Congress

Published — February 27, 2019

‘Not in compliance’: Wilbur Ross, the Trump official who keeps watchdogs up at night

(United States Department of Commerce)

Inaccurate statements by Department of Commerce secretary showcase limitations in ethics enforcement

This article is published in partnership with NPR.

Introduction

Rich businessman Wilbur Ross’s promise to divest millions of dollars’ worth of assets upon becoming Commerce Department secretary drew warm praise in 2017, even from Democrats.

Listen to the story on NPR.

At Ross’ confirmation hearing, Sen. Richard Blumenthal, a Connecticut Democrat, made a point of contrasting Ross’ commitment to divest with the president’s own decision to hold onto his business.

But two years later, Ross’ string of financial disclosure inaccuracies are drawing condemnation instead of hosannas.

“I feel that essentially, he misled the committee, and a lot of my colleagues relied on those at best misleading, potentially outright deceptive” representations, Blumenthal said in an interview this month.

Even a member of the Republican Senate leadership, Sen. John Thune, R-S.D., has called for an investigation into whether Ross placed the public’s interest ahead of his own.

But Ross continues to serve as commerce secretary without sanction even as Cabinet officials all around him have been felled by their ethical foibles. The saga showcases the weaknesses of a government ethics system that has long relied on political pressure as an enforcement mechanism and wasn’t designed to police billionaires.

The 81-year-old commerce secretary failed to divest assets when he said he would — despite telling ethics officials he had done so.

Ross’ inaccuracies and omissions have also prompted serious questions about whether he took official actions that could affect his personal financial interests, which would violate conflict of interest law — something he’s repeatedly said he hasn’t done.   

Ross has acknowledged mistakes in his personal financial disclosures. One of his assets, a tranche of stock in investment management firm Invesco Ltd. worth between $10 million and $50 million, went up in value by seven figures during his delay divesting it, a previous Center for Public Integrity investigation found.

In a rare rebuke of a Cabinet-level official, the executive branch’s ethics watchdog last week refused to certify Ross’ 2018 personal financial disclosure report, which he first filed last August. Emory Rounds, the director of the Office of Government Ethics, said he would not certify it because Ross had inaccurately reported divesting BankUnited stock he in fact did not sell until October 2018. Ross’ acknowledgement that he had failed to divest the stock when he said he had was first reported by the Center for Public Integrity in December.

The commerce secretary “was therefore not in compliance with his ethics agreement,” Rounds wrote.

Ross declined an interview for this article. In a statement provided via the Commerce Department before the Office of Government Ethics declined to certify his report, Ross said: “I continue to follow the guidance of Department of Commerce ethics officials to ensure compliance with federal laws and regulations. I rectified errors once I discovered them. I remain committed to the American people and will continue to seek the guidance of ethics officials.”

After the OGE decision, he said in a separate statement that he was “disappointed” his report was not certified, and that he remains “committed to complying with my ethics agreement and adhering to the guidance of Commerce ethics officials.”

Ross is far from the only high-level Trump appointee whose personal finances and conduct has drawn scrutiny. In fact, compared to other Trump administration ethics scandals — abuse of government travel budgets, accepting improper gifts, requesting a Chick-fil-A franchise for a spouse — Ross’ disclosure problems may seem arcane or obscure. His tone-deaf public statements during the shutdown drew more attention than his ethical lapses — and prompted a “Saturday Night Live” parody.

But Ross, it turns out, is the Trump appointee who keeps ethics watchdogs up at night.

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“This record by Ross and by others of multiple misstatements on ethics forms I think demonstrates what kind of commitment to ethics this administration has, which is, essentially, contempt,” said Kathleen Clark, a professor of government ethics law at Washington University in St. Louis.

Ross’ ethics issues carry echoes of Trump’s own. Both have complex, opaque financial assets that are impossible to fully understand based on information in the public record. Both have come under fire for failing to divest their assets. Both have been accused of acting in their own interests, rather than those of the public.

