Senators Swoon Over Billionaire PritzkerBy William Boardman, Reader Supported News
29 May 13
Had she offered them her ring, they would have kissed it
hile the fawning millionaire courtiers who populate the United States Senate fall all over themselves to smooth the way for Chicago billionaire Penny Sue Pritzker Traubert to become the next Secretary of Commerce, one might wonder what the country is getting here. In terms of hope and change, for example, what might Pritzker (she goes by her maiden name) portend in light of her public record?
On May 2, President Obama nominated Pritzker, his formidable fund raiser for more than a decade, to fill the vacancy at the Commerce Department. With an estimated net worth of $1.8 billion, Pritzker, 54, is married to Dr. Bryan Traubert and they have two children, Rose Pritzker Traubert and Donald Pritzker Traubert. Pritzker is a graduate of Harvard College, 1981, and Stanford Law School, 1984.
In the early 1990s, she was on the board of a family-owned bank that was a pioneer in the subprime loan business. The Pritzker family bank, Security Bank in Illinois, was also a pioneer in packaging all-but-worthless loans into all-but-worthless securities that the bank sold to unsuspecting customers. Security Bank failed in 2001, at the time the largest bank failure in a decade. Accused of unsound financial activities and predatory lending, the Pritzkers agreed to pay the U.S. government $460 million in fines (over 15 years) – a settlement in which Pritzker and her bank naturally admitted no wrongdoing.
"It was the right thing for us to do, because both for the depositors and for us as a family," she testified before the Senate Commerce Committee on May 23.
Pritzker filed a financial disclosure statement with the Office of Government Ethics as part of her nomination process. The 184-page document under-reported Pritzker's annual income by $80,000,000. She blamed the $80 million omission on a "clerical error" when she filed a correcting amendment. No senator asked her about this error, perhaps feeling that it was the sort of $80 million omission anyone could make. None of the senators chose to put this omission in perspective by comparison with the $10 million lost by her uninsured bank depositors or with the bank failure's $236 million cost to U.S. taxpayers despite the settlement payment.
Pritzker: "I Feel Very Badly" About My Bank's Shady Practices
In a widely-used sound bite, Pritzker answered a softball question from South Dakota's Republican senator John Thune about her bank by saying: "… I regret the failure of Superior Bank, it's not an outcome or a situation, that I'm, you know, I feel very badly about that. The lessons that I learned are really about good management, good governance structure, the importance of diversification and risk management, transparency and good governance."
The Pritzker fortune, estimated at $19.5 billion, has been in litigation and negotiation for most of the past decade, and Pritzker has been in the thick of it. She is one of the eleven cousins and heirs who have been arguing over whether to preserve the fortune as a single entity or divide it among the cousins. Pritzker was a key negotiator in this argument, and its demands reportedly led her to withdraw from consideration as Commerce Secretary in 2008, when her name was floated as a possibility.
The cousins resolved their inheritance dispute in 2011, by dividing the fortune into eleven shares. Each of their cousins now ranks on the Forbes 400 list of richest Americans, from 159th to 359th (Pritzker is 263rd). Part of the complexity in the distribution of the fortune involved adjusting various off-shore holdings (such as trusts in the Bahamas) that allowed the family to achieve significant tax avoidance. For her efforts in this and other family financial arrangements, Pritzker received a payment of $53 million in 2012.
Forbes Suggests Congress Explore Pritzker Tax Haven Schemes
Writing for Forbes on May 18, Stephane Fitch described some of the intricacies of the Pritzker family finances, at home and abroad:
Congress could finally make public one of the grandest and most successful family tax-avoidance schemes ever – one that exposed some pretty significant blind spots in the laws that govern family trusts. Congress should ask some probing questions. Pritzker's first act as a public servant could be to answer them frankly. A.N. Pritzker set up the family's first offshore trusts 50 years ago, when Penny Pritzker, now 54, was only four. It's clear some of the family's ploys wouldn't be allowed today. But a full explanation of what's been done might illuminate loopholes that remain.None of the Senate committee members asked Pritzker hard questions about the family's tax havens or what she had done to earn that $53 million. In response to limited senatorial inquiry from Thune, Pritzker got off with saying, "Senator, I am the beneficiary of off-shore family trusts that were set up when I was a little girl. I didn't create them, I don't direct them, I don't control them. I have asked the trustee to remove themselves and appoint a U.S. trustee."
