Energy, treasury picks questioned

WASHINGTON -- Treasury secretary nominee Steven Mnuchin defended his ties to offshore business entities and his management of a California bank during a confirmation hearing Thursday.

Former Gov. Rick Perry of Texas, President-elect Donald Trump's nominee for energy secretary, also went before the Senate on Thursday for his confirmation hearing.

Mnuchin, speaking before the Senate Finance committee, said businesses in the Cayman Islands and Anguilla revealed in his financial disclosures were not used for his personal benefit but served nonprofits and pensions.

"In no way did I use [offshore entities] to avoid U.S. taxes," Mnuchin said. "I can assure you I pay all my taxes as was required."

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A memo compiled by Democratic committee staff members obtained by The Washington Post showed Mnuchin initially omitted some of those entities -- as well as more than $100 million in personal assets -- from his nomination paperwork.

Mnuchin at first failed to disclose his role as director of Dune Capital International, which is incorporated in the Cayman Islands, the document shows. He also holds positions in nine other business entities and three trusts, including one connected to Sears Chief Executive Officer Edward Lampert, Mnuchin's former college roommate.

According to the memo, Mnuchin characterized the missing information as inadvertent mistakes, and he updated his answers to the committee's questionnaire on Saturday.

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Mnuchin, a veteran Wall Street investor, also has come under fire for his 2009 purchase of failed subprime mortgage lender IndyMac from the federal government. Mnuchin renamed the bank OneWest and ran it for six years. During that time, he said, the bank modified more than 100,000 of the country's most troubled loans and saved thousands of jobs in the process.

"I have been maligned as taking advantage of others' hardships in order to earn a buck," Mnuchin told lawmakers Thursday. "Nothing could be further from the truth."

Mnuchin purchased OneWest for $1.6 billion and sold the bank to CIT Group in 2015 for $3.4 billion.

Mnuchin is one of several Cabinet nominees facing a rocky path to confirmation. Democrats have seized on the vast wealth amassed by Trump's advisers -- not just Mnuchin but also his picks to lead the Commerce, Education and State departments, among others -- as undermining the working-class voters who fueled the president-elect's victory.

Mnuchin attended Yale University and began his career at Goldman Sachs, where his father was a senior partner, before leaving the investment bank to form his own private-equity fund, Dune Capital Management. After purchasing IndyMac, Mnuchin became a Hollywood financier, backing well-known films such as Avatar.

As Treasury secretary, Mnuchin would serve as the administration's chief economic spokesman. He has not previously served in government.

Perry

On Thursday, Perry said in his Senate confirmation hearing that he regretted having recommended the abolition of the Energy Department in the past.

He addressed his history on the issue up front, telling the Senate Energy and Natural Resources Committee that after "being briefed on so many of the vital functions of the Department of Energy," he no longer believed, as he said while running for president in 2011, that it should be eliminated.

"I believe the climate is changing," he said. "I believe some of it is naturally occurring, but some of it is also caused by man-made activity. The question is: How do we address it in a thoughtful way that doesn't compromise economic growth, the affordability of energy, or American jobs?"

Trump, by contrast, has called climate change a "hoax" and had continued to express doubts about established climate science.

Perry also appeared to signal a somewhat different position from Trump on nuclear weapons policy, the Energy Department's chief portfolio.

Trump has said the United States must "greatly strengthen and expand" its nuclear capability.

"Let it be an arms race," he said.

But Perry, asked by Sen. Bernie Sanders, I-Vt., whether he believed that expanded testing of nuclear weapons was a "dangerous idea," replied, "I think anyone would be of the opinion that if we never have to test another nuclear weapon that would be a good thing for the world."

He added, "I think nonproliferation is a good thing."

Democrats pressed him sharply on his views on climate science, noting that the Energy Department is a major science agency, with thousands of research scientists across the country. Democrats expressed concern that his past views, so at odds with established mainstream science, could be a serious impediment.

They also pressed him on reports that Trump's team is considering making cuts to the Energy Department's offices of energy efficiency, renewable energy and fossil energy. The last is focused on research to lower planet-warming carbon emissions.

Sen. Maria Cantwell of Washington, the panel's top Democrat, said, "Like many of my colleagues, I am deeply concerned by some of the things that Gov. Perry has said in the past about climate science." She added: "The Department of Energy's scientific horsepower is key to understanding these trends. I hope you can understand there is widespread anxiety about Trump's intention to dismantle these scientific capabilities or simply just starve them for resources."

Senate Democrats also are prepared to vote today on confirming James Mattis as defense secretary and John Kelly as secretary of Homeland Security, and to move ahead soon on other noncontentious Cabinet nominees, Minority Leader Charles Schumer said Thursday.

But the Democratic leader -- speaking a day before Trump is to be inaugurated as the 45th president -- accused Republicans of trying to "jam through" other Cabinet nominees who haven't completed ethics reviews or about whom Democrats have questions. Democrats will insist on full debate on the Senate floor on those nominees, Schumer said.

