On the same day as President Trump’s swearing in, the Department of Justice’s (DOJ) Office of Legal Counsel (OLC) released a memorandum elaborating upon why President Trump’s appointment of his son-in-law Jared Kushner as a Senior White House Advisor did not violate the federal anti-nepotism statute (5 U.S.C. § 3110). That statute prohibits a public official (including the President) from appointing or employing a relative (which the statute defines as including a son-in-law or daughter-in-law). The OLC reasoned that despite the seemingly clear prohibition in 5 U.S.C § 3110, another federal statute, 3 U.S.C. § 105(a), exempted positions in the White House Office from the anti-nepotism law. The OLC recognized this conclusion was a departure from its own precedent, but with the aid of some selective reading of legislative history, the OLC argued that lawmakers intended to allow the president “total discretion” in employment matters when it passed 3 U.S.C. § 105(a). (For non-specialists, see this primer for an explanation of these and other federal laws and regulations which could be relevant for addressing corruption in the Trump Administration.)
Somewhat predictably, the OLC memo generated debate among legal commentators (see here, here, here, and here). Yet even if the legal arguments were not entirely convincing, the OLC ended with a practical point that was echoed by many of the commentaries: given that President Trump will seek Mr. Kushner’s advice, regardless of whether he is a formal employee, it would be better for Mr. Kushner to be formally employed as a White House advisor, and thus subject to the applicable conflict-of-interest (COI) and financial disclosure rules. The same argument applies to Ivanka Trump, who also recently became an employee of the White House.
Some anticorruption advocates, myself included, were persuaded at the time by the OLC’s practical point. It would be best if the President did not make major policy decisions on the advice of radically unqualified relatives. But unfortunately, he is going to turn to them for advice. Given that baseline, we should prefer those family members occupy formal appointments, where at least they will be constrained by the COI statute and disclosure rules. However, with the benefit of hindsight, we should never have been persuaded. The COI statute and the disclosure rules turn out to be ineffective devices for preventing corruption in the Trump era. While the disclosure rules did encourage Mr. Kushner to make some divestments, they do not contain enough details to identify potential conflicts. And when there are conflicts, the COI statute is unlikely to be enforced, either because Attorney General Jeff Sessions will choose not to, or because the White House will grant a waiver.
The COI statute and the disclosure rule are meant to work in tandem to limit corruption. The COI statute requires Mr. Kushner and Ms. Trump either sell off their assets or recuse themselves from governmental matters that affect their holdings. Divestment is the best way to avoid the risk of breaking federal law. Gary Cohn, Trump’s chief economic advisor and former Goldman Sachs executive, opted for this route and sold all of his Goldman shares. However, since Mr. Kushner and Ms. Trump chose not to divest entirely, they are obligated to recuse themselves from matters such as tax reform, trade policy, or banking regulations that have the potential to affect their particular financial holdings. Otherwise they might (according to the law as written) face a DOJ investigation and penalties. According to the statute, if Mr. Kushner provides advice to the President on any matter in which he, Ms. Trump, his companies, partnerships, or trusts, or “any person or organization with whom he is negotiating” has a financial interest, then he could face up to five years in prison (18 U.S.C. § 208). As an example, Mr. Kushner is prohibited from advising the President to pursue certain trade policies with China that facilitate Chinese investment into Mr. Kushner’s real estate partnerships, or into assets for which he is a trustee. Given the breadth of Mr. Kushner’s portfolio as an advisor and an investor, such conflicts are just about inevitable.
However, such conflicts can be difficult for anticorruption watchdog organizations to identify; that is where the disclosure rules come in. Thanks to inherited wealth, Mr. Kushner and Ms. Trump have extensive financial holdings, and Mr. Kushner’s were recently released in a public financial disclosure report from the Office of Government Ethics. Mr. Kushner’s 54-page report includes notes on the divestment of some assets and a list of the remaining. (The report notes, for example, that Ms. Trump intends to keep a multimillion-dollar stake in the Trump International hotel, blocks from the White House). To be sure, thanks to the application of the disclosure rule, the public now has more information on Mr. Kushner’s interests than it had before, and this process encouraged Mr. Kushner to quit many entities and sell 58 businesses due to likely future conflicts. His lawyers state the remaining assets are unlikely to pose conflicts. If true, that would be nice, but the claim is both highly unlikely and impossible to verify. Mr. Kushner still retains vast stock holdings, and is the beneficiary of a number of trusts. More troubling, the details on the disclosure report are limited: many of the assets include a footnote “in the divestment process” or “are not disclosed due to preexisting confidentiality agreement.” Without more public information, watchdog organizations cannot play their role effectively.
