Why it Matters

The Senate Finance Committee voted Sept. 24 to advance Gerard "Chris" Klomp to be deputy secretary of the Department of Health and Human Services (HHS) by a 15-12 vote, and Ge Bai to be HHS assistant secretary for planning and evaluation, James Gadwood to be Internal Revenue Service (IRS) chief counsel, and Andrew De Mello to be a U.S. Tax Court judge by 14-13 votes. The session turned combative when Sen. Ron Wyden (D-OR) accused Klomp of manipulating his tax payments and called the administration's pharmaceutical deals "a fraud."

The Big Picture

The HHS deputy secretary position has been vacant since James O'Neill resigned on Feb. 13, leaving the department without a Senate-confirmed No. 2 during ongoing measles outbreaks. Klomp's Sept. 15 confirmation hearing drew scrutiny over his response to those outbreaks and his role in the administration's pharmaceutical pricing deals.

For the IRS nominations, a major backdrop was a May Department of Justice settlement involving President Donald Trump, the Treasury Department and the IRS. An addendum to the settlement purported to bar the government from pursuing audits and other claims involving Trump, his family and related businesses concerning tax returns filed before the agreement. The provision subsequently faced legal challenges, and Democrats criticized it as improperly shielding Trump from IRS scrutiny.

Gadwood is a tax attorney at Miller & Chevalier whose financial disclosure identified DJT Holdings LLC, one of Trump's holding companies, as a source of more than $5,000 in compensation for legal services the firm provided. Gadwood declined to say whether he personally represented the company, citing confidentiality obligations. If confirmed, he would be the fourth person to hold the IRS chief counsel role since Trump took office.

What They're Saying

Wyden opened saying, "These deals are a fraud. And Donald Trump and his accomplices are fleecing the American people while the corporate CEOs laugh all the way to the bank." Sen. Mike Crapo (R-ID) defended Klomp's tax approach as following established legal procedures under active litigation, saying, "The allegations against his character are not justified." On Gadwood, Wyden alleged, "That level of secrecy and obstruction at a time when the IRS is trying to give the president a corrupt immunity deal is, in my view, a whopping conflict of interest that should be disqualifying."

Political Stakes

Sen. Elizabeth Warren (D-MA) pressed Gadwood during his confirmation hearing about potential conflicts stemming from his work at Miller & Chevalier, a law firm that has represented Trump's DJT Holdings LLC on tax matters. Gadwood's financial disclosure identified DJT Holdings as a source of more than $5,000 in compensation for legal services the firm provided.

Bai, a Johns Hopkins University professor and critic of aspects of the 340B Drug Pricing Program, drew concern from Democrats over how she would approach the program, which requires participating drug manufacturers to provide discounts to eligible hospitals and clinics. Wyden also alleged that reports Bai oversaw contained false information that the administration later used to justify policies he said would cause 760,000 people to lose health insurance.

The Bottom Line

All four nominations now head to the full Senate for consideration. Wyden signaled Democrats will continue pressing the administration on pharmaceutical deal transparency and IRS independence as the nominations move forward. The committee votes close one stage of the confirmation process, but disputes over tax ethics, vaccine policy and the independence of federal tax administration are set to follow the nominees to the Senate floor.

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