First on CNN: Treasury secretary nominee’s foreign money links bring new scrutiny
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Senate Democrats are raising questions about whether Steve Mnuchin, President Donald Trump’s treasury secretary nominee, deliberately misled lawmakers at his confirmation hearing.
The concerns center on the extent of foreign investment in a series of finance entities Mnuchin helped manage, including one based offshore in the Cayman Islands, aides tell CNN.
It’s an issue – which Democratic aides and lawmakers say hasn’t been addressed in subsequent follow-up questions in the weeks since – that has raised concern about the extent of the influence those investors may hold, and the potential for conflicts of interest not unlike what has tailed Trump throughout his campaign. On its face, it echoes a prime point of contention for Democrats probing all of Trump’s Cabinet picks, many of whom boast extensive private business and finance ties.
But Mnuchin is slated to be the Trump Administration’s top economic official, making those ties even more susceptible to potential conflicts, aides say – the types of potential conflicts Mnuchin himself appeared to draw attention to inadvertently during his confirmation hearing.
The focus has trained on a series of finance entities, all offshoots of the hedge fund run by Mnuchin up until he was selected as Trump’s pick to be the country’s economic point person.
Foreign investors
Asked specifically about the investment makeup of the offshore entity during his hearing, Mnuchin repeatedly said it was created to provide opportunities for pension funds and non-profits to invest. There were also “a small number of foreign investors,” Mnuchin told lawmakers.
But the offshore entity and a series of other finance vehicles, some of which weren’t originally disclosed by Mnuchin during the financial disclosure process, hold gross assets of more than $240 million, according to an SEC filing reviewed by CNN. Significant percentages of each were held by foreign investors, according to the filing, and one was 100 percent owned by foreign investors.
Mnuchin’s failure to initially disclose his relationship with the funds, along with his minimizing the scope of foreign investment in them during the hearing, has Democrats questioning whether it was part of a deliberate effort to steer them away.
“Misleading – and that’s the most charitable way you could say it,” Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, said of Mnuchin’s explanation during an interview. “You walked away thinking that almost the only people were churches and pensions (investing in those entities.)”
One fund, Dune Capital International LTD., listed a gross asset value of $35.1 million in the 2013 disclosure. The disclosure, which identifies Mnuchin as one of three “Partners and Directors” of the Cayman Islands-based entity, claims 28% of the underlying fund ownership came from foreign investors, according to the SEC filing reviewed by CNN.
A second US-based entity with $18.4 million in gross asset value, DE International Holdings LLC, is listed as 100% owned by “non-US persons,” according to the SEC filing.
Dune Entertainment Holdings LLC, which had a gross asset value of $124.8 million, listed 43% of its ownership as coming from foreign persons or entities. Two additional entities, Dune Entertainment International and Dune Entertainment LP, held in total nearly $62 million in gross asset value. The underlying assets were 100% and 43% beneficially owned by non-US persons, respectively. The portfolio played a role, at least in part, in the financing of Mnuchin’s extensive financing of Hollywood projects.
“We’re talking about foreign investors,” Wyden said. “I don’t have a lot of evidence right now that all these non-profits and pensions were interested in investing in movies.”
The foreign investment in the offshoots was entirely legal and isn’t required to be disclosed. But Mnuchin’s role in the entities was supposed to be disclosed to the committee. It wasn’t. At least not until the Democratic investigative staff on the panel discovered the SEC document.
Missing paperwork
Mnuchin, for his part, blamed the missing paperwork on the byzantine nature of the disclosure process. In a private interview with committee staff, aides said, Mnuchin acknowledged that his responses to the committee had not, as he had stated, been “true, accurate and complete.” He twice was forced to revise his initial disclosure questionnaire. He stated his role in the entities was “inadvertently missed” during the disclosure process.
Mnuchin’s confirmation spokesman didn’t respond to multiple requests for comment for this story. A White House official said the SEC filing, along with the rest of Mnuchin’s extensive financial documentation, is now available for anyone to see.
Photos: Trump's nominees and their confirmation hearings
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Director of National Intelligence —
Vice President Mike Pence, right, administers the oath of office to Dan Coats, the new director of national intelligence, on Thursday, March 16. Coats was accompanied by his wife, Marsha. He was confirmed by the Senate the day before.
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Director of National Intelligence —
Coats speaks on Capitol Hill before his confirmation hearing in February. The former US senator from Indiana was the US ambassador to Germany in the first term of George W. Bush's administration.
