Looks like trouble for Geithner (Sec Tres nominee)

[J]

Yahoo News link

Geithner failed to pay self-employment taxes
By BRETT J. BLACKLEDGE, Associated Press Writer Brett J. Blackledge, Associated Press Writer – 1 hr 42 mins ago

WASHINGTON – President-elect Barack Obama's choice to run the Treasury Department and lead the nation's economic rescue disclosed publicly Tuesday that he failed to pay $34,000 in taxes from 2001 to 2004, a last-minute complication that Senate Democrats tried to brush aside as a minor bump on an otherwise smooth path to confirmation.

Timothy Geithner paid most of the past-due taxes days before Obama announced his choice in November, according to materials released by the Senate Finance Committee. He had paid the remainder of the taxes in 2006, after the IRS sent him a bill.

The still-unpaid taxes were discovered by Obama's transition team while investigating Geithner's background. Obama's staff told senators about the tax issues Dec. 5.

Finance Committee Chairman Max Baucus said he still hoped Geithner could be confirmed on Inauguration Day.

"These errors were not intentional; they were honest mistakes," Baucus said after he and other committee members met with Geithner behind closed doors on Tuesday.

Republican senators, who might be expected to raise the most significant objections, did not immediately comment.

After senators met with Geithner, the panel released 30 pages of documents detailing his tax errors — and also how he came to employ a housekeeper whose legal immigrant work status had briefly lapsed in 2005.

Senate Majority Leader Harry Reid dismissed the events as "a few little hiccups," and said he was "not concerned at all" about the impact.

Obama reiterated his support.

"He's dedicated his career to our country and served with honor, intelligence and distinction," incoming White House spokesman Robert Gibbs said. "That service should not be tarnished by honest mistakes, which, upon learning of them, he quickly addressed."

Geithner, plucked from his job as president of the Federal Reserve Bank of New York to serve as Obama's treasury secretary, told transition officials and senators that he didn't know he owed self-employment taxes when he worked for the International Monetary Fund.

He failed to pay self-employment taxes for money he earned while working for IMF from 2001 to 2003, according to materials released by the Senate committee. In 2006, the IRS notified him that he owed $14,847 in self-employment taxes and $2,383 in interest from 2003 and 2004, which he paid after an audit. The IRS waived penalties for those tax years.

Transition officials discovered last fall that Geithner also had not paid the taxes in 2001 or 2002. He paid $25,970 in back taxes and interest for those years several days before Obama announced his choice, the committee documents showed.

Geithner and his supporters have said his mistake was a common one for people hired by international organizations that don't pay the employer share of Social Security taxes. Geithner told Obama's team and senators that an accountant had reviewed his tax returns after Geithner prepared them and didn't discover the problem.

But some tax experts said the problem is not that common.

Tom Ochsenschlager, vice president of tax for the American Institute of Certified Public Accountants, said it would be difficult for someone preparing a tax return for a self-employed person to skip the Social Security and Medicare tax lines.

"It's such a basic mistake that I kind of wonder if we know all the facts," Ochsenschlager said of Geithner's situation.

Geithner also said he didn't realize a housekeeper he paid in 2004 and 2005 did not have current employment documentation as an immigrant for the final three months she worked for him, the documents indicated.

The committee's records do not show how or when senators learned about the expiration of the housekeeper's work status. The committee reported that Geithner failed to get an I-9 form verifying legal work status for three people he employed as household help since 2004, instead jotting citizenship dates, passport numbers and relevant work status information into an address book.

One housekeeper's legal authorization to work in the United States expired on July 15, 2005 and the person continued to work for the Geithners until October of that year, the report says.

Democratic senators lined up Tuesday to offer their support for Geithner.

"Tim came to the committee, admitted he had made some mistakes, and was very contrite," New York Sen. Charles E. Schumer said in a statement. "In my opinion, these mistakes were not at all disqualifying."

Geithner is the second Obama Cabinet choice to face controversy. New Mexico Gov. Bill Richardson withdrew his name on Jan. 4 as Obama's commerce secretary after questions surfaced about a federal investigation concerning contributions and a state contract.

