The top federal ethics watchdog said on Thursday that Treasury Secretary Steven Mnuchin’s sale of his stake in a film production business t...
The top federal ethics watchdog said on Thursday that Treasury Secretary Steven Mnuchin’s sale of his stake in a film production business to his wife did not comply with federal ethics rules, and it would not certify his 2018 financial disclosure report as a result.
Although Mr. Mnuchin will not face penalties for failing to comply, he has been required to rewrite his federal ethics agreement and to promise to recuse himself from government matters that could affect his wife’s business.
Mr. Mnuchin in 2017 sold his stake in StormChaser Partners to his then-fiancée, Louise Linton, as part of a series of divestments before becoming Treasury secretary. Since they are now married, government ethics rules consider the asset to be owned by Mr. Mnuchin, potentially creating a conflict of interest for an official who has been negotiating for expanded access for the movie industry as part of trade talks with China.
The controversy over Mr. Mnuchin’s finances has become an unwanted distraction in recent weeks as the Trump administration has been engaged in intense negotiations with China on a wide range of trade matters. While Robert Lighthizer, President Trump’s top trade official, has been leading the talks, Mr. Mnuchin has been the point person for promoting the film industry because of his background as a Hollywood producer and investor.
Mr. Mnuchin said last month at a Senate hearing that he was told by Treasury ethics officials that he was allowed to sell his stake in StormChaser to Ms. Linton, an actress and producer. However, the Office of Government Ethics was not made aware of that guidance and had not approved it.
In a letter to Senator Charles E. Grassley, Republican of Iowa and the chairman of the Finance Committee, the ethics office said that it could not certify Mr. Mnuchin’s report but that because he had modified his ethics agreement and agreed to recuse himself from matters that might affect StormChaser’s film business, he and Ms. Linton could continue to hold the asset.
Several Trump administration officials have faced red flags and ethical questions over their financial holdings. In February, the ethics office declined to certify the 2018 financial disclosure of Wilbur Ross, the commerce secretary, because of an inaccuracy in his report.
The Treasury’s assistant general counsel, Brian J. Sonfield, said that the department’s former top ethics official had cleared Mr. Mnuchin’s arrangement, according to a letter he wrote this week to Emory Rounds, the director of the ethics office. He said that the Treasury believes that Ms. Linton’s ownership of the business is “consistent with all applicable ethics laws and regulations.”
In a separate letter to Mr. Sonfield this week, Mr. Mnuchin wrote that, unless he receives a written waiver, he will recuse himself from any government activity that could benefit StormChaser’s movie business. He added that StormChaser did not own or have financial interests in films that are being marketed internationally. He also said he would recuse himself from any tax policy matters that could affect the kinds of independent films that StormChaser holds.
“If while I am secretary the nature of StormChaser’s business practices or the types of films it owns or produces changes, I will seek further guidance from the department’s ethics official, who will consult with O.G.E.,” Mr. Mnuchin wrote.
A Treasury spokesman, Tony Sayegh, tweeted a statement saying that the ethics issue was the result of a technical difference between federal ethics officials and Treasury’s ethics staff.
“We are pleased that OGE has approved an updated ethics agreement recognizing that he may hold an interest in that asset,” Mr. Sayegh said.
It is extremely rare for cabinet officials to not have their financial records certified, said Virginia Canter, a former senior ethics counsel at the Treasury Department. In 2001, Paul H. O’Neill, President George W. Bush’s Treasury secretary, divested his holdings in Alcoa, an aluminum producer, because of conflicts of interest.
Ms. Canter said she was surprised that Mr. Mnuchin was blaming Treasury’s ethics officials for the lapse, arguing that it was ultimately his responsibility to meet the government’s requirements.
“What’s he doing being involved in intellectual property matters that could affect the entertainment industry in the negotiations with China?” Ms. Canter said. “It raises an appearance issue.”
The explanation from Mr. Mnuchin did not satisfy some Democrats on Thursday.
Senator Ron Wyden of Oregon, the top Democrat on the Finance Committee, said that he remained baffled by how the Treasury and the ethics office handled the matter and that he planned to review Mr. Mnuchin’s modified ethics agreement.
