Jack Lew’s Cayman Islands Problem Just Got a Lot Bigger

By Pam Martens: February 11, 2013 

Senator Chuck Grassley set off a media uproar on Friday when he reported that President Obama’s nominee for Treasury Secretary, Jack Lew, had owned a Citigroup investment housed at a Cayman Islands building that President Obama has previously suggested was a tax scam due to almost 19,000 corporations being registered at that address. Lew had worked as a Deputy Secretary in the State Department for almost two years before he sold the investment in 2010 after returning to government service from Citigroup. 

The response from the White House has been that Lew made this disclosure known to the Senate for his confirmation hearing in 2010 and the Senators didn’t raise any issues with it. 

We first reported Lew’s investment in the Citigroup Venture Capital International (CVCI) private equity fund on January 14 of this year. In that report, we attached the financial disclosure report that Lew had provided to the U.S. Senate for vetting his nomination for Director of the Office of Management and Budget on September 16, 2010.  Our finding:  

“A review of documents submitted to the U.S. Senate Budget Committee for Lew’s confirmation hearing on September 16, 2010 to become Director of the Office of Management and Budget indicates Lew’s financial ties to Citigroup continued long after he joined the Obama administration. The public is being kept in the dark about the extent of Lew’s winnings at the Citigroup casino and its heads we win, tails you lose dealer tables. 

“One section of the documents refers to ‘Business Relationships’ and indicates that Lew had been a limited partner from 2007 through the date of the hearing on September 16, 2010 in the CVCI Private Equity Fund. There is nothing in these documents to enlighten either the Senators or the public that CVCI is an acronym for Citi Venture Capital International, a unit of Citigroup investing billions in foreign companies in hopes of making its limited partners very wealthy. (A limited partner in a private equity fund is synonymous with being an investor in the fund.)” 

Lew is still not coming clean on this investment. According to the Washington Post, Lew is currently telling the U.S. Senate Finance Committee which will vet his nomination for U.S. Treasury Secretary this Wednesday, that his investment in the Cayman Islands fund amounted to $56,000.  But in Citigroup’s proxy filings, the company says “Citi matches each dollar invested by an employee with an additional two-dollar commitment to each fund, or feeder fund, in which an employee has invested, up to a maximum of $1 million.” The matching funds are a loan which the employee repays when he sells his position, keeping the return minus any interest on the low cost loan. 

According to the financial disclosure form that Lew filed on January 11, 2009, his investment in CVCI was $50,001 to $100,000 and Citigroup had added $100,000 to $250,000. Now that we know Lew himself invested $56,000, that would mean that his total investment in the Cayman Islands fund was his $56,000 plus $112,000 from Citigroup for a total of $168,000.   

Lew is now saying he took a loss of $1582 on his $56,000 position. His 2010 financial disclosure form shows he sold the investment on November 18, 2010; that was his very last day at the State Department prior to taking his post as Director of the Office of Management and Budget. 

The question is not just why Lew didn’t have a problem investing in the Cayman Islands, it is also why Lew felt no ethical conflict in accepting a $950,000 bonus from Citigroup just prior to taking his post at the State Department on February 4, 2009. At that point in time, Lew knew full well that Citigroup was an insolvent institution and the money he accepted was taxpayer money and a highly improper gift to him. His division was at the core of Citigroup’s collapse. 

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