Explainer: The Trumps’ conflict of interest issues

President Donald Trump and his daughter Ivanka walk to board Marine One. AP Photo/Evan Vucci

Ivanka Trump recently gave an interview to CBS television in which she attempted to answer concerns about her role as an official adviser to her father, President Donald Trump, and potential conflicts of interest from her fashion business.

She suggested that such concerns were unwarranted, as she would no longer manage the company which had been placed into a trust, run by her sister-in-law and brother-in-law. Like her father, she has declined to sell off her assets, saying that would not be fair when the company (like his) bears her name.

Her responses do little to allay growing criticism about conflicts of interest as they pertain to both her and her husband Jared Kushner, and her father. A majority of Americans have said they are “somewhat” or “very” concerned about Donald Trump’s conflicts of interests.

I’ve researched and written about conflicts of interest for 20 years. Conflict of interest issues are not new in America. The fear and reality that government officials may be unduly swayed by their personal interests has existed since Colonial-era customs officials took bribes to reduce penalties for smuggling.

From my perspective Trump’s conflicts of interest are unprecedented in scope. But conflict of interest laws are often not cut and dried. They involve interpretation by lawyers within the Justice Department and judges, who can give a stamp of legitimacy (or illegitimacy) to presidential practices.

What’s at stake?

Among the Trump Organization’s holdings are 16 hotels, 17 golf courses, a modeling agency, a production agency and at least 25 residential real estate properties (a minimum of 17 domestically and eight overseas). His over 500 companies have dealings in 25 countries including India, Panama, Scotland and the Philippines.

President-elect Donald Trump stands surrounded by his son Eric (l), daughter Ivanka and son Donald Jr. in Trump Tower, Manhattan, Jan. 11, 2017. Shannon Stapleton/Reuters

That’s not all: Trump leases his D.C. hotel from the federal government and appoints the head of the agency that monitors his lease. Trump also owes millions in loans, including over US$300 million in loans to Deutsche Bank, which is under investigation by the federal government. He also owes money to at least seven other banks for his heavily mortgaged properties; one of his real estate partnerships has a loan from the state-owned Bank of China.

What does the law say?

Trump raised eyebrows when he said shortly after he was elected, “The law’s totally on my side, meaning, the president can’t have a conflict of interest.”

Legally speaking, though, he has a good case, with regard to several key statutes.

The basic criminal conflict of interest statute, enacted in 1962, forbids federal executive branch employees from participating in government matters in which they – or their immediate family members – have a financial interest.

Vice President Nelson Rockefeller, vice presidential candidate Bob Dole, President Gerald Ford and First Lady Betty Ford at the Republican National Convention, Kansas City, Missouri, August 1976. Handout /Reuters

But the president and vice president have been considered exempt since 1974, when Congress requested an opinion from the Justice Department on whether the law applied to Nelson Rockefeller. Rockefeller was the scion of a wealthy business family whom Gerald Ford had selected as vice president after he became the president, following the resignation of Richard Nixon. The DOJ was asked if a vice president could have any financial interest in a company that contracted with the U.S. government.

The DOJ responded in a letter that the statute didn’t apply to either the vice president or the president. The letter pointed to the “uniqueness of the president’s situation” and argued that it would be unconstitutional to apply the law to the president, since it could constrain him to the point that he would be unable to perform constitutionally prescribed duties.

Subsequent statutes such as the 1978 Ethics in Government Act and 1989 Ethics Reform Act reinforced this argument. A 2016 report by the Congressional Research Service further reiterated it.

Members of Congress are subject to some stricter conflict of interest regulations. For example, according to the 1989 Ethics Reform Act, they must adhere to an outside earned income limit equal to 15 percent of their official salary. They are also subject to “revolving door” limits that restrict them from lobbying or working for foreign governments for a year after leaving office. The president is required only to make public any conflict of interest issues.

Accepting gifts from foreign powers

What about foreign governments, or companies controlled by foreign governments, that do business with the Trump hotels?

