A day before President Obama's pick to be the nation's top trade
negotiator faces a Senate committee vote, Cayman Islands officials defended
their banking system and the kinds of offshore investments that have gotten the
trade nominee into some hot water on the road to confirmation.
Michael Froman, now deputy national security adviser for international economic affairs, was questioned closely last week after he revealed he has about $500,000 in Cayman Islands bank accounts in a filing with the Senate Finance Committee, which is reviewing his nomination. GOP senators highlighted Mr. Obama's own criticisms of 2012 rival Mitt Romney over his offshore bank holdings in pressing Mr. Froman, who was an executive at Citigroup before joining the Obama White House.
Cayman Finance, a trade association for financial services firms on the Islands, shot back Monday. The group said its members offer "perfectly legal" options for investing, even though they have been "mischaracterized" by recent media reports and political backlash concerning Mr. Froman's Cayman investments.
"We believe the mischaracterization of Mr. Froman's investment as far as how it reflects on the Cayman Islands as a financial services jurisdiction needs to be corrected," Cayman Finance said in a statement to the media.
"The focus of these various reports, which seems to cast a shadow over what is otherwise legal and well-regulated activity in the Cayman Islands, is unfortunately misguided and driven largely by the domestic political environment in the U.S.," the group added.
Mr. Froman, who would replace former U.S. Trade Representative Ron Kirk, is expected to be approved in a Senate Finance Committee vote Tuesday. If his nomination passes the committee, it will go to the Senate floor for final approval.
The next U.S. trade representative will have his hands full negotiating pacts with both the European Union and a handful of Asia-Pacific nations. In his confirmation hearing last week, Mr. Froman pressed Congress to give President Obama the expired "fast-track" authority to negotiate major trade deals that lapsed six years ago.
Republicans used last week's confirmation hearing to label Mr. Obama as a "hypocrite" for submitting yet another nominee who has an offshore bank account in his personal financial portfolio, after he attacked Mr. Romney for the same thing during last fall's presidential campaign.
Sen. Orrin G. Hatch of Utah, the ranking Republican on the panel, noted that President Obama had nominated two other people with financial ties to the Cayman Islands, including Treasury Secretary Jack Lew.
"Now, I don't raise these issues to suggest that Mr. Froman has done something wrong or that he has not complied with our tax laws," Mr. Hatch said. "I believe he has. Instead, I simply want to point out what appears to be hypocrisy on the part of President Obama and his administration."
Cayman Finance officials rejected the perception that their financial sector is structured as a tax haven, noting that investors in the Cayman Islands still have to pay the same income tax that their home countries charge.
"The notion perpetuated that somehow funds in the Cayman Islands are not effectively regulated or that our legal framework encourages any form of tax evasion is at best outdated and at worst an intentional mischaracterization purely for entertainment or political purposes," the group said.
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