Trump Cabinet's First World problem: omitting a few million here and there
U.S. President Donald Trump's Cabinet is worth a combined $14 billion, and they are catching flak in recent weeks for confessing an inability to keep track of their vast sums of wealth.
But private bankers who work with the ultra rich say that if they had a dollar for every time a client forgot about a million, they would be, well, almost as rich as their clients.
"We see it all the time," with new clients, said Chris Walters of GenSpring Family Offices, SunTrust Bank Inc's branch for clients with more than $50 million in assets. "It's not that they are surprised they own the asset. They just omitted it in the inventory."
Steven Mnuchin, a former Goldman Sachs Group Inc partner who is Trump's pick to lead the U.S. Treasury Department, was grilled by members of the Senate last week for inadvertently failing to disclose more than $100 million in real estate.
On Tuesday, the nominee for head of the budget office, Mick Mulvaney, said he did not realize he needed to pay $15,000 in federal taxes for a nanny until scrutinizing his finances more closely for confirmation proceedings.
Trump himself said in an interview with Reuters last March that he does not pay much attention to his own investments in hedge funds and mutual funds.
"I have no idea how they are doing. I don't really care," Trump said. "I'm in a lot of things. I may be in a few funds. I have no idea if they are up or down. I just know that they have been very good over a period of time."
Trump's lawyer Sheri Dillon has since said that he has liquidated all of his investments.
Senate leadership has delayed confirmation hearings for three other wealthy Trump nominees to allow more time for nominees to file disclosures and to accommodate schedules.
In response to questions about how people with millions or billions of dollars who hire experts to carefully tally their vast wealth could lose track of such big chunks of money, private bankers and family office managers said their clients simply live much more complicated financial lives than ordinary people.
About one-in-five people with more than $25 million in assets hire advisers to take care of tasks like paying daily bills, managing staff at multiple homes and keeping track of assets around the globe, according to a report by research firm Spectrem. Advisers say their clients need this type of assistance because they work, socialize and travel too frequently to take care of mundane tasks themselves.
Eileen Foley, head of Bank of New York Mellon Corp's family office business, said that some clients want daily reports detailing every dollar that goes in and out of each account. They also ask for daily reports on investments, tangible assets, properties and liabilities.
When a client is nominated for a position on the board of a public company or in government, this type of daily monitoring can help she said: "It's not a fire drill."
But even with that type of due diligence, clients often forget to mention assets held by multiple people, like limited partnerships. Those structures are harder for advisers to discover in financial statements, because they are often structured to keep ownership opaque.
Mnuchin, for instance, failed to disclose around $900,000 worth of artwork held by his children, according to media reports. Mnuchin did not respond to requests for comment. He also did not initially disclose homes in New York, Los Angeles and Mexico.
The complexity of a rich person's financial life usually builds over time as they acquire houses and collections and other belongings, advisers said.
In many cases, if a client has not been forced to detail all their assets or confirm that every domestic employee has insurance coverage, then they probably have not done it, said Bill Woodson, head of North American family offices at Citigroup Inc's private bank.
"It's understandable why" they forget, he said. "It doesn't excuse it."
(This story corrects spelling of flak in first paragraph).
(Reporting by Elizabeth Dilts; Additional reporting by Lawrence Delevingne; Editing by Lauren Tara LaCapra and Lisa Shumaker)