UPDATE with more details: Steve Mnuchin today covered an array of topics during his confirmation hearing before the Senate Finance Committee for the job of Secretary of Treasury. The former finance director for Donald Trump’s presidential campaign, a former partner in Goldman Sachs, co-owner of OneWest Bank and who has been involved in several Hollywood films via Dune Capital Management and also Relativity Media prior to its bankruptcy, he revealed some surprising information about Relativity and the FBI through questions raised by two U.S. senators, both Democrats.
Democratic Sen. Ron Wyden (Ore) — also one of the most aggressive in the questioning today — accused Mnuchin of employing “tax tricks” by setting up offshore accounts in the Cayman Islands to avoid paying taxes. “Profits from Avatar were funneled through an offshore web,” said Wyden, who clearly objects to Mnuchin rising to such a high level in the government.
'Celebrity Apprentice' Makes Surprise Appearance At Steve Mnuchin Confirmation Hearing
Wyden noted that in 2014, while CEO of OneWest, Mnuchin also bought his own stake in Relativity and bought a private jet with the CEO (Ryan Kavanaugh). OneWest then pulled out $50 million from numerous accounts, harming the little guy, “and bailed out right before the studio went into bankruptcy.” Wyden also said that an FOIA request into Relativity was denied by the FBI, citing it would “interfere with a law enforcement proceeding.” The FOIA request came from a non-profit watchdog called MuckRock.
Adding to that was Democratic Sen. Sherrod Brown (Ohio), who blasted Mnuchin on his financial dealings: “One example of an insider loan was the Relativity Media deal. The FBI denied a FOIA request related to Relativity Media where you were co-chair citing law enforcement procedures. Have you been questioned by law enforcement on this?”
“I have not,” said Mnuchin “… I assumed that the FBI did a thorough review of my background report. I have no idea why they didn’t approve the FOIA issue. I’ve been told that we have no reason to believe that it’s any issue associated with me. I would direct that (question) to the FBI.”
Brown opined that the OneWest purchase went well for Mnuchin but was a disaster for homeowners, employees, investors in Relativity, and for taxpayers which subsidized the purchase.
Brown went on to ask about Chinese investment in the film industry and while co-chair at Relativity opening the doors to Chinese investment: “China readily admits that it wants to become increasingly powerful by increasing its cultural influence in this country and expanding its stake in the U.S. film industry. You were a board member of a company that partnered directly with the Chinese government that increased their influence in Hollywood. We’re you helping China expand its global power?”
Mnuchin retorted: “As it relates to my experience at Relativity, the Chinese never invested in Relativity, and I don’t recall them ever having invested in Relativity films. They did have a small, joint venture in China but it was not particularly successful … in regards to my view on China, I, 100%, support the President’s view and we need to look at China overall from a trade standpoint, an economic standpoint and a securities standpoint. I look forward to working with him on that.” Sherrod shot back, saying: “That’s not the reports we’ve gotten.” Mnuchin did agree with one Democratic senator who called China “a monetary manipulator.”
Brown also noted that Goldman Sachs has a long history with China. It is known that they have helped the Chinese on many real estate deals in Los Angeles alone. He also mentioned the Heartland’s steel industry.
Sen. Bill Cassidy (Louisiana) apologized to Mnuchin for being “assaulted by innuendo.”
Repeated questions at today’s hearings included how Mnuchin at One West foreclosed on homeowners — from widows to families in the military — and that he failed to disclose all of his assets to the committee.
“He operates seven personal trusts — including one called the Dynasty Trust” to avoid taxes, said Wyden. He also dubbed no tax cuts for the upper class as The Mnuchin Rule. Mnuchin said that while they didn’t have any employees, business office or business in the Cayman Islands, he said, “in no way did I use them, whatsoever, to avoid taxes … all other hedge funds and many, many private equity funds set up off shore entities that are primarily intended to accommodate non-profits and pensions that want to invest through these offshore entities. As it relates to my own tax situation, these entities were either taxed as U.S. corporations or U.S. partnerships.” He also added that some foreign investment was involved.
