In my last post, I suggested that legal responses to concerns about corruption in the Trump Administration—in particular, concerns about Trump’s use of the presidency to enrich his family—might be more successful at the state level than at the federal level, and might be more viable if they do not attempt to target Trump directly, but rather deploy state law tools to limit the Trump family’s ability to leverage Trump’s position for commercial gain. My last post noted two proposals for lines of legal attack that could be initiated by state attorneys general (or possibly by private parties) under existing bodies of state law: state unfair competition laws (some of which are framed very broadly) and state corporate laws (which give states considerable power to regulate corporations, and possibly limited liability companies (LLCs), operating pursuant to state charters).
These proposals are attractive because they do not require any changes in existing laws. At the same time, and for that same reason, the laws in question are not necessarily well-tailored to the specific and unprecedented corruption/conflict-of-interest problems at issue in the Trump Administration. For that reason, it might be worth exploring potential changes to state law that would give state enforcement agencies, and possibly private litigants, more effective tools to rein in some of the most egregious sorts of potential conflicts, and thereby to enforce a more rigid separation between the Trump Administration and the Trump family’s business interests. Even though Republicans control the large majority of state governments, there are several states where Democrats and sympathetic Republicans might well have enough clout to pass such legislation—including, perhaps most importantly, California, New York, and Delaware. (Many other states have popular ballot initiative processes that might enable the passage of legislation even over the objections of Republican-controlled state legislatures.)
What might such state-level legislative reforms look like? This is a topic I hope to explore in a series of future posts, but here let me throw out a few relatively simple preliminary ideas:
- First, picking up on a suggestion I floated in my last post, states could amend their unfair competition laws (UCLs) to state specifically that it shall be an unfair method of competition for any business entity to engage in or facilitate a violation of the Foreign Emoluments Clause of the U.S. Constitution.
- Second, states could amend their UCLs to specify that it shall be an unfair method of competition for any for-profit commercial entity operating in the state, or marketing its products or services to residents of the state, to imply that its business, product, or service is endorsed or sponsored by the President of the United States. The amendment could further clarify that the conduct covered by this prohibition would include (but would not be limited to) using the name or likeness of the President, or the President’s spouse or children, in the commercial entity’s name or any advertisement or promotional materials. The amendment might also bar any third-party vendor in the state, including retail stores and online venues, to sell or facilitate the sale of goods or services to any commercial entity in violation of this prohibition.
- Third, states could amend their corporate laws to make clear and explicit what Professor Jed Shugerman has argued may well already be the case under current law in many states: That any corporation or LLC operating under the authority of a charter or certificate issued by that state must comply with all state and federal laws, including the Foreign Emoluments Clause of the U.S. Constitution, and that the state attorney general has the authority to sue to enforce this requirement and, in appropriate cases, to revoke a corporate charter or LLC certificate for violations.
- Fourth, states could amend their existing laws against bribery and unlawful gratuities to make clear (to the extent that it is not already clear) that, although state law cannot apply to federal officials who receive bribes or unlawful gratuities, the state laws against giving bribes or unlawful gratuities apply to anyone within the state’s jurisdiction who gives such bribes or unlawful gratuities to federal officials.
- Fifth, and building on the previous suggestion: In light of the fact that the risks of bribery are heightened when dealing with businesses in which senior government officials have a substantial interest, states could further amend their unlawful gratuities statutes as follows: (A) Any for-profit business entity in which the President of the United States, Vice President of the United States, or any officer of the United States of cabinet rank or higher, or the spouse or child of any such official, has effective control and/or a substantial ownership interest shall be designated a “politically connected entity”; (B) Any commercial transaction with a politically connected entity within the state’s jurisdiction shall be deemed a presumptive violation of the state’s prohibition on the provision of unlawful gratuities to federal officials; (C) This presumption may be rebutted only with the prior written consent of the state attorney general, or his or her designee, verifying that the party seeking to transact with the politically connected entity has no substantial and particular interest in any matter currently pending within the jurisdiction of federal official who has (or whose spouse or child has) effective control and/or a substantial ownership interest in the politically connected entity.
- Sixth, the state could amend its laws to prohibit the state itself, or any locality, political subdivision, or instrumentality of the state government, from doing business with a politically connected entity as defined in the previous proposal, absent written permission from the state attorney general or his or her designee, and only upon a showing that the politically connected entity supplies a product or service essential to the effective operation of the state or local government that cannot be procured at reasonable cost from an alternative supplier.
To be clear, it is important—not only as a matter of policy, but perhaps also as a matter of legality—that none of the above proposals is intended to interfere with or otherwise influence the operation of the federal government, or with how President Trump and other members of his administration discharge their constitutional duties. Rather, the above proposals target only private commercial enterprises, and seek to advance the following legitimate state interests:
- To ensure that economic competition within the state takes place on a fair and equal footing, and that no firm may seek commercial advantage—to the detriment of the state’s citizens and competing firms—through unfair means, in this case the exploitation of political connections or the appearance of such connections;
- To ensure that the state’s laws, and privileges granted pursuant to those laws (such as corporate charters and LLC certificates), are not abused to facilitate unlawful conduct;
- To further the interest in ensuring that private parties operating within the state’s jurisdiction do not seek to compromise the integrity of government operations through improper material inducements, and to safeguard this interest through the use of reasonable prophylactic presumptions and burden-shifting mechanisms;
- To ensure that the state government, as well as its instrumentalities and subdivisions, operate with integrity and efficiency.
Of course, pursuing these interests might also have the desirable collateral consequence of increasing the incentives for the Trump family to divest its holdings and place its assets in a blind trust, as the Office of Government Ethics recommended. This incentive might be especially strong if some or all of the above suggestions were adopted by economically consequential states like California and New York, and also states like Delaware, where many of Trump’s businesses are incorporated. But how Trump chooses to respond to state laws like those proposed above is not really the main point to emphasize. Rather, this set of proposals, or something like it, may help states enforce their own legitimate interests in protecting their interests, and the interests of their citizens, from some of the dangers associated with the excessive blending of business and politics at the highest levels of the U.S. government.