Geithner's tax problem was at least the second time such a situation has touched an Obama appointee. Nancy Killefer, the management consultant selected last week to become the new administration's chief performance officer, failed to pay unemployment compensation taxes, apparently on household employees. In 2005, the District of Columbia placed a $946.69 tax lien on her home over the unpaid taxes. Over a year and a half, she had failed to pay $298 in taxes plus the rest in interest and penalties, and she cleared up the debt within a few months.

Hopefully they'll use this to disqualify Geithner from holding the Treasury Secretary post. As head of the New York Fed, Geithner is the buttmunch in charge of the TARP funds and other bailout programs. Under his "supervision", those funds were abused to high heaven and went right into the pockets of banking execs paying for the infamous AIG spa trips among other things. As far as I'm concerned he's just as crooked as Paulson & Bernanke and has no business being anywhere near the government purse strings.

[Broomstick]

When I was 19 and naive even I had heard about the self-employment tax (and paid it, too). This was not an "honest mistake" - this guy should be expected to know better.

[LMSx]

This doesn't seem malicious, although a problem that suggests a disconcerting amount of sloppiness:
Link

The confusion over the self-employment tax arose from an unusual system used by the IMF. Though its U.S. employees receive W-2s, they have been treated for tax purposes as though they are self-employed. (This problem has occurred frequently enough that in November 2006, the IRS made a settlement offer to all U.S. employees of embassies and international organizations in order to bring the employees into compliance with their U.S. tax obligations. )

Geithner had earlier encountered the same problem. It had come up in an IRS audit in 2006, under slightly different circumstances. Geithner worked for the IMF until the fall of 2003, and also received a small amount of income from the IMF in early 2004. An accountant prepared Geithner's 2003 and 2004 returns and assured him in writing that he was exempt self-employment taxes on his IMF income. In 2006, the IRS informed Geithner that he owed--and had failed to pay--self-employment taxes for that period as well. He paid tax and interest totaling $17,230 (of which $14,847 was tax and $2,383 was interest) for the two-year period, and the IRS waived all penalties.

The second problem: In 2004 and 2005, Geither's family employed a housekeeper to clean their home, and verified when upon hiring her that she had a valid permit to work. What he didn't know was that this document expired three months before she left his employ to have a baby. (She continued to reside legally in the United States, was married to a U.S. citizen, and was granted a green card a few months later.)

[aerius]

Something smells fishy. The guy's been doing advanced finance stuff for decades and he somehow can't find competant people to fill out his tax returns. Then when he's not sure of his accountant's work he gets the guy's opinion in writing instead of verifying his opinion against the US tax code or checking with another professional. When I had some questions about my tax return last year I called up Revenue Canada and had them explain and read me the relevant sections from the tax code, Geithner gets his accountant to write up a note. Yeah.

With all the shit he's pulled off while heading the New York Fed, I'm more inclined to believe that it was intentional tax evasion. He was just unlucky enough to get caught.

[ray245]

Which begs the question, is there anyone else that can inspire confidence in the market and be a good Sec of Tres?

[The Original Nex]

Regardless of the actual circumstances, you will not see Geithner's nomination derailed by this, barring further negative developments. Harry Reid has said this should not be a problem and the transition is standing by him. This isn't something he hid from them, they knew about this from the get-go and informed Congress; it's only the media that's now getting a whiff of this.

Geithner will still be TreaSec. I will freely accept any and all ridicule if I'm wrong.

[CaptainChewbacca]

Link

President-elect Barack Obama's nominee for Treasury Secretary, Timothy Geithner, failed to pay Social Security and Medicare taxes for himself for four years and employed a housekeeper whose immigration documentation lapsed while in his employ.

Senate Finance Committee Chairman Max Baucus called a meeting with committee members to discuss the matter inside his office Tuesday.

Geithner disclosed to senators earlier in the day that he had failed to pay $34,000 in taxes from 2001 to 2004, a last-minute complication in an otherwise smooth path to confirmation.

Sources say Geithner also hired a housekeeper whose immigration papers expired during her employment in 2004 and 2005.

The woman, whose name has not been released, eventually obtained a green card to work legally in the U.S., and immigration authorities did not charge her with wrongdoing.

Senate Majority Leader Harry Reid told reporters after the revelations that he still believes Geithner is "extremely well-qualified" for the post.

"There was a few little hiccups, and that's basically what they are. I am not concerned at all," Reid said.

