Wilbur Ross, Trump's Commerce Dept Pick, To Keep 11 Investments Including Chinese Govt-Backed Company

In the hint that members of Trump's administration may be "compromised" by conflicts of interest, the WSJ reports that Trump's pick for Commerce Secretary, Wilbur Ross Jr, plans to keep millions of dollars invested in offshore entities "whose values could be affected by policies that he implements as commerce secretary." Ross, the 79-year-old private-equity billionaire has said that if he is confirmed, he will sell at least 80 business assets and investment funds over the next several months. But he plans to hold on to investments in an oil-tanker company and 10 other entities that invest in shipping and real-estate financing, according to federal financial-disclosure and ethics filings. It isn’t clear why Mr. Ross is retaining these 11 assets.

One particular assets which will raise eyebrows is a co-investment with the Chinese government’s sovereign- wealth fund in Diamond S Shipping Group Inc., one of the world’s largest owners and operators of medium-range oil tankers, according to its website. Ross’s private-equity firm in 2011 led a group of investors, including state-owned China Investment Corp., which injected a total of about $1 billion into the company.

The Chinese fund was still a co-investor in 2014, according to a filing for an intended public offering that was later canceled.

 

Diamond S Shipping Group, which is registered offshore but based in Greenwich, Conn., is private and doesn’t publicly list all its shareholders. The company, which has 33 tankers, didn’t respond to requests for comment.

 

Negotiating with and responding to China will be one of Mr. Ross’s responsibilities as commerce secretary. His role will include a seat on the Committee on Foreign Investment in the U.S., an agency that vets global deals on national-security grounds and has scotched a number of Chinese takeovers.

In all, according to the WSJ, Ross is retaining stakes valued at between $8.7 million and $41.5 million, according to a financial-disclosure form he filed with the Office of Government Ethics. The interests are mostly in private companies registered in the Cayman Islands, according to corporate filings. The entities are linked to investments his private-equity firm, W.L. Ross & Co., made in shipping and real-estate financing, including the U.S. and Irish property markets.

A spokesman said Mr. Ross has committed that, if confirmed as commerce secretary, “he will faithfully execute the law and the commitments in his ethics agreement, and will follow the advice of the department’s ethics officials.”

However, there appears to be a loophole: in a letter to the Commerce Department last month, Mr. Ross said six of the entities in which he is retaining stakes are no longer acquiring new assets. In three other companies, he will be a passive investor, “without prior knowledge of or influence over investment decisions made by the funds’ managers,” he wrote. Naturally, the values of Ross’s investments could rise or fall depending on policies set by the Commerce Department, which oversees oil-spill regulations and trade negotiations, among other things.

The Ross disclosure will provide Democrats more ammo for attacks on yet another Trump candidate, especially now that his National Security Advisor Mike Flynn appears to be on very thin ice.

Maria Cantwell of Washington, a Democratic member of the Senate panel that last month scrutinized Mr. Ross’s nomination, said in a later written question there is “clearly” a conflict of interest between his retained stake in a tanker company and his new job. “Your decisions could impact the regulatory environment for both your own and your [competitors’] shipping companies. You would also have authority to determine the financial liability facing tanker companies that pollute our waters,” the question, reviewed by The Wall Street Journal, said.

In a troubling lack of transparency, little public information is available about the entities in which Mr. Ross is retaining investments. That means it will be hard for outside groups to monitor what effect if any Commerce Department actions would have on Ross’s finances. For example, WLR Mezzanine Associates LLC is described on Mr. Ross’s financial disclosure form as the general partner of “various underlying funds.” The funds aren’t identified.

The Cayman Islands corporate registry entry for WLR Mezzanine Associates LLC gives little detail beyond a Grand Cayman office address, saying: “information regarding the corporate records and registers are not available for public inspection.” Company records in Delaware, where the company is also registered, don’t disclose its finances, owners or related funds.

 

“If these entities are essentially black boxes, how will the officials advising Mr. Ross be able to flag that a specific matter before him affects his financial interests and requires recusal?” said Kathleen Clark, a professor and expert in government ethics law at Washington University in St. Louis.

A spokesman for Mr. Ross said the commerce department’s ethics officials “are career staff with extensive experience, and together with Mr. Ross are committed to serving the public and faithfully executing the law.”

Then again, for an administration in which even Trump is concerned about the material number of "Goldman Guys", and which is about to add Bear Stearns' chief economist at the time of the bank's failure as Trump's international Treasury advisor, concerns about Ross' black box investments seem like a relatively minor thing to be concerned about in the grand scheme of what Trump's Wall Street based advisors are about to advise him.