Secretary of Commerce Wilbur Ross
Secretary of Commerce Wilbur Ross entered government in early 2017 with a conflict-ridden investment portfolio, and by the summer of 2018, a chorus of lawmakers were calling for investigations. Under pressure, Ross promised to sell off all his equity holdings, a move that proved to be costly. He ultimately dealt one of his most valuable assets, a roughly $25 million interest in a shipping fund, for less than half of what it was worth, according to documentation reviewed by Forbes. That deal alone wiped about $15 million off Ross’ personal fortune, enough to erase any gains he had reaped from his ethical misadventures.
The commerce secretary did not respond to multiple requests for comment before publication, but he did issue a statement after the story came out: "Forbes’ reporting is rife with numerous factual inaccuracies and mischaracterizations, not to mention an apparently willful misunderstanding of rules, regulations and agreements. I will not dignify these claims with any further comment."
It seems clear that Ross did not set out to lose money on the Trump presidency. As soon as Trump won the election, the value of banks shot up on hopes of deregulation. One of Ross’ funds, WLR Recovery Fund IV, moved to cash out its stakes in two financial firms, Virgin Money and Cascade Bancorp. WL Ross “used this tailwind as an opportunity,” Ross’ colleagues explained in a confidential letter to investors, expressing no discomfort that their boss was evidently betting on the policies of the Trump administration around the same time he was tapped to join it.
"When I chose to accept President Trump’s offer to join his administration," Ross added in a second statement, "I knowingly made economic sacrifices, both in terms of my existing portfolio of investments and in terms of future income generating opportunities so that I could give back to the country through public service. Any characterizations to the contrary are just plain wrong."
Once Ross was in office, his portfolio proved to be a mix of winners and losers. About the only thing that was consistent was the ethical headaches it created. He scheduled a March 22, 2017 meeting with the CEO of Chevron to talk business, even though his wife had a $400,000 stake in the oil giant, according to an analysis of federal filings. By hanging onto the asset, she helped put Ross at risk of violating a criminal conflicts of interest law, but it did not do the couple any good financially. By the time Ross’ wife sold the interest two months later, Chevron’s stock was down 3%.
Eight days after the Chevron sit-down, Ross’ calendar listed a meeting with the CEO of Boeing, even though his wife owned a stake in the business worth more than $2 million. Boeing shares ticked up 2.5% by the time she sold her stock about a month later. There is no evidence that Ross’ official actions contributed to the rise in share value, but the delayed sale certainly benefitted him.
Ross got in the habit of delaying his divestitures, seemingly paying little attention to potential conflicts of interest. For most of his first year in office, he held onto interests in his private equity firm’s flagship funds, WLR Recovery Fund III, IV and V.
Fund III had sold off most of its holdings before Ross arrived in Washington, but it still had an interest in a Luxembourg-based auto parts company named International Automotive Components Group. That created an ethical mess when Ross met with an industry group whose members apparently included International Automotive Components Group on April 24, 2017. Yet the value of the auto parts business dropped roughly 35% between the end of the first and last quarters of 2017, according to documents obtained by Forbes.
The value of Fund IV, meanwhile, was dragged down by shipping investments, which presented their own issues. The largest investors in one of the companies, Diamond S Shipping, included both Ross’ former private equity fund and the government of China. Another firm, Navigator Holdings, counted a company partially owned by cronies of Vladimir Putin among its biggest customers. Still, Ross held onto his interest in the fund for his first eight months in office. When he finally sold, Navigator shares had barely budged, and the value of Diamond S had dropped roughly 15%, according to internal documents.
Fund V fared slightly better, thanks to strong performances from a Texas-based concrete business and another shipping company, Nautical Bulk Holdings. But its returns still could not keep up with the S&P 500.
By October 2017, Ross was out of time to divest. In his ethics agreement, he said he would get rid of the funds in the first 180 days after his confirmation—or if not, during a 60-day extension period. So on October 25, exactly 240 days after his confirmation, Ross sold part of his interests to funds managed by Goldman Sachs. Given that he waited until the last possible day to legally divest the assets, it seems certain that he ended up selling at a discount.
The very next day, on October 26, 2017, a reporter for the New York Times contacted Ross with a list of questions about his ties to Navigator, the Putin-linked company. Before the story was published, Ross took out a short position against Navigator—essentially betting that the company’s stock would go down. When the story finally came out, on November 5, 2017, the stock did not plummet initially, but it did creep down 4% by the time Ross closed the short position 11 days later, apparently bolstering his fortune by $3,000 to $10,000.
On November 1, 2017, the day after Ross shorted Navigator, he signed a sworn statement that he had divested everything he previously told federal ethics officials he would. But that was not true. In fact, Ross still owned more than $10 million worth of stock in Invesco, the parent company of his former private equity firm. The next month, he sold those shares, pocketing at least $1.2 million more than he would have if he sold when he first promised to.
This June, Ross admitted that he had also failed to sell an interest in a company named Air Lease. In the 13 months after Ross had promised to sell the stock, it climbed 20%, meaning he cashed out with $12,000 more than he otherwise would have.
Also in June, Forbes revealed that Ross had submitted a false statement to federal ethics officials, shorted Navigator and served as a business partner to the government of China. Ross got a tongue-lashing on Capitol Hill. Three lawmakers asked the SEC to open an insider trading investigation. And the top ethics official in America accused Ross of jeopardizing public trust in government.
While all of that was happening, Forbes was putting the finishing touches on another expose, which would detail Ross’ meetings with dozens of companies tied to his personal fortune, including Boeing and Chevron. Ross knew it was coming, having been contacted multiple times about the story. Late at night on July 12, the day before the new story came out, Ross made a dramatic announcement. “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.”
Keeping that promise proved to be harder than making it. One month later, in mid-August, Ross told federal officials that he was still working to sell off some of his interests. The most valuable one was an entity named Starboard WLR Associates L.P., which held Ross’ roughly $25 million interest in a shipping fund called the Transportation Recovery Fund, according to documentation reviewed by Forbes.
Caught in a self-imposed fire sale, the commerce secretary ended up selling it this fall to a private equity shop named Siguler Guff, according to the documentation. The final price? Less than $10 million.