Before becoming president of the Federal Reserve Bank of New York, Geithner worked for the International Monetary Fund from 2001 to 2003. He paid all of his income taxes on his IMF income, but made a "common mistake" on his tax returns with regard to self-employment taxes, Obama transition aides told reporters Tuesday.

Incoming White House press secretary Robert Gibbs defended Geithner, saying, "He's dedicated his career to our country and served with honor, intelligence and distinction. That service should not be tarnished by honest mistakes, which, upon learning of them, he quickly addressed."

"He made a common mistake on his taxes, and was unaware that his part-time housekeeper's work authorization expired for the last three months of her employment," Gibbs said.

"We hope that the Senate will confirm him with strong bipartisan support so that he can begin the important work of the country," he added.

Utah Republican Sen. Orrin Hatch, a member of the Senate Finance Committee, also defended Geithner.

"I still support him. I have no problem," Hatch told FOX News. "He's a very, very competent guy."

Baucus told reporters that Geithner's errors -- though "serious" -- do not disqualify him from becoming Treasury Secretary and that he hopes Geithner can be confirmed by Inauguration Day.

"These errors were not intentional; they were honest mistakes," Baucus said after he and other committee members met with Geithner.

Now, I couldn't care less about the immigration thing, that sort of thing happens alot and even the INS didn't have a problem with it. But a Treasury Secretary who makes 'common errors' on his taxes? That's like nominating an attorney general with 25 unpaid parking tickets. Way to stumble right out of the gate, Obama Transition Team.

P.S. Don't tell me Bush screwed up bigger, because that doesn't matter here.

[Flagg]

Already posted.

[Zablorg]

So what are the legal ramifications of this? Why exactly did the IRS waive the penalties?

[Edi]

Duplicate threads merged.

[J]

Which begs the question, is there anyone else that can inspire confidence in the market and be a good Sec of Tres?

No. At this point in time the two are mutually exclusive. There is no way to inspire market "confidence" without engaging in lies, fraud, and other chicanery. Similarly, doing the right thing as Sec Tres will shatter market confidence and lead to a crash at least as severe as last October's, but at least the bad debts will be purged from the system so we can begin an actual recovery.

I do not care to live through a great depression which is exactly where we'll be headed if we continue our current course, given a magic wand I'd put Janet Tavakoli in charge of Treasury and make a clone of her to run the Fed. The market will likely lose 50-70% of its value within a week as all the bad banks & companies get crammed down and have their debts shoved up their asses, but at this point that's the best of all possible solutions left.

[The Original Nex]

Info on the Transition's and Congress' response and why Geithner's prospects still look good.

Both from Politico:

Can Obama save Geithner?
By: Craig Gordon and Amie Parnes
January 14, 2009 09:56 AM EST

Barack Obama picked Timothy Geithner to save the U.S. economy.

But now, Obama has to save Geithner first.

Geithner’s tax problems surfaced publicly Tuesday – but Obama’s team has known about them for at least six weeks, waging a behind-the-scenes campaign to push him through the Senate Finance Committee, despite the blemishes on his record, according to documents from the committee.

The episode raises questions about whether Geithner’s nomination will survive, despite early soundings of support from Democrats, and perhaps, more importantly, a larger question:

What was Obama thinking?

Obama's choice of Geithner flirts with an issue that has deep-sixed Cabinet picks before –his former housekeeper’s immigration status lapsed briefly while she was in his employ.

Also, Obama’s choice to oversee the IRS flubbed his own tax returns – some of which he had personally prepared – to the tune of $42,700 in back taxes and penalties.

And Geithner decided to pay more than half that amount — $26,000 — only after Obama decided to nominate him, according to finance committee documents.

Obama’s team calls them “honest mistakes.” And in the end, Geithner had the only supporter that mattered – Obama himself. One source familiar with Geithner’s vetting says Obama knew about Geithner’s tax problems and decided to push ahead with the nomination anyway because he “still wanted him."
"At the end of the day, Barack decided that he was the best person for a really important job," the source said.

"It wasn't that it wasn't a big deal," the source said. "It was definitely factored in. The question was 'Does this disqualify him?' And the answer was no. It was something that he took care of. Yes, it was a mistake but it was in the past."

