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Family of commerce nominee Penny Pritzker ‘bet against America’ with millions in offshore accounts

- The Washington Times - Wednesday, May 22, 2013

During his 2012 campaign for re-election, President Obama and his team accused Mitt Romney of "betting against America" for investing in offshore accounts that shielded the Republican challenger from paying U.S. taxes.

If Mr. Romney "bet against America," so did the family of Penny Pritzker, Mr. Obama's nominee for commerce secretary, whose confirmation hearing will be held Thursday in the Senate Commerce, Science and Transportation Committee.

On financial disclosure forms, Ms. Pritzker revealed that she received $53.6 million in income in 2012 from a trust in the Bahamas. The income is described as being paid for "consulting services."

A spokeswoman for the nominee said Ms. Pritzker paid taxes on the compensation before the April 15 deadline "at ordinary income rates," although she wouldn't specify the rate. The personal fortune of Ms. Pritzker, whose family owns the Hyatt hotel chain, among other commercial and financial interests, and who served as finance chairwoman of Mr. Obama's presidential campaign in 2008, is estimated at more than $1.85 billion.

The offshore issue is sure to bring questions from congressional Republicans, especially on the heels of a Senate hearing into tax avoidance by Apple Inc., whose chief executive defended the company's actions this week by protesting, "We don't stash our money on some Caribbean island."

The Pritzker family has placed some of its money offshore for decades. Some lawmakers accuse Mr. Obama of hypocrisy for slamming Mr. Romney over the tax havens and then nominating two people for his second-term Cabinet who have held such investments. Treasury Secretary Jack Lew also had an account in the Cayman Islands.

"The president should have the same standard for his opponents as he does for his friends and financial backers," said Sen. Chuck Grassley, Iowa Republican.

Campaign issue

Mr. Obama made an issue of offshore tax havens even before his re-election campaign. In 2009, he proposed closing tax loopholes for companies with overseas subsidiaries, declaring, "The way to make American businesses competitive is not to let some citizens and businesses dodge their responsibility, while ordinary Americans pick up the slack."

One of the president's campaign ads in 2012 questioned Mr. Romney's patriotism by noting that he had money in "tax havens like Bermuda ... and the Cayman Islands."

Ms. Pritzker's offshore family trust is legal, and a spokeswoman for the nominee said the trust was set up by her grandfather when Ms. Pritzker was a child.

"She does not control these trusts and has not received and has no legal right to require any distributions from these trusts," said the spokeswoman, Susan Anderson. "The only income Penny has received from these trusts is for the services she performed over the last 10 years to restructure the Pritzker family trusts' holdings, and she has paid taxes on that income."

The statement from Ms. Pritzker's office said the family business went through a "restructuring of holdings" that ended in November, resulting in a "separation of these assets among 11 individual family lines."

"Now that the restructuring is complete, Penny requested that the trustee of her and her immediate family's trusts initiate a legal process which would allow a U.S. trustee to be appointed in order to allow these trusts to become U.S.-based trusts," the statement said. "She has made this request because it would permit all the trusts for the benefit of her and her immediate family to be more effectively managed and efficiently administered. She has no control over this legal process, its timing or outcome."

White House backing

A spokesman for the White House wouldn't address Republicans' accusations of hypocrisy against Mr. Obama, but said Ms. Pritzker is well-qualified for the Commerce Department post.

"Penny is one of the most accomplished and highly respected women in business today," said White House spokesman Bobby Whithorne. "With more than 25 years of experience in the real estate, hospitality, senior living, financial services and other industries, Penny knows what it takes to build, grow, and invest in a business, and will be a strong advocate for policies that help grow the economy and create jobs. She also is an effective manager and successful entrepreneur, founded or co-founded five companies from the ground up, and created thousands of jobs. These are all skills that will be extremely valuable for the Commerce Department and the administration."

The Pritzker business empire may cause the nominee some uncomfortable moments on another front in the confirmation process.

Senators also are likely to question Ms. Pritzker on her role in the failure of Superior Bank, which was co-owned by her family. The Hinsdale, Ill.-based bank was involved in subprime mortgage lending, and its failure in 2001 prompted accusations of mismanagement and fraud. About 1,400 customers lost part of their savings.

Ms. Pritzker was the bank's chairwoman from 1991 to 1994. At the time of its collapse, Superior Bank was one of the largest bank failures in the country in nearly a decade.

The U.S. Chamber of Commerce and other business groups have endorsed her nomination. Some labor groups also are protesting the nomination, saying the Hyatt chain is anti-union.

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