Trump Just Failed His First Ethics Test as President
Policy + Politics

Trump Just Failed His First Ethics Test as President

REUTERS/Lucas Jackson

After months of delay, President-elect Donald Trump on Wednesday presented his plan to distance himself from his company during his time in the White House. Under the proposal, laid out by an attorney during a press conference with the incoming president, Trump would retain ownership of his company -- including hotels, golf courses, commercial real estate and various branding arrangements -- but would relinquish all management responsibilities.

He also proposed to donate any profits from his hotels derived from foreign governments directly to the U.S. Treasury in a move meant to silence critics who claim that accepting such payments would be a violation of the emoluments clause of the Constitution.

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Trump’s press conference came at a contentious moment, after the website BuzzFeed published an unverified dossier suggesting that the Russian government has compromising information about the president-elect, including evidence of illicit financial entanglements and potentially embarrassing sexual activity.

The publication of the report -- which, again, could not be verified -- plainly enraged Trump and his advisers. During the press conference Trump repeated his claim, aired on Twitter Wednesday morning, that he has no deals, loans or other financial interests in Russia.

When he was asked if he would release his tax returns to offer support for that claim, he declined, saying as he has for well over a year now that he cannot because they are under audit. (As many critics have pointed out, there is no law or other requirement that officially prevents a person under audit from releasing his or her returns.)

“The only one that cares about my tax returns is reporters,” he said, shortly before turning the event over to attorney Sheri Dillon, a partner with the law firm Morgan Lewis in Washington.

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Dillon said that at Trump’s instruction, she and her colleagues had worked out a plan to “completely isolate him from the management of the company” and to “build in protections that will assure the American people the decisions he makes and the actions he takes as president are for their benefit and not to support his financial interests.”

All of Trump’s investments and business assets will be signed over to a trust by the time he takes office, Dillon said, and he will give up “leadership and management of the Trump Organization” to his adult sons and a senior company executive. His daughter, Ivanka, will also shed all management responsibilities.

Trump will retain sharply limited information rights to his companies, which Dillon described as periodic reports on the profit and loss statement of the consolidated Trump Organization, and not information on individual holdings and business lines.

The company will also add an “ethics adviser” to its management team, who will be required to approve any new deals made by the company are “beyond reproach and cannot be viewed to be exploitive.”

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She said that the organization will not do any foreign deals while Trump is in office, but will pursue domestic opportunities. That would appear to violate a promise trump made in December, when he said “no new deals” would be made while he is president.

The trust Trump is establishing will hold liquid assets like cash and cash equivalents, Treasury securities and possibly mutual fund holdings. It will also hold what Dillon described as “pre-existing, illiquid and very valuable business assets.” That includes golf resorts, hotels, rights to royalties, etc.

Dillon said that after his election, Trump ordered the termination of 30 pending deals, which caused an immediate loss of millions of dollars.

Ethics experts have argued that the only way to truly remove conflicts of interest in Trump’s case would be total divestiture of his assets. However, Dillon argued, selling everything would be both impractical and rife with its own conflicts. For example, selling the business would immediately create questions about whether the price paid was fair.

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Further, selling the companies while retaining royalty rights to the Trump name would mean Trump retained an interest in the brands, but no ability to prevent it from being used to exploit his position. Stripping the Trump name from the company, she said, would vastly diminish its value, leading to a “fire sale.”

Dillon pushed back hard against claims that Trump will violate the emoluments clause if he profits from payments that foreign governments make to his hotels. She insisted that the clause does not apply to fair value exchanges.

“Paying for your hotel is a value-for-value exchange” and “is not an emolument.” she said. That is a position that many ethics experts hotly dispute, but Dillon said Trump will try to make the question moot with his promise to redirect money from foreign governments to the Treasury.

He will, she said, “voluntarily donate all profits from foreign government payments to his hotels to the U.S. Treasury. This way, it is the American people who will profit.”

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Government ethics experts were extremely critical of Trump’s plan, insisting that nothing short of total divestment would truly eliminate conflicts of interest.

“Today was his first test as president. He failed,” said Noah Bookbinder, executive director of Citizens for Responsibility and Ethics in Washington.

“He’s not worried about conflicts of interest because the statutes don’t apply to the president. If that sounds familiar, it was the position Nixon took when he told David Frost ‘when the president does it, that means it is not illegal.’ Just because it’s not illegal, does not mean it is right or moral.”

All of Trump’s decisions as president, Bookbinder said, “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.”

“Trump’s proposals today make decent sound bites, but, in reality, fall short of meaningfully solving the problem,” said Danielle Brian, executive director of the Project on Government Oversight. “Retaining ownership and allowing his children to operate the family business is a page out of the Corruption 101 Handbook.”

The plan, Brian said, “will likely embroil Trump in controversy and litigation.”