When, If Ever, Does a Favorable Legal or Regulatory Decision Count as an “Emolument”?

Last week, I posted about the amended complaint that the Citizens for Responsibility and Ethics in Washington (CREW) filed in its lawsuit against President Trump for alleged unconstitutional acceptance of “emoluments” from various sources. My post last week, like much of the immediate commentary on the amended complaint, focused on the new plaintiffs who had joined the suit, and the extent to which their addition mitigated concerns about whether the court would have jurisdiction to hear the case. But the amended complaint was notable for other reasons. In particular, it fleshed out more details about President Trump’s alleged violations of the Foreign Emoluments Clause, and also added a new set of allegations focused on separate violations of the Domestic Emoluments Clause.

What was most striking to me about the allegations detailed in the amended complaint is that in several cases, the alleged “emolument” is not a monetary payment or a market transaction, but rather a legal or regulatory decision by a government (U.S. or foreign) that favors businesses owned by President Trump. Consider the following examples:

  • Donald Trump had long sought—and had long been denied—Chinese trademark protection for his “Trump” brand in China. Shortly after his inauguration, President Trump made statements suggesting that he might reconsider the U.S. commitment not to recognize the government of Taiwan (the so-called “One China” policy). On February 9, President Trump met with Chinese President Xi Jinping. Following the meeting, President Trump reaffirmed the U.S. commitment to the One China policy. Five days later, China granted the Trump Organization its trademarks. According to CREW, the decision to grant the trademarks was an emolument, from the government of China to President Trump.
  • The Trump Organization has several ongoing real estate development projects in Indonesia, which require permits from the government. According to the CREW complaint, if and when the government of Indonesia grants these permits, this will constitute an emolument from the government of Indonesia to President Trump.
  • Prior to the election, a company owned by President Trump signed a lease with the U.S. General Services Administration (GSA) to open what is now the Trump International Hotel at a property owned by the U.S. government. The lease agreement stated that “no … elected official of the Government of the United States … shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom.” Prior to President Trump’s inauguration, a GSA official indicated that the GSA thought that Trump would be in violation of the lease unless he fully divests from the hotel. Shortly after the inauguration, President Trump appointed a new GSA Administrator. On March 23, the GSA issued a letter taking the position that President Trump is not in violation of the lease, principally because President Trump would not receive any earnings from the hotel until he leaves office. Many ethics experts derided the GSA’s letter as unpersuasive. The CREW amended complaint goes further, arguing that the GSA’s letter is itself an “emolument” from the U.S. government to President Trump.
  • Prior to the election, the Trump company that owns the D.C. hotel applied for a “Historical Rehabilitation Tax Credit,” which, if approved, could be worth up to $32 million. The application has cleared the first two phases of the three-stage approval process—the first step before the election, the second step after the election (but before inauguration). The National Park Service must provide the third and final approval. If the Service were to grant that approval, according to the CREW complaint, this would be an unconstitutional domestic emolument to the President.

All of these alleged “emoluments” are regulatory or legal decisions by government agencies. Can such decisions count as emoluments? When or under what conditions?

These turn out to be hard legal questions, and to the best of my knowledge there’s very little existing case law or scholarly commentary. I’ll throw out some preliminary thoughts here, but this issue likely deserves more sustained and careful analysis from genuine experts (which I am not).

First, let me say a few words about why I think it’s a hard question:

On the one hand, as CREW’s examples illustrate, all of the reasons why we might want to prevent governments from offering the President extra “emoluments” may apply with just as much force to valuable regulatory decisions as to suitcases full of cash. As CREW’s complaint rightly emphasizes, favorable government decisions on these matters—be they trademarks, operating permits, lease terms, or eligibility for government subsidies—have enormous monetary value. It’s just as bad, from the perspective of preventing the corruption of the U.S. President, if the Chinese government bribes Donald Trump by offering him a valuable trademark as if the bribe were paid in cash. (Indeed, from the Chinese perspective it might be worse, because at least the cash bribe doesn’t involve distortions of Chinese policy as well.) Likewise, if we think one of the main purposes of the Domestic Emoluments Clause is to prevent the President from using his influence to extract a higher annual salary (perhaps in the form of a multi-million dollar “bonus” payment), then why shouldn’t we be just as concerned if the President uses his influence to extract a favorable tax ruling with an equivalent cash value? Bribery is bribery. Embezzlement is embezzlement. Emoluments are emoluments.

