Forbes recently reported that before taking office, Secretary of Commerce Wilbur Ross moved more than $2 billion into funds to benefit his family members and others so that it would not appear on his Office of Government Ethics (OGE) Form 278 public financial disclosure report. However, what Secretary Ross did report to OGE, along with his limited efforts to resolve potential conflicts, may be equally troubling.
CREW’s analysis of Secretary Ross’s OGE filings reveals several concerning issues: First, Secretary Ross holds an interest in a company that does business in China and is part-owned by a Chinese government enterprise. Yet, as Secretary of Commerce, Ross met with Chinese officials with a shared financial interest in this firm. Second, Secretary Ross also is invested in companies involved in the exploration and shipping of natural gas, but negotiated a trade deal earlier this year that would increase U.S. natural gas exports to China. Third, these potential conflicts were made possible by the fact that ethics officials allowed Secretary Ross to keep a number of substantial assets, including investments in shipping and energy, and granted him several unusual extensions to divest from potentially problematic holdings that he committed to sell as part of his ethics agreement.
In his original ethics agreement filed with OGE, Secretary Ross indicated he would hold onto millions of dollars of shipping assets, which is highly unusual for an individual taking a Cabinet position that oversees U.S. policy on global trade. The sum of his total retained holdings is estimated to be worth between $8 million and $41 million.
Most notably, then-nominee Ross reported that he would keep DSS Holdings LP, which is invested in Diamond S Shipping, an international shipping line. Diamond S Shipping is engaged in the “seaborne transportation of refined petroleum and other products in the international shipping markets.” The company owns a fleet of more than 40 transoceanic tanker ships that operate throughout Asia and frequently dock in Chinese ports. Secretary Ross reported on his disclosure that the value of his stake in Diamond S could be worth between $1 million and $5 million, though he also reported that the value is “not readily ascertainable.” Secretary Ross’s former company W.L. Ross & Co. is also a major shareholder in Diamond S, as is China Investment Corporation (CIC), a state-owned government entity that invests in a wide range of overseas business assets.
In mid-July, Secretary Ross hosted a meeting of top Chinese government officials at the headquarters of the Department of Commerce. Discussion topics reportedly included “customs hurdles facing Chinese companies that sell goods to the United States and the exportation of American natural gas products to China.” CNBC reported that Tu Guangshao, president of the China Investment Corporation (CIC), also participated in the meeting.
By taking this meeting, Secretary Ross may have come close to violating ethics rules. Although it is unclear precisely how Diamond S might benefit from the discussion, at a minimum, the shared financial interests of the participants present the appearance of a conflict of interest and raise questions about Ross’s impartiality when meeting with foreign officials that also happen to be co-investors.
Ross also pledged to divest from many other potentially problematic holdings in his ethics agreement, including his interests in natural gas exploration. However, a review of his periodic transaction reports suggests that Ross negotiated a plan to increase natural gas exports from the U.S. to China before he had divested from holdings that would benefit from the deal. In particular, underlying assets of WLR Conduit MM appear to be involved in both shipping and liquified natural gas (LNG) exploration. Through WLR Conduit MM, Secretary Ross reported ownership of a holding company called WLR/TRF Shipping S.a.r.l. which owns 25 subsidiaries, that in turn own transoceanic tanker ships. Through the same entity, he also reported owning interest in a number of companies such as WPX Energy, QEP Resources and Laredo Petroleum that are involved in natural gas exploration in the U.S. Secretary Ross reported the total value of his WLR Conduit MM holding to be worth between $500,000 and $1 million.
Secretary Ross may also be invested in Navigator Holdings Ltd. which operates the world’s largest fleet of “handysize” (meaning mid-size) liquefied gas carriers. He sold $15,000-$50,000 of Navigator stock in May, but it is unclear if he still owns additional shares in the company. According to a March SEC filing, as of the end of 2016, WLR Group owned millions of shares of Navigator through a number of entities Secretary Ross has yet to divest from including WLR Recovery Fund IV DSS AIV LP. Of greater concern is that Secretary Ross appears to have been permitted to permanently retain his interest in transoceanic tankers through his holdings in Starboard WLR Associates L.P. and WLR Recovery Associates V DSS AIV, L.P.
Following President Trump’s April meeting at Mar-a-Lago with China’s President Xi Jinping, Secretary Ross helped negotiate a trade deal that was announced in May as part of the U.S.-China Comprehensive Economic Dialogue. The deal included a plan to increase natural gas exports from the U.S. to China, which could impact Secretary Ross’s natural gas exploration and shipping interests. According to a review of his transaction reports, at the time of the meeting, Secretary Ross was still invested in companies in those industries. Indeed, if Secretary Ross had sold his stakes in these companies prior to the meetings, he would have had at most 45 days to report the transactions to the OGE. However, those deadlines have long since passed and no transactions were ever reported for those assets, suggesting that he was still invested in them at the time of the meeting. Similarly, if Secretary Ross obtained an ethics waiver in order to participate in either of his meetings with Chinese officials, it has not been disclosed to the public.
A major contributor to both of these significant problems may be the lengthy extensions granted to Secretary Ross, which have left him vulnerable to conflicts of interest. Secretary Ross signed his ethics agreement, pledging to divest from potentially problematic holdings, on January 15, 2017. Yet, more than nine months later, there is still no clear evidence that he has completed this process. Ethics officials from OGE and the Department of Commerce granted Secretary Ross several extensions beyond the standard 90-day period to divest from problematic holdings, allowing him to profit from them while simultaneously serving in a government office. OGE and the Department of Commerce’s designated agency ethics official initially allowed him 180 days to divest from some investments — an unusually long period given the expansive nature of his holdings. When he was unable to comply with that deadline, Commerce’s designated agency ethics official granted him an additional 60 days to shed his remaining investments.
On June 5, OGE issued certificates of divestiture (CDs) to Secretary Ross for dozens of assets, suggesting his intent to divest from numerous entities. CDs allow filers to defer the capital gains tax on assets they sell to avoid a possible conflict of interest, and they must be filed before the filer completes the transaction. However, until he files transaction reports for those specific assets, it is unclear if he still owns them. As of November 1, there were no transaction reports showing the full divestment of at least 38 of the 80 assets from which Secretary Ross promised to divest in his ethics agreement. It is possible that he sold these assets within the time he was given to do so, but that the sales have not yet been made public.
Overall, Secretary Ross’s public financial disclosure and subsequent divestment process raise more questions than they answer. By keeping some potentially problematic holdings and receiving numerous extensions to divest from others, Ross has created a situation in which he may be directly profiting from his government service. October 25 was the deadline to sell his remaining controversial holdings, and he has until December 9 at the latest to report the transactions. Will he do the right thing? Or will he receive yet another extension and continue to benefit personally from his official position?