Trump’s Attempted Violation of the Emoluments Clause, and the Inadequacy of the “Services at Cost” Rationale

In a press briefing on October 17, 2019, acting White House Chief of Staff Mick Mulvaney announced that the United States would host the 46th G-7 summit at the Trump National Doral Miami, a golf resort in Doral Florida owned by the Trump Organization. The announcement provoked widespread concern (see here and here) that this choice would violate the U.S. Constitution’s Foreign Emoluments Clause, which bars any person “holding any Office of Profit or Trust under [the United States]” from “accepting any present, emolument, office, or title, of any kind whatever, from any King, Prince, or foreign state,” as well as the Domestic Emoluments Clause, which bars the President from receiving any emolument, other than his salary, from the United States or any of the individual states. Following two days of complaints—not only from the ethics watchdogs and the President’s Democratic opponents, but also from some of his Republican allies—the White House abandoned the plan. So, the situation appears to have resolved itself. Nonetheless, the particular argument that Mulvaney advanced to defend against the anticipated Emoluments Clause complaints is worth considering—and debunking—lest this argument arise again in another context.

To be clear, the White House’s attempt to host the G-7 at a Trump Organization venue appears to be part of the same pattern of self-dealing that has already prompted multiple lawsuits against Trump for alleged violations of the Emoluments Clauses. As Mulvaney said on Fox News this past Sunday, “[President Trump] still considers himself to be in the hospitality business, and he saw an opportunity to take the biggest leaders from around the world and he wanted to put on the absolute best show.” Although the proposal to host the G-7 summit at the Doral resort was dropped, Mulvaney’s admission is worrying because there are reasons to suspect Trump chose the Doral property to benefit himself financially. (Consider the fact that in 2004, when the United States hosted the summit on Sea Island the organizers served 45,000 meals and paid the resort owners $3 million to reserve the entire property for 10 days.)

When Mulvaney detailed the White House’s decision-making process for the G-7 venue on October 17, he claimed the administration used neutral criteria when it made this choice (which is a bit hard to swallow given that Mulvaney stated the President suggested Doral), and that Doral was actually the best location (an assertion that is hard to assess without knowing the other venues the White House was considering). Furthermore, Mulvaney also argued that there was no Emoluments Clause violation because Doral would host the event “at cost”—that is, that Doral would only charge the government for the cost of the goods and services provided, and would not make a profit. On its face, this sounds plausible. After all, if Doral—and hence the Trump Organization—does not earn any profits on the G-7 meeting, but merely breaks even, then how can Trump have received an “emolument” from the U.S. government? If anything, the Trump Organization would have provided the U.S. government with a venue and associated amenities at a discounted rate.

Despite its superficial plausibility, there are three flaws with the argument that running the event “at cost” would eliminate any Emoluments Clause problem:

  • First, while Mulvaney said that Doral would have provided rooms, services, and amenities “at cost,” it is likely that this would be limited to outlays made directly for the U.S. government. But a massive event like the G-7 would inevitably generate a huge amount of additional spending that the U.S. government would not cover. Suppose, for example, that Germany wants to bring one hundred staffers to the event, and the U.S. only pays for sixty. Would Doral provide the remaining forty rooms to Germany “at cost,” or would Germany pay the normal room rate? If Germany is not given the “at cost” rate, a strong argument can be made that that is both a domestic and foreign emolument, as the White House has picked the location and the Trump Organization is selling the additional forty rooms to a foreign government for a profit. Similarly, would press rooms and press meals be provided “at cost?” It is unlikely that reporters from CNN, the Washington Post, or the New York Times would receive a discount from a Trump Organization resort so the President could avoid a domestic emoluments case.
  • Second, even if all goods and services are provided at cost, the struggling Doral resort would still receive an enormous amount of valuable free publicity. Mulvaney dismissed this idea on the grounds that Trump’s fame already guarantees plenty of publicity for his resorts, but that argument assumes that each of the Trump Organization’s properties is as famous as any other. This is wrong. Trump’s Mar-a-Lago property, for example, has received far more press coverage than Doral. Thus, the G-7 would provide the added value of free press for a lesser known property.
  • Third, although the Doral Miami resort was one of the Trump Organization’s most prized properties before Trump became president, its revenue has steadily fallen since 2016. Hosting a massive event like the G-7—which would ensure a three-to-ten-day period where the hotel is completely booked—may actually save the Trump Organization money, even if the rooms and other services are being provided at cost, because the resort might otherwise operate at a loss for those days. Thus, the President would still be in violation of the emoluments clause because the federal government would be helping him save money.

Ultimately, the administration backed away from hosting the G-7 summit at a Trump property because many of his Republican allies opposed the decision as improper. It is important to understand why President Trump (or any future president) cannot avoid the strictures of the Emoluments Clauses simply by asserting that firms he owns or controls will sell the U.S. government, state governments, or foreign governments at cost. Even if this hard-to-verify promise is honored, the transaction may still confer financial benefits on the president, and hence violate the Constitution.

7 thoughts on “Trump’s Attempted Violation of the Emoluments Clause, and the Inadequacy of the “Services at Cost” Rationale

  1. Very interesting post. If Trump Organizations’ resort had effectively been chosen to host the G7 summit in the United States, theoretically a situation of conflict of interest would arise, regardless of American constitutional or statutory rules, like the Emoluments Clause and 18 U.S.C. § 208. Essentially, prohibitions to conflicts of interest are preventive anticorruption measures. They must be applied irrespective of tangible harm to treasury and of material profit to the involved public official. Potential damage and gain are enough. A long time ago, the United States Supreme Court stated that conflict of interest provisions “attempt [ ] to prevent honest government agents from succumbing to temptation by making it illegal for them to enter into relationships which are fraught with temptation”. United States v. Mississippi Valley Generating Co., 364 U.S. 520 (1961).

