What You Need to Know About Wilbur Ross’ Many Conflicts
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ILYA MARRITZ: Hello, and welcome to Trump, Inc., an open investigation from ProPublica and WNYC that looks at the business side of the Trump presidency. I'm Ilya Marritz, and — drum roll please! — I’m excited to tell you that Trump, Inc. is coming back for season two. Yes, we are already at work on new reporting.
And in the meantime, when we come across a story that we think you'll find interesting, we are not going to wait. So keep checking your podcast feed — which brings us to this podcast extra.
DAN ALEXANDER: Well, there are really a couple of stories, but — so I'll try to boil it down.
MARRITZ: And Dan Alexander, a reporter at Forbes. He’s been on the podcast before. Recently, Dan wrote about one of the most prominent members of Trump's cabinet: Commerce Secretary Wilbur Ross.
ALEXANDER: Wilbur Ross — his family still owns assets that are about as bad as you could get for somebody who is in Donald Trump's cabinet. We're talking about companies that are linked to Russia. We're talking about, uh, investments in which he's business partners with China while he's negotiating with China.
MARRITZ: Dan Alexander came to WNYC Studios recently and spoke with one of Trump, Inc.’s editors, Charlie Herman. Charlie, you want to set this up for us? Why is it worth taking a close look at Commerce Secretary Wilbur Ross?
CHARLIE HERMAN: Sure. Normally the Secretary of the Commerce is a pretty low-key position, promoting U.S. businesses at home and abroad, issuing trademarks. The Commerce Department also oversees the Census Bureau and the Weather Service. But in the Trump administration, Ross has been much more visible in the negotiations over one of the President's signature issues: trade and tariffs. In March the White House imposed 25% tax on steel imports and 10% tariffs on aluminum.
COMMERCE SECRETARY WILBUR ROSS: The tariff actions taken by the President are necessary to revive America's essential steel and aluminum industries. They have been harmed by imports to the point that allowing imports to continue unchecked threatens to impair our national security.
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HERMAN: What Dan uncovered is that for most of last year, as Ross was working on things like trade and tariffs, he still had investments in companies connected to the Chinese government and two friends of Russian president Vladimir Putin.
Dan’s story in Forbes is called “Lies, China And Putin: Solving The Mystery Of Wilbur Ross’ Missing Fortune.” And I started off our conversation by asking him who Wilbur Ross was before he joined the Trump administration.
ALEXANDER: Originally, he was, you know, a kid from Weehawken, New Jersey who, you know, had a judge for a dad and a teacher for a mom, and was really, really bright and, you know, went to Harvard and Yale and, uh, grew up in the — in Rothschild, uh, the investment bank, and was helping people — when there were bankruptcies, helping people divide up assets. This is really complicated stuff. And, by all accounts, Wilbur Ross is incredibly smart, and he was the best in the country at it. Then he took his expertise that he had there, and at the time when most people retire, he said, “You know what, I'm going to have a go of it. And I'm going to start my own shop.” Very laudable thing to do. And so I started his own private equity firm taking advantage of those same sort of distress situations that he had, uh, worked on behalf of others for for years. And he was an enormous success right away, uh, made several hundred million dollars, uh, especially in the steel industry.
And, uh, then his luck sort of ran out. Um, and his funds have not been performing as well. Uh, but he still, you know, had this image of this sort of legendary investor.
HERMAN: You used to work on the Forbes Billionaire List, right?
HERMAN: Do you still work on it?
ALEXANDER: I do, but I only work on a couple of people, and — and that's really Wilbur Ross and Donald Trump.
HERMAN: That’s quite a — a pairing there. Do you see similarities and differences between the two men?
ALEXANDER: Well, you know, some of the similarities are — you know, we — there are thousands of people on the Billionaires List. We look all over the world. There are three people who have made a really concerted effort — uh, that we have, have caught — to inflate their net worth over the years. And two of them are Donald Trump and Wilbur Ross.
