Cohn Offers Plan to Sell China Bank Stake to Avoid Conflict

20-Mar-2017 Intellasia | Bloomberg | 6:00 AM Print This Post

Gary Cohn, President Donald Trump’s top economic adviser, disclosed a plan to sell his stake in the world’s largest bank by assets to comply with federal ethics laws and reduce conflicts of interest.

Cohn, the director of the National Economic Council, owned almost 23.4 million shares of Beijing-based Industrial & Commercial Bank of China Ltd, according to a two-page disclosure dated March 8 and obtained by Bloomberg using public-records laws. The stake is valued at more than $15 million and probably was acquired as part of January 2006 investment by Goldman Sachs Group Inc. and its private-equity funds.

The filings also show that Cohn planned to divest more than $216 million in Goldman Sachs stock, 18 other publicly traded shares and investments in eight company-managed funds. Cohn’s wife, Lisa Pevaroff, owned stakes in three such funds. It’s unclear if they still own the investments.

The forms are just a portion of the disclosures expected for Cohn. He’s worth about $600 million, with about 40 percent of that tied to shares of Goldman Sachs, where he served as president for a decade before leaving for government, according to the Bloomberg Billionaires Index. The New York Times reported on the disclosures earlier.

The federal ethics agency released Cohn’s divestiture paperwork in response to a Freedom of Information Act request – along with similar disclosures for White House senior adviser Jared Kushner and his wife, Ivanka Trump, and their children; and Dina Powell, a senior counsellor to the president who was named this week to be deputy national security adviser.

Original Investment

Goldman Sachs invested in ICBC with two partners in 2006 to form business ventures that gave them access to millions of Chinese customers. The Wall Street firm, along with private-equity funds it managed and employees, paid $2.58 billion for a 7 percent stake in ICBC. It reaped about $12 billion in sales proceeds and dividends before exiting the investment in 2013, according to calculations by Macquarie Capital Securities Ltd

Hank Paulson, the Goldman Sachs chief executive officer who left in 2006 to become Treasury secretary, also sold a stake in the Chinese bank that year. ICBC had more than 23 trillion yuan ($3.3 trillion) in assets at the end of September.

ICBC is the largest office tenant at Trump Tower in Manhattan, and is set to renegotiate its lease during the president’s term in office. Ethics experts have said the arrangement may run afoul of the US Constitution’s emoluments clause, because the bank is state-owned. The clause bars US officials from accepting gifts or payments from governments.

Goldman Shares

Cohn owned 872,712 Goldman Sachs shares, according to the disclosure form. The value of those shares has climbed 36 percent, or almost $58 million, from the election through Thursday, according to Bloomberg calculations. Cohn, 56, once considered the heir-apparent to Goldman Sachs CEO Lloyd Blankfein, left the New York-based investment bank in December.

Cohn also had to divest shares in 18 other publicly traded companies, according to the document. Those shares had an aggregate value of $5.1 million based on Thursday’s closing prices, including $1.1 million holdings in cigarette makers Philip Morris International Inc. and Reynolds American Inc. Cohn’s holdings feature seven technology stocks, including Microsoft Corp., Facebook Inc. and Twitter Inc. He had 9,174 shares in Bank of America Corp.

Cohn was awarded $20 million in salary and bonus for 2016, Goldman Sachs said in a January filing.

Mnuchin, Bannon

Cohn is just one of several Goldman Sachs alumni with a job in the administration. Steven Mnuchin, sworn in last month as the Treasury secretary, spent 17 years at the investment bank, and Steve Bannon, chief strategist, also worked there. Jim Donovan, a member of the firm’s wealth division, has been tapped to take the No. 2 job at the Treasury Department.

A separate disclosure shows Powell, head of Goldman Sachs’s philanthropic arm before leaving for her new government role, had a plan to sell 3,543 Goldman Sachs shares and investments in three funds.

Cohn is the third Goldman Sachs executive to become NEC director, following Robert Rubin and Stephen Friedman. Rubin, who went on to become Treasury secretary, was the first person in the role after President Bill Clinton set it up as a counterpart to the National Security Council.

The group comprises representatives of various executive branch departments and is overseen by a director expected to represent the president’s interests and serve as an honest broker among competing agencies and departments to carry out his economic objectives.

Cohn joined Goldman Sachs in 1990, rising through the ranks to become co-president in 2006, and later sole president. The office in recent decades has been used to groom the next CEO, though Blankfein has shown no signs that he plans to step aside. Both he and his predecessor, Paulson, served as presidents before ascending to the top spot.

https://www.bloomberg.com/news/articles/2017-03-17/gary-cohn-to-sell-stake-in-china-banking-giant-to-avoid-conflict

 


Category: China

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