Before Mitt Romney’s Cayman Islands investments became an issue in the Republican presidential campaign, a senior Republican senator cited similar financial arrangements as cause for concern about a nominee for a top position at the Treasury Department.

Jeffrey A. Goldstein, who had worked at a private equity firm, was running into tough questions from Sen. Charles E. Grassley (R-Iowa) in 2010 when President Obama gave Goldstein a recess appointment as undersecretary for domestic finance, bypassing the Senate confirmation process.

“His position as managing director of the private equity firm was of particular interest to me because of its offshore investments,” Grassley, the ranking Republican on the Senate Finance Committee, said in a March 2010 statement.

Grassley said at the time that he was concerned that the private equity firm “set up blocker corporations” in the Cayman Islands to help investors avoid U.S. taxes.

Records show that Romney, who made a fortune at the private equity firm Bain Capital, has or had millions of dollars invested in a partnership registered in the Cayman Islands.

Experts say hedge funds and private equity firms routinely set up corporate shells known as “blockers” in offshore havens to shield investors such as charities, endowments and pension funds — which are generally tax-exempt — from taxes on a special type of profit known as unrelated business income.

Romney, who invested through an individual retirement account, could have received a similar benefit, according to people who specialize in offshore finance.

Grassley grilled Goldstein on such arrangements at a March 2010 confirmation hearing.

“So the only real difference that I hear between investing in the Cayman Islands and investing in the United States, or the only way that the Cayman Islands investments are superior, is the possibility of avoiding U.S. tax,” Grassley said.

He added, “I do not think that that is something the American public would agree with or appreciate.”

Grassley noted that Goldstein had listed other favorable attributes of the Caymans, such as a legal system similar to that of the United States, use of the English language and proximity to the United States.

Grassley mocked those points one by one.

“But if somebody wants to be close to the United States, would they not be even closer ... by actually being in the United States?” he asked.

In written answers to questions from Grassley, Goldstein said advantages to U.S. firms investing in the Caymans included “no Cayman Islands income tax.” He said that he had interests in several investment vehicles in which some investors used blockers organized in the Cayman Islands.

Goldstein wrote that the private equity firm where he worked, Hellman & Friedman, did not have staff or offices in the Caymans.

At his hearing, Goldstein testified that “blockers allow tax-exempt organizations to keep their income tax-exempt.”

The Romney campaign did not respond to requests for comment.

In a statement Wednesday, Grassley said offshore tax havens are subject to abuse. But he added: “If involvement in offshore tax havens isn’t disqualifying for someone whose position is directly related to tax policy, it shouldn’t be disqualifying for Mitt Romney.”

Staff writer Lori Montgomery contributed to this report.