Treasury Nominee Is Ideologically, Ethically Challenged

The Senate should reject President Bush’s nomination of Goldman Sachs CEO Hank Paulson for Treasury secretary. Under Paulson’s leadership, Goldman Sachs participated in ethically, and perhaps legally, questionable business practices. Paulson also supports the economy-killing Kyoto Protocol and has demonstrated little respect for private property rights.

On the ethical front, Paulson has refused to answer questions about his apparent use of Goldman Sachs’ corporate assets to advance his personal interests. In 2002, Paulson used at least $35 million of shareholder money to help environmental groups stop a “sustainable forestry” project in Tierra del Fuego, Chile. Environmental groups had delayed the project for years—to the point where financial stress on the project developer became acute and forced the sale of the land. Goldman swept in and bought the land, promptly turning it over to Paulson’s environmental allies.

The environmental groups involved in the transaction included The Nature Conservancy (TNC) and the Wildlife Conservation Society (WCS), the actual recipient of the land donation from Goldman Sachs. At the time of the transaction, Paulson was a member of the board of directors of TNC—after the transaction he was elevated to chairman. Paulson’s son is now listed on tax returns as a “trustee” of WCS’.

When I confronted Paulson with these accusations at the March 31, 2006, annual shareholder meeting, Paulson and Goldman Sachs attempted to deny the involvement of TNC in the “land steal.” At a very minimum, however, tax records indicate that Goldman Sachs paid TNC more than $144,000 in consulting fees related to the transaction. Moreover, the TNC acknowledges the WCS as one of its “organizational partners.”

On the legal front, the Washington Post reported just last week that Goldman Sachs participated in transactions with scandal-ridden Fannie Mae that “that improperly pushed $107 million of Fannie Mae earnings into future years. The aim, [said federal regulators], was always the same: To shape the company’s books, not in response to accepted accounting rules but in a way that made it appear that the company had reached earnings targets, thus triggering the maximum possible payout for executives…”

Aside from the potential ethical and legal issues surrounding Paulson, he has decidedly anti-economy and anti-property rights leanings.

Paulson supports economy-killing global warming regulation. Paulson transplanted TNC’s pro-Kyoto position into Goldman Sachs, an investment bank with no known expertise in climate science. Now Goldman Sachs not only supports greenhouse gas regulation, but has said it will lobby for such policies. No doubt this will be much easier, with Paulson as Treasury secretary.

Private property owners should also be unhappy with Paulson’s nomination. Paulson’s TNC is the world’s richest environmental group with $3 billion in assets and is a major opponent of private property rights.

A series of Washington Post articles in May 2003 exposed the Nature Conservancy as more than just a “land bank.” In the past it has also acted as a broker of too-sweet-to-be-true land and business deals for wealthy insiders and corporate supporters, often at taxpayer expense.

In one scheme reported by the Post, “…the Conservancy bought raw land, attached development restrictions and then resold the land to state trustees and other supporters at greatly reduced prices. Buyers then voluntarily gave the Conservancy charitable contributions roughly equivalent to the discounts, sums that were written off from the buyers’ federal income taxes. The deals generally allowed the buyers to build homes on the land.”

As Treasury secretary, Paulson will be in charge of the Internal Revenue Service. Should he be in charge of the government organization that has oversight over any tax problems that TNC might have?

With a Republican administration and Republican-controlled Congress in trouble for abandoning conservative principles and a scandal-ridden Washington, Hank Paulson as Treasury secretary is the wrong choice at the wrong time. Since the politically tone-deaf President Bush is unlikely to withdraw Paulson from consideration, it will be up to the Senate to do the right thing.