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Commentary By Diana Furchtgott-Roth

More Lies About Puzder

Economics Employment

The torrent of lies about Andy Puzder, CEO of CKE Restaurants and President Trump’s nominee for Labor Department Secretary, never seems to end.  It’s not enough to say that he abused his wife (she has denied it) and that 60 percent of his restaurants have violations (fewer than 1 percent had violations, according to Labor Department Wage and Hour data).

The latest accusation, from senior investigations editor David Sirota at the International Business Times, is that Puzder owes millions of dollars to UBS, a bank that could be in a position to benefit from favorable rulings if Puzder were confirmed as Labor Secretary. Sirota suggests that Puzder is disqualified due to conflicts of interest.

But Puzder has no financial interest or investments in UBS. 

Take the “millions of dollars in loans,” for instance.  Puzder stated when he filed his forms that he has two mortgages from UBS and one home equity loan. However, since he filed the forms, he sold his home in California, leaving him with one mortgage of around $990,000, and a personal line of credit on which he owes about $125,000.

A mortgage and a line of credit do not result in the borrower being under any obligation to the financial institution—except to repay the loans according to their terms.  If mortgage borrowers were obligated to their lenders, then all nominees to Senate-confirmed positions would either have to rent their homes or own them outright.  The only concern that a loan raises is if the loan were obtained under favorable terms, such as the loans that Countrywide made to former Senator Chris Dodd (D-CT) and other influential politicians in the mid-2000s.

How about Puzder’s so-called investments in UBS?  True, Puzder’s ethics forms list an investment in UBS Dynamic Alpha Fund and 10 other UBS accounts.  But these accounts are not investments in UBS, they are investments in funds or accounts managed by UBS.

Characterizing the Dynamic Alpha Fund as an investment in UBS is like saying that investors with retirement accounts in the Vanguard S&P 500 Index Fund are investing in Vanguard.  In order to invest in UBS, you need to own stock in UBS.  Puzder doesn’t own stock in UBS, as can be seen from his public forms filed with the Office of Government Ethics.

Furthermore, the Dynamic Alpha Fund, reported at between $100,000 and $250,000 in value, is classified as an “excepted investment fund” under federal ethics rules.  This means that the fund is (1) independently managed,” (2) widely held, and (3) either publicly traded, available, or widely diversified.   As a result, the Office of Government Ethics did not require Puzder to sell it. 

The other 10 UBS accounts mentioned in the article are brokerage accounts whose assets Puzder has reported on the Office of Government Ethics forms. Assets in these accounts include investments in household names such as Abbott Laboratories, Coca Cola, Cisco, and Intel.  Stocks in Coca Cola in a UBS brokerage account simply do not count as investments in UBS. Besides, all of the holdings in individual companies will have to be sold when Puzder is confirmed.

The focus on UBS arises because UBS has admitted violating currency trading practices and has been sanctioned by the Justice Department. The sanction includes a prohibition on managing pension funds. However, the Labor Department under Secretary Thomas Perez in December issued a one-year waiver so that UBS could continue to manage its $22 billion in pensions and Individual Retirement Accounts. Later this year the Labor Department will have to decide whether to extend the waiver.

Bart Naylor of the Public Citizen is reported by Sirota as saying, “How can [Puzder] referee its critical waiver from pension fund management penalties? Why does he omit UBS from his ethics statement [when] his investments are many?”

No matter that UBS was not omitted from the ethics statements, and that Puzder has no investments in UBS. Puzder has a general agreement with the Office of Government Ethics to recuse himself from any matter in which he has a financial interest. If, indeed, he has a financial interest in UBS, he would not be involved in any rulings involving the bank.

The process for recusal is straightforward.  If the Labor Department ethics officials judge that Puzder should recuse himself from decisions regarding UBS, then the UBS decision can be made by some other Labor Department official.  It is not an infrequent occurrence.

David Sirota is a known left-wing activist who agreed to be the CEO of True Blue Media, liberal activist David Brock’s “Breitbart of the Left,” before he changed his plans this week.  A business reporter would know the difference between investments in UBS and investments in funds or accounts managed by UBS; a political hack out to smear Andy Puzder might conveniently blur the distinction. 

Diana Furchtgott-Roth is a senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter here.

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