U.S. Commerce Secretary Wilbur Ross said in a statement Thursday evening that he would be selling all of his equity holdings and buying Treasury securities with the proceeds — after receiving a letter from the U.S. Office of Government Ethics saying Ross could "run afoul of the primary criminal conflict of interest law."
"As a high level public official, you have an affirmative duty to protect the public trust and serve as a model of ethical behavior. This duty includes exercising the care necessary to fully and timely comply with your ethics commitments, and be accurate in statements to OGE regarding the same," David J. Apol, the office's acting director and general counsel, said in the Thursday letter to Ross.
The letter was sent after the financial holdings of Ross came under scrutiny in recent months. Apol said financial disclosure forms and compliance documents that the commerce secretary submitted "contained various omissions and inaccurate statements."
Last November, Ross told the office in writing that he had divested every holding he had promised to do. But another transaction report was submitted one month later detailing two sales of Invesco stock. Invesco is Ross' former employer.
The November filing signed by Ross had indicated that intentionally false or misleading statement in the form is a violation of law. That's a warning that "should have triggered a more serious focus by Ross on the accuracy of his representations," said Walter Shaub, an attorney specializing in government ethics and the former head of the OGE.
Media reports in recent months revealed that Ross held, or had held, stakes in companies whose fortunes could be affected by U.S. trade policy decisions, with which Ross is intimately involved.
Among his controversial holdings were stakes in companies co-owned by China's government, a shipping firm linked to Russians that he short sold days before his ties to it were exposed. He also held more than $10 million in stock of his former employer, Invesco, despite earlier swearing he had divested those holdings.
Ross was also revealed to have taken short positions in stocks including Air Lease and Ocwen Financial Corporation, which he said were "technical ways of disposing the stocks." But such claims had been criticized.
Richard Painter, who served as chief White House ethics lawyer under President George W. Bush, told CNBC earlier this month: “I never heard of someone using short positions to divest.”
“I helped in hundreds of transactions for employees entering government,” noted Painter, who is now a Democratic candidate for senator in Minnesota. “This is not an acceptable situation.”
Sen. Ron Wyden, D-Ore., said controversy over Ross’s financial dealings could weaken efforts to improve America's trade position.
A legendary investor who made his fortune in distressed assets, Ross came into office in early 2017 with a long, complicated list of financial holdings.
According to a financial disclosure report filed last year, Ross and his wife, Hilary Geary, held combined disclosed portfolios consisting of more than 483 assets, income and retirement accounts. The value of those assets was estimated to be between around $51,029,060 to $523,981,070.
After President Donald Trump nominated him to be commerce secretary, Ross announced that he planned divestitures of at least 80 assets and investment funds.
Ross has said that his short sales were done to accomplish that goal. He explained that in each case, he learned after he began divesting in companies that he had been awarded additional shares in the firms as compensation for serving as a director.
“When I found out I had these investments my first reaction was to short them since they were not in my physical possession, and I had to wait until I received them from the transfer agent to dispose of the shares,” Ross said.
“My intent was to be economically neutral to ensure no perceived conflict,” Ross said.
Here's the statement from the Trump administration official:
Statement from U.S. Secretary of Commerce Wilbur Ross
Today I received the enclosed letter from the Office of Government Ethics (OGE). I agree with OGE that “the success of our Government depends on maintaining the trust of the people we serve.” I take my ethics obligations very seriously and am committed to serving the American people.
I have made inadvertent errors in completing the divestitures required by my ethics agreement. My investments were complex and included hundreds of items. I self-reported each error, and worked diligently with my department’s ethics officials to make sure I avoided any conflicts of interest.
My ethics agreement allowed me to retain some private equity holdings. To maintain the public trust, I have directed that all of my equity holdings be sold and the proceeds placed in U.S. Treasury securities.
I look forward to continuing to serve the American people.
— CNBC's Dan Mangan and Lori Ann LaRocco contributed reporting