HERMAN: How much would he say he's actually worth?
ALEXANDER: So Wilbur Ross is worth hundreds of millions. You know, last year we put him at $700 million.
HERMAN: And what does he say he's worth.
ALEXANDER: Well, let's see. Last time that I talked to him, he said that there were more than $2 billion in assets that were not disclosed on his form. Uh, and you know, when you look through the history of his deals, it just doesn’t — it doesn't make any sense where that $2 billion could come from. And then when you talk to the people who were by his side the whole time that he was making his fortune, they'd shake their heads and say, “There's no way.”
HERMAN: Your piece contains this stunningly simple sentence: “Wilbur Ross is not known for telling the truth.”
ALEXANDER: Well, it's true. True. Um, you know, he’s — this is a guy who has a reputation, uh, both in business and now in government for, uh, evading the truth. And in some instances for, you know, what appear to be outright lies.
HERMAN: That’s a pretty strong thing to say about someone, that they lie.
ALEXANDER: Yeah. I don't say lightly. Um, you know, we fact-check all of our stories incredibly carefully and — and we can prove, uh, that he has lied on multiple occasions.
HERMAN: So Wilbur Ross is, you know, worth at least millions. Uh, then he is appointed to the cabinet. He has to go through, uh, Senate confirmation hearings. How did that go?
ALEXANDER: Wilbur Ross stood out as somebody who seemed to be perfect for the job. And, you know, he did very well during his confirmation hearings and they specifically did ask him about his fortune and his assets and things that he was planning on holding onto. And in those responses, he was very, very clear.
ROSS: I intend to be quite scrupulous about recusal and any topic where there's the slightest scintilla of doubt.
ALEXANDER: So he said that he would divest from almost everything. There were a couple of assets that he said that he would hang on to, uh, and “to divest” means to sell or to give things away.
And what's interesting about this is that he actually did that. Um, you know, for most of these interests that we have been examining over the last month, he sold part of the interest to some funds managed by Goldman Sachs and then, uh, with the other part of the interests, he gave them to a trust, which he told me it was for members of his family.
What's remarkable is that if you're an 80 year-old guy who, uh, presumably is, you know, toward the end of his career, um, you can just dump tons of assets into trusts for your family members and then the federal government declares that you no longer have a conflict of interest.
HERMAN: [QUESTIONINGLY] Is that a conflict of interest?
ALEXANDER: I think to a layman, it is. Uh, to the Federal Ethics Office, it is not.
HERMAN: So he did divest himself, then, from his businesses, is what you're saying?
ALEXANDER: Correct. He divested himself from his businesses eventually. There was, at one point, when he told the federal government that he had divested himself from the businesses, and at the point that he told them that he had divested, he had actually not. Uh, it's a federal crime to lie to ethics officials. And in that instance, it’s, uh, clear that he made false statements.
Uh, then, afterward, though, he did divest of those entities. So, at this point he has divested, although as I say, uh, in this case, divesting means that his family appears to still own significant interests, which were the cause of the conflicts-of-interest concerns in the first place.
HERMAN: So part of your reporting had to do with the actual ethics filings themselves. What happened to them?
ALEXANDER: So what happens when people file ethics filings, then, first, their departments they work for — so, in this case, the Commerce Department — signs off on them. And in this case, that happened pretty quickly. And then those filings go to the Office of Government Ethics and they sign off on them.
Usually that takes about 60 days. In this case, the documents sat in the Office of Government Ethics for five months, uh, without getting any approvals. And when the Ethics Office doesn't sign off on it, then they also don't release it to the public. But, legally, they're required to release it to people who request the specific document. You wouldn't necessarily know that the document exists, though, in the first place. So we just took a gamble and we said, “Well, maybe there's something there.” And so we sent in a request for a document, not knowing if it existed and it came back and that's how we got it, uh, before it was released to the public.