“You failed to include your position as a director of Cayman Islands Corporation as well as (an official) in seven additional shell corporations and holding companies as well as $100M in real estate … as Treasury Secretary … would you support closing tax loopholes in the tax code that allows extremely wealthy people use — such as yourself — have used to avoid paying taxes?” asked Democratic Sen. Debbie Stabenow (Mich). In his defense, Mnuchin said that “Filling out these government forms is quite complicated … any oversights was unintentional. You mentioned that there was a $100M of real estate, I was told by my lawyer that it didn’t need to be disclosed.” Mnuchin said he delivered more than 5,000 pages of forms and disclosures.
Later in the afternoon, Mnuchin came under fire again for not “self-correcting” his omissions himself and it only came to light because the committee was made aware of it.
Pressed about whether he would close the Cayman Islands: “I did not use a Cayman Island entity to avoid paying taxes for myself.” The senator then asked, “So you helped others avoid paying … ” Mnuchin cut her off and said he helped others with tax issues but it was all legal. Asked if he would work to close the Cayman Island loophole, Mnuchin said, “I would support changing the tax laws to make them simpler and more effective, yes.”
Mnuchin was hammered for allegedly helping other companies avoid paying U.S. taxes. “Didn’t you help create offshore companies to help them avoid paying taxes?” asked another senator — Bob Menendez (NJ). “No. Not necessarily,” said Mnuchin. “I’m absolutely committed to working with your office … and not let anyone avoid taxes.”
Asked by Florida’s Nelson if he moved Dune Capital Partners LLC to Anguilla, Mnuchin said yes, they set up a master fund in Anguilla “and had to change it to become a foreign entity.” He said it was complicated but said, once again, that it was done to help non-profits and pensions.
After Wyden spoke, Republican Sen. Pat Roberts suggested that Wyden take a valium and infighting ensued.
Wyden went through a timeline of Mnuchin’s financial dealings, including as head of the bank OneWest which has come under attack for foreclosing on more than 35,000 homes through loan modifications. It only made two loans to African Americans and that this segment of the community were harshly affected.
“Since I was first nominated to serve as Treasury Secretary, I have been maligned as taking advantage of others’ hardships in order to earn a buck. Nothing could be further from the truth,” Mnuchin said in his opening remarks and then went onto defend his actions at OneWest bank, saying, “When we bought the bank, we assumed these bad (housing) loans which had been originated by previous management. Some of those individuals had to answer to federal authorities for their bad lending decisions. We invested $1.6B of capital into a failing financial institution when most investors were running for the hills. We renamed the business OneWest Bank and saved thousands of jobs … we worked diligently to help hard working homeowners remain in their homes through modifications, wherever possible. Ultimately, OneWest extended over 100,000 loan modifications to delinquent borrowers to try and help them out of a bad situation.”
“In the press it has been said that I ran a ‘foreclosure machine.’ This is not true. On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a ‘Loan Modification Machine.’
One of those was an 80 year-old woman who was foreclosed on in Bill Nelson’s home state. They also foreclosed on 54 military families and 60,000 other homes. CA Attorney General’s office found that OneWest backdated documents and then obstructed any investigation. Sen. Brown continued to hit Mnuchin with one question after another, without giving Mnuchin any time to answer. Mnuchin did acknowledge to Sen. Nelson that there were some issues and some mistakes made.
But it was a Republican Senator that underscored the issue. Sen Dean Heller of Nevada pointed out the fact that OneWest was able to get over $1B from the FDIC to its investors for foreclosing on homes. Mnuchin defended himself by saying that was against a loss. However, the anger that continued to nip at Mnuchin heels was for OneWest foreclosing on a number of homes (thereby returning ownership to the bank) from Senators from many states. “I never wanted to be in the mortgaging business or the reverse mortgaging business,” stated Mnuchin. “… I sympathize.”
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