Senator Claire McCaskill, a Missouri Democrat, ignored the long-abandoned tradition of wealthy people serving their government for a token $1 a year. Instead the Senator gushed to Pritzker, who will earn $197,000 a year as Commerce Secretary: "It's pretty obvious you're not coming to this job for a paycheck. You are coming because you desire to serve this country."
Harvard Paper Applauds Pritzker for Giving Back to the Community
In 2006, the Harvard Crimson (Pritzker is on the Harvard Board of Overseers) ran a flattering profile of Pritzker, noting: "Having founded five businesses during her career, Pritzker, along with her family, has continued to give back to the community…. Pritzker says she and her husband, Bryan S. Traubert, are interested in the welfare of children."
The Crimson quotes Pritzker as saying: "I believe the availability of quality public education is the foundation of our democracy. This is something we are extremely passionate about and we have gotten involved with in our community, both with the reform of the Chicago Public School system and the charter school movement."
As a member of the Chicago Board of Education for two years, until March 14, 2013, she exercised little apparent leadership and was not seen as an advocate for the welfare of students or teachers. Her gifts to the schools have mostly been for athletics and athletic fields. She has been a reliable supporter of Mayor Rahm Immanuel, telling him in her resignation letter: "Education is critical to ensuring every child has an opportunity to succeed, and I wholeheartedly support the work that you are doing to improve Chicago schools."
Closing Schools Keeps Them from Getting Any Worse
Chicago has announced the largest school closing in American history, stirring resistance among parents, students, and neighborhoods that stand to lose their schools. The Chicago policy is widely seen as a wedge issue to create lower-cost, publicly funded private schools. Such schools have not built a record of superior performance, but they meet one of the objectives of people like Immanuel and Pritzker – they undermine unions, especially teachers' unions.
As the Chicago Teachers Union financial secretary told the Chicago Tribune: "We know Penny Pritzker has a long and storied history as an anti-labor and anti-worker kind of boss. Her policies adversely affect working families. She has worked to close schools and destabilize neighborhoods, and we hope she does a better job in her new position, if she gets it."
Pritzker's father co-founded the Hyatt Hotel chain. Pritzker sits on the corporate board and holds a $400,000 stake in the company. Hyatt has a long history of anti-labor practices and is currently the target of a union-sponsored global boycott.
A group of Hyatt workers and union supporters were at the Commerce Committee hearing. One of them, a housekeeper at Hyatt Regency Chicago, said: "I am here to just to let everybody know the abuse the workers are under at the Hyatt. I wanted to let everybody know the kind of situation Penny Pritzker puts her employees in."
Lots of Rich People Prefer to Keep a Low Profile
The Harvard Crimson quoted a Pritzker friend describing how hard it had been for Pritzker, managing the family fortune dispute: "I admire her dignity and discretion in handling this by taking the high road. She has largely not engaged in the mudslinging. It is a tragedy for her family that this has happened, because the Pritzker family has always been very private."
What's the tragedy here? Not that they lost their money – because they didn't – but they had to talk about it.
Pritzker's official biography on the Penny Pritzker web site, begins like this:
"With more than 25 years of experience in the real estate, hospitality, senior living, financial services and private equity industries, Ms. Pritzker previously developed such diverse companies as Vi (formerly Classic Residence by Hyatt), a leader in luxury living for older adults, The Parking Spot, a large U.S. network of off-site airport parking facilities, and Centergate Residential, a vertically-integrated, multifamily development, investment and management company."
This is apparently just what America needs now, according to President Obama – someone who has spent her life so far helping the rich get richer.
There Is More Than One Vision for Making America Better
Speaking in quite a different context, author Alice Walker suggested that sometimes a country needs some other kind of woman:
And this is a woman who can teach a lot of us about what it feels like and what it can be like to come face to face with the reality that your country is being not only stolen from you, but trashed, absolutely degraded – you know, your mountains despoiled, your rivers a mess, your children badly educated, if educated at all.
… a guide to see what it's like to actually confront the forces that are literally destroying you, they're destroying your children – horrible food, horrible laws, you know, rich people permitted to own much more than anyone should own of anything, and poor people being continually ground into the dust.Or as the Wall Street Journal wrote, conveying much the same message, but from a different perspective, "Ms. Pritzker's experience as an investor and businesswoman could help Mr. Obama mend ties with corporate leaders who have bristled at his policies and what they deemed populist rhetoric during his first term.