    In this context, I would like to pose one question. All G7 countries are signatory states of the United Nations Convention against Corruption, whose article 7, section 4, establishes that “[e]ach State Party shall, in accordance with the fundamental principles of its domestic law, endeavour to adopt, maintain and strengthen systems that promote transparency and prevent conflicts of interest.” Apparently, this provision is directed to the countries’ domestic level. However, could the G7 countries also consider the rule as a standard or guideline of their international relations, sending a message to the United States that they would not accept that the summit happened in the Trump Organizations’ resort, in order to avoid conflict of interest? It could be an external interference in internal affairs, but I think that global anticorruption efforts should go in that direction.

  2. Thank you for this insightful post. A follow-up question to consider with potential Emoluments Clause violations is who could have standing to bring a suit to enforce the President’s obligations. As you say, although the situation is now moot, it is still worth considering for later instances where this might arise.

    Standing has been difficult to establish in prior cases. For example, the Fourth Circuit found no standing in the suit where the District of Columbia and Maryland sued the President, claiming that his business operations affected their interests (see https://www.washingtonpost.com/context/appeals-court-dismisses-emoluments-lawsuit-involving-trump-s-d-c-hotel/65d4f818-2f4a-4d5b-af68-43a3e4d163e3/). In a case currently under review by the D.C. Circuit, the D.D.C. did find standing for about 200 members of the House of Representatives to sue claiming Emoluments Clauses violations (see https://www.theusconstitution.org/wp-content/uploads/2018/01/Blumenthal-Opinion.pdf). The legislative standing analysis in the latter case is debatable, so it seems quite possible that the D.C. Circuit will overturn the opinion. In the Doral situation, it would be worthwhile to consider who might have a strong enough claim to a particularized and concrete injury.

    This might be further support for Rodrigo’s position. If we cannot enforce the Emoluments Clauses at home because of how difficult standing is to establish in these kinds of cases, perhaps we have to turn to other countries for support under the conflict of interest rubric he set out.

  3. I think Rodrigo’s suggestion is really interesting, but I wonder how often it would work in practice. It seems like there are political benefits to be gained in staying at Trump properties for foreign and domestic leaders who want to curry favor with the administration (see https://www.nytimes.com/2019/09/07/us/politics/trump-hotel.html). Is it really likely that world leaders will uniformly agree to forego a low-cost way of currying favor with the American president? And even if they do, it seems this may create a strong incentive to defect, as the only country who houses its officials at a Trump property may get even more attention from the president. If there is no law that forbids officials from staying at Trump properties, I’m not sure I would expect them rule out staying at a Trump property, even during a major event like the G-7. Maybe political/electoral pressures in other countries’ domestic politics would provide a counter-pressure, but this would have to be uniformly true for an international boycott to be effective. Perhaps I’m overly cynical, but relying on international norms to prevent this sort of behavior strikes me as unlikely to yield concrete results.

  4. One benefit that I think has been particularly interesting about the decision to no longer host the event at the Doral resort has been the ability of public backlash to influence corruption. In a way, this gave me a sense of hope that the old saying “sunlight is the best disinfectant” might actually be a useful way to tackle corruption. It seems that the reasons that the G7 was no longer hosted at the Doral was less about a fear of legal repercussions (this administration doesn’t seem to be particularly worried on that front) but more of the overwhelming political backlash against the visual of it all.

  5. Thanks for the post, I agree with the analysis. However, it’s worth noting that if these considerations are the only ones we care about, i.e. whether Trump gains a personal benefit from hosting the summit, then perhaps they could be satisfied by charging a price that is *below* cost, to the extent needed to offset the indirect benefit to Trump, such as the free publicity, improved reputation, and so on. There is a chance that this calculation will not be done properly, leaving some profits for Trump. But if we assume, for the sake of disentangling the different arguments, that it could be easily done, would we be OK with it? Personally, in that hypothetical (assuming there are zero benefits – direct or indirect, tangible or intangible), I would be fine with letting him host the summit. However, I have a hunch that most people would not agree with me, which leaves the question of whether there is something else that would bother many people in addition to the benefit created to Trump personally – some moral intuition that hosting a global summit in the president’s private property is wrong by itself, even if he gets no benefit from it. While it can be argued that such moral arguments should not drive policy, they may be politically influential and therefore important to explore

  6. Thank you Jacques for your insight into the particularities of the latest Trump administration attempt to circumvent legal frameworks and rebuff presidential norms. While this was an especially brazen attempt to benefit from the Office of the U.S. Presidency, I would be interested to know why there hasn’t been as much of an outcry about his similar behavior outside the borders of the U.S. as detailed here. Is it because the public is less aware or is it more complicated than that? As a non-lawyer I would also be curious as to how the Emoluments Clause is applied in foreign countries. Is there are difference? Lastly, as others have pointed out in their comments, this post got me thinking about vantage points that different actors could use to put pressure on the administration to discontinue these particular types of actions. I agree that getting international politicians to boycott or take a stand in this way is unlikely (especially as many are looking to curry favor with the U.S.) but I wonder how likely it would be for say, U.S. State Department employees or other members of the U.S. government to speak up or use creative solutions to not stay, for example, in Trump properties abroad.

  7. Pingback: What ‘Trump v. Vance’ Holding Means for Presidential Corruption and Malfeasance

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