Trump’s Conflicts–He’s done enough

Trump’s Conflicts–He’s done enough–58gh.,b58

.President-elect Donald Trump’s attempt to put the conflicts issue behind him has failed, at least according to the mainstream media. His announcement that he would resign from all positions with companies in the Trump Organization, put the Trump Organization in a trust run by his two sons and a Trump Organization employee, and not communicate with the trustees on the business did not stifle the howl from the media and such self-appointed ethics watchdogs as Richard Painter and Norman Eisen, who continue their dire warnings about the new president’s potential conflicts of interests. Even the supposedly nonpartisan director of the Office of Government Ethics has chimed in, saying that Trump’s “plan does not comport with the tradition of our presidents over the last 40 years” (which is incorrect with respect to President Carter; the others did not have financial interests that came close to the extent and complexity of Trump’s).

The media and the watchdogs insist on a full divestiture by Trump of all financial interests in the Trump Organization (he will be the principal beneficiary of the Trump trust). For a variety of reasons, divestiture probably cannot be done at all, but it certainly cannot be done without creating an entirely new set of conflicts. What the president-elect has done would not satisfy the requirements of the federal conflicts law if they applied to him (they do not), but he has made a good-faith effort to distance his role as president from his financial interests. To understand why he has gone about as far as he can or should go, one must look at the law and the facts.

The Law. The president is specifically excluded from the federal conflicts of interest law. The issues he is dealing with are not legal issues, but appearances of conflicts. There are no end of these in sight. If President Trump reduces the corporate tax rate as part of an economy-boosting tax reform, the media and the watchdogs will claim that his trust benefits. Even if the laws applied to him, though, this would not be a conflict of interest. In 1990, when Saddam Hussein invaded Kuwait, President George H. W. Bush’s advisers worried whether the imposition of sanctions on Iraq would create a conflict of interest for those advisers who had domestic oil industry investments.

Thus, presidential acts by President Trump that are focused on broad issues like, say, tax reform would not fall under the conflicts law. The media and the watchdogs will decry any big-picture presidential action that has an incidental benefit on his financial interests. As a matter of law, this is just wrong.

The Facts. Most of the watchdogs, citing actions by other presidents, demand that Trump avoid even the appearance of conflicts by divesting his business interests, either through a massive public stock offering or leveraged buyout. No recent president, however, has had financial interests approaching the extent and complexity of the Trump Organization. In fact, what Trump has done is not that different from what Jimmy Carter did with his peanut farm and warehouse.

The Trump Organization is vast and complicated. It is in large part based on two illiquid assets: real estate and the Trump name. Real estate holdings are not easily disposed of. The Trump name is perhaps the ultimate illiquid asset—even if Trump himself were willing to sell it, any buyer would no doubt insist on a perpetual, exclusive right to use the name.

Demands that Trump divest are impractical for many reasons, even if the family name were not involved. Besides their sheer complexity and the time that would be required to effect them, an IPO or buyout would generate the same ethical issues that led to their being proposed. As I have pointed out elsewhere (Wall Street Journal, December 10, 2016), an IPO would have to be cleared by the SEC. By the time Trump becomes president, three SEC commissioners’ seats and the head of the Division of Corporation Finance will be vacant, and in the time required to implement an IPO, the other two commissioners’ terms would expire. Trump would thus be appointing all five members of the agency, as well as the director of the division regulating his IPO. A leveraged buyout, on the other hand, would require massive lending by banks regulated by the Trump administration, including some owned in whole or part by foreign states.

The real problem with divestiture demands is that they require that the Trumps give up their name—not just the president-elect, but his wives, his children, and his grandchildren, born and unborn. Is there a buyer willing to pay what Trump would demand, and could Trump deliver a valid, perpetual use of the name?

Could Trump Do More? My conclusion is that he cannot, with one exception. He is stuck with his financial interests. He has tried to distance himself from his business operations. The media will hound him about whether he has had communications with his trustees or whether some presidential act benefits a financial interest. My advice: He should simply state that he will not participate personally and substantially in any “specific party particular matter” to which an entity controlled by him is a party. This is based on the standard in Section 502 of the Standards of Ethical Conduct for Employees of the Executive Branch, requiring a waiver or recusal if participation in such a matter would create an appearance of a conflict of interest. (Incidentally, the president and vice president are exempted from this standard, and there are no penalties for its violation.)

What About the Emoluments Clause? This constitutional clause provides that “no Person holding any Office of Profit or Trust .  .  . shall without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince or foreign State.”

Painter and Eisen, the primary watchdogs, say that any payment by any foreign government or official to any Trump entity is a violation. The problem is that Painter and Eisen have nothing to back up their position. Period. There are no court decisions or OLC opinions that support this view.

Trump, however, is going further than the emoluments clause would require, in order to avoid a problem the media has drummed up—foreign officials will try to curry favor by staying at Trump hotels. Trump has committed all profits on rooms rented by foreign officials to be paid to the U.S. Treasury. Thus, he has taken all profits out of staying at Trump hotels.

What About the Hotel Lease in Washington, D.C.? Perhaps the highest profile asset in the Trump Organization is the Trump International Hotel, located just four blocks from the White House, housed in the historic Old Post Office building and leased from the Government Services Administration (GSA). George Washington University Law professor Steven Schooner has declared that Trump will breach the lease when he takes the oath of office, citing the following clause in the lease: “No .  .  . elected official of the Government of the United States .  .  . shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom.” This clause is meant to bar a lessee from passing an interest on to a government official. If it were intended to bar a lessee from becoming an official, the lawyer drafting it should be fired.

Trump has personally guaranteed the net worth of the lessee, and it cannot be transferred except to an entity that meets specified financial requirement. Add to that the general perception in the D.C. real estate business that Trump substantially overbid his competitors for the lease, and one can see what the GSA has at stake in any proposed transfer of Trump’s interest—and in releasing him from his guarantee! And who will be the GSA’s boss? President Trump. Again, the media’s favorite “solution” only creates new conflicts.

Eisen, I assume, was a co-architect of the understandings between the Obama administration and the Clinton Foundation that were designed to “ensure that the activities of the Foundation .  .  . do not create conflicts or the appearance of conflicts for [Secretary] Clinton,” but did not stop Secretary Clinton from meeting personally with donors to the Clinton Foundation with business before the State Department. To my knowledge, neither has any experience in the complicated transactions of the type they are insisting President-elect Trump must undertake.

We are a rule-of-law country; what Trump is doing to alleviate the appearance of conflicts is probably enough; it is certainly well within the law on these issues. If he were to do something really bad, the media should pounce. But my conclusion from the media’s sorry performance so far on the ethics/conflicts coverage is that they are so anti-Trump that even routine actions taken by him will be criticized severely. That’s a problem. Effective watchdogs should wait for a real wolf before “crying wolf” if they want to be listened to.

source–weekly std, edwin williamson, richard painter, narman eisen, olc, wsj, steven schooner,

 

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