Baseline #4: Conflicts of interest

Submitted: Dec 03, 2016
By: 
Badlands Journal editorial board

 The Trump presidency, its cabinet shaping up to be a plutocracy, is likely to become the most corrupt executive the United States has ever seen. This entry in our Baseline Series concerns only the president-elect's conflicts of interest, not those of the rest of his cabinet-of-the-wealthy. The exception to The Donald's plutocrat law is a retired US Marine general, who he chose for his secretary of defense. The selection of Genl. James Mattis shows Trump's contempt for the law excluding the general from serving in that position for seven years. It is one more example of that general contempt for the law and adds to the pattern of lawlessness this regime was elected to represent.

The appearance of corruption is an important principle established by several US Supreme Court decisions. Donald Trump must do whatever he can to stomp that principle into historical dust in order to continue on his merry way. The media, as it has been from the beginning with Trump, focuses on Mattis's nickname because it is always important to divert the attention of the children.

-- blj

 

 

 

 

 

 

 

 

12-1-16

The Atlantic

Donald Trump's Conflicts of Interest: A Crib Sheet

The president-elect's billions in loans from Deutsche Bank, which is currently in negotiations with the Justice Department over its lending practices, threaten to further complicate an already difficult situation.

Jeremy Venook

http://www.theatlantic.com/business/archive/2016/12/donald-trump-conflicts-of-interests/508382/

Since his election, an ever-increasing level of attention has been paid to the unprecedented conflicts of interest that President-elect Donald J. Trump seemslikely to bring with him when he assumes office. His responses to the concerns have been varied and, at times, contradictory. His first statement on the subject, which came via Twitter, suggested that he would make little effort to avoid entangling his business and his office, and would instead attack those who point that out:

 

 

 

 

 

A few days later, in a conference with the editorial staff of The New York Times, he appeared similarly defiant, asserting, “The law’s totally on my side, the president can’t have a conflict of interest.”

Now, the president-elect appears to be shifting his stance, although just how much remains to be seen. In an early-morning tweetstorm, Trump announced that he will be “holding a major news conference” on December 15 about a plan “being crafted which take[s] me completely out of business operations,” although he stressed again that he is “not mandated to do this under the law.”

In response, the Office of Government Ethics issued a tweetstorm of its own lauding Trump for deciding to pursue “total divestiture,” which is not, in fact, what Trump promised. A later statement from the OGE’s spokesman Seth Jaffe has led to speculation that the posts were facetious and meant to imitate Trump’s signature tweeting stylean attempt to influence the president-elect’s decision on the subjector both.

Central to the discussion is that, as Trump has repeatedly pointed out, the president and vice president are exempt from the Office of Government Ethics’ rules preventing conflicts of interest within the executive branch. More recently, attention has shifted to the Emoluments Clause, a relatively obscure section of the Constitution barring the chief executive from receiving gifts from foreign governments, which some experts say Trump might violate if his properties receive preferential treatment from other world leaders. However, case law on the clause’s possible application is sparse.

At any rate, legality does not imply propriety. Unless Trump acts to put appropriate distance between himself and his business ventures, these questions are likely to continue throughout his time in the Oval Office. Below is an attempt to catalogue the more clear-cut examples of conflicts of interest that have emerged so far; the most recent entries appear at the top.

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That Deutsche Bank Debt

Though he often brags about leveraging corporate-finance law to become “The King of Debt,” Trump’s numerous bankruptcy filings have left most large Wall Street banks reticent to lend to him, according to The Wall Street Journal. Among the few exceptions is Deutsche Bank, which “has led or participated in loans of at least $2.5 billion” to the president-elect since 1996, with at least another $1 billion in loan commitments to Trump-affiliated companies; more than $300 million of those loans have come since 2012.

