Trump’s ‘Meaningless’ Ethics Plan Assailed by Watchdogs

  • Top government-ethics official urges president-elect to divest
  • Questions include Washington hotel, constitutional provision

Trump to Step Down From Business, Won’t Divest Ownership

Donald Trump will hold on to his multi-billion-dollar businesses from the White House, leaving him open to conflicts of interest that ethics specialists say could undermine his presidency.

Trump, whose interests in real estate, golf courses and licensing reach into more than 20 countries, said Wednesday that by stepping down from his leadership role at those businesses, he’s already going further than the law requires.

“I could actually run my business and run government at the same time,” Trump said Wednesday. “I don’t like the way that looks, but I would be able to do that if I wanted to.”

While federal ethics law requires officials to divest financial holdings that present conflicts of interest, the president is indeed exempt from the requirement. Still, the director of the federal Office of Government Ethics on Wednesday departed from the agency’s typically tight-lipped policy regarding individual ethics questions to publicly urge Trump to divest from his holdings and act as though the law did apply to him.

Trump’s plan to step down is “meaningless from a conflicts-of-interest perspective,” Walter Shaub, the OGE director, said during an appearance Wednesday at the Brookings Institution.

“The plan the president has announced doesn’t meet the standard that the best of his nominees are meeting and that every president in the past four decades has met,” Shaub said. “The greater the authority entrusted in a public official, the greater the potential for conflicts of interest.”

‘Specter of Doubt’

By maintaining his ownership in more than 500 companies with $3.6 billion in assets and more than $600 million of debt, Trump is setting his administration up for unending questions about whether its decisions -- on everything from financial regulation to international diplomacy -- serve the public interest or his own, ethics watchdogs say.

“Every decision he will make as president will be followed by the specter of doubt, and will be questioned as to whether his decision is in the best interest of the American people or the best interest of his bottom line,” said Noah Bookbinder, executive director of Citizens for Responsibility and Ethics in Washington. Until last month, the watchdog group had Democratic activist David Brock as part of its leadership team, and he has said he still plans to raise funds for CREW and advise it.

Judicial Watch, the conservative-leaning watchdog group, offered praise for Trump’s plan, saying he “seems to be on the right track.”

Beyond that statement, however, concerns about Trump’s plan for handling his businesses stirred broad condemnation among ethicists Wednesday. Various experts, including the OGE, had urged the president-elect to divest from his signature properties and brands and then transfer his assets into a blind trust. But Trump said he will put his businesses into a trust managed by his two adult sons and the Trump Organization’s current chief financial officer.

No Solution

“That doesn’t solve any of the problems,” said Richard Painter, who served as a top White House ethics lawyer to President George W. Bush and is now a professor at the University of Minnesota Law School and a board member at CREW. “If he owns it, he has conflicts of interest.”

The blind-trust option wasn’t feasible given the nature of Trump’s assets, said Sheri Dillon, an attorney for the president-elect at Morgan Lewis. Selling his properties and brand equity would only stir questions about whether buyers were offering above-market prices to curry his favor, she said.

On top of that, Dillon said, an independent trustee wouldn’t be as qualified to manage Trump’s assortment of golf courses, hotels, office buildings and licensing agreements as his sons, who’ve been involved in the family businesses for years.

“President-elect Trump should not be expected to destroy the company that he built,” Dillon said.

‘Direct Path’

“Having Trump’s adult children lead the operational control of his business, while he still retains full ownership, is not an acceptable solution,” Trevor Potter, president of the Campaign Legal Center, said in an e-mailed statement. The group has criticized public officials from both major parties. “His decision has created a direct path by which U.S. and foreign interests, including foreign governments, can exert influence over him through his companies or holdings.”

Trump’s daughter, Ivanka, who is moving to Washington, is stepping down from her clothing and accessories brand and taking leave from the Trump Organization.

Under his sons’ leadership, the Trump companies won’t enter into new international business arrangements, such as licensing deals for new hotels, while Trump remains in the White House. Trump had earlier pledged that his businesses wouldn’t do any new deals -- including in the U.S. Now, though, any new domestic deals would be vetted by an independent ethics officer who would advise the trust, Dillon said. Trump himself wouldn’t be consulted about business decisions.

