February 14, 2013

Obama's new Treasury Secretary ran tax avoidance schemes for Citi

Weekly Standard - Jack Lew, who has been nominated as the next treasury secretary, oversaw up as many as a hundred Cayman Island investments when he worked at Citi Bank as chief operating officer of the alternative investment services unit, SEC disclosures reveal. It has previously been reported that Lew himself had been invested in a fund that was based in the Cayman Islands.

SEC documents ending in the year 2007 reveal that at least 90 subsidiaries of Citi were based in the Cayman Islands. A couple weeks later, in January 2008, Jack Lew took the high-ranking executive job at Citi.

By the end of 2008 that number of Citi subsidiaries in the Cayman Islands, which fell under the jurisdiction Lew was in charge of, jumped to 113.

In the 2012 presidential campaign, the Obama campaign called Mitt Romney's own Cayman Island investments "bets against America."

But only months after the election ended, Obama nominated his former chief of staff Jack Lew, who himself had similar investments and even oversaw investment funds there, to be the next treasury secretary.

Dana Milbank, Washington Post - Lew, who was White House chief of staff while Obama’s campaign was pummeling Romney over his pay and taxes, received a $945,000 bonus in January 2009 after a brief tenure at Citigroup — just as the bank announced huge losses and took a taxpayer bailout. Lew also invested $56,000 in a Citigroup venture-capital fund registered in the Cayman Islands — registered in the very building, in fact, that Obama labeled “the largest tax scam in the world.”

Sen. Chuck Grassley (R-Iowa) pressed Lew to “explain why it might be morally acceptable to take close to a million dollars out of a company that was functionally insolvent and about to receive a billion dollars of taxpayers’ support.”

Grassley also asked Lew to justify investing his money in one of the 12,000 businesses based in Ugland House, a five-floor building in Grand Cayman. “There’s a certain hypocrisy in what the president says about other taxpayers and then your appointment,” the senator observed.

Lew’s explanation was Romneyesque. “I was an employee in the private sector compensated in a manner consistent with other people who did the kind of work that I did in the industry,” he said, justifying his payout. As for his offshore investment: “I reported all income that I earned. I paid all taxes due.”


Lew’s best defense on the Caymans matter was that he lost money on the investment, so there were no taxes to be avoided. But this only proves that he wasn’t necessarily good at selecting tax havens. And his plum job at Citigroup, which Sen. Orrin Hatch (R-Utah) said has been called “a political trophy position,” is a fine example of the revolving door between government work and private-sector lucre.

Obama frequently mentioned Ugland House on the campaign trail in 2008. Baucus held a hearing on it that year, saying that the place had “a lot to do with tax evasion” and the $345 billion gap “between the taxes legally owed and the taxes timely paid.”


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