- The Washington Times - Tuesday, April 14, 2009

Shortly before joining the Obama administration, Deputy Secretary of State Jacob J. Lew reported in a little-noticed government filing that he intended to collect a bonus for his 2008 work at Citigroup even though the Wall Street firm had just received a massive federal bailout.

Now administration officials - who expressed outrage when other bailed-out firms such as American International Group Inc. (AIG) awarded bonuses to executives - are steadfastly refusing to say whether Mr. Lew accepted the money in January or how much of his nearly $1.1 million compensation from Citigroup last year was paid in the form of bonuses.

“Like so many, Deputy Secretary Lew returned to government to serve the public. A review of his public financial disclosure report and his federal salary speaks to that commitment,” State Department spokesman Robert A. Wood said, refusing to answer questions from The Washington Times about the size or date of any bonus.

If Mr. Lew accepted bonus payments from Citigroup after the financial services firm was bailed out in November, he might be subject to new rules to force bailed-out Wall Street executives to give up such compensation. The rules, passed in the House and pending in the Senate, impose a 90 percent tax on any bonus paid on or after Jan. 1 to an employee making more than $250,000 per year from a bailed-out firm.

“He's a major presidential appointee, and if he got a bonus that was received during the bailout, then the same standard that's being applied to AIG should be applied to him,” said Craig Holman, legislative representative at the nonpartisan watchdog group Public Citizen.

Preparing for his Senate confirmation, Mr. Lew reported on an ethics disclosure report filed Jan. 12 that he had received almost $1.1 million in salary and “discretionary cash compensation” in 2008 as chief operating officer at Citi Alternative Investments (CAI), a unit of Citigroup.

On the same Office of Government Ethics form, he also noted that he was eligible for “discretionary compensation for 2008 which I will receive prior to assuming the duties” of deputy secretary of state. The disclosure doesn't say when Mr. Lew got paid and how much.

State officials also repeatedly refused to provide specifics when pressed by a reporter and senior editor of The Times.

“As a Senate-confirmed appointee, Deputy Secretary Lew was required to provide significant personal and financial information to Congress as well as file a public financial disclosure report,” Mr. Wood said, declining to answer the newspaper's questions. Citigroup declined to comment as well.

The administration's silence isn't lost on observers who have watched the debate over bonuses the past few weeks.

“It just demonstrates the fundamental hypocrisy of this outrage over bonuses in Washington,” said Andrew M. Grossman, senior legal policy analyst at the Heritage Foundation, who has criticized the House plan to tax bonuses by 90 percent as potentially unconstitutional. “They're not sure what they're outraged at.”

Mr. Grossman said that if Mr. Lew received a bonus payment after Jan. 1, he could be forced to give up much of the money. However, he said, the House's tax on bonuses remains far from certain.

“It raises very serious constitutional questions,” he said.

Mr. Lew's annual salary at the State Department is $177,000. The department describes his new role as “chief operating officer” and “alter ego” to Secretary of State Hillary Rodham Clinton.

His official biographical information with the department states that he continued working until January at Citi Alternative Investments, which manages hedge funds, real estate and other investments. Previously, he was chief operating officer of Citi Global Wealth Management, another division of Citigroup.

CAI posted more than $300 million in losses in the first quarter of 2008 on hedge fund and other assets, according to a company press release.

Citigroup spent $800 million to integrate one hedge fund, which was founded by Citigroup founder Vikram Pandit, into CAI, but in 2008 “CAI faltered, and Old Lane [an investment company] was shuttered,” according to a report by HedgeFund.net.

According to Citigroup, as of Sept. 30, CAI had about 850 employees and nearly $50 billion under management.

Mr. Lew's Citigroup work arose during only a few instances during his Jan. 28 Senate confirmation hearing. Democratic and Republican senators pressed for no details about Mr. Lew's compensation.

Senate Foreign Relations Committee spokesman Frederick Jones said Mr. Lew's finances had been vetted by State Department attorneys and that senators were focused on how he would approach the job.

Sen. Johnny Isakson, Georgia Republican, did question Mr. Lew about what sorts of alternative investments he handled at Citigroup.

“They ranged from private equity investments to real estate investments and various forms of fixed-income investments,” Mr. Lew answered.

Mr. Lew added that he wouldn't participate in any matters “that have particular impact on Citigroup.”

He was confirmed by the Senate on Jan. 28 and was sworn into office by Mrs. Clinton the next day. He has strong ties to former President Bill Clinton, for whom he served as director of the Office of Management and Budget. He was also a member of the Clinton administration's National Security Council. President Obama also named Mr. Lew to his national security team.

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