Chuck Grassley Drills Down on Lew's Cayman Island Investments

SEN. CHUCK GRASSLEY: And now to something that president Obama has made a big deal. On may the 4th, 2009, president which is where you invested your money overseas, quote, on the campaign I used to talk about the outrage of a building in Cayman Islands that had over 12,000 businesses, and I’ve said before, either this is the largest building in the world or the largest tax scam in the world, end of quote. You invested more money there than the average American makes in an entire year. Do you believe the president was accurate in referring to the building, which housed your investment as, quote, and the largest tax scam in the world?

JACK LEW: senator, I’m happy to answer questions about my own investments. I’m also happy to answer questions about tax policy regarding the sheltering of income from taxation. I reported all income that I earned. I id all taxes due. I very strongly believe that we should have tax policies that make it difficult, if not impossible, to shelter income from taxation.

SEN. GRASSLEY: Well, there's certain hypocrisy in what the president says about other taxpayers and then your appointment, but let me move on. You’ve told finance committee staff that you were unaware of Uggland house and its association with tax scams. That makes me wonder where you have been for the last eight years. The chairman of this committee as well as a former budget committee chairman whose chart is behind us highlighted Uggland house as the nation -- to the nation several times. As I said, president Obama preached about it. It’s no wonder that maybe you and the president haven't proposed legislative solutions to what you consider -- or what the president considers a tax scam. So my question, how can you be the president's top tax enforcer if you haven't heard of this offshore loophole.

LEW: Senator, this committee has reviewed my taxes for many years. I think it's clear that I reported all income that I’ve earned, I paid taxes as appropriate. I believe very strongly that people should pay taxes on their income. I have very strong views on how the tax code should be constructed to encourage investment in the United States and I am happy to answer any policy questions you have.

SEN. GRASSLEY: Uggland house ought to be shut down?

LEW: Senator, I am actually not familiar with Uggland house. I understand there are a lot of things that happened there that were a problem.

SEN. GRASSLEY: Let me move on. A case filed in the new york state supreme court in which NYU, New York University is the plaintiff, states that at the same time you were executive vice president, New York University invested in the aerial fund, a Cayman Islands open-ended investment company, created to be used for united states tax-exempt investors and foreign investors, end of quote. Nonprofits sometimes seek to avoid paying taxes on unrelated business income through offshore vehicles like funds in the Cayman Islands. So question, while you were the executive vice president, did NYU have investments in the Cayman Islands to avoid taxes on unrelated business expense? And if so, how many millions of dollars did NYU have invested in the Caymans?

LEW: Senator, when I was at NYU, I was not aware of any policy to invest in a manner that you describe. I was in no discussions regarding the ubit. I was involved in discussions about making sure the endowment was invested to have as good a return as possible and the goal at NYU was to try to have a diverse portfolio that would help the university get income from its endowment.

SEN. GRASSLEY: I’ll close then with this conclusion, since you're unaware of it and I take your word for it. But it's certainly a poor reflection on your tenure there if you didn't know about these investments. You were paid over $800,000 more than the actual president of NYU to know what was going on, and I’m surprised you didn't know what was going on. Thank you, Mr. Chairman.