The president-elect’s indebtedness does not itself pose a conflict of interest, but Deutsche Bank’s ongoing legal troubles very well might. The Justice Department is currently negotiating with Deutsche Bank regarding a preliminary settlement of $14 billion to resolve probes into allegedly misleading predatory lending practices in the leadup to the 2008 financial crisis; while it is believed that Deutsche Bank will push back against the sum, there has been no public news regarding negotiations since the initial figure was reported in September. Trump will soon be naming many of the officials with jurisdiction over this and other deals, prompting several House Democrats to send a letter to federal financial agencies calling for close scrutiny of how Trump may seek to influence the settlement through his appointments—although doing so would be just as in keeping with his general stance toward financial regulation as with active protection of his pocketbook. Other Democrats have called for the proactive appointment of independent prosecutors to avoid any appearance of conflict if the case is not resolved before Trump takes office.

Fears that Trump may unduly consider his indebtedness to Deutsche Bank in deciding his administration’s policy toward the financial sector go beyond general anxiety about deregulation. Deutsche Bank is undergoing a period of struggle that may have it on the verge of failure already. Its stock valuation has dropped by more than half since July 2015; in January, it posted its first full-year loss since 2008; and one of its many tranches of bonds—one specifically designed to be a high-risk, high-reward safety valve in times of trouble—has recently begun to crash. In June, the International Monetary Fund called Deutsche Bank “the most important net contributor to systemic risks” among globally important financial institutions. If the bank were to fail, it could have major consequences for not only Trump’s businesses, which would lose their sole remaining lender, but for the global economy as well.

Arguably, the $14 billion fine the Justice Department is seeking to impose has exacerbated rather than alleviated these struggles. Based the company’s market capitalization—the number of shares multiplied by their price— of roughly $16 billion, the sum would leave Deutsche Bank critically low in liquid assets with which to absorb future troubles. although the institution’s own self-valuation of $68 billion argues otherwise. But given the complexity and potential volatility of the situation, it is important for any decision to be free from outside influence, something Trump’s outstanding debt threatens to jeopardize.

 

That Secret-Service Detail

During the election, the Trump campaign put no small portion of its funds toward paying for use of the candidate’s own properties; perhaps the most notable of these expenditures was the nearly $170,000 the campaign spent in July on rent for its headquarters in Trump Tower. These expenses raised the possibility that, as Trump predicted in 2000, he “could be the first presidential candidate to run and make money on it.” Now that he will be president, he may be able to profit off of the Secret Service by virtue of the fact that he and his family will live in Trump Tower and fly in his private jets—which requires the agents tasked with guarding them to pay him rent and airfare.

The first way Trump could monetize his own protective detail is by having family members travel in his two planes and three helicopters. This is not so much speculative as foregone: Over the course of the campaign, the Secret Service, which traditionally pays for its own travel during elections, spent $2.74 million to fly on a plane owned by one of Trump’s own companies. Once Trump takes office, he will fly exclusively on Air Force One, while Mike Pence will be riding Air Force Two. However, their families may still be flying on Trump’s private planes—along with their protective details, which would effectively direct even more money to Trump. (Previous first families have flown with a detail, whose legal purview covers “the immediate family members,” but none have done so on planes they themselves own.)

A bigger question regards Trump Tower in New York, where the president-elect appears likely to spend a significant amount of time. For the past few decades, it has been common practice for the Secret Service to provide protection for the president and vice president’s non-White House residences, which sometimes entails paying rent to the officeholder. (Joe Biden, for example, received $2,200 per month when the agency rented a cottage he owned near his home in Delaware.)

But Trump Tower is a unique case, as it’s not in Delaware but the middle of Manhattan. Already, pedestrians and tourists are chafing at the increased security around the building, Trump’s frequent use of which has required closing a block of 56th Street and multiple lanes of Fifth Avenue; with multiple outlets reporting that Trump’s wife Melania and 10-year-old son Barron are expected to stay at Trump Tower for at least part of his term, it appears that the consternation will continue, with an enormous price tag for taxpayers: According to the New York Post, it could cost as much as $3 million a year to rent out two of the building’s vacant floors, meaning that Trump will be making money off of his own security detail.

