Treasury Secretary Reportedly Created OZ For Ex-Con Pal Michael Milken
U.S. Treasury Secretary Steven Mnuchin reportedly used his position to create an opportunity zone that would benefit Michael Milken, a financier who went to prison in the 1990s for violating federal securities and tax laws, and a friend of Mnuchin's.
Following instructions personally given by Mnuchin, the Treasury Department designated an opportunity zone that included land in Nevada owned by Milken, despite an IRS memo warning against doing so, The New York Times reports.
Milken, known as the “junk bond king” of Wall Street in the 1980s and supposedly a model for Gorden Gekko in the movie Wall Street, has investments in at least two real estate projects in OZs in Nevada, near his Lake Tahoe vacation home.
One of those developments is a nearly 700-acre site in which Milken is a major investor. Last year, the Treasury Department ignored its own guidelines on how to select OZs and put the area in a zone, according to the NYT, citing people involved in the discussions and Treasury emails that the paper reviewed.
The Treasury Department denied that any department officials, including Mnuchin, had any knowledge of Milken’s investments that could be helped by the opportunity zone program.
“It is outrageous but not surprising that the Times chose to disregard the facts in service of a false narrative,” the department said in a statement, as reported by Politico.
After a stint in federal prison, Milken founded the Milken Institute, a nonprofit think tank whose stated goal is to "advance prosperity" across the world. The organization holds events, sponsors programs and finances research. It has also been a proponent of opportunity zones.
Mnuchin's reported directive could add fuel to criticism of the opportunity zone program as a windfall to wealthy investors, rather than a program that will largely serve its stated purpose: to encourage economic development in impoverished areas.
In a memo obtained by the Times' Eric Lipton, the IRS warned that the OZ designation benefiting Milken would open the door for accusations that the determination process was influenced by political considerations or bias.
"Any such controversy would in turn taint the Opportunity Zones and potentially chill or cloud the incentive for investors to invest in the Opportunity Zones," the memo said.
Milken isn't the only wealthy investor with ties to the Trump administration that has been accused of gaming the OZ program.
Billionaire Dan Gilbert’s relationship with the White House helped him win his desired tax break for much of the property he owns in Downtown Detroit, reports ProPublica, which added that the Gilbert OZ is one of a handful around the country that were included despite not meeting the eligibility criteria.