For the billionaires, the multimillionaires and the plain well-off people whom US president-elect Donald Trump is choosing for his Cabinet, the first step to office is to be the sort of grilling he did not face — on potential business conflicts of interest and, for some, tax returns — courtesy of US Senate sleuths who have taken their toll in the past.
US President Barack Obama’s first Treasury secretary, Timothy Geithner, was nearly derailed in 2009. His first choice for secretary of health and human services, Tom Daschle, did not make it through that year.
Now billionaires Betsy DeVos, Linda McMahon and Wilbur Ross Jr, and multimillionaires Rex Tillerson, Ben Carson, Elaine Chao, Steven Mnuchin, US Representative Tom Price, Andrew Puzder and Todd Ricketts can expect much of the same scrutiny.
Illustration: Constance Chou
“With the president-elect flouting a 40-year bipartisan tradition of disclosure and transparency, we think it’s more important than ever to ensure that senior officials across government aren’t operating under a different tax code than everyone else,” said US Senator Ron Wyden, the senior Democrat on the US Senate Finance Committee, which has upended its share of nominees.
After about two centuries in which US Senate reviews were cursory at best, that confirmation process has become increasingly arduous, regardless of party, and especially in the committees that require nominees’ tax returns.
Dean Zerbe, a former counsel to the Finance Committee, had some advice for Trump’s nominees facing that panel: Do not copy the US president-elect’s defiance on disclosure.
“The committee will say: ‘Bless your heart. Now send us your tax returns,’” Zerbe said.
Senate Democrats would be pressing next month to make the scrutiny even broader. They propose that all committees make nominees privately submit their three most recent federal tax returns. Three committees — Finance, Budget, and Homeland Security and Governmental Affairs — already do so. Together they have responsibility for examining five Cabinet-level officials before confirmation: the secretaries of the treasury, health and human services, and homeland security, and the US president’s trade representative and budget director.
For Democrats, the tax-disclosure proposal is a way to underscore Trump’s refusal to release his returns, despite a four-decade tradition of presidential candidates doing so. More to the point, they will have ample opportunity to press home their contention that a number of his Cabinet choices have wealth and backgrounds at odds with his populist pitch.
“He is building an administration that looks a whole lot like himself,” said US Senator Patty Murray, the senior Democrat on the committee that is to handle the nominations of DeVos — who married into the Amway fortune — as education secretary, and Puzder, a fast-food executive, to be labor secretary.
Those nominations are to go to a committee that has not previously required nominees to file tax returns along with other financial disclosures. So will those of Tillerson, chief executive of Exxon Mobil; Ross, an investment titan chosen for secretary of commerce; Trump’s choice for deputy commerce secretary, Ricketts, the heir to the Ameritrade fortune; the pick for transportation secretary, Chao, a wealthy former labor secretary and the wife of the majority leader, US Senator Mitch McConnell; Carson, a retired neurosurgeon; and McMahon, a billionaire professional wrestling impresario, who was picked to lead the Small Business Administration.
Finance Committee chairman Orrin Hatch, a Republican, has served notice that Trump nominees “will undergo the same bipartisan vetting process as the nominees from previous administrations” and would not get a public hearing until the committee staff’s private examination — including a review of the nominees’ tax returns from the past three years — is complete.
The Finance Committee considers nominees to three Cabinet-level offices — Treasury, trade, and health and human services — while other committees have jurisdiction over one or two. So far Trump has made his selections for two of the three spots: Price, a Republican, an orthopedic surgeon, to be secretary of health and human services; and Mnuchin, a former Goldman Sachs partner-turned-hedge fund operator and Hollywood financier, to be secretary of the treasury.
For Mnuchin especially, the multipage questionnaire that the Finance Committee uses for its review illustrates the hoops a nominee must jump through to pass muster. It includes listing all jobs held since college, all business relationships, political activities and contributions, any legal or ethics issues, and a precise accounting of financial net worth for the nominee, a spouse and dependents. Nominees must answer whether they have paid all local, state and federal taxes, including those for household employees — a common tripwire.
To gauge potential conflicts of interest, the questionnaire also asks for “any investments, obligations, liabilities or other relationships” and any business dealings and lobbying activities in the past 10 years that could be problems, as well as for an explanation of how those potential conflicts will be resolved. Separate opinions are required from both the federal Office of Government Ethics and the ethics officer of the agency a nominee would lead.
Even as Trump resists a complete break with his far-flung businesses, a nominee before the Finance Committee must answer whether they, if confirmed, will “sever all connections with your present employers, business firms, associations or organizations.”
If not, the nominee must provide details of how those connections will be handled.
The questionnaire must be notarized — providing false answers is potentially a federal crime — and the nominee’s tax returns attached. The documents are not made public, though information might come out in hearings or be leaked, often by senators.
Neither Daschle’s nor Geithner’s tax returns were made public, but their offenses were widely aired.
When US Senate aides discover problems, a nominee is given a choice: Agree to a public report on the infraction and pay all taxes, penalties and interest, or quietly withdraw.
“Those are the not-very-attractive options a nominee was given,” said Mark Patterson, a Democrat who was the staff director for the Finance Committee in the late 1990s and the chief of staff at the Treasury Department from 2009 to 2013.
Zerbe, who was on the staff of the Finance Committee during most of former US president George W. Bush’s administration, recalled of a few sub-Cabinet nominees: “They’d fade away so as not to be embarrassed.”
He said common transgressions included taking questionable deductions for home-office expenses.
However, high-level nominees often cannot escape embarrassment.
Daschle, a former US Senate Democratic majority leader who was a member of the Finance Committee, withdrew his nomination in early 2009 after it was revealed that he had to pay US$140,167 in back taxes and interest for infractions including improper deductions and failing to report as income a chauffeur-driven car that an employer had made available.
At the same time, Geithner won confirmation, despite being found to have failed to pay payroll taxes during three years at the IMF, which as an international organization did not withhold taxes for employees as domestic employers do.
Lael Brainard, now a Federal Reserve governor, waited more than a year to be confirmed as Treasury undersecretary for international affairs while she and the Finance Committee haggled over discrepancies in her tax returns.
Such close scrutiny of nominees, now taken for granted, is relatively recent in the history of the Senate’s exercise of its constitutional confirmation power.
Not until the 1950s is there evidence of committees examining a president’s picks, US Senate historian Betty Koed said.
The first record of a committee hearing on a nominee was in 1953: In just more than an hour, steel magnate George Humphrey, the sole witness, answered questions about his stock holdings and went on to be confirmed as Treasury secretary two days later.
Starting in 1981, the Finance Committee began receiving reports on nominees from the FBI and the new Office of Government Ethics. Eventually it became the first panel to require nominees’ tax returns.
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