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Source: United States Senator for Massachusetts – Elizabeth Warren

July 15, 2019

Commerce Department decisions appear to benefit their former steel industry clients and employers

Text of the letter (PDF)

Washington, DC – United States Senator Elizabeth Warren (D-Mass.) sent a letter to the U.S. Department of Commerce Designated Agency Ethics Official (DAEO) David Maggi regarding potentially serious conflicts of interest for the two most senior Commerce Department officials responsible for managing the Section 232 exemptions from President Trump’s steel and aluminum tariffs, Under Secretary of Commerce of International Trade Gilbert Kaplan for the International Trade Administration (ITA) and Acting Under Secretary for Commerce Department’s Bureau of Industry and Security (BIS) Nazak Nikakhtar.

While thousands of companies are seeking billions of dollars’ worth of exemptions from the Administration’s steel and aluminum tariffs, Senator Warren and her staff’s investigations have revealed that the process for awarding the exemptions appears to be arbitrary, opaque, and subject to political favoritism; and documented that the vast majority of steel tariff exemptions were going to foreign-owned companies – even though the tariffs were designed to benefit domestic producers.

Senator Warren’s new concerns were prompted by a newly released analysis by the Commerce Department Office of Inspector General (IG) revealing that the exemption adjudication process has benefitted former clients and employers of Ms. Nikakhtar and Mr. Kaplan.

As a part of the exclusion process, the Commerce Department allows other firms – including domestic steel and aluminum suppliers – to submit objections to requests. A company that wants to undermine an exclusion request can do so simply by submitting an objection, which, regardless of the objection’s merits, will likely cause a delay in the decision and result in a rejection. In fact, the IG data show that completed requests without objections were over 11 times more likely to receive an approval than requests that received an objection, and that less than half a percent of requests with an objection received an approval. This process is troubling because the reliance on objections as a key decision factor appears to benefit clients of Mr. Kaplan and Ms. Nikakhtar’s former employers.

Over the last year, BIS has been administering this exemption process — now under the leadership of Ms. Nikakhtar — with assistance from ITA under Mr. Kaplan’s leadership. Based on data made available in the IG’s memorandum, the process through which BIS and ITA administer the program appears to benefit former clients or former employers of Mr. Kaplan and Ms. Nikakhtar. U.S. Steel, one of the largest steel manufacturers in the country, and a client of Ms. Nikakhtar’s former employer – Cassidy Levy Kent – has submitted more objections to and successfully derailed more exclusion requests than any other organization. Similarly, a steel manufacturing company that paid Mr. Kaplan’s firm almost $3.5 million “to enlist (his) services in pressing Congress and federal agencies” on Chinese steel imports has filed almost 400 objections.

“It is disturbing that, the head of ITA and the Acting head of BIS are former industry insiders who either represented or lobbied for companies in the steel industry and that these two individuals are now responsible for steel tariff decisions worth millions of dollars to former clients or clients of their previous employers,” wrote Senator Warren.

Both Mr. Kaplan and Ms. Nikakhtar signed ethics agreements as nominees that bar them — in some form — from participating in matters that affect their former employers or their former employers’ clients. To better understand the scope of Mr. Kaplan’s and Ms. Nikakhtar’s ethics agreements, and the extent to which they have been adhering to them and avoiding potential conflicts of interest in administering the Section 232 Product Exclusion Requests program, Senator Warren asked the DAEO a series of questions about the scope of the recusals and any waivers sought by Mr. Kaplan or Ms. Nikakhtar.

Senator Warren’s sweeping ethics legislation, the Anti-Corruption and Public Integrity Act, would shut the revolving door and prohibit giant corporations, including those in the steel industry, from wielding undue influence by hiring or compensating any senior government officials for at least four years after leaving government service, among other measures to root out corruption in government. 

MIL OSI USA News