But it’s not so simple. Without a limiting principle, the idea that any government decision that has value to the President counts as an impermissible emolument could produce a range of seemingly absurd consequences. Consider the following examples:

  • Suppose the President, before taking office, wrote a book or filed a patent. (Presidential books are common–patents less so, though Abraham Lincoln actually had one.) Suppose the copyright or patent term is coming to an end, and the President would like to renew it. Can it really be the case that the renewal would be unconstitutional, because it would be a government decision that is valuable to the President?
  • President Trump repeatedly used the fact that he’s currently under audit as an excuse not to release his tax returns. Put aside the implausibility of that excuse and focus on the audit itself. Presumably the IRS auditors may need to make some judgment calls about whether certain claimed deductions were legitimate, or whether certain sorts of income were correctly reported and classified. If the IRS, acting under pressure or influence or a sense of loyalty to the President, approves a deduction that it should have rejected, that’s obviously bad. But suppose the IRS, in good faith, looks at a claimed deduction in a grey area and decides that it’s legitimate. That determination has obviously has monetary value to President Trump. Does that make the IRS’s determination an impermissible domestic emolument? That conclusion seems odd, as it would seem to imply that the IRS is constitutionally required to rule against the President on every potentially contestable issue related to any aspect of the legitimacy of his tax filings, even if the IRS doesn’t actually think there’s any problem.
  • If that example seems too fanciful, consider the GSA lease situation. This issue is complicated by the fact that the GSA letter on the meaning of the lease seems so implausible; the whole thing smells. But suppose the lease contained no clause limiting the ability of an elected official to benefit from the lease. Suppose instead that some outside party, perhaps a Member of Congress, wrote to the GSA arguing that such a restriction out to be implied in the contract. Suppose the GSA administrator thinks that this is a silly argument—perhaps, for example, the GSA actually considered but rejected including this sort of limit in the lease. Could the GSA issue a letter saying, in essence, “There’s no provision that bars the President’s company from holding this lease, and we’re not going to read into the lease terms that aren’t explicit?” A broad reading of the legal theory in CREW’s complaint would seem to suggest that the answer is no: a government agency has made a decision that is valuable to President Trump, which, on CREW’s theory, would seem to qualify as an unlawful domestic emolument. As in the audit example, the weird thing about this result is that it would seem to require, as a matter of constitutional law, government agencies always to rule against the President in any matter that affects the President’s financial interest, even if doing so contravenes their best judgment and their interpretation of the law.
  • Suppose the President (or, for that matter, any U.S. official) travels to a foreign country and applies for a temporary driver’s license, or permission to visit a tourist site for which special permission is required. Are these “emoluments” from a foreign government, acceptance of which is unconstitutional? Or suppose a deputy at the Environmental Protection Agency decides to take a vacation and go to China on a tourist visa, just for sightseeing. Does China’s discretionary decision to grant the visa count as an emolument from a foreign government? The answer seems like it should be no, but how can we distinguish that case from China’s decision to grant the Trump Organization its trademarks? One is more valuable than the other, but they’re both valuable. One occurred in a much more suspicious context, but the Foreign Emoluments Clause is a prophylactic provision that in principle applies to the receipt of the emolument—of any kind—and does not require evidence suggesting actual corruption.

So that’s why, for me, this issue seems so hard. On the one hand, it seems obvious that favorable legal or regulatory decisions must count as an emoluments; otherwise, a whole swath of activity that the Emoluments Clauses seem clearly designed to prevent would escape proscription. On the other hand, it seems obvious that favorable legal or regulatory decisions can’t count as emoluments; otherwise, the Emoluments Clauses prohibit a whole swath of activity that those clauses seem clearly not intended to cover.

I think I’ve got a sense of the underlying principle that resolves the tension, but I’m not yet sure how to translate it into a workable, administrable legal doctrine:

  • The principle is this: If the President receives a favorable legal or regulatory decision because of his or her status as President, then this is an impermissible emolument. Though there are some debates about the right way to interpret “emolument” in the Constitution, I think it makes most sense to view it as a kind of payment, perk, or bonus of holding office, rather than literally anything of value received by an officeholder. If the Trump Hotel would not otherwise receive a Historic Preservation Tax Credit, but the National Parks Administrator decides to grant one anyway because the applicant is a company owned by the President, that’s an emolument. If the credit would have been granted anyway, it’s not an emolument. If China would have granted the Trump Organization a trademark regardless of Trump’s status as President, it’s not an emolument—it’s just the ordinary operation of Chinese trademark law. But giving the President special consideration because he’s the President would make the decision into an emolument, rendering it unconstitutional.
  • I’m fairly confident that principle is right, but I’m not sure how to translate it into a workable doctrine. Asking the court to scrutinize each individual government decision that affects the President’s interests and figure out, as a factual matter, whether the decision would have been different if the President were not the President, seems hopeless. (And in some cases incoherent: Were Trump not the President, there’d be no question about whether his company was in violation of the GSA lease, for example.) We could try to set up some legal presumptions that would resolve most of the cases. For example, we might adopt a “presumption of regularity” for legal-regulatory decisions, and require a challenger to produce convincing evidence that the decision was actually made to confer a special benefit on the President. Or we might adopt a more complicated set of presumptions, based on the type of decision. We might, for example, adopt a prophylactic rule that the President (or organizations he owns) cannot apply for special discretionary benefits (like tax breaks or subsidies) during the President’s term in office, but that does not otherwise require government agencies to disfavor the President’s interests when making legal or regulatory determinations. As is likely obvious, I haven’t really worked this out yet. I’m hoping other, smarter people can come up with a better, more systematic way to balance the competing interests at stake here.

One thought on “When, If Ever, Does a Favorable Legal or Regulatory Decision Count as an “Emolument”?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s