Mnuchin gave inaccurate answers on FBI probe, Relativity and China

The Senate took notice of my reporting that the FBI had indicated that the media Steven Mnuchin had helped drive to bankruptcy before leaving and allowing his other company to plunder Relativity Media’s coffers. Senator Sherrod Brown asked the FBI to release the files and made a point of bringing up the matter during Mnuchin’s confirmation hearing. However, while Mnuchin’s response may not have been a lie, it was not accurate and raises several more questions. Until the FBI responds to the appeal for the release of the file and Senator Brown’s supporting request that the FBI release the file, it’s important to look at Mnuchin’s answers on the matter and examine them in light of what’s known.

According to a transcription presented by Deadline, Senator Brown brought the matter up with Mnuchin in the context of insider loans. “One example of an insider loan was the Relativity Media deal. The FBI denied a FOIA request related to Relativity Media where you were co-chair citing law enforcement procedures. Have you been questioned by law enforcement on this?”

Mnuchin responded by denying that he had been questioned by the Bureau and that “I have not … I assumed that the FBI did a thorough review of my background report. I have no idea why they didn’t approve the FOIA issue. I’ve been told that we have no reason to believe that it’s any issue associated with me. I would direct that (question) to the FBI.” In the full context, Mnuchin seemed to imply that the FBI investigation into Relativity Media may have simply been part of the background check. This is not the case, however.

Despite the FBI’s stonewalling both the public and (for the moment) the Senate on this, we can state with near absolute certainty that this is not what happened. (The only real source of “reasonable doubt” in this regard is that the FBI’s written response may have been inaccurate or misleading.) The FBI’s response does not simply refer to it as an “investigative file,” but rather as an investigative file “compiled for law enforcement purposes” and that “there is a pending or prospective law enforcement proceeding.” This is neither the language nor the exemption that would be cited for a background check, which would fall under either b(1) or b(6) instead of b(7)A. That it was not the result of a background check is confirmed by the fact that no information on this was provided to the Senate and it wasn’t include in the background report that they received from the FBI.

The fact that the FBI’s investigation is not simply a background check is further confirmed by the fact that they cited no exemptions for the file on another one of Mnuchin’s media companies. When it comes to RatPac-Dune Entertainment, the FBI says there is no investigative file. In addition to the language and exemption codes used by the FBI indicating they’re investigation isn’t part of a routine background check, there’s no reason to believe that the FBI would have looked at one of his companies but not the other.

Mnuchin also said, in a rather vague manner, “I’ve been told that we have no reason to believe that it’s any issue associated with me.” This statement raises several questions that need answering by Mr. Mnuchin and that the Senate should consider. When did Mnuchin first become aware of the investigation? Who has he spoken to about it? Was he apparently told this by the FBI, someone in law enforcement or one of his lawyers? Was this “no reason to believe” based on ignorance (i.e. “no one’s told us you’re being investigated”) which would make the assurance somewhat hollow, or based on specific knowledge (i.e. “we have information about the investigation that leads us to conclude it’s X”) that remains private? If it is the latter and Mnuchin (understandably and respectably) decided not to reveal details of an ongoing investigation in a public forum, there will be no reason that he cannot address this to the Senators in closed door meetings.

There is another possible explanation for the FBI investigation, which Senator Brown raised in the confirmation hearings. To quote the transcripts provided by Deadline:

Brown went on to ask about Chinese investment in the film industry and while co-chair at Relativity opening the doors to Chinese investment: “China readily admits that it wants to become increasingly powerful by increasing its cultural influence in this country and expanding its stake in the U.S. film industry. You were a board member of a company that partnered directly with the Chinese government that increased their influence in Hollywood. We’re you helping China expand its global power?”

Mnuchin retorted: “As it relates to my experience at Relativity, the Chinese never invested in Relativity, and I don’t recall them ever having invested in Relativity films. They did have a small, joint venture in China but it was not particularly successful … in regards to my view on China, I, 100%, support the President’s view and we need to look at China overall from a trade standpoint, an economic standpoint and a securities standpoint. I look forward to working with him on that.” Sherrod shot back, saying: “That’s not the reports we’ve gotten.” Mnuchin did agree with one Democratic senator who called China “a monetary manipulator.”

These foreign entanglements could explain the FBI’s interest. Although our understanding of these ties and what might concern the Bureau remains limited for the time being, comparing Mnuchin’s response against the record reveals a disconnection from reality. By the time Mnuchin came on board at Relativity Media in October 2014, the company’s ties to China were already firmly established. According to The Hollywood Reporter in 2011, Relativity Media launched a “strategic partnership” in China with “Huaxia Film Distribution Co. and SkyLand (Beijing) Film-Television Culture Development … to create the first  joint venture that will handle distribution along with film production and financing in both China and the U.S.” Relativity Media’s founder and CEO Ryan Kavanaugh described the deal as “unprecedented.” The deal with Huaxia is significant as it’s a government operated distributor. The deal would ultimately result in Relativity Media asserting it had a “close relationship” with Huaxia.

This initial deal with China would not be the end of Relativity’s relationship with them. Variety reported that just before Mnuchin joined Relativity Media, the company made a new deal in the form of a joint broadcasting agreement with Jiangsu Broadcasting Corp (JSBC). As part of this deal, Deadline reported that the companies would be working “to develop, co-finance, co-produce and distribute film and TV projects for the Chinese and international marketplace. JSBC is making an equity investment in Relativity as part of the deal.” This would directly and significantly contradict Mnuchin’s lack of memory of any investment as it played a major role in the companies operations during Mnuchin’s tenture at Relativity Media. Deadline also reported that Relativity was “appointed as the strategic international distribution partner for Chinese language films licensed by China Film Promotion International, a state-owned government agency that oversees the promotion and commercial distribution of Chinese films abroad.” This would be the second state run agency that Relativity was making deals with at the time. Deadline added that another Chinese company would be investing in Relativity, stating the company had “also signed a strategic advisory agreement with Industrial and Commercial Bank of China Limited [(ICBC)] via which investment firm SeedShine Capital has entered a binding agreement to invest in Relativity.” According to the Managing Director of ICBC, this “strategic advisory relationship with ICBC will grant Relativity access to ICBC’s international network of financial resources.”

In light of this, there are two additional questions that the Senate should consider about Mnuchin. First, why did he dismissively profess ignorance to these extensive and ongoing ties to and investments from China and Chinese state-run companies when asked about it? Second, what did Relativity do with this international network of financial resources, how did it affect the bankruptcy and the money that OneWest took from Relativity Media’s coffers right after Mnuchin stepped down?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s