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Secretary of Energy —
New Energy Secretary Rick Perry speaks at his swearing-in ceremony in Washington on Thursday, March 2. The former Texas governor was confirmed by a Senate vote of 62-37.
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Secretary of Energy —
Perry is sworn in before his confirmation hearing in January. During his testimony, Perry cast himself as an advocate for a range of energy sources, noting that he presided over the nation's leading energy-producing state. He also said he regrets once calling for the Energy Department's elimination.
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Secretary of Housing and Urban Development —
Ben Carson is joined by his wife, Candy, and his granddaughter Tesora as he is sworn in as the secretary of housing and urban development on March 2. The renowned neurosurgeon and former presidential candidate was confirmed by a vote of 58-41.
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Secretary of Housing and Urban Development —
Carson greets Tesora prior to testifying before the Senate Committee of Banking, Housing and Urban Affairs in January. In his opening statement, he noted that he was raised by a single mother who had a "third-grade education" and made the case that he understands the issues facing the millions of people who rely on HUD programs.
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Andrew Harnik/AP
Secretary of the Interior —
New Interior Secretary Ryan Zinke signs an official document after he was confirmed by the Senate on Wednesday, March 1. The former congressman from Montana was joined by his wife, Lolita, as well as Vice President Mike Pence, US Sen. Steve Daines and Montana Attorney General Tim Fox.
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Secretary of the Interior —
Zinke, a former Navy SEAL, is sworn in before his confirmation hearing in January. He pledged to review Obama administration actions that limit oil and gas drilling in Alaska, and he said he does not believe climate change is a hoax.
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Secretary of Commerce —
Pence swears in new Commerce Secretary Wilbur Ross as Ross' wife, Hilary, stands by on Tuesday, February 28. The billionaire was confirmed by the Senate by a vote of 72-27.
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Secretary of Commerce —
Ross, center, waits to be introduced by US Sen. Marco Rubio, right, at his confirmation hearing in January. At the hearing, Ross said he wants countries that resort to "malicious" trading tactics to be "severely" punished. He pointed the finger at China, which he called "the most protectionist country of very large countries."
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Administrator, Environmental Protection Agency —
Supreme Court justice Samuel Alito swears in Scott Pruitt as the new administrator of the Environmental Protection Agency on Friday, February 17. Holding the Bible is Pruitt's wife, Marlyn, and they were joined by their son, Cade. Pruitt, the former attorney general of Oklahoma, was confirmed by the Senate 52-46.
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Administrator, Environmental Protection Agency —
Pruitt testifies at his confirmation hearing in January. Pruitt said he doesn't believe climate change is a hoax, but he didn't indicate he would take swift action to address environmental issues that may contribute to climate change. He said there is still debate over how to respond.
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Director, Office of Management and Budget —
Pence shakes hands with Mick Mulvaney after swearing him in as the new director of the Office of Management and Budget on Thursday, February 16. Mulvaney's wife, Pam, looks on. Mulvaney had been a congressman since 2011.
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Carolyn Kaster/AP
Director, Office of Management and Budget —
Mulvaney testifies before the Senate Budget Committee in January. He didn't back off his views that entitlement programs need revamping to survive -- and he didn't back away from some of his past statements on the matter. President Donald Trump, during his campaign, pledged not to touch Social Security or Medicare.
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Carolyn Kaster/AP
Administrator, Small Business Administration —
Linda McMahon is joined by her six grandchildren as she is sworn in as chief of the Small Business Administration on Tuesday, February 14. McMahon, the former CEO of World Wrestling Entertainment, was confirmed by a vote of 81-19.
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Administrator, Small Business Administration —
McMahon speaks during her confirmation hearing. She stepped down from her WWE duties in 2009 and ran for the Senate in 2010 and 2012.
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Secretary of Veterans Affairs —
Pence watches David Shulkin, the new secretary of the Veterans Affairs Department, speak at his swearing-in ceremony on February 14. Shulkin was confirmed by a unanimous vote in the Senate.
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Alex Brandon/AP
Secretary of Veterans Affairs —
Shulkin speaks at his confirmation hearing. He was the VA's undersecretary for health, a position in which he oversaw more than 1,700 health care sites across the United States.
