Conflict of Interest and President-elect Trump: A Primer

How Donald Trump intends to keep his business interests separate from his duties as President has become a principal point of contention since he won the election eight days ago.  Trump has said he will turn over management of his affairs to his children, but critics say this is not enough and have begun stepping up an attack based on potential conflicts between his personal financial interests and his responsibilities as President.  For reasons both legal and practical, however, the attack is without substance, and continuing it only diverts attention from real worries about his policies while fueling the hyper-partisanship surrounding discussions of ethics in American political life.  Furthermore, whatever the President-elect thinks about ethics and corruption-fighting, using the conflict of interest cudgel to beat him around the head and shoulders is unlikely to make him more sympathetic to the cause readers of this Blog share.

As a legal matter, the conflict of interest statute does not apply to presidents for the simple reason that it would limit the powers they enjoy under the Constitution.  The law makes it a crime for any government employee “to participate personally and substantially . . . [in a] particular matter in which . . . he [sic] . . . has a financial interest.”  Were it applicable to presidents, a president who took office holding shares in an arms maker would not be able to decide matters affecting the national defense – at least until the shares were sold.  But this would limit the powers the Constitution grants the president as Commander in Chief, something no statute can do. The presidential exemption has never been questioned and was formalized in a 1989 amendment to the Ethics in Government Act approved without a peep of opposition.

Some claim the only way Trump can avoid hopeless entanglement with the conflict of interest rules is to put his assets into a blind trust.  To see why this is no solution requires delving into how the conflict of interest law prevents executive branch appointees and civil servants from “personally and substantially” participating in decisions that would affect their financial interests.

One way is for the individual to sell off the offending interest before taking office.  The second is for the employee to put the assets in a blind trust, meaning one where the trustee does not reveal what assets are in it.  The theory is that since the person will not know what’s in the trust, whatever assets it holds could not influence his or her official decisions.  The rules specifying the requirements a trust must meet to be considered “blind” are lengthy and complex.  Among other things, the trustee “must be a financial institution, a C.P.A., an attorney, a broker, or an investment advisor who is independent of the federal official;” the official cannot “peak” at the assets, and critically, the official is still disqualified from personal and substantial involvement in a matter that would affect assets transferred to the trust until the trustee certifies they have been sold (click here for the text of the regulations).

Confusion exists as to whether President-elect Trump is required to put his assets in a blind trust.  So in discussing Trump’s plans to turn his businesses over to his children, a Wall Street Journal story says this won’t be good enough: “Mr. Trump wouldn’t be able to use a blind trust to have his children run the business because federal law allows for such arrangements only to be managed by independent outsiders, not family members.” But the presidential exemption from conflict of interest rules applies to the blind trust rules too, leaving Mr. Trump free to establish whatever type of arrangement he chooses to handle his affairs – including no arrangement whatsoever.

Trump biographer (and critic) Timothy L. O’Brien acknowledges Trump can do whatever he likes with his assets but urges that he establish a blind trust for appearances sake.  This view echoes advice the Office of Government Ethics offered in 1983, which, while acknowledging that the president, or the vice president for that matter, is not required to obey the conflict of interest law, stated that “as a matter of policy, the President and the Vice President should conduct themselves as if they were so bound.”  Although this would seem to be sensible counsel, in fact it is not and certainly not in the case of Trump.

There is first of all the problem with the current rules governing blind trusts.  Both academics and practitioners have shown they are ineffective, for reasons ranging from the ease of their permeability to the daunting complexity of the rules governing them to the practical problem of finding a trustee who will not mismanage trust assets.  In a 2015 critique, two attorneys with long experience with U.S. ethics laws questioned why in light of their many flaws the media and the public had placed such “mystical confidence in the ability of blind trusts to defend against conflict of interest charges. . . .”

Applied to presidents, there are more fundamental problems which the Trump case lays bare.  His financial disclosure shows he has interests in hotels and other properties in Azerbaijan, Brazil, China, Dubai, Qatar, and Scotland as well as the United States.  If he were to follow the Government Ethics Office advice and act as though he were bound by the blind trust rules, he would have to refrain from participating in any decision that would, in the words of the regulation, “have a direct and predictable effect” on these interests until the assets were sold.  How long would that take? What should he do in the meantime? Refrain from involvement in the negotiation (or renegotiation) of any trade agreement? Decline to confer about a Middle Eastern peace accord? Avoid discussing resolution of territorial disputes in the South China Sea? Or matters involving Brexit?  Should he not propose changes in the tax code too? Perhaps he should just put the entire government on hold.