Once a potential conflict of interest comes to light, the COI statute will not provide any protection. Attorney General Jeff Sessions would have to decide to bring an action against Mr. Kushner for failure to recuse himself from whatever the particular policy matter happens to be. Since Jeff Sessions is a famous Trump toady, this leaves anticorruption advocates with limited recourse; since only the Attorney General can enforce, the law loses its bite, eliminating Mr. Kushner’s incentive for recusal. Consider the case of Christopher P. Liddell, Assistant to the President and Director of Strategic Initiatives. Early in Trump’s term, Liddell participated in meetings with the representatives of companies in which he may have still held millions of dollars in stock. The group Citizens for Responsibility and Ethics in Washington filed a complaint with the White House Counsel about the potential conflict. However, all the complaint does is urge the White House to refer the case to Jeff Sessions. If the White House Counsel and the Attorney General are unwilling to explore Mr. Liddell’s situation, we should not expect them to dig into Mr. Kushner’s or Ms. Trump’s.
The COI statute is also unlikely to limit corruption because of provisions covering waivers and exclusions. According to 18 U.S.C. § 208(b)(1), President Trump could simply provide a bogus waiver stating that Mr. Kushner or Ms. Trump’s financial interests “are not so substantial as to be deemed likely to affect the integrity of the services.” Given the simplicity of this escape hatch, I would be surprised if the White House has not already filed such a waiver.
If the original OLC memo on the applicability of the anti-nepotism law had come out the other way, neither Mr. Kushner nor Ms. Trump would be formal employees of the White House. As the OLC anticipated, the President would no doubt ask for their advice anyway, and the public would not have access to the (limited) information from the disclosure forms. However, after the OLC decision, Mr. Kushner and Ms. Trump are now full-time employees, with offices adjacent to the President’s, and the ability to significantly affect policy decisions. They now occupy legitimated positions of power, and they remain functionally immune from the COI laws, regardless of those laws’ formal applicability. Those like me, who the OLC managed to convince, are now realizing we were duped.
A nice complement to your very fine post is this editorial that appeared the same day in the Washington Post: “Ivanka Trump’s foreign entanglements put America’s reputation on the line.” http://www.washingtonpost.com/opinions/ivanka-trumps-foreign-entanglements-put-americas-reputation-on-the-line/2017/04/23/eb41325e-26ba-11e7-a1b3-faff0034e2de_story.html?utm_term=.9a368f9e933d
The swamp thickens.
Really insightful post. Do you think that there would be any differences in Mr. Kushner’s and Ms. Trumps’ influence over the country if the OLC opinion came down the other way such that they would not be formal employees of the White House? It seems like you think the answer to that question is yes. I think your discussion that the statutes will little protection is on point, but I guess I believe their influence over the country would be similar regardless.
I think both of us are sort of shooting in the dark as to whether their influence on White House policy would be more or less significant if they didn’t hold formal positions. Although they might hold equal sway in either case over Trump himself, I think that their positions as full time employees does allow them to exert greater influence over other policy makers in addition to the President. More clear to me is the importance of the official posts in the eyes of foreign leaders. The formalities might matter more to them than they do to us. For example, Xi Jinping visited and sat at the table with Ivanka during official discussions. To him, she occupied a legitimate position, and coincidentally or not, her business was then awarded valuable trademarks in China. Particularly when it comes to foreign relations, their official positions allow them to profit from public office more than a part-time position would.
This is an interesting post but of course very frustrating in that we are left with knowns and known unknowns, but completely lack the power to pursue them. Could states have any impact on this process or maybe circumvent the AG’s role? Of course states can’t directly legislate on federal hiring, but perhaps they could pass anti-corruption laws that would allow capacious investigations by state AGs. Any thoughts on the possibilities there?
That is the key question, isn’t it? States probably have a better shot of targeting parties on the other side of corrupt exchanges than targeting the President for his nepotistic hiring. For example, adapting legislation requiring the state AG’s pre-approval before permitting a visiting political operative to stay at a Trump property. States have significant interests at play, as well as power over property and corporations within their territory. A particularly fruitful area of action would be adapting the existing unfair competition laws. State legislative proposals are being prepared as we speak. But if the real worry is corruption involving foreign actors, then state-level responses have their limits.