Trump’s Interests vs. America’s, Dubai Edition Part VIThat Blind Trust IssueAlmost as soon as Donald Trump and a lawyer from the Trump Organization unveiled their plans to distance the president from his businesses on January 11, many ethics experts argued that the proposal didn’t do nearly enough to ward off concerns that Trump’s business involvements would produce conflicts of interest during his presidency.
Under that plan, Trump resigned from the positions he held at the many companies that make up his real-estate empire, ceding control to his two adult sons and a longtime business associate, with his assets placed in a trust run by his two adult sons and Allen Weisselberg, a longtime Trump Organization executive, for the duration of his presidency. In unveiling the plan, the president vowed to refrain from talking about his financial interests with Donald Jr. and Eric Trump and said that all future business decisions would be reviewed by a newly appointed compliance officer to prevent even accidental impropriety. However, critics said, as long as Trump still profits from his businesses, these measures do almost nothing to mitigate worries about conflicts of interest. Besides, with so much of his fortune derived from highly visible real-estate and branding deals, some lawyers note that no trust would fully blind him from knowing where his financial interests lie; they say the only way to fully protect against conflicts of interest would have been for him to have sold off his businesses before taking office.
Events since the election demonstrate that these experts’ doubts are well-founded. Trump and his sons have shown little interest in maintaining the appearance of separation, with Eric and Donald Jr. showing up at numerous political events for their father. Roughly two weeks before the election, Donald Jr. met with a pro-Russian group in Paris to discuss his father’s policy toward Syria and, according to Politico, was involved in his father’s search for a Secretary of the Interior; he was also spotted hunting in Turkey shortly after his father’s phone call with Turkish President Recep Erdogan in which the president praised a Turkish business partner. Eric, meanwhile, appeared in photos with his father and a group of Indian businessmen mere days after the election. And both were present for the president’s announcement of his nominee for the Supreme Court.
Then, when asked about the blind trust in a March 24 interview with Forbes Eric gave answers that seemed to contradict not only the arrangement to which he supposedly agreed but also his own statements on the topic. “I do not talk about the government with him, and he does not talk about the business with us. That’s kind of a steadfast pact we made, and it’s something that we honor,” he said, before telling the interviewer that he will be providing updates to his father “on the bottom line, profitability reports and stuff like that” on a quarterly basis. “My father and I are very close. I talk to him a lot. We’re pretty inseparable,” he concluded. If Trump is in constant contact with Eric and receiving updates on his businesses from his sons, it renders the trust they created effectively meaningless—and validates the concerns watchdog groups raised when Trump first unveiled his plan in January.
After Eric Trump made those comments to Forbes, other holes in Trump’s plan have come to light. On April 3, ProPublica discovered a previously unreported change to the trust arrangement that effectively allows the president to personally withdraw money from his businesses at virtually any time he chooses. On February 10, a clause was apparently added to a letter outlining the details of the trust stating that “the Trustees shall distribute net income or principal to Donald J. Trump at his request, as the Trustees deem necessary for his maintenance, support or uninsured medical expenses, or as the Trustees otherwise deem appropriate.” In other words, Trump will be able to draw profits from his businesses at any time during his presidency as long as he and the trustees—again, his two sons and his long-time business partner—agree that it is “appropriate,” and will not have to disclose when he does so. This goes directly against the purpose of a blind trust, which in this case would be to distance Trump from his sources of income in an attempt to get rid of his incentive—or even ability—to consciously act in his own financial interest. So far, the plan unveiled in January appears to be as inadequate as many ethics experts had feared.
Finally, removing himself from day-to-day operations will do little to change the fact that Trump will retain substantive knowledge of the illiquid assets involved in his business, such as the numerous buildings and other products that bear his name, especially if he remains in frequent contact with his children. Even assuming that Trump does separate himself from any consideration of his holdings, his children will still likely be major players in the family’s organization, which will still bear at least the Trump name—arguably one of their most valuable properties, as much of the family’s wealth derives from licensing the name to third-party companies. Given the family’s oft-touted brand-consciousness (Ivanka, for example, briefly appeared to be distancing herself from the campaign, and several properties considered rebranding under the name “Scion” when it appeared Trump would lose), the situation epitomizes the way Trump’s, and his family’s, business interests may very well prove inextricable from his actions as president.
Those Fannie and Freddie InvestmentsAfter railing against elites during the campaign, Trump has so far stocked his prospective cabinet with an array of billionaires whose policy positions seem likely to significantly benefit those who are also doing very well. Trump’s putative treasury secretary, Steven Mnuchin, is no exception: His resume includes stints as a banker at Goldman Sachs, a Hollywood producer, and the operator of a bank that has been described as a “foreclosure machine” and once foreclosed on a homeowner over a 27-cent discrepancy.