This system creates an unusual set of conflicting interests for Trump regarding his own travel and residences. Though presidents as disparate as Dwight Eisenhower and Barack Obama have evoked partisan ire over time spent away from the White House, whether on the golf course or on vacation in Hawaii, only Donald Trump will actually have gained from his and his family’s travels. And if, while in office, Trump visits properties he owns other than Trump Tower—his buildings in other U.S. cities like Chicago and Miami, for example, or his golf course and resort in Scotland, or one of the many international hotels bearing his name—he stands to gain from the stays for which his security detail (and, by extension, taxpayers) may be paying. Moreover, the more his family members fly on his planes, whether they are running his business on his behalf or running interference with foreign leaders, the more the Secret Service will end up paying for seats alongside them.

 

That Property in Georgia (the Country)

Trump’s election has had the effect of speeding up development on a number of his branded properties, even when the president-elect appears not to be pulling any strings himself. As occurred with Trump Tower Buenos Aires, the completion of an embattled Trump-branded building in the former Soviet republic of Georgia is no longer on hold now that Trump has won. The project, which has been in the works in the seaside resort city of Batumi since 2010was initially scheduled to break ground in 2013, but has been in stasis for several reasons, possibly including the 2013 electoral defeat of President Mikheil Saakashvili, a friend of Trump’s and a supporter of the deal.

According to a report in The Washington Post, the green-lighting of the Trump property in Batumi has not been linked to a specific conversation with Georgian leaders, and a U.S.-based partner on the project has suggested that it has moved forward without any nudging from the government. However, numerous public statements in the days since suggest that Trump’s election was a major factor, including an interview with a real-estate entrepreneur who said, “Cutting the ribbon on a new Trump Tower in Georgia will be a symbol of victory for all of the free world.”

That the property seems to be moving forward solely because Trump was elected suggests his various business interests around the world may play a role not only in his foreign policy but in how other countries seek to deal with the U.S. as well. America’s relationship with Georgia is largely shaped by concerns about Russian influence and potential aggression in the region, most recently manifested in Russia’s 2008 seizure of two regions of Georgia, South Ossetia and Abkhazia. With controversy already swirling over Trump’s admiration for Putin and Russia’s alleged role in the U.S. electionsome in the foreign-policy community have expressed trepidation that Trump’s potential deferential attitude toward Russia would prove deleterious for the continued independence of former satellite nations like Georgia. So, if Georgia has an ulterior motive behind the approval of Trump’s property in Batumi, it would be to keep Russia at bay and maintain the status quo in the region. It’s alarming that a country like Georgia may be giving Trump’s businesses favorable treatment (whether he asked for it or not) in an attempt to influence his foreign policy.

 

That Phone Call With Erdogan

One of the worries regarding Trump’s many conflicts of interest is that they may influence policy towards countries whose relationships with the U.S. are currently strained. Such is the case with Turkey, whose president, Recep Erdogan, has been cracking down significantly on civil liberties and democratic institutions within the country after a failed coup last summer. Though Turkey has in the past been a vital U.S. ally as a bulwark against Islamic terror, Erdogan’s authoritarian turn and combative stance toward Europe have led to some reevaluation of that relationship.

Thus, it was troubling news that when Erdogan phoned Trump earlier this month—it was one of the first calls Trump received after his victory—Trump used the opportunity to plug his business partners in Istanbul. According to the Huffington Post, while on the line with Erdogan, Trump relayed praise for the leader from Mehmet Ali Yalcindag, whose father-in-law, Aydin Dogan, owns the holding company that operates the Trump Towers in Istanbul. Dogan has previously drawn Erdogan’s ire by criticizing the leader; in recent years, however, Dogan’s companies, most notably CNN Turk, have shown support for Erdogan’s regime, including broadcasting his first message after the uprising in July.

