Commerce Secretary Wilbur Ross last week disclosed a tardy sale of stock he had pledged to divest, saying he had overlooked the shares because they were held in a separate account.
Ross was a director of Air Lease from 2010 through 2013, and he obtained the shares as part of a stock plan for directors of the company. But the shares were under the name Wilbur L. Ross, whereas the others were listed without his middle initial, Ross said. As a result, he said he had overlooked them until he received a check for less than $200 in dividend payments that had gone unclaimed.
“I had no record of receiving these payments and had no prior record of these shares,” Ross said in a statement to the Office of Government Ethics.
Few people could say they weren’t aware of owning stock worth that much. On June 11, the day Ross said he sold his shares, they would have been worth about $73,166 at the closing price.
But Ross joined the Cabinet as one of its richest members, worth about $800 million. He said he would divest himself of his vast holdings, and on Nov. 1, 2017, he signed a letter to the Office of Government Ethics saying he had done so. But he has recently admitted to belatedly selling shares of a shipping company called Navigator, a bank called Sun Bancorp and his investment firm Invesco. The Invesco stake was worth at least $10 million.
Ross also used short sales — transactions used by sophisticated investors who want to bet on a stock going down. Ross said he did so to hasten his divestment in five companies. CNBC reported that he had shorted Air Lease, Ocwen and Greenbrier in May 2017 and Navigator and Sun Bancorp on Oct. 31.
A Commerce Department spokesman said that to sell his shares Ross had to wait for them to be transfered from a trust account to the Secretary’s own brokerage account. By short selling, “he borrowed a number of shares equal to those he already owned in order to make delivery. This approach allowed him to divest as quickly as possible.” The spokesman said that because Ross “was simultaneously short and long, the Secretary had no economic interest in the value of the shares subsequent to the date of the short.”
Ethics experts say, however, that short selling would mean that Ross would continue to have an interest in the stock price. Depending on timing, leverage and basis prices, his short and long interests might not match.
“Shorts don’t really remove the conflicts of interest,” said Richard Painter, a professor specializing in legal ethics at the University of Minnesota law school. A former Republican, Painter is seeking the candidacy for Senate in Minnesota.
“We have seldom seen a cabinet official whose holdings create actual or potential conflicts engage in this kind of trading, including short selling, over and over again,” Norm Eisen, chair of Citizens for Responsibility and Ethics in Washington, said in an email. “Holding the stock creates the conflict, and going short (or long) merely affects the gain or loss. It does not obviate the ethics problem, and may worsen it depending on the facts.”
Eisen added that “this and the other trades need to be reviewed, singly and as a group, by an appropriate and independent federal authority to assure that the insider trading, ethics and other applicable laws were met.”
The Commerce Department spokesman insisted that “If you are long and short the same number of shares there is no circumstance under which there could be a mismatch.”
On June 27, eight Democratic House members asked the Commerce inspector general to investigate the sales, and two Democratic senators and a House member asked the Securities and Exchange Commission to investigate.
Forbes and CNBC have earlier reported on the Ross disclosure form.
