U.S. Treasury Secretary-designate Steve Mnuchin on Thursday told senators that he had founded – and was a director of – a Cayman Islands hedge fund, but avoided answering if he would close the “tax haven.”

Michigan Democratic Senator Debbie Stabenow confronted Mr. Mnuchin about his failure to disclose his Cayman-registered fund, Dune Capital Management, on forms required for the high-powered government position in the new Donald Trump administration.

“You failed to include your position as a director of [a] Cayman Islands Corporation, as well as [an official] in seven additional shell corporations and holding companies as well as $100 million in real estate,” she said.

“[A]s Treasury Secretary … would you support closing tax loopholes in the tax code that … extremely wealthy people … – such as yourself – have used to avoid paying taxes?” Ms. Stabenow asked.

“I would support changing the tax laws to make them simpler and more effective, yes,” the former Goldman Sachs partner answered.

“I did not use a Cayman Island entity to avoid paying taxes for myself,” he said.

“So you helped others avoid paying?” Ms. Stabenow asked.

Mr. Mnuchin, employed at the Wall Street firm for 17 years, acknowledged that he had helped others with tax issues, but insisted it was perfectly legal.

The New York Times reported that “Republicans came to Mr. Mnuchin’s defense, suggesting that none of his omissions were willful …. ”

Mr. Mnuchin founded Dune Capital International Ltd. in December 2004, registering it at Queensgate House on South Church Street in George Town.

In its listing, the company says it “provides investment services [and] offers day to day operations and control investment activities of various companies [sic].”

“Dune Capital Management LP is a privately owned hedge-fund sponsor,” according to a Bloomberg summary, which describes Mr. Mnuchin as “co-founder, co-chief executive officer and chairman.”

“The firm also manages a real estate opportunity fund for its clients. It primarily invests in the public equity markets of the United States and Western Europe. The firm typically invests in the entertainment industry.”

At least two other senators joined Senator Stabenow’s attacks on the secretary-designate, citing the Cayman Islands connection. Chuck Schumer of New York, the Senate minority leader, said the nominee’s “failure to disclose his Cayman Islands holdings just reeks of the swamp that the president-elect promised to drain on the campaign trail.

“Never before has the Senate considered such an ethically challenged slate of nominees for key Cabinet positions,” he said.

Oregon Senator Ron Wyden criticized Mr. Mnuchin for “setting up outposts in Anguilla and the Cayman Islands, an action that can be explained only by the islands’ zero percent tax rate.

“In Mr. Mnuchin’s case, millions of dollars in profits from Hollywood exports like the movie ‘Avatar’ were funneled to an offshore web of entities and investors,” Mr. Wyden said.

Mr. Mnuchin said he had always paid personal income taxes, but, according to news reports, declined to tell the Senate panel why he operated offshore companies. He said tax advantages were only one possibility, but did not say if that had motivated his creation of the companies.

“Didn’t you help create offshore companies to help them avoid paying taxes?” asked New Jersey Senator Bob Menendez.

“No, not necessarily,” Mr. Mnuchin said. “I’m absolutely committed to working with your office … and not let anyone avoid taxes.”

He told Florida’s Bill Nelson that he had moved Dune Capital Partners LLC to Anguilla at one point, saying he and his co-directors had created a “master fund” in the British-ruled island “to become a foreign entity,” but said the move was to help nonprofits and pensions.

Locally, officials at the Cayman Islands Monetary Authority noted that neither Dune Capital nor Mr. Mnuchin was listed under registered/licensed mutual funds or mutual funds administrators, but said his position as director would not necessarily be part of the public record.

Former CIMA director and head of Maples and Calder Tim Ridley said he was unfamiliar with Dune or Mr. Mnuchin, but “would be surprised if he were not involved in hedge funds in the Cayman Islands.”

Cayman boasts approximately 10,000 such funds, and is acknowledged as the world’s leading domicile.

“It’s quite legal to be involved in hedge funds in Cayman,” Mr. Ridley said, “and to have them set up by investors. I think he [Mr. Mnuchin] has much more sensitive issues to face than that.”

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  1. Blab, blab, blab.

    The US and in officials who are tasked to denounce Tax Regimes in other countries should look to the state of Delaware, Illinois and Nevada to see the real “Tax Havens”. The US touts special tax incentives for foreign corporations all the time.

    This is like the pot calling the kettle black, and is so typical of the US hypocrisy and bullying.

  2. It doesn’t matter what they are doing inside the USA, that is their country. But if they eliminate the tax free nature of our country or prevent funds from being wired in and out of Cayman (as the French have done) then this place is a ghost town.

    • I understand what you are saying, but my point is the hypocrisy of the US, as they are compelling that we are providing tax shelters for money, while they do the same thing. The US uses its’ power and control over so many areas of business, finance and trade to unfairly control small countries such as Cayman.