“Before being confirmed by the Senate, he signed an ethics agreement that said he would divest from StormChaser Partners L.L.C.,” Mr. Wyden said. “Rather than divest, he violated the spirit of his ethics agreement by selling his interest to his then-fiancée and then he violated the letter of the agreement when he reacquired the assets upon their marriage.”
Although Mr. Mnuchin will not face penalties for failing to comply, he has been required to rewrite his federal ethics agreement and to promise to recuse himself from government matters that could affect his wife’s business.
Mr. Mnuchin in 2017 sold his stake in StormChaser Partners to his then-fiancée, Louise Linton, as part of a series of divestments before becoming Treasury secretary. Since they are now married, government ethics rules consider the asset to be owned by Mr. Mnuchin, potentially creating a conflict of interest for an official who has been negotiating for expanded access for the movie industry as part of trade talks with China.
The controversy over Mr. Mnuchin’s finances has become an unwanted distraction in recent weeks as the Trump administration has been engaged in intense negotiations with China on a wide range of trade matters. While Robert Lighthizer, President Trump’s top trade official, has been leading the talks, Mr. Mnuchin has been the point person for promoting the film industry because of his background as a Hollywood producer and investor.
Mr. Mnuchin said last month at a Senate hearing that he was told by Treasury ethics officials that he was allowed to sell his stake in StormChaser to Ms. Linton, an actress and producer. However, the Office of Government Ethics was not made aware of that guidance and had not approved it.
In a letter to Senator Charles E. Grassley, Republican of Iowa and the chairman of the Finance Committee, the ethics office said that it could not certify Mr. Mnuchin’s report but that because he had modified his ethics agreement and agreed to recuse himself from matters that might affect StormChaser’s film business, he and Ms. Linton could continue to hold the asset.
Several Trump administration officials have faced red flags and ethical questions over their financial holdings. In February, the ethics office declined to certify the 2018 financial disclosure of Wilbur Ross, the commerce secretary, because of an inaccuracy in his report.
The Treasury’s assistant general counsel, Brian J. Sonfield, said that the department’s former top ethics official had cleared Mr. Mnuchin’s arrangement, according to a letter he wrote this week to Emory Rounds, the director of the ethics office. He said that the Treasury believes that Ms. Linton’s ownership of the business is “consistent with all applicable ethics laws and regulations.”
In a separate letter to Mr. Sonfield this week, Mr. Mnuchin wrote that, unless he receives a written waiver, he will recuse himself from any government activity that could benefit StormChaser’s movie business. He added that StormChaser did not own or have financial interests in films that are being marketed internationally. He also said he would recuse himself from any tax policy matters that could affect the kinds of independent films that StormChaser holds.
“If while I am secretary the nature of StormChaser’s business practices or the types of films it owns or produces changes, I will seek further guidance from the department’s ethics official, who will consult with O.G.E.,” Mr. Mnuchin wrote.
A Treasury spokesman, Tony Sayegh, tweeted a statement saying that the ethics issue was the result of a technical difference between federal ethics officials and Treasury’s ethics staff.
“We are pleased that OGE has approved an updated ethics agreement recognizing that he may hold an interest in that asset,” Mr. Sayegh said.
It is extremely rare for cabinet officials to not have their financial records certified, said Virginia Canter, a former senior ethics counsel at the Treasury Department. In 2001, Paul H. O’Neill, President George W. Bush’s Treasury secretary, divested his holdings in Alcoa, an aluminum producer, because of conflicts of interest.
Ms. Canter said she was surprised that Mr. Mnuchin was blaming Treasury’s ethics officials for the lapse, arguing that it was ultimately his responsibility to meet the government’s requirements.
“What’s he doing being involved in intellectual property matters that could affect the entertainment industry in the negotiations with China?” Ms. Canter said. “It raises an appearance issue.”
The explanation from Mr. Mnuchin did not satisfy some Democrats on Thursday.
Senator Ron Wyden of Oregon, the top Democrat on the Finance Committee, said that he remained baffled by how the Treasury and the ethics office handled the matter and that he planned to review Mr. Mnuchin’s modified ethics agreement.
“Before being confirmed by the Senate, he signed an ethics agreement that said he would divest from StormChaser Partners L.L.C.,” Mr. Wyden said. “Rather than divest, he violated the spirit of his ethics agreement by selling his interest to his then-fiancée and then he violated the letter of the agreement when he reacquired the assets upon their marriage.”
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