Treasury Nominee’s Cayman Islands Investment Draws Ire of Senate Republicans

An investment in the Cayman Islands could spell trouble for Jack Lew, President Obama’s nominee for Secretary of the Treasury, when he appears before the Senate Finance Committee on Wednesday.

At issue are Lew’s previous holdings — estimated to have been between $50,000 to $100,000 — in a Citigroup employee investment fund called Citigroup Venture Capital International Growth Partnership II, which the Treasury nominee reportedly divested himself of in 2010.

That fund, it turns out, was housed in the infamous Ugland House, a Cayman Island office building used as the registered address of nearly 19,000 companies, yet has only one known physical occupant — a law firm that advises financial and business clients.  Coincidentally, a photograph of the nondescript, white five-story office building was used as a backdrop in a press conference held yesterday by Vermont Sen. Bernie Sanders when he introduced legislation to eliminate offshore tax havens.

The Ugland House, moreover, was cited by President Obama in a 2009 speech condemning offshore tax havens.  “Either this is the largest building in the world or the largest tax scam in the world,” the President said at the time.

Originally drawing fire from the progressive Sanders, who publicly questioned the Treasury nominee’s close relationship to Wall Street, Lew is now likely to face scrutiny from Senate Republicans, including Charles E. Grassley of Iowa and Utah’s Orrin Hatch, ranking minority member of the Finance Committee.

“President Obama has been almost obsessively critical of offshore investments,” said Grassley in a statement issued Friday.  “That makes this Cayman Islands investment of his top official and now Treasury secretary nominee worthy of attention.  The irony is thick,” he said.

As expected, the Obama administration quickly leapt to Lew’s defense.  “Jack Lew paid all of his taxes and reported all of the income, gains and losses from the investment on his tax returns,” said 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.” 

While Lew’s investment in the Cayman Islands wasn’t raised as an issue when he was confirmed to be deputy Secretary of State in 2009 and director of the White House Office of Management and Budget in 2010, that’s no reason why it shouldn’t be addressed now.

The 57-year-old Lew, the current White House chief of staff, had once served as the chief operating officer of one of Citigroup’s proprietary trading units — one that reportedly included a hedge fund that bet on the housing market to collapse.

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