HERMAN: Why hadn't they signed off on it? What was the delay?
ALEXANDER: That's that's a good question. There were apparent, uh, you know, legal violations on the — on the filing, uh, namely that Ross continued to own shares of some companies that he had promised to divest after he said that he had already divested them.
HERMAN: And — and what happened to those shares you just mentioned?
ALEXANDER: So those shares that I just mentioned, he ended up selling. Uh, he told everyone that he had sold everything on November 1st. He ended up selling those shares on December 19th and December 20th.
HERMAN: Could it have just been a — a — a delay, a fact that it took a little bit of time to make it all happen?
ALEXANDER: Well, certainly you want to give them the benefit of the doubt. You know, he was confirmed on February 27th. He had 180 days to divest of the more complicated assets. Then he could’ve gotten a 60-day extension beyond that. Even if he were to have taken the full amount of time, that still would have been months before he actually sold them. He claims that he just didn't realize that he owned them.
Uh, even for a guy as rich as Wilbur Ross, that's hard to believe. It was at least $10 million. You know, they disclose things in big ranges in the Ethics Office. So it was somewhere between $10 million and $50 million.
HERMAN: And how did he explain the discrepancy?
ALEXANDER: He said he made a mistake. You know, it’s — it’s hard to imagine that you could forget about over $10 million in stock that you have, but that's what he said.
HERMAN: What kind of government business is Ross doing with Russia, with Putin, with China?
ALEXANDER: So, uh, first of all, let me say that Ross is not a typical Commerce Secretary. So most Commerce Secretaries are not very prominent people in administrations. Wilbur Ross is an exception to that. And Donald Trump made it very clear early on that Wilbur Ross was going to play a prominent role.
So part of what that means is that he sort of been, uh, the top general, if you will, in the trade war with China, and in negotiating other trade deals. Now, the reason that that's significant is because, for most of 2017, while he was negotiating things with China, Wilbur Ross owned interests alongside the government of China. He was business partners with them.
Then once he technically divested, he apparently gave some of those interests over to his family. So he continued to negotiate, uh, trade relations with China, apparently knowing that his family held interests which were alongside the government of China. If you look at Russia — so, in the same way, they're constantly working on trade negotiations with Russia, and meanwhile, uh, he, during most of 2017, and after he divested, his family appears to have owned interests aligned with Russians in Russia.
HERMAN: Did you find any instances that, uh, decisions that were being made by the Commerce Department as it relates to tariffs or negotiations with China, Russia, could actually benefit him as well?
ALEXANDER: What you have to wonder — and, you know, if you're a person who really supports, uh, tariffs and that sort of thing — is okay, so, how does Wilbur Ross influence that at all? You know, maybe they were really hard-line, and now they're pretty hard-line. You just don't quite know. And the difference with this administration is that there are a lot of instances in which we don't quite know, where you have to wonder because they're overlapping, uh, business interests and, you know — and policy interests, So one of the ones that really stands out to me is, he had an interest in a company called International Automotive Components Group. International Automotive Components Group makes car parts. And in September of 2017 — uh, which was right around the time that Wilbur Ross was traveling to Asia and negotiating trade deals with the Chinese government — the funds that he used to be a part of and at the time, still had an interest in, close the joint venture with a state-owned Chinese company called Shanghai Shenda. As part of that joint venture, uh, Ross’ company took a 30% interest in the company and the state-owned business paid the funds $300 million in cash.
And so you have that sort of influx of money coming in, and meanwhile, you have the guy negotiating policy. And again, we don't know if there was anything untoward in terms of, you know, “Was Ross doing any quid pro quo or anything like that?” I don't want to make any suggestion of that sort whatsoever. But the problem is, is that you have to wonder. And usually we don't allow people to hold interests in which the public is left wondering.
HERMAN: Last fall, there were the release of millions of financial documents of some of the world's wealthiest people and their offshore holdings. It was called the — the “Paradise Papers.” Um, and in them, there were connections that were shown between Ross and a shipping company that had connections to Putin, um, and that Ross had actually shorted the stock in that firm right before the news came out. What — what's the implication of that?
ALEXANDER: I was shocked when I saw this on the filing.
So, “to take a short position in a company” is a very aggressive move. You're betting that the stock is going to go down. And it's much easier for a stock in a company to go down sharply than it is for it to go up sharply. And so, from a conflict-of-interest standpoint, it’s — it’s a more extreme potential conflict.
So when he took that short position, knowing — we now know — that the negative stories were about to come out, what you have to wonder about is, “Well, did he think in his mind, ‘Hey, these negative stories might have an impact on the stock, and if I short it now I can make some money’?” Now we don't know that for sure. And, in fact, when the stories came out, the stock was about flat initially.
Uh, but then over the next 11 days, it trickled down about 5% from where it was at the time that he took the short position and then he closed the short position. So it does appear that he made a profit on it ultimately.
HERMAN: What’s been the reaction from Ross to all of this recent reporting?
ALEXANDER: Again, not a whole lot. Um, you know, the Commerce Department, uh, Issued a statement saying he did not break the law, that he did not lie. Uh, but at the same time, they have submitted, um, documents showing that he did make false statements. So the difference between lying and making a false statement is whether or not you knew that the thing was false when you said it.
And, uh, that's a critical difference, because lying to federal officials is against the law. Accidentally making false statements is not.
HERMAN: Are you aware of any investigations to try and figure out that difference?
ALEXANDER: [LAUGHS] I’m not aware of any investigations, but I would not be surprised if, uh, people are looking into that.
You know, as we said earlier, this is a guy who is a Commerce Secretary, uh, at a time when some of the most important policies that the United States is taking on are on issues of international trade, and Wilbur Ross is at the forefront of those issues.
We are in a trade war right now with China, the second-largest economy in the world. And we are the largest economy in the world. This is something that not only affects the United States and China, but the global economy, and right at the center of that war is Wilbur Ross, who, simultaneously, uh, had interests in which he was personally invested alongside China. And now his family appears to have interest in which they are personally invested alongside China.
HERMAN: Are there areas where you're concerned?
ALEXANDER: I would say that the biggest area that you have to look at is the fact that Wilbur Ross is now leading an investigation into foreign auto imports, uh, of car parts at a time when his family appears to own an interest in one of the largest foreign manufacturers of car parts in the world. It's stunning how specific both of those two things are.
HERMAN: This is perhaps the wealthiest cabinet that there's ever been. If you look at the — the billionaires and millionaires who are on it, what do you think that we're learning about? What happens when really wealthy people — really rich people — go into government jobs where they're supposed to be serving the public interest?
ALEXANDER: So I want to defend really rich people here for a second. [LAUGHS LIGHTLY] Um, I think that to look at a group of 10 people handpicked by Donald Trump, and who were willing to go into government with Donald Trump, and to extrapolate that out about a greater, uh, comment on rich people serving in public office, I don't think makes a whole lot of sense, because there are a lot of rich people who have a lot of different interests, who have a lot of different philosophies. But certainly, in this case, uh, with Donald Trump as president selecting these people, and in this cabinet, there seems to be a whole lot of ethical issues.
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HERMAN: Dan, thank you very much.
ALEXANDER: Thank you.
MARRITZ: Dan Alexander is a reporter for Forbes Magazine. Charlie Herman is one of the editors of this podcast. Trump, Inc. is produced by Meg Cramer. The associate producer for this podcast extra is Rachel Smith.
The engineers are Matt Boynton and James Coyle. The editors are Charlie Herman and Eric Umansky. Jim Schachter is the Vice President for News at WNYC, and Steve Engelberg is Editor-in-Chief of ProPublica. The original music is by Hannis Brown.
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