Trump’s conversation with Erdogan is also worth noting because of a number of Trump’s previous statements regarding the Turkish president. Though Erdogan briefly called for Trump’s name to be removed from the Istanbul property due to his proposed ban on Muslim immigration, Erdogan dropped the demand when, after the overthrow attempt, Trump praised Erdogan for “turning it around” and essentially dismissed concerns over Erdogan’s crackdown on civil liberties by bringing up domestic problems. Michael Flynn, who was recently named Trump’s national security adviser, wrote an election-day op-ed in The Hill arguing against offering asylum to a Muslim cleric whom Erdogan has accused of orchestrating the uprising, which some have interpreted as a diplomatic overture. Erdogan has also bristled at post-election protests in the U.S. and the description of both himself and Trump as part of a “ring of autocrats.” That the two are now talking about their countries’ relationship as in the same conversation as Trump’s business interests further complicates Trump’s strangely effusive comments about Erdogan.

It’s worth noting that Trump himself considers his hotel in Istanbul a potential conflict of interest. In a December 2015 interview with Stephen Bannon, at the time the chairman of Breitbart NewsTrump said as much, telling Bannon, “I have a little conflict of interest ‘cause I have a major, major building in Istanbul. It’s a tremendously successful job." That he chose to discuss the towers with Erdogan, albeit obliquely, through his references to his business partners when he has already acknowledged the impropriety of doing so simply reinforces the perception that he may prove unable to separate his business from his official duties once he assumes office.

 

That Las Vegas Labor Dispute

On top of owning various properties and enterprises, Trump and his company employ roughly 34,000 people, according to an analysis by CNN. Currently, at least 500 of those workers are actively engaged in a labor dispute against the president-elect—one in which Trump will soon have the power to make appointments that could affect the eventual outcome.

In October 2015, several hundred employees, primarily housekeeping staff, at the Trump International Hotel in Las Vegas voted to join the local branch of the Culinary Workers Union. Trump Ruffin Commercial LLC, which owns the hotel and is itself owned by Trump and the casino magnate Phil Ruffin, contested the vote, first by enlisting an anti-union consulting firm (for whose services it paid $500,000) and then by filing complaints with the National Labor Relations Board (NLRB). Shortly before the election, the NLRB not only rejected Trump and Ruffin’s complaints but also found that, because the pair had refused to negotiate with the nascent union, they had violated federal law and their hotel was operating illegally. Trump and Ruffin have since appealed to the U.S. Court of Appeals for the District of Columbia.

Once he assumes office, Trump will be tasked with appointing members to fill current openings on the NLRB, the very body that ruled against him shortly before his election and will be tasked with resolving any future disputes between the hotel’s owners and its employees. Moreover, as Slate recently noted, the chief justice for the D.C. Court of Appeals is none other than Merrick Garland, whose nomination to the Supreme Court has spent months languishing in the Republican-controlled Congress and will likely be withdrawn once Trump becomes president; in the unlikely case that by the time the dispute is resolved, Garland is no longer on the court, his replacement will almost definitely be a Trump appointee. Finally, if either party is unsatisfied with the D.C. Court of Appeal’s decision, the case may go to the Supreme Court, to which Trump will be appointing a justice, which is expected to tip the balance decisively in a more conservative (and likely anti-union) direction. In other words, no matter how far up the chain this dispute goes, Trump’s presidency will give him new power to influence the results.

 

That Blind-Trust Issue

Though precedent alone is not legally binding, history dictates that politicians typically divest themselves from assets that might pose conflicts of interest upon entering office. Having ruled out selling his company, Trump could form a blind trust, turning over management of his holdings to a lawyer or other trustee with whom he will have no contact, as Michael Bloomberg did upon becoming the mayor of New York City (although, given how much of Trump’s portfolio is real estate, he would still likely retain enough substantive knowledge to render the trust blind in name only). Another option is for politicians to diversify their holdings so broadly that their growth tracks with that of the economy overall, as President Obama did in 2008.

Already, Trump has run afoul of these precedents on several occasions. Throughout the campaign, when asked how he would mitigate conflicts of interest, he responded that he would transfer his assets into a blind trust operated by his three adult children, Donald Jr., Ivanka, and Eric. However, doing so does not fit even the most basic definition of a blind trust: As his close advisersmembers of his transition team, and, well, his children, Trump’s family members do not have nearly the distance from the president-elect required of a blind trust.