"It was put into calculation and at the end of the calculation, he was still the best person for the job."

So far anyway, some Senate Democrats, and a few key Republicans, agree. Finance Committee Chairman Max Baucus (D-Mont.) said the revelations did not disqualify Geithner, and he said it was crucial for Obama to have a new Treasury secretary in place when he takes office next week. Sen. Orrin G. Hatch (R-Utah) said he still supports Geithner.

Iowa Sen. Charles Grassley (R-Iowa), the ranking member on the Finance Committee, has privately questioned whether Geithner’s problems should derail his nomination and so far has refused to comment publicly.

It’s not clear when – or if – Obama’s team planned to go public with the tax problems, first disclosed by the Wall Street Journal Tuesday. And the Geithner developments come less than two weeks after another Obama Cabinet pick, Bill Richardson for commerce secretary, washed out amid questions about what Obama’s vetters knew about a grand jury investigation into the New Mexico governor’s office.

Obama chose Geithner on Nov. 24 – and at the time, the pick was viewed as a forceful move by Obama to assert himself on the economic front. It came after a particularly bad week in the economy, at a time when commentators were starting to raise questions about whether the new president was taking a firm enough stand to reassure the public about the economic meltdown.

Perhaps the biggest factor in Geithner’s favor now is that he’s well-known to senators on both side of the aisle, who consider him a smart and level-headed figure from his work on the Wall Street bailout as president of the New York Fed. It would be a particularly bad time to deny Obama his choice for treasury, when world markets are looking to the new administration to get the U.S. economy on stronger footing.

Still, one potential trouble sign for Geithner is that some senators are speaking out against giving Obama the second half of that $700 billion bailout – which was deeply unpopular among many in the public. If some of that public sentiment spills over onto the Geithner nomination, that could spell trouble. For instance, CNN’s Lou Dobbs already was complaining about the Geithner choice because of his role as an architect of the bailout.

In the end, presidents usually get wide leeway to build the teams they want, and many senators seems satisfied with Obama’s explanation that these tax and immigration issues were honest slip-ups.

The Senate Finance Committee documents, however, suggest committee staff put Geithner through the paces – and questioned some of his answers. Transition aides met with committee staff on Dec. 5 to explain Geithner’s back taxes and the committee did follow-up interviews with three Geithner accountants and a human resources rep at his former employer, the International Monetary Fund. Geithner also met personally with committee staff Dec. 19.

The committee notes that Geithner failed to pay his Social Security taxes while employed at IMF from 2001 to 2003 – even though he was provided documents that explained that he was required to do so.

In addition, Geithner included payments to overnight camps in calculating his dependent child care credit in 2001, 2004 and 2005. His accountant informed him in 2006 the camps were not allowable expenses. The committee notes that Geithner did not file amended returns to fix the mistake.

Despite that, the source familiar with Geithner's vetting made clear the treasury pick still has Obama's blessing.

"Definitely," the source said. "He stays."

© 2008 Capitol News Company, LLC

PR push may save Geithner
By: John Bresnahan and Martin Kady II
January 14, 2009 09:27 AM EST

Democratic and Republican senators say a full-court press by Barack Obama’s transition team is likely to keep ethical questions from sinking the nomination of Treasury Secretary-designee Timothy Geithner.

As Obama pressed senators on his economic recovery plan Tuesday, The Wall Street Journal reported that Geithner had failed to pay $42,000 in taxes and had employed a housekeeper whose work permit had expired.

But minutes after the news broke, the Obama transition team pushed back with talking points — distributed to Capitol Hill, K Street and congressional reporters — in which it portrayed the problems as simple mistakes or oversights.

The talking points noted that Geithner had paid off all of his back taxes — although nearly $26,000 of them weren’t paid until November, just before his nomination went to the Senate Finance Committee for official review.

The talking points also said that the legal status of Geithner’s former housekeeper didn’t lapse until the last three months of her employment.

Members of the Finance Committee gathered quickly for a closed-door meeting with Geithner, then released a 30-page report explaining the complexities of Geithner’s unusual employment arrangement with the International Monetary Fund and how it was that he could have mistakenly underpaid $42,000 in taxes.