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MANDEL NGAN/AFP/Getty Images
Secretary of the Treasury —
Trump watches as Steven Mnuchin is sworn in as treasury secretary on Monday, February 13. The Senate vote was 53-47, mostly along party lines.
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J. Scott Applewhite/AP
Secretary of the Treasury —
Mnuchin arrives for his confirmation hearing in January. Mnuchin, a former Goldman Sachs banker, faced policy questions about taxes, the debt ceiling and banking regulation.
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Andrew Harnik/AP
Secretary of Health and Human Services —
Pence shakes hands with Health and Human Services Secretary Tom Price -- who was accompanied by his wife, Betty -- after a swearing-in ceremony on Friday, February 10. Price, a former congressman from Georgia, was confirmed 52-47 in a middle-of-the-night vote along party lines.
Photos: Trump's nominees and their confirmation hearings
Carolyn Kaster/AP
Secretary of Health and Human Services —
Price testifies at his confirmation hearing in January. Price confronted accusations of investing in companies related to his legislative work in Congress -- and in some cases, repealing financial benefits from those investments. Price firmly denied any wrongdoing and insisted that he has taken steps to avoid any conflicts of interests.
Photos: Trump's nominees and their confirmation hearings
Pablo Martinez Monsivais/AP
Attorney General —
Trump watches as Pence administers the oath of office to Attorney General Jeff Sessions in the White House Oval Office on Thursday, February 9. Sessions, one of Trump's closest advisers and his earliest supporter in the Senate, was confirmed by a 52-47 vote that was mostly along party lines. He was accompanied to the swearing-in by his wife, Mary.
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Attorney General —
In his wide-ranging confirmation hearing, Sessions pledged to recuse himself from all investigations involving Hillary Clinton based on inflammatory comments he made during a "contentious" campaign season. He also defended his views of the Supreme Court's Roe v. Wade ruling on abortion, saying he doesn't agree with it but would respect it.
Photos: Trump's nominees and their confirmation hearings
Pablo Martinez Monsivais/AP
Secretary of Education —
Pence swears in Education Secretary Betsy DeVos next to her husband, Dick, on Tuesday, February 7. Pence cast a historic tie-breaking vote to confirm DeVos after the Senate was divided 50-50.
Photos: Trump's nominees and their confirmation hearings
Carolyn Kaster/AP
Secretary of Education —
DeVos, a top Republican donor and school-choice activist,prepares to testify at her confirmation hearing in January. DeVos stood firm in her long-held beliefs that parents -- not the government -- should be able to choose where to send children to school, pledging to push voucher programs if she was confirmed.
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Carolyn Kaster/AP
Secretary of State —
Trump watches as Pence swears in Rex Tillerson as secretary of state on Wednesday, February 1. Tillerson's wife, Renda St. Clair, holds the Bible. Tillerson, a former CEO of ExxonMobil, was confirmed in the Senate by a vote of 56 to 43.
Photos: Trump's nominees and their confirmation hearings
Photos: Trump's nominees and their confirmation hearings
Alex Wong/Getty Images
Secretary of Transportation —
Elaine Chao, Trump's pick for transportation secretary, signs the affidavit of appointment during her swearing-in ceremony in Washington on Tuesday, January 31. Chao is joined, from left, by Pence; her father, James Chao; and her husband, Senate Majority Leader Mitch McConnell.
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Secretary of Transportation —
Chao testifies at her confirmation hearing in January. Chao, who was approved by a 93-6 vote, was deputy secretary of transportation under George H.W. Bush and labor secretary under George W. Bush.
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Evan Vucci/AP
UN Ambassador —
South Carolina Gov. Nikki Haley takes the oath of office as she becomes the US Ambassador to the United Nations on Wednesday, January 25. She is joined by US Sen. Marco Rubio and staffer Rebecca Schimsa as she is sworn in by the vice president.
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UN Ambassador —
During her confirmation hearing, Haley rapped the UN for its treatment of Israel and indicated that she thinks the US should reconsider its contribution of 22% of the annual budget. "The UN and its specialized agencies have had numerous successes," Haley said. "However, any honest assessment also finds an institution that is often at odds with American national interests and American taxpayers. ... I will take an outsider's look at the institution."
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CIA Director —
Mike Pompeo is joined by his wife, Susan, as he is sworn in as CIA director on Monday, January 23. Pompeo, who is vacating his seat in the US House, was confirmed by the Senate in a 66-32 vote.