Republicans "want the hearings to be as quick, as short and as bunched up as they can be," Schumer of New York told reporters in Washington.

Schumer said after the votes on Mattis and Kelly, Democrats favor beginning debate on U.S. Rep. Mike Pompeo, nominated to lead the CIA. Senate debate on Pompeo is expected to start today.

Trump's team wants his national security team to be confirmed as soon as possible.

Sean Spicer, a spokesman for the Trump transition, said it was "disappointing" that Democratic senators weren't moving faster.

Staying on

Trump has asked roughly 50 senior appointees from President Barack Obama's administration to remain in their posts after his inauguration to ensure continuity in government, his incoming White House spokesman said Thursday.

The officials include the highest-ranking career officials at key national security agencies such as the Pentagon and State Department.

Deputy Defense Secretary Robert Work and the U.S.' third-ranking diplomat, Undersecretary of State for Political Affairs Thomas Shannon, will serve as acting chiefs of their agencies until successors for the top jobs are confirmed by the Senate, Spicer said.

Thursday's announcement comes after weeks of questions about how Trump's team is managing the presidential transition, although it may not address broader concerns about what officials at many federal agencies have said is a lack of communication with the incoming team.

At the State Department, Shannon will be in charge at least until next week as a Senate vote on Trump's choice for secretary of state, former Exxon Mobil CEO Rex Tillerson, isn't expected until Monday or Tuesday.

Also staying will be Brett McGurk, the Obama administration's point-man for fighting the Islamic State group; Nicholas Rasmussen, the National Counterterrorism Center director; and Adam Szubin, the Treasury Department's top official for terrorism and financial intelligence.

Spicer said Chuck Rosenberg, the Drug Enforcement Administration administrator, and Susan Coppedge, the State Department's ambassador-at-large to fight human trafficking, would be left in place for the transition.

The National Institutes of Health said its director, Francis Collins, was asked to stay on at least temporarily.

A full list of Obama appointees asked to remain was not immediately available.

The transition team has largely yielded on matters of national security to retired Gen. Michael Flynn, Trump's national security adviser, and Jared Kushner, the president-elect's son-in-law and senior White House adviser. But the circle will have to be expanded once the new administration assumes the full responsibility of government.

Inspectors general

Last Friday, Trump transition officials phoned inspectors general in at least a handful of Cabinet departments to indicate that they could soon be removed from their posts, a break from the bipartisan tradition of letting inspectors general stay in their jobs as long as they are willing.

The Trump transition team contacted inspectors general in the Treasury and Labor departments, and at least one other key department that confirmed the approach as long as it was not identified.

After some inspectors general protested, a member of the Trump transition team ordered a new round of phone calls within days to reassure them that they would not be forced from their posts.

In an email, the office of the Treasury Department inspector general noted that recent precedent suggests the presidential transition will not affect its leadership.

"In the past few decades, incoming administrations have not indicated expectations that IGs should resign, and generally IGs have not resigned," the office said in an email.

Trump transition officials did not reply to emails seeking their comment.

Eric Thorson, the Treasury Department inspector general, was nominated by President George W. Bush in 2007. Earlier he worked for the Air Force Department, for Republicans in the Senate and for the Small Business Administration.

Thorson spokesman Rich Delmar said the inspector general "was contacted by a member of the Treasury transition team and advised that he would be temporarily extended after Jan. 20."

The Labor Department's inspector general later received word that his tenure would be open-ended.

Not all inspectors general were contacted: Nancy DiPaolo, who directs external affairs for the Interior Department's inspector general's office, said her office did not receive such a call and held a "normal" meeting with the transition team last week.

After the initial round of calls, some inspectors general, including Michael Horowitz, who is chairman of the Council of the Inspectors General on Integrity and Efficiency, reached out to Republicans on Capitol Hill in an effort to get additional information from the transition team about its plans. Horowitz, who serves as the Justice Department's inspector general, declined to comment for this article.

House Oversight and Government Reform Committee Chairman Jason Chaffetz, R-Utah, who wrote a bipartisan law last year that made it easier for inspector generals to gather evidence and pursue cases, said in an email that he was informed of the situation.

"Inspectors general play a key role in keeping the federal government open and honest," Chaffetz said. "They must be empowered with the tools they need to effectively do their job."

At least one lawmaker interpreted the series of phone calls in a positive light. Senate Judiciary Committee Chairman Charles Grassley, R-Iowa, said in an email that it was a "good sign that the incoming administration listened to people who understand the important role that inspectors general play."

Information for this article was contributed by Martin Crutsinger and Matthew Lee of The Associated Press; by Coral Davenport of The New York Times; by Steven T. Dennis and Laura Litvan of Bloomberg News; and by Steven Mufson and Juliet Eilperin of The Washington Post.

A Section on 01/20/2017