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pledge to sell his remaining private-equity holdings covers about seven private funds and management companies valued at as much as $31 million, according to estimates he provided to the government when he was nominated to the post.
Mr. Ross on Thursday acknowledged that he didn’t sell in a timely fashion some investments as required by ethics agreements reached when he became head of Commerce, a cabinet-level post in the Trump administration. The move to sell the remaining portfolio came after the government’s top ethics watchdog said his mistakes had raised questions about conflicts of interest and public trust.
When taking the Commerce post, the former private investor pledged to sell many assets but was allowed to retain his stake in private funds and companies that principally invested in real-estate financing, mortgage servicing and transoceanic shipping businesses, according to his ethics agreement.
- Ross to Sell Equity Investments, Cites Inadvertent Errors
Since entering the government and beginning to divest himself of financial holdings in January 2017, Mr. Ross has sold assets valued at between $78 million and $261 million, according to transaction reports maintained by the Office of Government Ethics. The assets include stocks, bonds and stakes in private-equity vehicles, records show.
Mr. Ross agreed Thursday to sell the additional private equity holdings after sparking a controversy by failing to disclose some assets in ethics forms or making inaccurate statements about them. The government’s top ethics watchdog, the Office of Government Ethics, told him that the errors undermined public trust. In addition, they could have placed him “in a position to run afoul of the primary criminal conflict of interest law,” the ethics watchdog said.
“Your failure to divest created the potential for a serious criminal violation on your part and undermined public confidence,”
acting director of the Office of Government Ethics, wrote in a letter dated Thursday.
A Commerce spokesman didn’t return emailed requests for comment Friday.
Mr. Ross, who sold his company to Invesco Ltd. in 2006, certified in November that he had sold Invesco stock in compliance with an ethics agreement, according to public records. But one month later, he sold Invesco shares valued at between $10 million and $50 million, ethics records show.
Mr. Ross said holding on to the Invesco stock, as in a few other cases, was an inadvertent mistake. He thought he had sold the stake before becoming commerce secretary but hadn’t. “I self-reported each error, and worked diligently with my department’s ethics officials to make sure I avoided any conflicts of interest,” he said Thursday.
The private-equity stakes that Mr. Ross held on to were permitted under his ethics agreement because they posed only a “remote” chance of a conflict of interest, his ethics letter states. Mr. Ross asked to retain them “because they were illiquid and not easy to divest,” said Theodore Kassinger, an attorney for Mr. Ross at O’Melveny & Myers LLP.
Because ethics forms require reporting the value of assets only within a range, the precise value of his remaining interests isn’t clear. The low end of the range is $6.7 million, while the maximum is $31.4 million, according to ethics records. Mr. Ross had pledged to be a passive investor and said he wouldn’t know about any investment decisions made by the funds’ managers.
Stakes in private-equity funds, which lock up investors’ cash for 10 years or more and are used to buy entire companies, are far less liquid than stocks, bonds and other securities. Specialist investment bankers must be hired to facilitate sales, which can take months to complete. Such sales are complicated by the fact that fund managers must approve transfers to new investors. Investors typically have obligations to pony up additional cash when the funds make new deals.
The Commerce secretary said he would invest the proceeds of what he sells in U.S. Treasury bonds. Mr. Ross already sold his interest in numerous other private-equity vehicles, according to ethics reports.
A letter from the Office of Government Ethics said the Commerce Department’s own ethics officer had reviewed Mr. Ross’s “calendars, briefing books, and correspondence,” and found no evidence of a criminal violation.
Even so, the Commerce Department’s inspector general should conduct an independent investigation to make sure Mr. Ross’s conduct didn’t violate criminal conflict of interest laws, said Kathleen Clark, a law professor and expert in government ethics at Washington University in St. Louis.
“We just don’t have any information on that from an independent person, in the way an inspector general has independent standing in the government, rather than someone who works for Ross,” Ms. Clark said.
Don Fox, a former senior ethics official at the Pentagon and the Office of Government Ethics, said he was also “alarmed” by the statement that an agency ethics officer had reviewed Mr. Ross’s calendars and found no apparent conflicts of interest.
“My thought was, time out, that’s not at all what ethics officials do. This whole matter needs to go to the department’s inspector general,” he said. “The IG would be the one to figure out exactly what was happening, to go through the calendars, the emails, the travel, etc.”
In June, Mr. Ross sold stock in
valued at between $50,000 and $100,000. The Air Lease shares were a benefit from serving on the company’s board that he hadn’t known about, he wrote in an ethics form made public July 3.
Mr. Ross also last year sold short the shares of several companies,
and Sun Bancorp Inc., according to ethics forms. The transactions, some of which were disclosed in June, sparked criticism because Mr. Ross, as a high-ranking government official, could have access to inside information that would inform his trades.
The commerce secretary has said the short sales were attempts to quickly rid himself of stock that he found out he owned but couldn’t immediately access.
—Julie Bykowicz and Ryan Dezember contributed to this article.
Write to Dave Michaels at firstname.lastname@example.org
Appeared in the July 14, 2018, print edition as ‘Ross Sale Of Stakes Worth Millions.’
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