Moreover, even if one does take take the president-elect at his word that his children will be entirely separate from his administration, events since his election strongly suggest otherwise. Rumors quickly emerged that Trump had requested security clearance for not only his three children but also his son-in-law, Ivanka’s husband Jared Kushner, who owns his own real-estate company as well as The New York Observer. His children further undermined even the appearance of a blind trust—Ivanka by sitting in on a meeting between her father and the Japanese prime minister Shinzo Abe as well as a phone call between Trump and the Argentine president Mauricio Macri, and both Ivanka and Eric by appearing with their father at a business meeting with three of the family’s Indian business associates in New York.

 

That Hotel in Washington, D.C.

The White House is not the only new Trump property in Washington, D.C.; there’s also the new Trump International Hotel, which opened in October and is located just a few blocks away in what was formerly known as the Old Post Office Pavilion. Previously, the hotel played a role in the campaign as the site of the event at which Trump recanted (sort of) his belief that Barack Obama was not born in the United States. Now, the hotel is at the center of speculation as a symbol of how inextricable Trump’s presidential role may be from his personal interests.

First and foremost, Trump does not own the location outright; instead, he leases the building from the federal government’s General Services Administration, an agency whose next administrator Trump will soon be appointing. The GSA has explicit regulations prohibiting contracts with government employees to prevent conflicts “that might arise between the employees’ interests and their Government duties, and to avoid the appearance of favoritism or preferential treatment.” The Trump Organization’s 60-year lease on the property likewise states, “no ... elected official of the Government of the United States ... shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom.” Nevertheless, Trump’s lawyers maintain that, as his children will be running the organization, the lease will not violate the GSA’s rules.

As if its location didn’t pose enough of an ethical question, the hotel has already hosted at least one promotional event specifically aimed at enticing foreign diplomats to stay at the establishment while in town on official state business. On the one hand, direct influence will likely be difficult to prove: The establishment is, after all, a five-star hotel that would have been likely to attract high-class clientele even if Trump had lost the election, a fact to which Trump and those who surround him may well point in order to maintain a patina of respectability around their dealings. Still, the meeting’s proximity to the election reinforces that it will be worth watching the comings and goings at the hotel closely for signs that Trump, who so often accused his opponent (often without evidence) of pay-for-play, may be using his position as president to promote his businesses.

Trump himself acknowledged that his presidency is likely to increase traffic to his Washington, D.C. property. Speaking to The New York Times, the president-elect noted that the property is “probably a more valuable asset than it was before” and that his brand is “hotter” since the election. However, he went on to insist that there was nothing even potentially problematic about his unprecedented situation and that he sees no reason why he couldn’t run both the presidency and his business without conflict.

Multiple events since the election have made Trump’s lease on the hotel a central focus of discussions of his conflicts of interest, including among Democrats in the House. On November 29, Bahrain—a country whose donations to the Clinton Foundation Trump and his campaign decried during the campaign—announced that it would be celebrating the anniversary of its king’s ascension to the throne at the hotel. Numerous ethics experts, many of whom are calling for Trump to generally divest his business holdings, have singled out the building’s lease, which will likely be breached the moment Trump takes office even if he does transfer his company to his children. And on November 30, mere hours after Trump stated on Twitter that “legal documents are being crafted which take [him] completely out of business operations,” Buzzfeed reported that Trump and the federal government were closing in on a tax subsidy for the property that could be worth as much as $32 million. As a result of the increasing scrutiny, the hotel and his handling of the commotion about it have become emblematic of the broader issues surrounding Trump’s conflicts of interest.

 

That Argentinian Office Building

According to a report by the prominent Argentine journalist Jorge Lanata, the president-elect’s first phone call with his Argentine counterpart Mauricio Macri included a discussion of the permit issues currently holding up construction of a new Trump-branded office building in Buenos Aires. Both Macri and Trump quickly denied the report; according to a statement from the Embassy of Argentina, “The subject both leaders talked about was the institutional relationship, and they briefly mentioned the personal relationship they have had for years.”

