“Now we are going to have Donald Trump’s swamp,” said ethics guru Paul Painter of University of Minnesota Law School. “The D.C. swamp is going to be back-filled from New York.” That’s how Painter described to Right Turn the problems implicit in the president-elect’s announcement via Twitter that he will leave his sons in charge of his business but make no “new deals.” On its face, that makes no sense, Painter said. “What is a ‘deal’? It’s just slang for a transaction. You cannot run a business without transactions.” Leases get renegotiated, loans get refinanced or initiated, hotels renovate and hire contractors. “This [approach] isn’t going to sell,” said Painter. “We need a deal — he has to sell his business.”
Apart from Trump, the administration and everyone who serves in it will have an ongoing problem. Every employee is bound by the ethical standard of impartiality in federal regulations (5 CFR Section 2635.502). That prohibits employees from taking actions that would “cause a reasonable person with knowledge of the relevant facts to question his impartiality in the matter.” In such cases, “the employee should not participate in the matter unless he has informed the agency designee of the appearance problem and received authorization from the agency designee.” However, the regulation is not clear whether, for example, an executive-branch employee charged with regulating or negotiating with Congress on a matter that could affect Trump’s still-owned properties would be violating the law if he did Trump a “favor.” Painter recommends that Congress pass a law such that if, for example, the party to a lease with the government is the president, then no political appointee — only career civil servants — can rule on the matter. But even then, are the civil servants at risk if they think there is a raise or promotion in store for them if they do something that helps the Trump kids make money? It surely creates the appearance of partiality, at the very least.
The issue is especially acute for employees of the federal government who are in the role of adjudicators — at the National Labor Relations Board or the Security and Exchange Commission, for example. If a Trump property is at issue (e.g., a labor dispute at a Trump hotel), there is an inherent conflict and any ruling the employee makes could well be overturned upon review in federal court, Painter says. “This is a serious issue.” If the employee is a member of the state bar, he or she may think twice about ruling on matters for fear of violating his or her professional obligations, which could end in penalties or suspension or revocation of the employee’s law license by the bar.
At a bare minimum, inspector generals in the various federal departments and agencies will be charged with investigating fraud, waste and abuse. A never-ending stream of conflicts very well could flow from hundreds of actions the federal government takes every day that could affect Trump’s businesses. Kurt Eichenwald, after a laborious analysis demonstrating how Trump’s foreign business operations could be affected by policy decisions, concludes:
Given the extraordinary power Donald Trump now wields, it’s obvious that foreign governments and corporations can easily curry favor, bribe or even blackmail him, which is why the Founding Fathers so feared outside influences on the Executive Branch. Once he’s president, Trump does not need to ask for cash to be delivered to his pockets or to those of his children to cross the line into illicit activities—and possibly impeachable offenses. Macri of Argentina cannot know if his country will be punished by the Trump White House if the remaining permits for that Buenos Aires project are denied. Abe of Japan does not know if a government holdup of Ivanka Trump’s deal with Sanei International will lead her impulsive father to call for an American military withdrawal from his country. Erdogan of Turkey has told associates he believes he must keep pressure on Trump’s business partner there to essentially blackmail the president into extraditing a political enemy. Duterte of the Philippines believes he has received approval from the president-elect to, at best, abide by or, at worst, continue to authorize the frenzied slaughter of drug users and dealers, and knows he can harm the Trump family if the president ever angers him.
Members of Congress are not errand boys for the president or president-elect. Rather than waving off all questions about Trump’s conflicts as House Speaker Paul D. Ryan (R-Wis.) does, it is time for them to abide by their oath and demand Trump comply with the Constitution and the spirit of conflict-of-interest laws. If not, anyone who goes to work for him should “lawyer up” just in case they get tagged with accusations of a conflict or partiality. Voters in 2018 should hold Republicans to their promise to act as a check on Trump, drain the swamp and uphold the Constitution.
And on it goes. But there is more: Enter Exxon Chief Executive Rex W. Tillerson as secretary of state.
He has been head of an oil company that has negotiated deals in many countries. Can he act on behalf of the United States with those very same countries now? As the Wall Street Journal reported, in some sense Tillerson got where he is thanks to a deal with Vladimir Putin. (“Rex Tillerson was propelled to the top of Exxon Mobil Corp. partly by negotiating a deal with Vladimir Putin to kick-start an oil project in Russia’s Far East, one of a series of agreements between the pair stretching back to 1999. That relationship is both Mr. Tillerson’s biggest claim to the nomination as Donald Trump’s secretary of state, and potentially the biggest concern about him in the U.S. Congress, where members of both parties are pushing for an investigation into Russia’s alleged hacking and its impact on the U.S. election.”) How do we know Tillerson won’t be returning favors right and left, or seeking to help his former employer? Tillerson is also going to be tasked with negotiating or renegotiating or ending the Paris climate agreement. Can he do that without creating the appearance of a conflict?
To address these and other issue, Tillerson will surely have sell all 600,000 shares he holds in Exon to comply with specific conflict-of-interest rules. However, that doesn’t solve the problem of 2 million shares he is scheduled to receive in the future. CNN reports:
Tillerson would know the schedule for when he is due to receive those shares, and his actions in office could influence their value.
“It’s a crime to participate in any government action that has predictable effect on your investment holdings,” Painter said.
To avoid that problem, or the prospect that Tillerson would forfeit the 2 million shares, Exxon could change its rules and give Tillerson the stock when he leaves the company.
But that would be a tremendous favor for the future secretary of state, a move that in itself could raise ethical and conflict of interest questions. A spokesman for ExxonMobil wouldn’t comment if the company is considering such a change.
Or Trump could grant Tillerson a waiver from having to follow the conflict of interest laws, a step he could legally do once he is in office. But that option too would just further arm critics concerned about potential conflicts.
Of course, Tillerson could walk away from the 2 million shares. He could still sell the 600,000 shares he already controls — currently worth about $55.6 million. But he would be giving up a pot of money worth $184 million in today’s prices.
Tillerson could do all that and still not satisfy government ethics lawyers, say Painter and ethics expert Norman Eisen in a press release for Citizens for Responsibility and Ethics in Washington:
Even if he does divest, there still may be some necessary recusals. The biggest concerns revolve around his close business and personal ties to Russia, which may be the subject of a separate Senate investigation into apparent interference with the election. . . . It may be that the appearance of conflict and the need for repeated recusals is so profound that the Senate concludes he cannot do the job. We hope the confirmation hearings and the Senate’s investigation of Russia’s alleged intrusion upon the election will provide an occasion for a comprehensive review of all these issues, including full disclosure of all business ties between Russia and senior members of the administration—including the President-elect.
Unlike Trump, Tillerson is going to be subject to explicit conflict-of-interest rules. Chances are, he is going to leave quite a lot of money on the table, and the Senate should demand he take that and whatever other steps are need to minimize his conflicts of interest.