Menendez Leads Colleagues in Demanding Mnuchin Recuse from SEARS Bankruptcy

Menendez Leads Colleagues in Demanding Mnuchin Recuse from SEARS Bankruptcy

  
WASHINGTON, D.C. — Today, U.S. Senator Bob Menendez (D-N.J), a senior member of the Senate Finance Committee was joined by Ranking Member Ron Wyden (D-Ore.) and Senate Finance Committee member Sherrod Brown (D-Ohio) in sending a letter to U.S. Treasury Secretary Steven Mnuchin demanding his formal, written recusal from any matters before the Pension Benefit Guaranty Corporation (PBGC) related to Sears Holding Company. On Monday, Sears filed for chapter 11 bankruptcy protection following the closure of hundreds of stores and layoffs of thousands of employees in the last several years. 

Secretary Mnuchin was previously a Director at Sears and owned valuable interests in Sears stock. He also held interests in Seritage—a company that owns Sears’ property—and ESL Partners, a hedge fund that has a controlling stake in Sears. Furthermore, his college roommate and close friend, Eddie Lampert, is the former Chief Executive Officer and current Chairman of the Board of Sears. These ties create an unavoidable and clear conflict of interest between Secretary Mnuchin and Sears. The Senators’ letter follows up on questions that Sen. Menendez pressed Secretary Mnuchin during this nomination hearing.

“During your confirmation hearing in January 2017, you committed to recusing yourself from any proceedings before the Pension Benefit Guaranty Corporation (PBGC) regarding Sears as it relates to your position as a member of the Board of the PBGC,” wrote the Senators. “Given your statement before the Finance Committee, we are concerned that anything short of full recusal will present a significant conflict of interest and risk bias in any PBGC decisions and actions taken pursuant to Sears defined benefit plans.”

The Senators continued. “As Secretary of the Treasury, you are a member of the PBGC’s Board of Directors. This places you in a position of influence over decision-making at the PBGC related to the possible termination of Sears’ defined benefit pension plans during any bankruptcy proceedings.”

The Senators also asked for financial information on Secretary Mnuchin’s holdings from last year. Secretary Mnuchin’s 2017 financial disclosure—which was submitted earlier this year to the Office of Government Ethics (OGE)—has not yet been certified by OGE.

A copy of the letter can be found here and below.

Steven Mnuchin
Secretary of the Treasury
1500 Pennsylvania Avenue, NW
Room 3330
Washington, DC 20220

Secretary Mnuchin,

We are writing in regard to the recent bankruptcy filing by Sears Holdings Corporation (Sears) and the importance of addressing any potential conflicts of interest.   During your confirmation hearing in January 2017, you committed to recusing yourself from any proceedings before the Pension Benefit Guaranty Corporation (PBGC) regarding Sears as it relates to your position as a member of the Board of the PBGC:

“And then as it relates to your [Senator Menendez] question, obviously I will recuse myself in any way as it relates to being on the board, if indeed there ever were an issue with Sears.  Whether I had an investment in ESL or I did not have an investment in ESL, I would be concerned about any appearance of conflict.  So I would recuse myself.”  

Given your statement before the Finance Committee, we are concerned that anything short of full recusal will present a significant conflict of interest and risk bias in any PBGC decisions and actions taken pursuant to the Sears defined benefit plans. 

As you are aware, the PBGC is an independent federal agency with the mission of protecting the pensions of participants and beneficiaries covered by private sector defined benefit (DB) plans.  In the event of a reorganization or liquidation of a plan sponsor, who either voluntarily or involuntarily terminates its pension plan and participates in the PBGC’s pension insurance program, the PBGC will step in and assume, up to the guarantee limits, the financial obligations of the pension plan.  At the time of your confirmation hearing, you held interests in Sears, Seritage and ESL Partners, all of which are deeply connected to Sears either directly or indirectly through Sears’ real property or intellectual property.   As Secretary of the Treasury, you are a member of the PBGC’s Board of Directors.  This places you in a position of influence over decision-making at the PBGC related to the possible termination of Sears’ defined benefit pension plans during any bankruptcy proceedings. 

Furthermore, the former Chief Executive Officer and current Chairman of the Board of Sears, Edward Lampert, is your former college roommate and longtime friend.  Your relationship with Mr. Lampert is so strong that he attended your nomination hearing in January 2016 and sat in the row reserved for family and friends of the nominee.  With this in mind, we believe that, even absent a clear financial relationship related to Sears, it is imperative that you formally and in writing recuse yourself from any and all activity relating to the PBGC and the bankruptcy of Sears, including any discussions related to a pension termination agreement with the PBGC outside of formal bankruptcy proceedings.

(1)        Will you commit in writing to fully recusing yourself from any matters before the PBGC related to Sears?

In addition, it appears your annual Financial Disclosure Form (OGE 278e) for calendar year 2017, which you submitted to OGE earlier this year, has not yet been certified by OGE and not made publicly available on OGE’s website.  In light of this, we have the following questions:

(2)        In your initial financial disclosure, which you signed on December 16, 2016, did you have any other interests, other than in Sears, Seritage, ESL Partners or an “Excepted Investment Fund” as defined by the Office of Government Ethics (OGE), which had an interest in Sears? 

(3)        In subsequent financial disclosures filed in the Spring of 2017, you reported the divestment of interests in Sears, Seritage and ESL Partners.  Can you confirm that you are now fully divested of any and all interest in Sears, Seritage and ESL Partners? 

(4)        Can you further confirm that you have no interests, outside of an “Excepted Investment Fund” as defined by the OGE, which holds or maintains an interest in Sears or any of its related real property or intellectual property?  

Thank you for your prompt attention to this request.

Sincerely,

 

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