State-Level Responses to Trump’s Corrupt Mix of Business and Politics: Some Preliminary Proposals

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.

9 thoughts on “State-Level Responses to Trump’s Corrupt Mix of Business and Politics: Some Preliminary Proposals

  1. Has anybody given any thought to whether the FCPA can be used against Trump? It may be difficult to prove that Trump’s businesses have made improper payments to foreign officials in exchange for a business advantage, but there seem to be some transactions that would at least warrant investigation (I would imagine access to the WH would be “something of value” and that the improper advantage would be, for example, obtaining a license or permit).

    • I haven’t seen anything in writing, but I’ve certainly heard folks chat about this. I’m pretty sure that if someone — say, one of Trump’s sons — said to a foreign government official, “If you give our business this license or contract, we’ll make sure the White House makes some policy decisions you like,” that would be an FCPA violation. But there are at least two enormous obstacles to using the FCPA as a weapon against Trump in this way. First, as you point out, there’s the evidentiary problem. The transaction is unlikely to be as crude as I’ve described it. Second, the FCPA is enforced by the DOJ and SEC, and it’s very hard to imagine them aggressively going after the President’s family’s businesses, for reasons that are probably obvious.

      That’s not to say there’s no possibility of pursuing possible FCPA investigations against the Trump Organization, but unfortunately I’m skeptical we’ll make much progress on that in the short term.

  2. Pingback: State-Level Responses to Trump’s Corrupt Mix of Business and Politics: Some Preliminary Proposals | Matthews' Blog

  3. Regarding the second recommendation, is it possible that such a law would run into a free speech issue? It’s hard for me to imagine an argument in which speech promoting corruption is deemed valuable, but then again, the courts seem increasingly hesitant to allow restrictions on just about any speech.

    I particularly like the fifth suggestion. If foreign dignitaries are staying in Trump Tower in order to please the President and affect his policy decisions, New York could enact your fifth suggestion and prevent any person from checking in at Trump Tower without prior approval from the AG. If NY is more concerned with bribery by foreign actors rather than by Americans, it could limit the ‘presumptive violation’ to only those transactions that occur between foreign government actors/state-owned enterprise officers and the “politically connected entity”. If I were a New Yorker, I would feel that, as things currently stand, New York is facilitating corruption.

    • Sorry it took so long for me to reply to your excellent comments. (I’ve been traveling.)

      On your first point, about the second proposal, yes, there’s definitely a concern that prohibiting businesses from stating or implying endorsement by the President of the United States would run afoul of the Free Speech Clause of the First Amendment. The speech in question would be “commercial speech,” where the government generally has more leeway to regulate (which is why governments can prohibit false or misleading commercial advertising, but not false or misleading political advocacy), but you’re right both that there are limits to the government’s ability to regulate commercial speech, and that in recent years the courts have become more aggressive in striking down regulations of commercial speech. I don’t know the doctrine here well enough to know whether or how it would be possible to craft a prohibition that would not violate the First Amendment, but I’m hoping that if the proposal attracts some interest, I (or more expert lawyers) can do some more serious research into this issue.

      On your second point, I’m glad you like the fifth suggestion, and your understanding of how it would work, what it’s effects would be, and its underlying justification all correspond to my own. Now we just need to convince the New York state legislature to enact it!

  4. With regard to the second suggestion, would the prohibition on “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,” only apply to those businesses of which the President and his associates have spoken favorably? Or now that being criticized by the President can actually be helpful to businesses, see Nordstrom and most media outlets, would it also apply to those that seek to benefit from negative associations?

    • Good question, and as I said above in response to Michael’s comment, sorry for the delay in responding.

      The second suggestion, as I’d originally conceived it (and remember that these are all very preliminary, half-formed ideas!) is that it would apply not to entities that the President has spoken favorably of in general terms, but entities that hold themselves out as in some sense “belonging to” the President (e.g. Trump Hotels, Trump Wine, Trump Steak, etc.), though the way the proposal is written, I now see it looks much broader, which might be problematic, both because the First Amendment issues that Michael flags become much more serious, and because it invites the sorts of questions that you raise. It would seem perverse (and probably unconstitutional) to penalize a business for advertising that it had been _criticized_ by the President. So if this second proposal is going to fly, it seems clear that one would have to come with a way to craft language that is sufficiently limited that it covers only businesses that hold themselves out as the President’s businesses, not merely businesses that the President likes (or doesn’t like).

  5. Donald Trump’s family has applied and acquired business license in China in less than a month. That’s never heard as things usually drag on in China without any political tie. He’s playing American voters like chump and people still cheer for him. How far can the predominately white citizens steal from the rest of the country without the others notice

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