Commerce Secretary Wilbur Ross appears to have a cronyism issue or, at least, a problem with ethics disclosures. Forbes reported last week Ross may not have been telling the truth when he claimed last year to have completely divested of all his ownership stakes in companies, including some affected by America’s sanctions war or its slowly bubbling trade war with China. The headline barely made any waves in the U.S. mainly because everyone’s eyes were on the U.S.-Mexico border, the family separation policy, and the various reactions to the issue by politicians far and wide. It’s still an important story and one which deserves much more attention because of its implications.
The Forbes piece levels harsh accusations at the former banker mainly that he wasn’t honest in multiple Office of Government Ethics filings in 2017 during and after his confirmation by the Senate. The report – remember this is Forbes, not The New York Times – asserts Ross has a slew of conflicts of interest in his role as Commerce Secretary and those countries with whom he’s currently negotiating trade deals.
• For most of last year, Ross served as secretary of commerce while maintaining stakes in companies co-owned by the Chinese government, a shipping firm tied to Vladimir Putin’s inner circle, a Cypriot bank reportedly caught up in the Robert Mueller investigation and a huge player in an industry Ross is now investigating. It’s hard to imagine a more radioactive portfolio for a cabinet member.
• To this day, Ross’ family apparently continues to have an interest in these toxic holdings. Rather than dump them all, the commerce secretary sold some of his interests to Goldman Sachs—and, according to Ross himself, put others in a trust for his family members. He continued to deal with China, Russia and others while evidently knowing that his family’s interests were tied to those countries.
• In addition, five days before reports surfaced last fall that Ross was connected to cronies of Vladimir Putin through a shipping firm called Navigator Holdings, the secretary of commerce, who likely knew about the reporting, shorted stock in the Kremlin-linked company, positioning himself to make money on the investment when share prices dropped.
• Absurdly, maintaining all those conflicts of interest appears to be entirely legal—a reflection of ethics laws woefully unprepared for governing tycoons like Donald Trump and Wilbur Ross.
• Ross appears to have broken one law, however: submitting a sworn statement to federal officials in November saying he divested of everything he had promised he would—even though he still held more than $10 million worth of stock in financial firm Invesco, his former employer. He also continued to hold a short position in a bank called Sun Bancorp, a company he had promised to divest. The next month, Ross got rid of interests in both.
I took a look at Forbes’ claims through government documents and they appear to be on the level – although Forbes theorizes without evidence Ross knew his connection to Navigator Holdings would become public. That evidence did show up in a Bloomberg story which claimed NYT contacted Ross about his shares in Navigator a day before they were put up for sale. It should be pointed out Ross didn’t break any laws with the stock sale – a note which is extremely important.
What little reaction there was to the Forbes piece was full of furor and handwringing. Bloomberg noted OGE didn’t have investigative powers but just tries to see “whether reported transactions comply with federal conflict of interest and disclosure requirements.”
The Atlantic was harsher in its assessment with David Graham implying Ross “made a buck” last year when NYT confronted him on his Navigator shares.
“(Ross) took a short position on it—in effect, betting the value of his investment would drop,” Graham wrote before noting disclosures showed Ross made $100K-250K with the sale. “It looks like an ingenious maneuver: He absorbed the public-relations damage, but at least made some cash from it.”
Graham proceeds to take his furor a step further by casting an indictment on most of the Trump Administration. The full-frontal righteous indignation is hard to miss.
These high-dollar conflicts of interest are not new to the administration. In fact, the most brazen of them was revealed last year. Trump appointed Carl Icahn, like Ross a famed investor, as an unpaid adviser. In that capacity, Icahn worked to advance his own personal interests, pushing the EPA to aid a refinery he owns. Icahn was forced to resign on the eve of a New Yorker report on the conflict, though in April the EPA approved a waiver Icahn had sought for the refinery.
There’s a bigger issue all critics of Ross and the Trump Administration are ignoring. Why does the United States even have a Commerce Department? It’s a question none of the gadflies of the President’s White House are willing to ponder, let alone consider. It’s as if they’ve put on blinders like some steed charging down a dirt track with the singular goal being criticism without bothering to look at how we got here.
The Commerce Departments origins date back to President Theodore Roosevelt’s 1901 State of the Union message to Congress. TR, as was his habit as a progressive, blustered about the supposed imminent danger of trusts and prodded the legislature to give the federal government a big stick to strike back or down corporations.
There is a widespread conviction in the minds of the American people that the great corporations known as trusts are in certain of their features and tendencies hurtful to the general welfare…It is based upon sincere conviction that combination and concentration should be, not prohibited, but supervised and within reasonable limits controlled; and in my judgment this conviction is right.
It is no limitation upon property rights or freedom of contract to require that when men receive from Government the privilege of doing business under corporate form, which frees them from individual responsibility, and enables them to call into their enterprises the capital of the public, they shall do so upon absolutely truthful representations as to the value of the property in which the capital is to be invested. Corporations engaged in interstate commerce should be regulated if they are found to exercise a license working to the public injury. It should be as much the aim of those who seek for social- betterment to rid the business world of crimes of cunning as to rid the entire body politic of crimes of violence. Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and our duty to see that they work in harmony with these institutions.
Roosevelt may have had a point in his observation of some corporate owners avoiding individual responsibility when their business ventures go under. Yet, much like most who observe problems in society, Theodore Rex (as Edmund Morris calls the former president) decided the solution was to give government more power, instead of loosening or destroying its tendrils. Some of it has to do with corporate law – specifically since New York decided to enact a law on corporate ownership in 1811. That rule was put in effect in reaction to federal laws enacting embargoes on European nations which really weren’t enforceable. Thomas Jefferson and his Democratic-Republican allies in Congress deserve blame for the embargoes since they went against his idea of being friends with everyone. Roosevelt’s decision to continue the notion of government involvement in business issues is an obvious by-product of state movements into business measures. Had he not decided to move the federal government into the commerce sector it’s possible Ross wouldn’t have troublesome conflicts of interest as Commerce Secretary since the department wouldn’t even exist.
So, can we get rid of the Commerce Department? It’s certainly possible but would take spine not seen in Congress or in the White House to slice and dice away its power (which means it’s unlikely to happen in your lifetime or mine). The good news is the department has seen its budget shrink over the last several years (Ross asked for only $7.8B for FY2018 down 16% from the previous year). Here’s hoping the budget will keep shrinking until it’s down to zero and the 1903 law which established the department is repealed.
This is the actual solution to ending conflicts of interest and ethics issues in government bureaus not defined in the Constitution. After all, there are watchdogs who keep their unyielding eyes on businesses who behave unethically. It’s unfortunate people run to government to solve their problems instead of looking elsewhere.