“He has escaped sort of the more popular scrutiny because they’re kind of sophisticated violations and they’re a little bit wonky in terms of what the actual issue is,” said Delaney Marsco, ethics counsel at the Campaign Legal Center, a nonprofit watchdog that filed a 115-page complaint against Ross last summer. “But that makes them even more serious. … This is a pattern of impropriety.”

Marsco and others say that after two years, they are still unable to confirm from public disclosure filings whether Ross has cleanly parted ways with all the assets he promised to divest.

Six months ago, after a particularly biting scolding from government ethics officials, Ross said that “to maintain the public trust,” he would sell all his equity holdings and place the proceeds into U.S. Treasury securities.

At the end of November, he disclosed selling some assets.

Ross came into office as a member of Trump’s own gilded tribe, billed as a billionaire business titan who earned Trump’s respect when he helped him wiggle out of an ugly mess in Atlantic City, New Jersey, more than a quarter century ago.

Clark, the law professor, said she is struck by the similarities between Ross and Trump. Said Marsco: “The tone from the top has been, ‘I’m not going to disclose my tax returns. I’m not going to divest from my company. I’m going to hire my relatives.’ And of course other folks are going to do the same things. Why not? Where’s the consequences?”

The White House referred a question about what Ross’ case says about the administration’s commitment to ethics to the Commerce Department.

In response to a question about whether Ross’ ethics issues have raised concern at the White House about his performance as commerce secretary, spokeswoman Lindsay Walters said, “Secretary Wilbur Ross has been an advocate of the President’s agenda and played a key role in growing our economy. Under Secretary Ross’ leadership, the Department of Commerce has flourished.”

Members of Congress have asked the inspector general of the Commerce Department, as well as the Department of Justice, to investigate Ross. Ross is scheduled to testify before the House Committee on Oversight and Reform next month, and could be asked about his personal financial disclosure issues.

How did Ross get to this point?

Even at his confirmation hearing, Ross’ decision to hold onto his investments in transoceanic shipping prompted questions.

But ethics officials didn’t require him to divest, and Ross at the hearing said the shipping assets didn’t raise any issues.

“The research we’ve done suggests that there has never been a shipping case come before the Department of Commerce,” Ross said, adding, “I intend to be quite scrupulous about recusal” anytime “there is the slightest scintilla of doubt.”

In March 2017, an investigation by the Center for Public Integrity found Ross’ stake in Diamond S Shipping raised complex conflict of interest concerns, given Ross’ muscular role in the administration’s trade policy. Most of the company’s fleet sails under Chinese flags, and the company has ties to a major Chinese investment firm.

Later that year, The New York Times and International Consortium of Investigative Journalists reported that a Russian energy company, Sibur, was a major client of another Ross shipping holding, Navigator Holdings, and Russian President Vladimir Putin’s then-son-in-law was a member of Sibur’s board.

Some ethics experts said his ownership of shipping interests potentially presented conflicts for his involvement in trade policy. In November 2017, Ross said he had sold his stakes in both Diamond S and Navigator.

Meanwhile, questions about Ross’ financials — and mistakes by Ross — continued to pile up.

Forbes’ reporting raised questions about Ross’ net worth and whether he had told the truth about his assets. Ross acknowledged transferring some assets into a trust to benefit his family, but gave conflicting accounts of the timing of the transfers.

Then, in a series of filings with ethics officials, Ross acknowledged that he had failed to divest assets he had promised to shed upon becoming Commerce secretary until months after he was supposed to have done so.

In one such case, involving $10 million to $50 million worth of stock in Invesco Ltd., the stock rose in value by seven figures during the delay. In other cases, he said he sold some stock short, a move government ethics officials later blasted as apparently “an ineffective attempt to remedy your actual or apparent failure to timely divest assets.”

