Why Aren’t Donald Trump’s Epic Conflicts of Interest Illegal?
With Donald Trump’s global business empire already reaching such nations as Azerbaijan, Turkey, Indonesia, and the United Arab Emirates—and eager to enter new realms—the potential for conflicts of interests both domestically and internationally has long been obvious.
It’s clear also that the “blind trust” candidate Trump has been talking about setting up since last January between himself and those far-flung business interests will be neither blind, nor a trust, nor provide any meaningful insulation whatsoever.
He will let his adult children run his businesses, he has said, even though they are also now serving on his transition team, will certainly stay in close touch with him, and may well serve as de facto advisers on presidential business as well. (CBS News reported Monday that Trump is seeking top secret security clearances for his children.)
Several people have asked me why the federal conflicts of interest law, which bars every lowly executive branch official from acting on matters that affect their personal financial interests, won’t apply to President Donald Trump.
To find out answers to that and related inquiries, I did some research and also spoke to Richard Painter and Norman Eisen, the former top White House ethics counsels for George W. Bush (2005-2007) and Barack Obama (2009-2011). Here are the answers.
Why doesn’t the federal conflicts of interest law apply to the President?
Congress was most likely avoiding direct confrontations between branches of government, which would also raise Constitutional issues.
The Constitution sets out the qualifications for being President (things like being at least 35 years old and a “natural born citizen”). If Congress added supplemental strictures, those could at least be challenged in court as unconstitutional.
The conflicts of interest law—which carries federal criminal penalties—avoids those issues by exempting the President and Vice President from its provisions.
It also leaves out members of Congress (though not their staffs), perhaps, similarly, to avoid confrontations with prosecutors from the executive branch. Each branch of Congress has set up its own ethical rules, which that branch alone enforces.
Do Presidents, then, simply govern despite conflicts of interest?
Not in the past 50 years.
According to Painter, “every other President in modern times has tried as best they could to act as if the law did apply to them.” President Reagan, both Bushes, Clinton, and Obama, all used “blind trusts” to manage assets, he says. Painter is now a professor at the University of Minnesota Law School.
(Vice President Dick Cheney was dogged by criticism for allegedly not adequately severing his relationship to Halliburton, the oil services company he had once run. In that instance—trivial when compared to the conflicts Trump is gearing up to incur—he merely continued to receive deferred compensation and options proceeds, which he had pledged to donate to charity.)
What’s a blind trust exactly?
With a true blind trust, Painter says, a president would typically sell his business, and then have an independent trustee—someone with no familial ties—reinvest the proceeds in assets the president doesn’t even know have been selected.
That would be very difficult for Trump. Without such an elaborate divestiture, are the conflicts really so serious?
“Profound,” argues Eisen, who is now with the Brookings Institution. “They are the most serious set of business conflicts any president has faced in modern times.”
The “core conflict” is that “real estate businesses often thrive on easy money from banks,” according to Painter. That industry and the banking industry therefore “have a mutual interest in loose credit and loose regulation,” he continues. So Trump’s stated goal of “dismantling” the Dodd-Frank reforms of 2010 presents at least the appearance of a personal conflict. (The Trump Organization and campaign did not immediately respond to an inquiry seeking comment. In a statement to the New York Times published Monday evening, the organization said: “We are in the process of vetting various structures with the goal of the immediate transfer of management of the Trump Organization and its portfolio of businesses to Donald Jr., Ivanka and Eric Trump along with a team of highly skilled executives. . . . This is a top priority at the organization, and the structure that is ultimately selected will comply with all applicable rules and regulations.”
So are there no other existing restraints? Are we simply at Trump’s mercy when it comes to conflicts?
Well, if Congress thinks an abuse of power becomes obvious and outlandish, it could impeach him. Federal criminal bribery statutes apply to presidents, too, but only for egregious and blatant abuses. Then there’s the emoluments clause, too.
What’s the emoluments clause and how does it factor in?
Article I, Section 9, Clause 8 of the Constitution bars federal officers from, among other things, accepting, without the consent of Congress, payments and gifts “of any kind whatever, from any king, prince, or foreign state.” The Justice Department has interpreted this provision very broadly.
A retired Army officer, for instance, who wanted to take a post as a visiting professor at a foreign university, would have to jump through multiple hoops, seeking permission from both the Army and the State Department. The same would go for a Navy reservist who joins a private law firm that happens to have a sovereign wealth fund as a client—even if the reservist doesn’t work on that account.
In Donald Trump’s case, according to the New York Times, at least one of his businesses has outstanding loans from the Bank of China, which is majority owned by the state. Loans typically have dozens of conditions, and if the bank were to ever forgive or forbear on any of those, or Trump were to negotiate a refinancing, it would be scrutinized microscopically to see if it was a “gift.” If Trump’s policy toward China were tough, it might look like was exerting pressure in an effort to win better terms on his company’s loans. If his policy were accommodating, it might look like he feared retaliation by the bank in the form of tighter terms on those same loans.
White House ethics lawyers ordinarily pore over presidents’ tax forms each years (and those of cabinet members and nominees) to make sure there are no emoluments problems. Because Trump has refused to make his returns public, scrutiny of potential problems has been impossible so far.
Is there anything the public can do to protect itself right now?
Painter recommends that Congress pass a law right now that would require that when a President or his businesses have specific matters pending before a federal agency—like, say, an Internal Revenue Service audit, or a case before the National Labor Relations Board or the Securities and Exchange Commission, or a licensing issue before the Federal Communications Commission—that the matter must be decided by a career civil servant, rather than by a political appointee. (Trump has said that his taxes are currently under audit, and his hotels are also known to have active disputes with unions pending before the NLRB.) In the event that a White House official tried to intervene in any such matter, Painter continues, the bill he envisions would require the agency to notify the House and Senate oversight committees.
Eisen would go further still. He believes that the Congress has the constitutional power to extend the existing conflicts of interest law to cover the President, and he thinks Congress should try to do so. “If the drafters of the conflicts law had foreseen something on this scale,” he says, “they never would have exempted the President and Vice President.”