Finance Committee Chairman Max Baucus (D-Mont.) said the revelations did not disqualify Geithner, and he said it was crucial for Obama to have a new Treasury secretary in place when he takes office next week. Sen. Charles Schumer (D-N.Y.) said the economic problems facing the country are too serious to allow Geithner’s nomination to go down.

Obama stood by his nominee.

“The president-elect chose Tim Geithner to be his treasury secretary because he’s the right person to help lead our economic recovery during these challenging times,” incoming White House Press Secretary Robert Gibbs said. “That service should not be tarnished by honest mistakes, which, upon learning of them, he quickly addressed. He made a common mistake on his taxes and was unaware that his part-time housekeeper’s work authorization expired for the last three months of her employment.”

The Senate Finance Committee had been aware of Geithner’s tax problems since Dec. 5, Senate aides said.

Sen. Orrin G. Hatch (R-Utah) said he still supports Geithner.

Iowa Sen. Charles Grassley (R-Iowa), the ranking member on the Finance Committee, has privately questioned whether Geithner’s problems should derail his nomination. But he has refused to comment publicly.

In a put-up-or-shut-up challenge late Tuesday, Baucus asked members of the committee to tell him by Wednesday morning whether they would object to holding Geithner’s confirmation hearing on Friday — earlier than the usual seven-day notice requirement would allow.

Majority Leader Harry Reid (D-Nev.) dismissed the Geithner issues as “a few minor hiccups” and said they would not derail his nomination. “I’m not concerned at all,” Reid said as he went into a bicameral Democratic leadership meeting in House Speaker Nancy Pelosi’s office on Tuesday afternoon.

“Tim came to the committee, admitted he had made some mistakes and was very contrite. In my opinion, these mistakes were not at all disqualifying,” added Schumer, a member of both the Democratic leadership and the Finance Committee. “I continue to strongly support his nomination and, given the tough economic conditions, hope we can confirm him as quickly as possible.”

The extraordinary effort to save Geithner stands in stark contrast to the Obama team’s handling of commerce secretary nominee Bill Richardson, who withdrew his nomination quickly at the first whiff of a scandal in New Mexico.

If Geithner survives, he will have avoided the fate of Washington insiders Zoe Baird and Kimba Wood, Clinton administration attorney general nominees who were undone by scandals involving taxes and illegal immigrants.



© 2008 Capitol News Company, LLC

Geithner will be the next Treasury Secretary. As far as the Obama team is concerned, he's already too key in the Financial Stimulus negociations and the TARP to release him. Although I'm certain that Larry Summers would be happy to take his place if need be.

[J]

Stuart Levey tapped as interim Sec Tres

WSJ link

Levey Will Head Treasury Pending Geithner Confirmation
By DEBORAH SOLOMON

WASHINGTON -- Stuart Levey, Treasury's undersecretary for terrorism and financial intelligence, will run Treasury pending the confirmation of Timothy Geithner, whose nomination as secretary has run into trouble over the disclosure that he did not pay certain taxes for several years.

The Senate plans to hold a confirmation hearing for Mr. Geithner on Wednesday, a day after President-elect Barack Obama is sworn in as president. It's unclear how quickly the Senate may vote on Mr. Geithner's confirmation and the Obama team has asked Mr. Levey to fill in until Mr. Geithner is confirmed.

Mr. Levey, a Bush administration appointee, has spent his tenure at Treasury focusing on financial terrorism and has little expertise in the financial crisis now roiling the markets. He is expected to consult heavily with the Obama administration and serve essentially as a caretaker during the interregnum.

Mr. Levey, an attorney, came to Treasury in 2004 from the Justice Department, where he dealt with counterterrorism efforts.

Write to Deborah Solomon at deborah.solomon@wsj.com

Never heard of him, but I doubt he could do worst than Hank Paulson's protégé. I'm hoping Geithner is permanently out of the picture, the world does not need a Hanky Panky mini-me in charge of Treasury.

[The Original Nex]

Levey will be interim for no more than a week at the most. Geithner's hearing is scheduled for the 21st, the day after the Inauguration. He will likely be confirmed by the Senate that Thursday or Friday (earlier if they feel the need to rush him through). He's not "out of the picture." His nomination is not in jeopardy and never was. Tim Geithner will be the next Treasury Secretary of the United States.