Shaub, who was appointed by President Barack Obama in 2013 to lead the OGE, said “the notion that there won’t be new deals doesn’t solve the problem of all the existing deals and businesses.”

One early test may involve the U.S. Constitution’s “emoluments clause,” which prohibits officials from accepting gifts from foreign governments. Painter of the University of Minnesota Law School and Norm Eisen, a former top ethics adviser to Obama, have said Trump will be in violation of the clause as soon as he takes the oath of office.

Foreign Holdings

That’s in part because Trump’s foreign holdings include a partnership with a special U.S. envoy from the Philippines -- and one of his tenants in Trump Tower is the state-owned Industrial & Commercial Bank of China.

Trump’s lawyers argue that the constitutional ban on emoluments doesn’t apply to fair-value exchanges between businesses. At Trump hotels, profits derived from foreign-government spending will be paid to the U.S. Treasury, Dillon said Wednesday -- though it’s not clear whether their operations would be open to public scrutiny for verification.

The emoluments clause has never been litigated -- and it’s unclear whether anyone outside of Congress would have standing to challenge Trump over it. Republicans, who control both chambers of Congress, were generally silent on Trump’s business plans Wednesday.

Representative Elijah Cummings, the ranking Democrat on the House Oversight and Government Reform Committee, said in a statement that Congress should obtain all corporate and legal documents relating to Trump’s global financial entanglements, including his tax returns, “to ensure that the President is not violating the Constitution.”

Washington Hotel

Among Trump’s most scrutinized businesses is the 263-room Trump International Hotel Washington D.C. -- which is housed in a federally-owned building that Trump’s company leases. A provision in that lease appears to prohibit elected officials from benefiting from the property.

Trump’s legal team believes his ownership doesn’t violate that provision -- because it’s designed to prevent sitting officials from crafting sweetheart deals, and Trump signed the deal as a private citizen. Following Trump’s announcement, the General Services Administration, which oversees the lease, said in a statement that it is seeking additional information on the Trump Organization’s new structure to determine whether it complies with the terms of the contract.

Still, Trump’s decision to stay invested in his businesses creates opportunities for those who might wish to influence the next U.S. president, ethics specialists say.

“Foreign governments or U.S. government contractors or anybody else who has an interest in President Trump’s exercise of discretion as president can send business to the Trump Organization,” said Kathleen Clark, a professor at Washington University School of Law who specializes in ethics for government officials. “It’s about one notch away from bribery.”

Canceled Deals

Prior to the Wednesday announcement, the Trump Organization canceled deals for developments in Brazil, Argentina, Azerbaijan and Georgia, though the projects were troubled and brought in little revenue. Ties with other countries, including China, the Philippines and Indonesia, remain. Trump on Wednesday said he had already begun to turn down lucrative deals.

Trump’s conflicts are unprecedented for a U.S. president. Ethics officials, including those at the Office of Government Ethics, have publicly urged him to divest from his assets and limit the involvement of his adult children in any ongoing business. The president-elect has been consulting Fred F. Fielding, an attorney with Morgan Lewis who served as White House counsel to Presidents George W. Bush and Ronald Reagan, on how to address them.

For four decades, incoming presidents and vice-presidents have gone to great lengths to establish clear lines between their governments and their personal fortunes. Vice President Nelson Rockefeller turned over 10 years of tax returns to the Federal Bureau of Investigation, and Congress held hearings on the finances, which derived from his famously wealthy family. President Jimmy Carter placed an independent trustee in charge of his family’s peanut farm in Georgia, and Vice President Dick Cheney sold his shares in Halliburton Co., where he had served as CEO, and earmarked proceeds from unvested stock options for charity. Presidents Bill Clinton and George Bush sold their assets and placed the proceeds into true blind trusts.

Robert Weissman, president of the government watchdog Public Citizen, said that Trump’s potential conflicts could have far reaching impact on policy.

“These pervasive conflicts will affect matters from consumer protection to bankruptcy law, labor rights to tax policy, as well as foreign policy,” Weissman said in an e-mailed statement.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE