A Man of Many Assets or a Foreign Asset?
You can fool all the people some of the time and some of the people all the time, but you cannot fool all the people all the time.
—ABRAHAM LINCOLN
AS WE SAID, THIS BOOK IS NOT A FULL ACCOUNT OF THE virtues and vices of Trump’s early years. In the previous chapter we discussed the personality traits that we believe are most relevant to his presidency. In this chapter we discuss some of the highs and lows of his personal and financial life that define Trump and make him more vulnerable than any past president to the influence, and perhaps even control, of a foreign power.
TRUMP’S PERSONAL LIFE
Trump’s personal life is, and always has been, colorful. He has had two ugly divorces. He talked on the Howard Stern Show about his many affairs and the physical attractiveness of his daughter Ivanka. He has made bizarre sexist comments such as, “Bad press doesn’t matter as long as you have a sexy girlfriend,” “A woman must be hot in order to be a journalist,” and “All women hate prenups because they are gold diggers.”
Trump bragged about how he could grab women by the private parts and get away with it, and shortly before the election, he paid the National Enquirer to buy and then bury stories of a porn star and a model who accused Trump of sexual abuse, just to keep the evidence of his bad behavior from the public.
But enough with the Trump sex stories. Entire books have been written about that. The upshot is that Trump’s sex life is far more salacious than any previous president’s, including Warren Harding and Bill Clinton, the most promiscuous presidents in modern American history. (We suspect that at least half the other presidents had affairs outside of marriage as well, but with far less publicity.)
In most representative democracies, sexual promiscuity is not a serious obstacle for an elected leader, but since the days of the Puritans, memorialized by Nathaniel Hawthorne’s book The Scarlet Letter, American mores have been affected by an intersection of our quest for perfection with our hypocrisy. Keeping sexual promiscuity under wraps is, in America more than in most other countries, important for political success.
On one side we have the preachers of the “religious right,” some of whom preach as often as they fornicate. On the other side we have politicians and political commentators who purport to strive to correct imbalances in relations between men and women by politicizing sexual harassment and assault, while keeping their own hypocrisy under wraps. For example, Senator Ted Kennedy was one of the most senior Democrats on the Judiciary Committee for the confirmation hearing when Judge Clarence Thomas was nominated to the Supreme Court. President Clinton used the Anita Hill allegations in his 1992 campaign, before his own reputation was marred by sexual harassment allegations in Arkansas. Everyone is eager to hang upon someone—usually a political rival or opponent—the scarlet letter.
There’s an endless list of instances in which Americans have torn themselves apart over sexual misconduct allegations that would be minimized or even ignored elsewhere in the world.
What is important for this book is not the fairness of our more puritanical—and some would say righteous—approach to sexual misconduct. It’s the effect on our political life when candidates and elected officials are involved in misconduct. Candidates use sexual misconduct as a weapon against each other in America far more easily than in other countries. After the release of the Billy Bush tape in 2016, the first thing Trump did was invite Paula Jones to attend his debate with Hillary Clinton in an attempt to humiliate her. It worked.
More ominously, foreign powers that obtain evidence of sexual misconduct can use it to hold high-ranking American officials—and perhaps even our entire government—hostage.
The gravest risk from Trump’s personal life is blackmail. Religious conservatives, with their extreme sensitivity to sexual immorality, have limits to what they will tolerate. Granted, they have tolerated a lot of Trump’s bad behavior, including his admission that he can “grab them by the pussy.” A videotape of Trump actually performing or witnessing a perverted sex act would likely be too much. Evidence of his ever having paid for an abortion would be even worse. It remains to be seen whether the religious right will decide to pull the plug on this president and replace him with one of their own: Vice President Mike Pence. So far that doesn’t seem apt to happen.
But if Vladimir Putin has a tape of Trump’s sexual activity in Russia—a “pee-pee tape” or any other—as private investigator Christopher Steele suggests he might, the blackmail risk is a near certainty. Same if Putin has evidence of anything else that could make the religious right turn on Trump.
Voters from other powers, especially France, would probably laugh off evidence of sexual misconduct by an elected leader. After what happened to President Clinton in 1998, however, Russia and other adversaries know that in America sexual conduct can create a constitutional crisis. They also know that an elected leader will do anything to avoid being exposed.
We’ll talk more about Russia taking advantage of this in our discussion of hacked emails. The focus here is on Donald Trump.
In sum, the problem for the United States and our national security is not so much what Donald Trump has done in his personal life—history is filled with examples of promiscuous and even perverted world leaders—but the combination of puritanical responses and what foreign adversaries with sophisticated intelligence operations, particularly Russia, can do with it.
Is Trump being blackmailed by Russians?
His behavior certainly has made him vulnerable.
His bromance with Vladimir Putin also begs the question.
TRUMP’S BUSINESS ASSETS (AND LIABILITIES)
Even more troubling and complex than Trump’s personal life is his financial life, which makes him vulnerable to the influence and control of foreign powers.
It’s clear that Donald Trump decided to run for president for the opportunity to expand his wealth. He didn’t think he would win, but he saw a campaign as a great way to promote himself and his businesses. When he did win, he found more ways to accomplish the same objective.
Donald Trump took his extraordinary sales talent (or conmanship) into the family business of real estate. It’s a business that very much depends upon borrowed capital. The developer invests some of the developer’s own money—ideally no more than 10 percent to 20 percent—borrows the rest with a note and mortgage of the land and buildings, and then, hopefully, takes all the profits and pays off the loan. In boom times such as the 1980s, the developer makes an extraordinary amount of money (80 percent or more of the capital comes from the lender, but the developer gets all of the profits). The seasoned developer with good judgment knows to keep enough cash on hand for bad times.
If the market collapses, the developer can be stuck with the building, a sluggish rent roll, and a mortgage coming due. At that point it’s decision time: whether to keep paying the mortgage out of personal funds, even if the building is “underwater” (worth less than the loan), or to give the bank the keys and walk away.
Developers who choose the latter option usually don’t get to borrow again for a while, if ever.
For large-scale projects, this can be done not only with banks, but with bonds. