Senate Republican criticizes Obama over nominees’ financial holdings

Questions are creeping back into the picture because Mike Froman, a White House adviser since 2009, is scheduled to appear on Thursday before the Senate Finance Committee to discuss his nomination to become the next U.S. Trade Representative.

Froman holds close to $500,000 in Citigroup’s CVCI investment funds in the Cayman Islands, all of which he has disclosed and will have to divest if confirmed to head the trade office. 

The White House says Froman has been up front in his financial reporting since he joined the Obama administration and hasn’t done anything wrong that would preclude him from taking the position.

“Mike Froman has paid every penny of his taxes and reported all of the income, gains and losses from the investment on his tax returns,” said a White House spokesman Bobby Whithorne. 

“Froman has disclosed the investment in annual public financial disclosures in 2009, 2010, 2011, and 2012,” he said. 

Whithorne said he is in “compliance with all ethics rules and regulations governing conflicts of interest” and “played no role in creating, managing or operating the fund.”

He was not required to divest his investment in CVCI to hold is current position but, if confirmed, he will have to sell off the assets. 

The problem for Grassley is that Froman’s fund is registered at Upland House, which Obama called ‘the biggest tax scam in the world’ in 2009.

“He also nominated a Commerce secretary with significant offshore income,” Grassley said. “He railed against fat cats who avoid taxes offshore.”

The administration has targeted accounts held offshore that seek to avoid U.S. taxes, which the White House argues is not the case with Froman’s investments.  

Grassley asked his colleague Sen. John Thune (R-S.D.), ranking member on the Senate Commerce Committee, to press Commerce nominee Penny Pritzker about her offshore investments. 

Pritzker said the accounts were set up when she was very young. Thune said he was relatively satisfied with the response and expected that she would get a committee vote soon. 

Senate lawmakers also questioned Treasury Secretary Jack Lew about his investments — he and Froman both worked at Citigroup. 

For all Citigroup accounts that Froman sold off, the White House said was taxed as ordinary income, not capital gains.

The White House has been trying to close the carried interest tax benefit since 2009, but Congress has failed to act. A change could come with comprehensive tax reform somewhere down the road. 

There has been little bluster surrounding Froman’s nomination. He seems to generally have enough support in the Senate and has the backing of business groups and European trade officials who have endorsed him because of his in-depth knowledge of trade issues. 

Froman is likely to face tougher questions at Thursday’s hearing about the trade agenda and currency manipulation, which is heating up again on Capitol Hill.