The Emoluments Clause of the Constitution says that no person holding a federal office of profit or trust shall accept any “present, emolument, (or) office… from any king, prince, or foreign state.”

Even though the president clearly holds an office of “trust,” the clause does not name the president specifically, unlike other clauses in the Constitution. Opinions are divided on the issue.

One study argued that it would be inconceivable for a clause aimed at limiting influence by foreign governments not to apply to the president. According to this analysis, a member of the Constitutional Convention, who later became a member of George Washington’s Cabinet, specifically mentioned “the danger… of the president receiving emoluments from foreign powers.”

However, another historical analysis reached the opposite conclusion, pointing to President George Washington accepting gifts from the French ambassador after he became president. Since Washington was not criticized at the time for this action, according to this author, the understanding of the president and the broader public was that this clause did not apply to the president.

The researcher also argued that if the president was intended to be included, he would have been specified by name, as he is in the impeachment clause.

Either way, the Supreme Court has not ruled on whether the Emoluments Clause applies to the president.

Blind trusts and previous presidents

Just because something is legal, however, doesn’t mean it is good.

Presidents are not required by any law to place their assets in blind trusts (just as they are not required to disclose their tax returns). But before Trump, starting with Lyndon B. Johnson, most presidents voluntarily placed their assets in blind trusts. This meant that any investments (but not cash or personal real estate) were managed by an independent entity, without the beneficiary knowing what they were.

Former U.S. Presidents Barack Obama,George W. Bush (L) and Bill Clinton ® in the Rose Garden of the White House. Larry Downing/Reuters

The exceptions were President Obama and President Nixon. Nixon liquidated his limited assets and bought two houses. Obama chose not to place his assets in a blind trust, saying his family’s money was mostly invested in U.S. treasury bonds and other funds unlikely to cause a conflict.

While Trump has put his assets in a trust, the trustees are not truly independent. His two eldest sons are managing the assets of the Trump Organization, which remain known to him and of which he maintains ownership.

Since it is highly doubtful that Trump will give in to pressure to liquidate his assets, potential conflicts will remain, indeed abound.

Who will monitor the president’s conduct?

The Office of Government Ethics isn’t of much use in policing the president. One study shows that OGE is a weak and ineffective agency.

It has a small staff of about 80 full-time people and a budget of $15 million. Furthermore, the director is nominated by the president.

Its main authority is overseeing financial disclosure for legislative, judicial and executive branch officials, including the president. But the disclosure reporting categories are very broad and not very informative. Civil or criminal charges for false disclosure can be filed only by the presidentially appointed attorney general. There is a $50,000 maximum fine for false filing, but that is not much of a deterrent for very wealthy individuals.

Ivanka Trump joins her father, President Donald Trump, as he meets with women small business owners at the White House in Washington, D.C., March 27, 2017. Jonathan Ernst/Reuters

Oversight of the president’s ethics could come mainly through two channels: Congress and the media. Congress has the power to impeach the president, by a simple majority vote of the house and a two-thirds vote of the Senate.

Congressional committees can conduct hearings to investigate presidential and executive branch activities, as with the current House Intelligence Committee’s hearing into Trump’s claim that Obama wiretapped him.

Creation of an independent commission, such as the one that investigated the U.S. administration’s preparedness for the 9/11 attacks, will require that Congress and the president sign off on such a commission.

The DOJ could also investigate and prosecute criminal violations by the president. The Supreme Court ruled in 1997 that the judiciary could review the legality of the president’s actions, both in his capacity as a private citizen and in his official role. But the attorney general has discretion over whether to pursue violations of federal criminal law.

The decisions by the president and his daughter not to create truly blind trusts mean that concern over potential conflicts of interest will likely persist. Many other questions, such as those about the fitness of Trump’s daughter and son-in-law as top advisers, are also unlikely to disappear.

Simply asking the American people to trust the president, his three eldest children and his son-in-law to do the right thing may not be satisfactory for many Americans.

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