The failures raised questions about conflicts of interest, ethics watchdogs charge. For example, Invesco has investments in Chinese steel, and in 2017, Ross led an investigation to determine whether the U.S. should impose tariffs on Chinese steel. At the time, he still held the Invesco stock. The Commerce Department has said Ross has kept his pledge to recuse with regard to Invesco, and as of July, no matter concerning Invesco had come up.

Ross has repeatedly said the series of inaccuracies and omissions were inadvertent, and maintains he hasn’t violated conflict of interest law.

Then-Commerce Secretary-designate Wilbur Ross, center, listens to President Donald Trump during a meeting with House and Senate legislators in the Roosevelt Room of the White House in Washington on Feb. 2, 2017. At right is White House Senior Adviser Jared Kushner. (AP / Pablo Martinez Monsivais)

His assertions haven’t been enough to satisfy lawmakers.

“The breadth and the brazenness of his ethical lapses are just staggering,” said Sen. Ron Wyden, an Oregon Democrat who serves as ranking member of the powerful Senate Finance Committee. Wyden has called for a Department of Justice investigation into Ross.

In a July letter, David Apol, then acting head of the Office of Government Ethics, the agency charged with monitoring ethics for the executive branch, sent Ross a sharply worded letter “to express my concern regarding how recent actions on your part may have negatively affected the public trust.”

In his letter, Apol bluntly warned Ross “to devote the resources necessary to ensure that your report and all future communications with OGE are complete and accurate.”

Despite the warning, Ross failed to do so: He filed a financial disclosure form in August, but has since corrected it to acknowledge he reported divesting BankUnited stock he had continued to own. The Commerce Department subsequently stressed it was only 100 shares of stock worth about $3,700 — a tiny fraction of Ross’ net worth, and too small an amount to disqualify him from working on related matters. Nonetheless, it forced him to acknowledge another inaccuracy.

Ross’ improper reporting of the BankUnited divestiture was the last straw for federal ethics officials. In a letter explaining why he wouldn’t certify Ross’ 2018 report, Rounds pointed out that OGE in its July warning to Ross “noted that even inadvertent errors could undermine the public’s trust.”

But OGE lacks enforcement authority, leaving it with few tools beyond a public scolding and the ability to refer potential investigations to entities such as the inspector general at Commerce or the Department of Justice.

After Apol sent his letter last summer, then-Senate Commerce Committee Chairman John Thune, a South Dakota Republican who is also a member of Senate leadership, asked the Commerce inspector general to look into whether Ross violated conflict of interest laws. Thune, who no longer serves as committee chairman, declined to be interviewed. The inspector general’s office does not comment on pending matters.

Former ethics officials and watchdogs say there is no real precedent for the errors and omissions in Ross’ disclosure filings.

“There seems to be a continuing pattern of either mistakes or deceptions or lies,” said Marilyn Glynn, who was general counsel of the Office of Government Ethics, as well as acting director during part of the George W. Bush administration. “For a guy whose business is managing money and investing money, he’s awfully sloppy, and a million red lights are going off that there is something odd here.”

Said Don Fox, also a former general counsel and acting director of OGE: “I haven’t seen anything that approaches this. It’s certainly incredibly careless the way that he has approached compliance with his ethics agreement.”

Ross isn’t the only Cabinet member whose forms have not yet been certified: Treasury Secretary Steven Mnuchin submitted his on time in May, but OGE has yet to OK them. It isn’t clear what’s causing the delay in that case, and a Treasury spokeswoman said Mnuchin is working with OGE to have it certified.

OGE has also yet to certify and publicly post two 2018 transaction reports filed by Mnuchin, showing he invested between $1.1 million and $5.25 million in a limited liability company, North Park I LLC.

Public information about North Park I LLC is scant, though records show it was created in Delaware in August. In response to questions from the Center for Public Integrity and NPR, a Treasury spokeswoman said it is a “personal non-investment asset owned 100 percent” by Mnuchin. She did not directly respond to questions about what the LLC owns.  

