President-elect Donald Trump's nominee to head the Treasury Department has already been the target of Democratic resistance, but the former Goldman Sachs partner, hedge fund founder, and foreclosure magnate Steve Mnuchin's confirmation hearing Thursday, Senator Bob Menendez (D-NJ) turned up the heat, and Mnuchin's own testimony made a great case for why he should not be confirmed.
Shareblue has already covered some of the many reasons why Secretary of the Treasury-designate Steve Mnuchin is a wholly unqualified and conflicted choice to lead the Treasury Department. And at the confirmation hearing Thursday morning, Sen. Bob Menendez (D-NJ) broke some new ground with a tough grilling over Mnuchin’s failure to initially disclose $100 million in real estate holdings and directorship of Cayman Islands holdings, and his related use of offshore instruments to help clients avoid U.S. taxes.
First, Menendez asked Mnuchin to explain that late disclosure, which was only made once the omission had been caught by committee staff. Then, he pressed Mnuchin on the purpose of those offshore holdings. In his response, Mnuchin actually concedes that sometimes those offshore instruments are for avoiding U.S. taxes, but then tries to spin his way out of it:
MENENDEZ: The information that came to us this morning makes me concerned. you have addressed some but not all of it. On December, 19 of last year, you signed a notarized affidavit on your questionnaire to the finance committee certifying it was true, accurate, and complete. Question 11 of this questionnaire asked nominees to “list all — all — positions held as an officer, director, trustee, partner, proprietor, agent, representative or consultant of any corporation, company, firm, partnership, other business enterprise, educational or other institution.” That seems to be pretty pervasive. So it’s almost like an open book test.
And yet, you did not answer in that questionnaire listing your position as director of a Cayman Islands corporation, as manager, chairman, and director of 8 additional shell corporations and holding companies, and nearly $100 million in real estate. And that questionnaire was corrected only after the committee staff, having done their due diligence, brought the missing information to your attention. Now, after that, you admitted to being the director of the offshore entity Dune Capital International Ltd, a Cayman Islands corporation. You admitted to moving your hedge fund, Dune Capital Partners, LLC, offshore to Anguilla in 2005, even though all the business was conducted in New York City. So, I have a ton of other questions on policy, but first and foremost is truth and veracity, is what Americans need in their Treasury secretary, to know if they are going to be asked to do difficult and challenging things, that they understand there’s a system. In essence, isn’t it true that what you did here is take these companies and put them offshore so you could help your clients, who you are making money from, avoid U.S. taxation?
MNUCHIN: No, that’s not true at all. That is not true. That is not true, Senator.
MENENDEZ: You just described that the purposes of creating these offshore entities were to help pensions and other entities, and the only reason to go offshore, as Senator Grassley said when he was I think the chairman of the committee, is the difference between investing in the United States or the Cayman Islands is the possibility of avoiding U.S. taxes. Your clients — you’ve made it very clear that you paid your taxes and I’ll accept your word on that, but the people or the entities you were helping and that you were making money from, you were helping them avoid U.S. taxes. Otherwise they could have invested here.
MNUCHIN: Senator, let me first answer the first part of your question, which I will tell you, and I have said this before and I will repeat again, I assure you that these forms were very complicated, I do not have the form in front of me but I believe it said “to the best of my knowledge this is true,” and when I certified those forms I thought it was correct. Perhaps it was a mistake in giving the committee information early and I should have waited until I finish the 278 and the ethics office. It was not just a function of your office, we were in the process of correcting things.
MENENDEZ: It does not take a rocket scientist to understand the word “list all positions.” All positions.
MNUCHIN: Senator, in all due respect, I had a lot of complicated entities. You’re referring to, I did not list the director. I listed the entity, so the fact that I was a director was not intended to hide anything, and as I mentioned in regards to my $100 million in real estate, my lawyer, who is quite sophisticated in this stuff and has done this for many many nominees before, believe that we filled out the form correctly and that —
MENENDEZ: Let’s get to the heart of my question. Didn’t you create these offshore entities, that most Americans cannot create or take advantage of, in order to help your clients, who you were making money from, avoid U.S. taxes?
MNUCHIN: No, not necessarily. First of all, I want to say that is important that the committee and American public understand that —
MENENDEZ: Well, what were you doing it for then? What were you doing it for?
MNUCHIN: — this was done so that different entities could invest, so sometimes, it had nothing to do with taxes, it had to do with what they could invest in, and what they could not invest in. And as I’ve said to you, if you want to put me on for the entire hedge fund and pension fund, we should have an IRS session to go through these issues, and I would be more than happy to work with you and your offices to go through, these are very complicated issues.
MENENDEZ: I appreciate that, and let me make the complication simple: One does not go and create offshore entities, at the end of the day, other than to avoid, in some form or fashion, the tax laws of the United States. That’s pretty simple.
What Mnuchin is referring to when he talks about “eligible” investments is the practice of finding such investments for U.S. nonprofits…so they can avoid taxes.
Setting aside Mnuchin’s dishonest description of his offshore entities, and even his unsavory history, the man who is hoping to run the Treasury Department just said that filling out an ethics form is too complicated for him, and that he cannot be trusted to keep track of $100 million of his own real estate holdings.
If we take Mnuchin at his own word, he is manifestly unqualified for the job he seeks. But in the Trump cabinet-in-waiting, he will fit right in.