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U.S. Secretary of Commerce Wilbur Ross attends the Forbes Global CEO Conference in Hong Kong, Tuesday, Sept. 26, 2017.
AP Photo/Kin Cheung
Do not lie to Forbes about your ungodly wealth.
WHAT'S A FEW MILLION BETWEEN FRIENDS?

Wilbur Ross’s business partners say he stole $120 million

By Tim Fernholz

If you don’t see corruption in American business, look a little closer at Wilbur Ross.

Four of Ross’s six former lieutenants are suing the commerce secretary for robbing them back when they worked together. Alongside improper fees and regulatory penalties, the questionable financial moves add up to a total $123 million, almost a fifth of Ross’ estimated $700 million in wealth.

The story comes to us from Forbes, which has been investigating Ross since the magazine discovered he lied to them about $2 billion in phony assets in order to assure a place on their list of billionaires. Digging into his record as a private equity investor, reporter Dan Alexander documented a boatload of dodgy moves.

None of this is the smash and grab of the bank robber, although Alexander reports that Ross is known to snatch up handfuls of free sweeteners at restaurants. (A spokesperson for Ross denied this.) Instead, this is larceny on a scale that only bankers can perform.

Ross ran a private equity firm called WL Ross & Co. that managed $4.1 billion for investors, which could make a fortune under standard fee structures—but Ross appears to have gone above and beyond.

The allegations against him fall into three buckets: First, the fund failed to make good on agreements to return $12 million in fees to investors. The SEC forced the company to repay that sum in 2016, and leveled a $3 million fine.

Second, Ross sold a controlling stake in his eponymous fund to a larger company called Invesco in 2006 for $100 million; afterward, Invesco had to pay $43 million in fines and reimbursements due to Ross’s pattern of charging inappropriate fees on failing investments and collecting money for serving on corporate boards in violation of his agreement with his investors.

Third, and perhaps most damning, six of Ross’ former colleagues, including the firm’s former co-chairman and Ross’ own deputy, have sued or are suing him for skimming some $56 million from their compensation. The former co-chairman reportedly received $10 million in a settlement in 2005, and another lawsuit settled confidentially last week.

In response to Forbes’ reporting, Ross said that SEC had never initiated a case against him personally and said the on-going lawsuits against him were “without merit.”

The opaque world of private equity investing often sees disputes over fees, but the pattern of allegations here suggests something out of the ordinary. Two lawsuits are winding their way through the court system and may shed more light on his behavior.

Ross is not unique among cabinet officials appointed by president Donald Trump when it comes to allegations of unethical behavior. Three members of his cabinet, Tom Price, Scott Pruitt, and David Shulkin, resigned amidst investigations into the abuse of their offices.

Trump himself has not divested from his companies, which appear to benefit from his official work, and has refused to release his tax returns publicly. His former campaign chairman Paul Manafort is currently on trial for financial crimes, and three of Trump’s former campaign advisers have pled guilty to crimes ranging from failure to disclose being a foreign agent to wire fraud.

When it comes to white-collar crime, it appears that America really may be swarming with Manaforts.

Tim Fernholz
Reporter
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