Do Donald Trump's new conflict-of-interest proposals really ensure that the first billionaire POTUS will be fully barred from using his presidential power to increase his mammoth fortune?
At the President-elect's press conference on January 11, Sheri Dillon, an attorney at Morgan, Lewis & Bockius, outlined a long list of restrictions and provisions designed to separate President Trump from any connection to his business empire. Many critics are already assailing the plan for not going nearly far enough.
But John Olivieri, an partner at prominent law firm White & Case who has drafted blind trusts for politically connected clients, generally finds that the new Trump rules make sense, and that taking the extreme measures proposed by his critics might not work in practice and could potentially cause other conflicts. What's more, while critics might like Trump to fully divest, in reality, there is no legal obligation for a president, Trump or anyone else, to give up management control over his businesses.
Here are the principal features of the Trump blueprint, and Oliveri's view of their strengths and weaknesses.
Trump In A Trust
The Trump Organization will be rolled into a trust, with full managerial control passing from Donald Trump to his sons, Donald, Jr., and Eric, along with long-time CFO Allen Weisselberg.
Oliveri observes that the trust agreement resembles the blind trusts created for politicians, with a major difference. "In most cases, blind trusts have independent trustees who make all the decisions with no communication from the 'grantor,' in this instance Donald Trump," says Oliveri. "As represented, this trust calls for his sons and his CFO to make the decisions." He adds, however, that the terms described bar the three decision-makers from sharing any information with the President regarding individual deals, or even the revenues or profits from different lines of business. "As long as those provisions are followed, the arrangement makes sense," says Oliveri. "It's in the same spirit as a classic blind trust."
Selling Off Assets
Dillon stated that Trump has already sold all his stocks and corporate bonds, and will hold the proceeds in cash and Treasuries while he is President. She also stated that the Trump Organization will forego all deals with foreign governments or investors. But the company will continue licensing its name and making real estate investments in the U.S.
Critics had called on Trump to sell all of his assets, including the rights to licensing his name, and his collection of hotels, golf courses and apartment buildings.
Clearly, Trump's solution fall far short of what his critics were demanding. Oliveri, however, believes the extreme demands wouldn't work. "First of all, it isn't clear that he could sell the rights to his own name, and prevent Donald Jr. and Eric from using the Trump name in some other way. It's their name too." And selling the "name" to investors poses its own problems. "You create the perception that someone bought the president's name, and paid a big price, because his becoming president made that name worth so much more," says Oliveri. Hence, he'd be profiting from his office by selling his name. Also, the purchaser of the Trump name could benefit from moves Trump might make as President, leading to accusations that Donald Trump got a premium price in exchange for promises to aid the new owner of the Trump name. "It's a better solution to keep the name in the Trump Organization, but have an arrangement where the President has no day-to-day knowledge or influence on what's going on."
What about the practicality of dumping all of his assets for cash? Oliveri agrees that putting all of the Trump properties on the market at once, with a tight deadline to sell everything, "would have a depressing effect on the price of those assets." Still, critics have a point that, to totally and definitively eliminate any possibility of conflict, the pure, ultimate solution is cashing everything out, and putting the proceeds in a blind trust.
That course would cost Trump billions. His critics claim it's a necessary sacrifice for the honor of serving as President. But it's a cost The Donald is unwilling to pay.
An Ethics Adviser
Dillon stated that all new deals must be approved by an "ethics adviser" who will soon be appointed. That adviser "will scrutinize all deals," Dillon said, and must approve all new transactions in writing.
Although Dillon didn't specify what organization will employ and pay the adviser, it appears that the he or she will work for the Trump Organization. But it's common practice for "independent" monitors at newspapers, investment banks and law firms to work for those entities. "Having an expert that you pay saying that something is fine, won't necessarily convince the public that it's fine," says Olivieri. But he still feels that the watchdog role is a useful one. "If that expert, unknown to the public, stops them from doing something that's not okay, that will be a valuable service," he notes.
In one of the most surprising provisions, Dillon announced that the Trump Organization will donate any money spent by foreign governments at Trump hotels to the U.S. Treasury.
The Constitution bars U.S. officials from receiving gifts, titles or "emoluments," basically meaning payments, from foreign governments. It's far from clear that payments are illegal if they're in exchange for services of like value–for example, paying the normal rate at a Trump hotel, or a licensing fee for using the Trump name. Dillon made exactly that point.
In an effort to avoid controversy over the issue, Trump agrees to donate all money paid by foreign governments at Trump hotels to the U.S. Treasury. He's following the example of America's eighth president, Martin Van Buren, who petitioned Congress to allow him to accept Arabian horses and other presents from what was then the Sultan of Oman, so long as the U.S. sold the loot and deposited the proceeds in the Treasury.
Nevertheless, payments could still pass unnoticed by the Trump Organization itself, stirring further criticism. It's clear if a foreign government is paying a licensing fee, but what if a foreign government employee stays at a Trump hotel for $400 a night. The Trump Organization might not notice.
The Trump ethics plan is extremely comprehensive and detailed, and if it works as proposed, he'll be fully isolated from all business decisions for the next four, or even eight, years that he serves as president. Still, America's never had a president whose gigantic business keeps running, in his absence, while he's leader of the free world. Trump's betting that what he thinks is ethical fits the broad public's view. If his instincts are right again, the conflict-of-interests issue will fade quickly. If not, it could dog his presidency for years to come.