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Lew to face questions over Cayman fund

By Jia Lynn Yang,February 08, 2013

Jack Lew, U.S. treasury secretary nominee and White House chief of staff.… (Andrew Harrer/BLOOMBERG )

Treasury secretary nominee Jack Lew will face questions at his confirmation hearing next week about an investment fund registered in a Cayman Islands building that has been called a notorious site for tax haven abuse.

Lew invested $56,000 in the fund, which was run by his former employer Citigroup, and sold his investment in 2010 for $54,418, according to the Senate Finance Committee.

Lew, the White House chief of staff, is to appear before the Senate Finance Committee on Wednesday as he seeks to become the next Treasury secretary.

Lew was confirmed by the Senate in 2009 as head of the Office of Management and Budget, during which he faced a similar vetting process. The Citigroup fund did not come up then, even though his investment had been disclosed.

The investment fund could become an issue during the upcoming hearing because Lew’s job as Treasury secretary would give him a major role in shaping the administration’s tax policy. The president has targeted tax haven abuse as a major problem in the country’s tax system.

Sen. Charles E. Grassley (R-
Iowa), a senior member of the committee, vowed to ask Lew about the Citigroup investment.

“President Obama has been almost obsessively critical of offshore investments,” Grassley said in a statement Friday. “That makes this Cayman Islands investment of his top official and now Treasury secretary nominee worthy of attention. The irony is thick.”

The White House said “there are no new facts” regarding Lew’s finances that should give the senators pause.

“Jack Lew paid all of his taxes and reported all of the income, gains and losses from the investment on his tax returns,” White House spokesman Eric Schultz said. “He played no role in creating, managing or operating the fund, and he sold his investment in 2010 at a net loss.”

Schultz also said that 12 members of the Senate Finance Committee were members of committees that had reviewed Lew’s previous nominations. He was confirmed unanimously in 2009 for deputy secretary of state and again in 2010 as head of OMB.

The address for the Citigroup fund is a building in the Cayman Islands known as the Ugland House, which President Obama singled out in a 2009 speech railing against tax haven abuse.

“Either this is the largest building in the world or the largest tax scam in the world,” Obama said.

The Ugland House is the registered address for more than 18,000 companies, according to a Web site for the building. The only physical tenant is the law firm Maples and Calder, which advises financial and business clients.

The committee’s staff has been poring over pages of tax and financial documents from Lew in preparation for the hearing, though the information about Lew’s Citigroup investment has been public for four years.

The fund, known as Citigroup Venture Capital International Growth Partnership (Employee) II, was made available to employees for investment starting in 2007. In a letter to shareholders last year, Citigroup said it matched each $1 invested by an employee with $2.

Lew worked at the bank from 2006 to 2008, serving in top roles at the firm’s wealth management and alternative investment units.