A Financial Mystery Emerges. Its Name? Steven T. Mnuchin Inc.

2017-01-12 11:22:22

 

A Financial Mystery Emerges. Its Name? Steven T. Mnuchin Inc.

Steven T. Mnuchin plans to divest himself of his financial interests in 43 companies, hedge funds and investment funds and resign from numerous board positions as he tries to disentangle himself from potential conflicts of interest before his confirmation as the next Treasury secretary.

But Mr. Mnuchin, a former hedge fund manager and Goldman Sachs executive, intends to retain control of one of his oldest companies — one named after himself.

In an ethics statement and a 42-page financial disclosure form filed on Wednesday with the Office of Government Ethics, Mr. Mnuchin said without elaboration that he would retain his “unpaid position” as president of Steven T. Mnuchin Inc., a company he said is used to manage some of his investments.

The financial disclosure statement did not say what investments the company manages, nor did it ascribe a value to any of those investments. But Mr. Mnuchin said he would “not participate personally and substantially in any particular matter” that could have a “direct and predictable effect on the financial interests” of the little-known entity.

His disclosure does little to unwrap the mystery of just what the company does and manages. Several weeks ago, a spokesman for Mr. Mnuchin said in an interview with The New York Times that the namesake entity “held small legacy Goldman Sachs investments” and that it “hasn’t made any new investments since 2002.”

The form does confirm that Mr. Mnuchin, 53, is a very wealthy man.

The combined minimum value of the assets and investments listed on his disclosure form — including a stake in a 1978 Willem de Kooning oil painting (“Untitled III”) worth $14.7 million — is a minimum of $166 million. Mr. Mnuchin also reported a minimum of $52.7 million in income last year from his business activities. (The figures are reported in ranges.)

Among the investments and funds he intends to divest himself of are interests in his lucrative movie production businesses and a number of real estate investment funds. They also include investments in several hedge funds, including one managed by John Paulson. President-elect Donald J. Trump has reported having money, as of May 2016, with Mr. Paulson, who was a donor and is an economic adviser to Mr. Trump.

Mr. Mnuchin’s confirmation hearing has not been scheduled. Four other hearings have been delayed by Republicans amid concerns by Democrats about having enough time to fully review background information on the nominees.

Julia Lawless, a spokeswoman for the Senate Finance Committee, said the office would review the documents submitted by Mr. Mnuchin. “Finance Committee hearings are announced seven days in advance, and we will announce the details as soon as soon as they become available,” she said.

Norman L. Eisen, a former special counsel for ethics and government reform under President Obama, said the Treasury secretary nominee’s retention of Steven T. Mnuchin Inc. “raises some obvious ethics concerns” that should be discussed at his hearing.

“That is what these hearings are for,” Mr. Eisen said. “Can the nominee, and will he, recuse fully from this entity and anything related to it, including the investments it holds?”

A spokesman for Mr. Mnuchin did not respond to requests for comment.

As he sheds assets, Mr. Mnuchin suggested in his filing that he might try to take advantage of a benefit that allows certain federal employees to defer paying capital gains taxes on certain assets that they sell to avoid conflicts. The allowance is intended to encourage government service and must be granted by the Office of Government Ethics.

The tax considerations could be widely sought among the long line of wealthy Trump nominees, who are now in the process of making their financial entanglements public and explaining their plans for avoiding possible conflicts. Federal law prohibits cabinet members and other executive branch employees from using their government positions to enrich themselves, prompting them to sell off assets or detach from interests that could lead to conflicts.

Last week, Rex W. Tillerson, the nominee for secretary of state, filed a complex plan to distance himself from Exxon Mobil, where he has worked for more than four decades.

Other potential members of the wealthiest cabinet in modern American history — including Wilbur L. Ross Jr., the commerce secretary nominee; Betsy DeVos, Mr. Trump’s choice for secretary of education; and Andrew F. Puzder, his choice to be secretary of labor — have yet to file their ethics plans and financial disclosures.

In his ethics disclosure, the twice-divorced Mr. Mnuchin said he would also disclose the assets of his fiancée, Louise Linton. She is a Scottish actress whose memoir, “In Congo’s Shadow” — described as “one girl’s perilous journey in the heart of Africa” — was criticized by the Zambian government, which accused her of falsifying events.

Mr. Mnuchin spent much of the last decade in California, first as the chief executive of a bank and later as a Hollywood financier, and much of the disclosure is related to his various investments during this time.

He led a group of investors who bought IndyMac, a bankrupt housing lender, from the government in 2009 and restructured it under the name OneWest. In 2015, the CIT Group completed its $3.4 billion acquisition of OneWest, resulting in a remarkable profit for Mr. Mnuchin and other investors. He stepped down from the helm of OneWest in March, just before Mr. Trump tapped him to raise funds for his presidential campaign.

The filing is somewhat backward looking. For example, it outlined that during his time at CIT Bank, Mr. Mnuchin made at least $40 million, but the data is attributable only to his position before the merger’s close in 2015, according to footnotes in the documents. In a regulatory filing in February, Mr. Mnuchin disclosed that he controlled shares in CIT valued at about $67 million based on today’s price of the stock. The discrepancy is partly because he received shares when CIT bought OneWest.

In the deal to buy the remnants of OneWest from the Federal Deposit Insurance Corporation, Mr. Paulson’s hedge fund was one of the main investors with Mr. Mnuchin and his former boss, George Soros, a billionaire investor. It is not known when Mr. Mnuchin first invested with Mr. Paulson, who is known for making a $15 billion wager on the collapse of the United States housing market during the 2008 financial crisis.

Mr. Paulson, Mr. Trump and Mr. Mnuchin have one investment interest in common: Fannie Mae and Freddie Mac, the two mortgage finance giants that were bailed out by the federal government during the financial crisis. Mr. Paulson, like some other hedge fund managers, has made a big bet that the federal government will eventually privatize Fannie and Freddie.

The day after Mr. Mnuchin was nominated to be the next Treasury secretary, he declared on television that the government should get out of the business of running Fannie and Freddie.

What seemed like an off-the-cuff comment sent the shares of the two companies surging.

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