As summarized in a tweetstorm here, Trump’s relationship with Argentina’s government and business elites—and the story so far on his property there—is already long and convoluted. The phone call with Macri was apparently set up through Felipe Yaryura, one of Trump’s longtime associates whose company, YY Development Group, is in charge of Trump Tower Buenos Aires. The day after the phone call, the PanAm Post reported that YY Development Group had been approved to break ground in June 2017; evidence has since emerged that the permitting process is not, in fact, finished, although Trump’s business associates are moving ahead as though it is.

 

Those Companies in Saudi Arabia

Even as Trump was running for president, his company was continuing to operate and open new properties. While the most memorable openings may have been that of his hotel in Washington, D.C., and his golf course in Turnberry, Scotland, the Trump Organization was continuing to work on projects in other countries, including, according to a report the Washington Post, registering eight new companies in Saudi Arabia during the 16-month campaign.

The organization’s endeavors in Saudi Arabia are notable not only because they may further complicate the shaky relationship between the U.S. and an oil-rich gulf state notorious for human-rights abuses but also because of how they relate to Trump’s campaign rhetoric. One of his criticisms of Hillary Clinton was that her charitable foundation had accepted donations from governments with questionable records on human rights, most notably Qatar and Saudi Arabia, always with the implication (or direct accusation) that they were doing so to curry favor with Clinton when she was secretary of state. That Trump was continuing to level this criticism while his namesake organization was actively pursuing new projects in Saudi Arabia not only bodes ill for his ability to separate his personal and presidential interests but also further calls into question the honesty and transparency of his campaign.

 

That British Wind Farm

As he indicated when he stopped there during the campaign, President-elect Trump takes enormous pride in his recently opened golf course in Turnberry, Scotland. The day after the British public voted for Brexit—over intense Scottish opposition—Trump spoke at the property’s opening, proudly touting how the decision’s deflationary effect on the pound would benefit his business.

Now, it appears that Trump has taken active steps to intercede at Turnberry in the interest of his own pocketbook. According to The New York Times, Trump had a post-election meeting with Nigel Farage in which he “encouraged Mr. Farage and his entourage to oppose the kind of offshore wind farms that Mr. Trump believes will mar the pristine view from one of his two Scottish golf courses.” Hope Hicks, a spokeswoman for the president-elect, denied that the two had discussed the subject, only for Trump to later confirm that the topic had, in fact, come up in their conversation.

 

Those Indian Business Partners

It didn’t take long after the election for President-elect Trump to be seen in public with international business partners. According to a November 19 article in The New York Times, Trump took a break from his transition schedule to meet with three Indian real-estate executives who are currently building a Trump-branded apartment complex in Mumbai. According to both Trump and the Indian businessmen, the meeting was essentially congratulatory in nature; a picture posted by one of the executives on Twitter shows the four men smiling broadly and giving a thumbs-up to the camera. However, that the meeting happened in the first place suggests that Trump does not currently have any qualms about forestalling official state business for personal business.

On top of that, the meeting raises questions in the blind-trust realm as well. The president-elect himself was not the only member of his family there; two Facebook photos show that Ivanka and Eric Trump both attended the meeting as well. Their presence serves as a reminder that their father seems so far uninterested in maintaining even the nominal separation between himself and his assets that he repeatedly said he would create during the campaign.

 

That Envoy From the Philippines

One leader with whom Trump already has an advantage over President Obama is Rodrigo Duterte, the similarly brash president of the Philippines. Duterte, who has threatened to “break up with America,” told Obama to “go to hell,” and called the president a “son of a whore,” expressed admiration for Trump, noting that, among other similarities, they both enjoy swearing.

Duterte’s affinity for Trump apparently goes beyond vulgar word choice. Late in October, Duterte appointed a longtime business associate of Trump’s as a special envoy to the United States, an announcement that became public shortly after the election. This appointment in particular raises questions because it is just as open to exploitation by Duterte as it is to Trump, as the Filipino president could intend to use his new envoy’s relationship with Trump to strengthen the Philippines’ hand. Whichever side the appointment does eventually benefit, however, the situation is nevertheless fraught with conflicts between the three men’s personal and political interests.

 

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