Pritzker to be pressed on bank, offshore cash
- Photos (1)
Chicago billionaire Penny Pritzker, whose fundraising prowess fueled President Barack Obama's ascent, will confront Republicans' questions about a bank she led and offshore trusts that benefit her during a hearing on her nomination to be U.S. Commerce secretary.
Pritzker, 54, would bring to the cabinet decades of business experience, including serving as director of Hyatt Hotels Corp., started by her family. At the same time, her management of an Illinois bank that collapsed and investments held in offshore accounts are yielding fodder for critics.
Senator John Thune of South Dakota, the top Republican on the Senate Commerce, Science and Transportation Committee that will consider her nomination today, said how she responds to questions may decide whether she gets the job.
"We're going to give her a fair and thorough process," Thune said in an interview. "It's hard to predict the outcome at this point. My guess is that if she performs well, she'll have a lot of support from Democrats and some Republicans."
Pritzker, who has developed real estate and led a credit reporting agency, would be among the wealthiest cabinet secretaries in U.S. history. In a disclosure form filed last week, she reported assets in the range of $400 million to $2.2 billion, excluding the value of more than $50 million in Hyatt Hotels stock. The Bloomberg Billionaires Index puts her net worth at more than $1.5 billion.
Her wealth and connections have helped Obama. Pritzker led record fundraising for his 2008 campaign as finance chairman. She also personally collected $200,000 to $500,000 in bundled donations that year, then at least $500,000 for his 2012 re- election campaign, according to the Center for Responsive Politics, a Washington-based group that tracks such spending. She also gave $250,000 to the 2013 inauguration, the group said.
Democrats control the Senate, 55-45, so she will need Republican support to muster the 60 votes needed to end a filibuster, if any senator tries to block confirmation that way.
Such hurdles are rare for cabinet nominees. Defense Secretary Chuck Hagel was subjected to a filibuster in February, only the third time a top cabinet pick has run into the tactic. Republicans are pledging to obstruct the nominations for Labor secretary and head of the Environmental Protection Agency.
Pritzker has won some Republican support. Senator Mark Kirk, an Illinois Republican, said this week he'll support the heiress, citing her extensive business experience. Senator Roy Blunt of Missouri, a top Republican on the Commerce panel, said he's leaning toward supporting her as well.
Two Republicans on the committee -- Ron Johnson of Wisconsin and Dan Coats of Indiana -- said yesterday that Pritzker made a positive impression in recent meetings, although they still want to hear from her on matters such as the collapse of suburban Chicago's Superior Bank, a Hinsdale-based pioneer in securitizing subprime mortgages that failed in 2001.
Pritzker was chairman until 1994. Federal regulators took over the bank and the co-owners, including the Pritzker family, agreed to pay the government $460 million, according to the Federal Deposit Insurance Corp. and the Office of Thrift Supervision. It was the biggest U.S. bank failure in a decade.
"She's a very impressive person," Coats said. "She is very transparent and directly addresses the issues. I think there will be questions raised about the Pritzker enterprise and Superior Bank."
Republicans say they will ask about her extensive investments held in offshore trusts, after Obama charged Republican presidential nominee Mitt Romney in 2012 with avoiding taxes by stashing money overseas.
In her disclosure filing last week, Pritzker said she received $54 million in income last year from an offshore trust in the Bahamas, administered by CIBC Trust Co. The income was listed as payment for consulting services.
Pritzker said that if confirmed she would divest 221 separate financial holdings and resign from 158 entities -- including her seat on the Hyatt board. Two days ago, she filed an amended report to correct an understatement of income from consulting on restructuring her family's domestic trusts. The income was at least $80 million more than listed initially, the latest filing showed.
The nominee probably will tell the Senate panel that she's seeking to exit offshore holdings -- investments that her spokeswoman, Susan Anderson, said are trusts that were set up when she was young and benefit her and other family members. She doesn't control the trusts, Anderson said.
After a restructuring of family business interests that was completed by November 2012, Pritzker requested that a U.S. trustee be named to relocate the trusts to the U.S. for her and her immediate family, Anderson said last week.
"She has no control over this legal process, its timing or outcome," Anderson said by email.
The Superior Bank collapse may be a tougher issue.
Pritzker's family once owned half of the bank and its failure tarnished their reputation as investors. None of the holdings she listed in disclosure forms showed an association with the bank.
The nominee's family, along with Alvin Dworman, a New York real estate developer, created the lender in 1988 after acquiring a distressed savings and loan. Pritzker led it as chairman from 1991 to 1994 and later was a director of a holding company.
While she was there, the bank used a "high-risk" strategy of rapid growth in subprime mortgages and car loans for securitization, the Thrift office said in a July 2001 statement. It also had poor management and lending practices, and engaged in improper record-keeping and accounting, the regulator said.
Subprime loans typically go to people with the weakest credit, with higher interest rates to cover the greater risk of default. Superior's collapse foreshadowed the financial crisis that came several years later when the subprime market imploded.
A February 2002 report by the General Accounting Office, as the investigative arm of Congress was then known, blamed bank managers for the collapse.
"Primary responsibility for the failure of Superior Bank resides with its owners and managers," the GAO said. "Its strategy resulted in a high concentration of extremely risky assets. This high concentration of risky assets and the improper valuation of these assets ultimately led to Superior's failure."
- Share Facebook Twitter
Article sent to (required)E-mail
Article sent from (required)E-mail Name
Subject Line (article title)
Message (optional)Success - Article sent Click to close
Interested in reusing this article?
Custom reprints are a powerful and strategic way to share your article with customers, employees and prospects.
The YGS Group provides digital and printed reprint services for Daily Herald. Complete the form to the right and a reprint consultant will contact you to discuss how you can reuse this article.Need more information about reprints? Visit our Reprints Section for more details.
Contact information ( * required )Name * Company Telephone * E-mail *
Article InformationTitle URL
Message (optional)Success - Reprint request sent Click to close