One of Mnuchin’s apparent beliefs is that the government should cede control of the mortgage guarantors Fannie Mae and Freddie Mac, which the government acquired during the 2008 financial crisis. The two financial institutions’ stocks rose by more than 40 percent after Mnuchin stated that he believes the Trump administration “will get it done reasonably fast.”
Doing so would be broadly compatible with Trump’s general antipathy toward regulation of the banking industry. However, The Wall Street Journal identified an additional wrinkle to the story: When Fannie Mae and Freddie Mac’s stocks rose, one major beneficiary was John Paulson, an adviser to the Trump campaign and a business partner of Mnuchin’s. Paulson’s hedge funds include significant investments in both Fannie and Freddie. Trump himself has invested between $3 million and $5 million across three of Paulson’s funds, according to his filings with the Federal Election Commission (which remain the only available window into the president’s financial holdings). In other words, as Fannie Mae and Freddie Mac’s stock prices increase—and they have so far more than doubled since the election on the expectation that the incoming Trump administration will be more lenient toward the financial sector than Obama—Trump’s portfolio benefits.
That Phone Call With TaiwanWhen news first emerged that the president spoke on the phone with Taiwanese President Tsai Ing-wen on December 2, the immediate reaction was uproar over his apparently impetuous breach of decades of U.S. protocol toward China and Taiwan. As my colleague David Graham explained, since 1979, the United States has participated in the “artful diplomatic fiction” of officially recognizing the mainland People’s Republic of China as the only legitimate Chinese government while maintaining loose, unofficial recognition of—and significant economic and military ties to—Taiwan. That Trump would speak to the president of Taiwan, especially before doing the same with Xi Jinping, the president of the PRC, flies in the face of a diplomatic tradition that has undergirded almost 40 years of U.S.-China relations.
Amid the days of dissembling that followed the phone call, an additional worrisome detail came out: At the time, the Trump Organization was apparently exploring expansion into Taiwan. Soon afterwards, the Trump Organization denied that it planned to do so; however, even before the controversy arose, the mayor of Taoyuan, Taiwan, the municipality in which the Trump Organization allegedly wants to build, described in a televised interview a meeting with a representative of the Trump Organization in September to discuss prospective real-estate projects, and at least one Trump employee was found to have posted on Facebook that she was in Taiwan at the time on a business trip. Based on the January 11 announcement that the Trump Organization will be suspending its development plans and will not pursue foreign deals in office, it would appear that any movement on development in Taiwan is no longer on the table.
The phone call, and the many statements that have followed, are of particular interest because of the extent to which they dovetail with some of the biggest concerns about Trump’s approach toward governance. In the ensuing 48 hours, Republican officials offered several, sometimes entirely contradictory, explanations of what initially appeared to be an impulsive move by Trump; depending on who was speaking, the phone call was actually initiated by Ing-wen (which, if technically true, ignores that it was Trump’s staff who arranged the conversation), was just “a courtesy,” or manifested a policy shift weeks in the making—although, regardless, it was made without first consulting the White House or State Department. The defense of the move, and the questions it creates regarding conflicts of interest, have largely hinged on the belief that, since voters apparently don’t mind, the reaction was overblown.
On this issue, though, whether or not voters care is immaterial to the central question. The president of the United States breached decades of international protocol created to preserve a precarious balance of power. That decision raised not only the possibility that Trump was blundering into a potential international incident but also that he may have done so in part out of consideration for his business prospects.
That Deutsche Bank DebtThough 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 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’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 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 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 2010, was 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. election, some 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.
According to Trump and his lawyer, as of January 11, the Trump Organization has suspended ongoing development projects and will no longer pursue deals in foreign countries. As the project in Batumi falls under both categories, the statement suggests that progress on the president’s property in the city is no longer moving forward. Still, 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 ErdoganOne 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 shortly after the election—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 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 News, Trump 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 while in office.
That Hotel in Washington, D.C.The White House is not the only Trump property in Washington, D.C.; there’s also the Trump International Hotel, which opened last 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 presidential campaign as the site of the event at which Trump halfheartedly recanted his belief that Barack Obama was not born in the United States. Now, the hotel is a symbol of how inextricable Trump’s presidential role is from his business interests.
Trump himself acknowledged that his presidency would likely increase traffic to his Washington property. Speaking to The New York Times shortly after the election, the then-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. The numbers certainly seem to bear that prediction out: After projecting that the hotel would lose $2.1 million in the first four months of 2017, the Trump Organization revealed in August that the property had instead made $1.9 million in profit. This beating of expectations reflects more than anything else the exorbitant prices the hotel is charging: Guests are on average paying more than $650 per night, an increase of more than $200 over the Trump Organization’s projections for what the market would bear—and $150 more than the average price for other similar luxury hotels in D.C.
