How President Trump Could Use the White House to Enrich Himself and His Family
Trevor Potter authored the article " How President Trump Could Use the White House to Enrich Himself and His Family" for the November 18, 2016 edition of The Washington Post. Please visit this link for the online version. Below is the article in its entirety.
For the past 40 years, every president has placed his personal investments and assets in a blind trust while in the White House, or has sold everything and held cash equivalents. President-elect Donald Trump has made it clear that he does not plan to set up such a trust, which would require that his company be run by an outsider who has had no previous business relationship with Trump, and that there be virtually no communication between the outside trustee and Trump or his family during his administration.
Trump is not required by law to create a blind trust or otherwise divest himself of all business holdings, though many people who will work for him in the government will have to do so: The 1978 Ethics in Government Act exempts the president and vice president from its conflict of interest provisions, out of constitutional concerns about separation of powers.
So Trump says he plans to continue to personally own the Trump Organization, a multibillion-dollar company with business interests around the world, but three of his adult children will operate the firm while he’s in office. This is a colossal mistake. It will produce conflicts of interest of an unprecedented magnitude, and create the appearance that he and his family are using his office to enrich themselves, even if they don’t take advantage of the many opportunities to do so that this situation presents. These conflicts will stain and haunt Trump’s presidency, unless he changes course.
It is possible that Trump and his team gave only cursory thought to this question until after the unexpected (even to them) election result. So they have a steep learning curve, but they still have time to make the right decision.
The Trump Organization is a vastly bigger business than the peanut warehouse owned by Jimmy Carter — who was the last president to enter the White House directly owning and operating a business of any kind. Trump’s potential conflict problems are a quantum leap larger than questions posed by the Agriculture Department’s dealing with President Carter’s peanuts.
But why should the public care whether Trump continues to own his business, run by his children, for the next four years? And why is it a truly terrible idea for the Trump administration and the country?
Although Trump has not released his tax returns, as a candidate he was required to file a personal financial disclosure form that describes his assets and businesses in broad dollar ranges. The press has added some additional information to this picture. As a result, we know that the Trump Organization does business in dozens of countries around the world and is seeking to do business in others. It has arrangements with foreign governments and foreign banks, some of which are owned by foreign governments. Some of its investments are dependent on foreign loans, including from the Bank of China and Deutsche Bank.
Trump has said he intends to penalize China for its trade policies. That could prompt the Bank of China, owned by the Chinese government, to threaten to pull its loans that are financing Trump buildings. If so, would the president back down? Likewise, Trump knows that Deutsche Bank financing is important to his business. The bank, even before Trump takes office, is reported to be in trouble. What happens if the Treasury Department recommends that the U.S. government decline to prop it up? A major European bank failure could have an adverse impact on Trump’s real estate investments across the board. If he decides to rescue Deutsche Bank (even if that is the “right” policy decision), it will appear as if he did so to benefit his business interests.
Neither of those scenarios requires any leaps of imagination; they are right out of today’s news. But say Trump is sworn in as president and remains the owner of a vast business run by his children. Some foreign businesses and foreign leaders will want to cozy up to the Trump family, because that is how they are used to doing business and conducting foreign policy. The children will get a raft of proposals for new hotels and golf courses and other investments in places that will offer very favorable terms: cheap land, no red tape in the permitting process, low-interest loans for construction, a guaranteed large management fee in return for the Trump name on the new enterprise.
His children will face extraordinary challenges in sorting through which of these sweetheart deals are offered for “genuine business purposes” and which come with strings attached. They won’t necessarily know which are market-based and which are designed to build goodwill with the man who owns the company — and who will reap all the profits personally. Worse, they may know perfectly well which deals are legit, but maybe they’ll be tempted to prove to their father that they can do as well as he did in business and brazenly push for the most corrupt deals. Either scenario will look awful, and the public will be justifiably suspicious.
Of course, it is just as possible that when the Trump children turn up in a foreign capital looking for a good business deal, that government will be worried that failing to cooperate could hurt their relations with the United States and its president. Either way, the incentive will be to offer terms that make Trump and his family even richer, at great risk to U.S. prestige and foreign policy. We will look like the very sort of kleptocracy we criticize in corrupt dictatorships elsewhere.
Again, this is not hypothetical. The Trump Organization already does business in corrupt one-party countries such as Azerbaijan, and his children have been traveling to the Middle East looking for deals. The press has devoted significant resources to reporting on the company’s ties to Russian oligarchs. And that was all before Trump became president-elect.
The founders of this country were greatly concerned about foreign attempts to influence our government. They feared that kings or potentates would make generous gifts to our president in an attempt to sway U.S. policy, so they wrote into the Constitution the emoluments clause, which prohibits the president from receiving any personal financial benefit from a foreign government.
Any fair reading of this provision, as codified in the Foreign Gifts and Decorations Act of 1966, also prohibits a company owned directly by the president from receiving such a financial benefit — whether from a foreign leader, a foreign treasury, or a bank or other business owned and controlled by a foreign government — without the consent of Congress. So Trump, through the actions of the company that he owns personally and that his children will control, may be accused of violating the Constitution.
More to the point, Trump’s critics will argue that every new business deal is a potential conflict or unjustly enriches the soon-to-be president. How will the public know whether this is true? The last thing Trump should want is a never-ending battle over the conduct of his personal business affairs. Even small decisions could become scandals: What if foreign heads of state visiting Washington feel obligated to stay at the Trump International Hotel, down Pennsylvania Avenue from the White House? Or use a Trump property in their own country for government events, as a way to curry presidential favor?
There is a way out of this dangerous situation: Create a genuine blind trust. But it appears that Trump does not want to do that. Even though that would be the best and simplest solution, he does not seem the sort of man to put his financial future in the hands of a stranger, however qualified. The second alternative would be to take the business public and sell his interest — to issue stock and liquidate his holding. Real estate is doing well, interest rates are low, millions of Americans and foreigners might want a piece of the famous Trump name. He would have a pile of cash with no conflicts and would remain just as rich as he is now.
If he does not like that, there is a third option: Sell the business to his children, rather than just putting them in charge. Let them borrow the money in the marketplace (plenty of financiers would like a piece of the action) and buy him out. Trump could bank his billions in cash; by law, no tax would be due from this sale, because he did it to avoid a conflict of interest. That way, the children could sink or swim on their own, foreigners would not think they were putting money in the president’s pocket, and a potential constitutional crisis would be averted. This would still leave the appearance of conflicts not present in a blind trust or a sale to the public, but even so, it would be better for him — and for us — than what he is now proposing.
Then, Trump could get on with “making America great again” without distraction.