What happens when a billionaire faces Congressional confirmation?
President Barack Obama announces that he will nominate Chicago business executive Penny Pritzker (R) for Commerce Secretary in the Rose Garden at the White House May 2, 2013 in Washington, DC.
Consider, for a moment, the lot of the uber-wealthy Cabinet nominee. Forced to provide 184 pages of financial disclosure, just for the privilege of submitting herself for public service; forced to reveal the most intimate details of her investments and liabilities to the Senate and the nation.
This is the prep required for Penny Pritzker, 54, to try to become the next Secretary of Commerce. The Chicago philanthropist, Democratic fundraiser (she was finance chair of Barack Obama’s 2008 campaign), and Hyatt Hotels heir goes before a Senate Committee this week to face questions about her political, business and financial connections.
Admittedly, not many Cabinet secretaries these days are thousand-aires -- millionaire is more common.
But Penny Pritzker -- heir to a hotel, real estate and industrial fortune -- is a billionaire, with a "B." Forbes pegs her net worth at $1.85 billion, making her the 277th richest person in America. According to her financial disclosures, she runs a quarter-million-dollar tab on American Express and carries tens of thousands more on her Chase and Neiman Marcus credit cards.
So there are sure to be financial entanglements to untangle in Senate hearings this week.
“She and her family are so wealthy that they own investments and stocks that pretty much cover the entire economic field,” says Craig Holman, government affairs lobbyist at Public Citizen in Washington. Ten other family members whose wealth derives from the hotel chain and related businesses are reportedly also billionaires.
Holman says in preparation for her confirmation hearing, having been nominated by President Obama, Pritzker will have already worked extensively with the Office of Government Ethics and the General Counsel’s office to determine which stocks, bonds, and other investments she will plan to sell or shift into blind trusts if confirmed. That is in order to avoid any perceived conflict of interest in her decisions once she is Commerce Secretary. Holman points out that John Kerry and his wife had to sell at least one hundred investments when Kerry recently became Secretary of State.
Pritzker has already said she will resign her board position with Hyatt Hotels Corp., though she will not sell her stock in the company. She says if need be, once she is Commerce Secretary, she will recuse herself from decisions or actions related to Hyatt or other hotel-related entities.
Of course, that is assuming that she and her finances make it through confirmation. Norm Ornstein, resident fellow at the American Enterprise Institute (and author of the book “It’s Even Worse Than It Looks: How the American Constitutional System Colided With the New Politics of Extremism") has a colorful way of describing this: “The multiple proctological exams that congressional committees will put you through.”
Orenstein laments the scrutiny would-be Cabinet secretaries and Ambassadors now get, as congressional staffers from both political parties dig through the candidate's voluminous financial disclosures looking for any investments, relationships or past actions that might make the nominee politically vulnerable.
Orenstein says the disclosure and hyper-intense scrutiny is onerous even for Cabinet and Ambassadorial nominees of modest means. He estimates the typical cost of preparing oneself for confirmation hearings can run into the $35,000 range, most of it paying for lawyers and accountants. “There’ll be a few lawyers driving around D.C. in Mercedes after this is over,” he quips.
In the hearings, Pritzker can expect to be grilled in particular about her family’s multi-million-dollar trust, held in the Bahamas, of which she has been one of several family managers (she received a $54 million consulting fee last year from the trust). The trust was established to divide up the family fortune after a dispute in the early 2000s. Pritzker has said she is in the process of moving her Bahamanian trusts back under U.S. jurisdiction, now that the division of the family's holdings has been completed.
In the hearings, Pritzker’s role on the Hyatt Hotels Corp. board is also likely to be scrutinized, as the company has gotten into repeated fights with hotel unions.
Holman says if she is confirmed, Pritzker will have 90 days after taking the oath to actually complete the divestiture of her investments, and set up any blind trusts that are required.