Sen. Grassley: 'The irony is thick' in Lew’s Cayman Islands investment fund

Congressional Republicans are targeting Jack Lew's nomination to lead the Treasury Department, raising new questions about the former White House chief of staff's Cayman Islands financial holdings.

ADVERTISEMENT
In a statement Friday, Sen. Chuck Grassley (R-Iowa) blasted the White House, saying "the irony is thick" after President Obama has voiced criticism over the use of offshore accounts to avoid taxes.

But the White House argues that Lew's financial holdings had been fully disclosed during his three previous confirmation hearings and that all appropriate taxes had been paid on the foreign holdings.

ADVERTISEMENT
Moreover, it appears that Grassley and other Republicans have supported at least one other nominee — Bush Treasury Secretary Hank Paulson — who had extensive financial holdings in the Cayman Islands.

At issue is an employee investment fund based in the Cayman Islands that Lew bought into during his time working at Citigroup before entering the Obama administration. In a release Friday, Grassley argued it was hypocritical of Obama to have nominated a candidate with such an offshore investment despite having railed against tax avoidance schemes based in the Caymans.

"President Obama has been almost obsessively critical of offshore investments," Grassley said. "He called Ugland House ‘either the biggest building or the biggest tax scam on record.’ "

The Ugland House is a building in the Cayman Islands that serves as the legal address for thousands of corporations seeking favorable tax breaks. In a 2009 speech, Obama called the use of the adders "the kind of tax scam that we need to end."

"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.

The Obama campaign also railed against Mitt Romney's offshore holdings during the presidential campaign, cutting advertisements that mocked the Republican nominee for a Swiss bank account and holdings in the Caymans and Bermuda.

White House spokesman Eric Schultz says Lew fully reported his holdings in the Caymans and paid all appropriate taxes.

“Jack Lew paid all of his taxes and reported all of the income, gains and losses from the investment on his tax returns," Schultz told the New York Times.

According to a source with knowledge of the investment, Lew fully divested from the fund in 2010, when he was confirmed as director of the Office of Management and Budget. 

“The existence of Mr. Lew’s investment is not news to the Senate,” he continued. “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.”

Grassley, however, disputed the idea that Lew's holdings had been fully disclosed.

“On the White House claim that Mr. Lew previously disclosed his Ugland House investment, it was disclosed only if you knew where to look and then were able to put the pieces together. To say this information was fully disclosed to the public is misleading, at best,” Grassley said.

Grassley has been an outspoken critic of the use of offshore tax shelters in the past. But he has also previously backed Treasury nominees with investment holdings in the Cayman Islands.

The financial disclosure forms of former Treasury Secretary Hank Paulson show investments between $15,001 and $50,000 in at least two funds that held a total of 21 Cayman investments. Those funds were administered by Goldman Sachs, which Paulson ran before joining the Bush administration.

Lew's confirmation hearings are scheduled for Wednesday.


-This post was updated at 12:38 p.m.