Questions about Ross’ divestitures

Ross’ original financial disclosure form may have won praise, but it was also impenetrable — 57 pages, including six pages of endnotes that were supposed to explain complexities, such as the underlying holdings of different business entities.

Ross is not the first billionaire commerce secretary to have problems. His predecessor in the Obama administration, Commerce Secretary Penny Pritzker, had to amend her financial disclosure forms before her confirmation because she had understated her income by tens of millions of dollars. She also drew fire in connection with offshore tax havens.

Here’s roughly 25 percent of investor Wilbur Ross’s holdings, as he disclosed to the Office of Government Ethics after being appointed Secretary of Commerce. The watchdog group American Oversight made the schematic to analyze Ross’s first personal financial disclosure — a 57-page array of private-equity entities, cross-referenced, end-noted and presented in a format designed years ago for appointees with much simpler financial lives. One finding by American Oversight: Five corporations, near the left lower edge, all cite the same 21 real estate funds as their assets. Austin Evers, executive director of American Oversight, said, “I wouldn’t even want to speculate how much time it would take to apply this analysis to all of the other components of Wilbur Ross’ holdings.” (NPR / Amr Alfiky)

The disclosure forms are designed for average people entering government service, said Jack Blum, a Washington lawyer and former Senate staffer who is an expert in tax evasion and money laundering.

They are “not for people who have holdings in dozens of companies which own, in turn, other companies, which have financial statements that are obscure as hell because they’re all private so people can’t figure anything out,” Blum said.

Watchdog groups such as the Campaign Legal Center, American Oversight and Citizens for Responsibility and Ethics in Washington (CREW) say despite Ross’ disclosures — and the series of amendments he’s filed — they continue to have questions about what he’s actually divested.

Ross has reported putting some assets into what he, in one interview, described as a “family trust.” That, too, has sparked more questions about exactly which assets were put into the trust, and how the trust is set up.

Ross has told ethics officials that he and his wife do not have a financial interest in the trust, though it isn’t entirely clear who does. In June 2018, he told CNBC that he has “no economic interest” in the trust, and used it to divest “illiquid” assets “that were very difficult to sell.”  

New level of ethics problems?

Don Fox, the former OGE head, said the question he’s asked most often about Ross is how the government will hold him accountable for his ethics issues. “And I don’t always have a great answer for that.”

During the Bush and Obama administrations, he said, political accountability would have been the first line of defense — a call to the White House counsel’s office, to say someone isn’t complying with an ethics agreement.

Walter Shaub, the head of the Office of Government Ethics when Trump took office, stepped down in July 2017 and has since become a prominent critic of the administration’s handling of ethics.

“We’re seeing a level of ethics problems we just haven’t seen” in past administrations, he said, which has thrown the limitations of the ethics program — and OGE’s lack of enforcement power — into stark relief.

Former Office of Government Ethics Director Walter Shaub wants to see reforms to strengthen the office. (NPR / Claire Harbage)

The ethics rules, he said, were always dependent on appointees abiding by norms, and on presidents, wary of political scandal, “pushing their own staffs to behave. And we’re discovering that you can’t always count on that if you have a president who doesn’t care about the ethics rules.”

Shaub, now at Citizens for Responsibility and Ethics in Washington, said he’s hopeful the parade of scandals will push Congress to both exercise oversight and strengthen the system. He recently testified at a House committee hearing on how anti-corruption legislation proposed by Democrats would strengthen the Office of Government Ethics by granting it subpoena power and more enforcement ability, among other things, proposals he has endorsed.

Disclosure violations may seem technical, but ultimately, he said, government ethics rules are essential for the public trust.

“They enable us,” he said, “to have trust in the idea that the people in whom we entrust great power are using that power solely for our own benefit and not for their benefit.”

Read more in Money and Democracy

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