1 trillion in across-the-board spending cuts set to begin March 1.
Aides in both parties said it was quite likely to come up during his confirmation hearing Wednesday. Senate Democrats are struggling to come up with a package of spending cuts and tax loophole closings that could stave off the automatic spending cuts — known as sequestration — for at least three months. Tax breaks for hedge fund managers and offshore tax shelters are a prime target.
The Finance Committee held hearings in 2008 burrowing in on Ugland House, a nondescript white building in George Town, Cayman Islands, that shelters a bewildering number of corporate headquarters.
“Today we will take a look at some ostensibly crowded halls, those of the Ugland House in the Cayman Islands,” Senator Max Baucus of Montana, the committee’s chairman, said, opening the hearing. “That is a remarkable five-story building that the G.A.O. tells us has some 18,857 tenants. Today we will examine whether many of those tenants are feasting at America’s taxpayers’ expense.”
Mr. Lew divested himself of the CitiGroup Venture Capital International Growth Partnership in 2010. When confirmed as budget director in 2010, he sold the investment at a loss, for $54,418.
“Jack Lew paid all of his taxes and reported all of the income, gains and losses from the investment on his tax returns,” said Eric Schultz, a White House spokesman. “The existence of Mr. Lew’s investment is not news to the Senate. Mr. Lew disclosed the investment in his prior confirmations, before three separate committees. There are no new facts that provide a basis for senators to reach a different conclusion about Mr. Lew’s nomination than they reached twice before in this administration.”
Mr. Lew did not create, manage or operate the fund, officials said. Republican aides did not suggest any illegality or tax cheating with the disclosure. Indeed, Republicans on the Finance Committee had leaped to the defense of Henry Paulson, President George W. Bush‘s last Treasury secretary, when numerous Cayman Island investments surfaced during his confirmation.
Senator Charles E. Grassley of Iowa, then the Finance Committee’s ranking Republican, accused the president of hypocrisy.
“President Obama has been almost obsessively critical of offshore investments,” Mr. Grassley said. “He called Ugland House ‘either the biggest building or the biggest tax scam on record.’ That makes this Cayman Islands investment of his top official and now Treasury secretary nominee worthy of attention. The irony is thick. Members of the Finance Committee will question Mr. Lew about his foreign investments at the hearing.”
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