He could follow the provisions in the conflict of interest law and ask his supervisor to appoint someone to act in his stead until the assets are sold.  But who is his supervisor?  Maybe he should be the one to appoint someone to act in his place?  Who should that be?  Vice President Pence?  A Cabinet member? White House staff?

Not only does the Constitution make no provision for an acting president in these circumstances, but those who voted for Trump voted for him to make such decisions – not some surrogate. Are they to be disenfranchised until the final sale of his assets?

The crux of the matter is that the conflict of interest law was never meant to apply to presidents.  It was enacted in response to procurement fraud uncovered during the Civil War and meant always to cover appointed and career employees who had particular and substantial power over a narrow part of government from which they could reap a financial bonanza if they misused it.  The problem is that the conflict of interest mantra has expanded, in the words of its most insightful analyst, into something much more:

a “demand [for] reassurance from officeholders that their official judgment is unencumbered in ways that require increasingly sophisticated excursions into their (and often our own) moral psychologies.” (Andrew Stark, Conflict of Interest in American Public Life, Harvard University Press, 2000, p. 3.)

But this something no law can achieve and to ask that one do is to be guaranteed disappointment.

American ethics law long ago passed the point of providing guidance on what kind of conduct citizens were entitled to ask of government employees. It has become instead a weapon in the hands of partisans.  So it is surely too much to expect, particularly given the extraordinary divisions in the body politic Trump’s election has opened, that his opponents will take the above to heart and stop barking up the conflict of interest tree.  But beyond the lack of substance to the conflict claims, his adversaries should be reminded that the time spent on them is time taken from asking whether he will buddy up to dictators or whether his fiscal policies will lead to financial ruin, to pick just two of many examples of issues of far greater weight at home and abroad than whether by devious design or unwitting accident some decision Trump takes might add to his personal wealth.

8 thoughts on “Conflict of Interest and President-elect Trump: A Primer

  1. Pingback: Conflict of Interest and President-elect Trump | Anti Corruption Digest

  2. Honestly, this seems quite bleak to me. Why wouldn’t Trump do everything in his power to enrich himself and his family through the use of presidential power? The enrichment may not be some side effect of his actions, but rather the central aim of those decisions, whether it be trade law or going to war.

  3. Pingback: No checks, big balances | Appendix A

  4. Very interesting, thanks for this.

    But what about the Emoluments Clause of the Constitution? It seems pretty clear that this applies to presidents, as there is plenty of historical precedent, most recently including Obama (for example, with respect to his acceptance of the Nobel Prize, as described recently in NYT) and going much further back (as argued by Zephyr Teachout: Doesn’t that seriously restrict Trump’s business dealings with foreign government-owned businesses?

    The blind trust may be an imperfect solution, as you say, but doesn’t it still seem better than openly violating the Constitution, at least from appearances perspective?

    Also, I am not sure I agree with you that the Trump voters intended for Trump to just get on with things while ignoring these issues, given that this was not prominently discussed in the media prior to the election (certainly nowhere near as much as the Clinton Foundation scandal, for example).

    • Thanks for the thoughtful comment. My take is that with Trump openness is a better approach to addressing the conflict of interest issue than blindness. Let citizens decide for themselves whether, when faced with a decision where his financial interests conflict with the national interest, he puts the latter ahead of the former. If enough decide he is favoring his own interests rather than the nation’s they have two remedies, deny him re-election or convince Congress to remove him from office through the impeachment process.

      The problem with my approach is that the current disclosure rules may not provide enough information for the electorate to make informed judgments. That is where Trump could help himself, and disarm his critics, by disclosing enough to allow informed decisions. That would also deal with the emoluments question. If the disclosure reveals he is getting paid by a foreign government (I gather the question of a state-owned enterprise is open as there were no SOEs around when the clause was drafted), that would seem to fit comfortably within the definition of “high crimes and misdemeanors,” the standard, along with treason and bribery, for removal from office.

  5. If he doesn’t divest what he can, place into a blind trust, and or have some fiduciary manage his affair while in office, wouldn’t every decision he makes, suspect, and subject to criticism, if it can be shown to be even loosely linked geographically, industrially or economically to one of his businesses?

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