The Trump International Hotel’s unexpected profits are also a worrisome indicator regarding the relationship between Trump’s businesses and his presidency, especially considering that, shortly after the election, the hotel hosted a promotional event aimed at enticing foreign diplomats to stay there while in town on official state business. Critics have argued that the hotel thus violates the Constitution’s emoluments clause, which makes it illegal for a federal official to “accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State” lest the payment influence his or her decisions.
Direct influence would likely be difficult to prove: The establishment is, after all, a five-star hotel that would have been likely to attract clientele even if Trump had lost the election, a fact to which Trump and those who surround him may well point in their defense. Still, the hotel’s unanticipated popularity and several events held by both foreign governments and other interest groups reinforce the notion that Trump may be inappropriately commingling his financial interests with his duties as president.
A string of post-election events have kept the Trump International Hotel a focal point in discussions of his conflicts of interest, including among Democrats in the House. On November 29, 2016, Bahrain—a country whose donations to the Clinton Foundation Trump decried during the campaign—announced it would be celebrating at the hotel the anniversary of its king’s ascension to the throne. Other events announced not long after the election included a Hannukah celebration co-hosted by the Embassy of Azerbaijan and the Conference of Presidents of Major American Jewish Organizations and a reception for the conservative think tank the Heritage Foundation featuring Vice President Mike Pence as its keynote speaker.
Nor did the string of bookings by international entities end after Trump’s inauguration: On February 9, Politico reported that a lobbying group with connections to the government of Saudi Arabia had booked a four-day stay at the hotel in Washington, D.C. And on March 13, The Daily Caller reported that the Turkish-American Business Council, whose chairman paid $530,000 to Trump’s former National Security Adviser Michael Flynn to lobby on behalf of the Turkish government, would be co-hosting its annual conference at the hotel after a seven-year run at the Ritz-Carlton.
Moreover, since the election, ethics groups and critics of the president have alleged that, since taking office, Trump has been in continual violation of the lease he holds on the Old Post Office, the government-owned building the Trump International Hotel inhabits. At issue is a clause in the lease stating that “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.” As such, watchdog organizations such as Citizens for Responsibility and Ethics in Washington (CREW) have repeatedly appealed to the Government Services Administration (GSA), the federal agency that administers the lease, to terminate the agreement with the Trump Organization.
On March 23, however, the GSA released a letter finding that Trump “is in full compliance” with the lease. According to Kevin Terry, the contract officer who oversaw the initial negotiations between the government and Trump, the president’s plan to turn over his businesses to his two adult sons and the long-time Trump Organization executive Alen Garten is sufficient to meet the terms of the agreement, as Trump is no longer “an officer, director, manager, employee, or other official in any of the entities” involved in operating the hotel. The letter immediately drew outcry from ethics organizations like CREW, which called the ruling “a disappointment” that failed to address the underlying problems of Trump’s businesses, and the left-leaning advocacy group Public Citizen, which described it as “an affront to the rule of law” based on “tortured and wholly uncompelling analysis” that “would get a first-year law student kicked out of law school.”
The GSA’s decision may also prove a blow to the more general argument that Trump has not done enough to distance himself from his namesake organization. Critics have strenuously objected to the plan Trump and his lawyer Sheri Dillon laid out on January 11 to mitigate conflicts of interest, under which the president has stepped down from, but retains ownership of, his numerous business interests, and placed his assets in a trust to be administered by his adult sons and a longtime Trump Organization executive. Trump’s opponents maintain that, because he still has significant knowledge of his business interests and will still be benefiting from them, and because he has put in place few real barriers to communication between himself and his sons, there is still ample opportunity for outside actors to seek to influence the president’s decisions by patronizing his companies Though the letter from the GSA discusses only the Trump International Hotel and not the legality of the overall arrangement, it is nonetheless a decidedly favorable outcome for Trump in the first legal challenge over his conflicts of interest.
That Argentinian Office BuildingAccording to a report by the prominent Argentine journalist Jorge Lanata, the president’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.
Based on the information at the president’s January 11 press conference, it appears that the properties in Argentina, as both ongoing development projects and deals in a foreign country, is no longer moving forward. Nevertheless, the questionable circumstances under which it did so in the immediate aftermath of the election demonstrates just how many avenues there are for Trump’s conflicts of interest to interfere with governance around the world.
Those Companies in Saudi ArabiaEven 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 FarmAs he indicated when he stopped there during the campaign, President 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.
However, Trump also has a second golf course in Aberdeen, where it appears Trump has attempted to intercede 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, 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 PartnersIt didn’t take long after the election for President 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 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 PhilippinesOne 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.
https://www.theatlantic.com/business/archive/2017/08/donald-trump-conflicts-of-interests/508382/