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CIA Director —
Pompeo is sworn in at his confirmation hearing. Along with Russia, Pompeo said other global threats include Iran's growing influence in the Middle East, ISIS' grip over major urban areas, and the conflict in Syria.
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Secretary of Defense —
Retired Marine Gen. James Mattis, President Trump's pick for defense secretary, is sworn in after being confirmed by a 98-1 vote on Friday, January 20.
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Secretary of Defense —
Mattis testifies before the Senate Armed Services Committee. He emerged from his confirmation hearing with broad support after he took a strong posture against Russian President Vladimir Putin and answered tough questions on women and gays in combat.
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Secretary of Homeland Security —
Retired Marine Gen. John Kelly signs his confirmation letter on January 20. He is joined by his wife, Karen.
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J. Scott Applewhite/AP
Secretary of Homeland Security —
Kelly testifies at his hearing. He was previously the head of US Southern Command, which is responsible for all military activities in South America and Central America.
“Mr. Mnuchin has followed all the necessary rules and regulations for his confirmation process,” the official said in a statement. “All of this information is now publicly available and can be found by anyone who wishes to look at Mr. Mnuchin’s financial records.”
Mnuchin, as it currently stands, is on track to be confirmed.No Republican has voiced opposition to his nomination and unified GOP support alone will ensure confirmation. But Democrats are already throwing procedural roadblocks in the nomination’s way, refusing to agree to the scheduled committee consideration of his nomination Monday night and then boycotting a Tuesday meeting to vote on the nomination entirely.
The tactics were deemed by Sen. Orrin Hatch, the top Republican on the panel, as “amazingly stupid.” Yet it underscores the clear desire to hold up the nomination by any means necessary.
But it was Mnuchin’s characterization of the makeup of the offshore entity during the hearing that has drawn the most scrutiny. Wyden pursued the issue in follow-up written questions, asking for the exact ration of investment “at their peak, that were made by pension fund and non-profits versus other investors.”
Mnuchin responded, in answers provided to CNN by an aide, that he was unable to provide an “exact characterization of the underlying investors” because of the structure of the fund.
“However, I do know that approximately 20% of the fund consisted of individuals, family companies, or trusts that were true foreign entities,” Mnuchin said.
That answer, according to Wyden, wasn’t adequate. His committee staff is seeking a more thorough response.
Hurdles
The issues raised by Wyden, specifically on the appearance of conflicts of interest, threaten to create new hurdles for Trump’s selected economic point person before he can take his position in the Cabinet. “What I’ve been concerned about is we’ve been talking about vastly bigger sums of money and lack of transparency this year than you saw in 2009,” said Wyden, as he compared his concerns over Mnuchin’s offshore interests to those of President Barack Obama’s nominees.”Treasury plays a critical role in enforcing the regulations to increase transparency,” the Oregon Democrat said.
The focus on the foreign investment in the funds tied to Mnuchin is a turn from the confirmation hearing itself, where Democrats repeatedly tried to pin down Mnuchin on whether his use of offshore entities was done for tax avoidance purposes. Mnuchin, in large part, batted the queries away, defending his right to do just that, criticizing the existing system and pledging to lawmakers to help them fix loopholes if confirmed.
“In the hedge fund world, these are only set up to make the accountants rich and I would love to work with the IRS to close these tax issues that make no sense,” Mnuchin told lawmakers. But in pushing back on the tax avoidance allegations, he opened the door to the scrutiny he now faces.
“I want to say that is important that the committee and American public understand that this was done so that different entities could invest here,” Mnuchin told lawmakers. “Sometimes it had nothing to do with taxes and had to do with what they could invest in and what they could not invest in.”
The primary reason, he explained, was to open the door to pension funds and nonprofits.
“It’s real chutzpah to say, ‘Hey, we’re doing this to help churches and non-profits,’ ” Wyden added.
The issue of foreign influence surrounded Trump himself throughout the campaign into the opening days of his time in office. Trump, who hasn’t released his tax returns, has faced questions about his business connections with foreign investors, businesses and governments. It was a potential problem posed directly to Mnuchin during his confirmation hearing by Sen. Claire McCaskill. Should, McCaskill asked, lawmakers and top government officials have a full understanding of the new president’s foreign entanglements?
Mnuchin responded that McCaskill “had a valid point about foreign debt and understanding foreign things.”
“If I’m confirmed, I will research that and get back to you,” Mnuchin pledged.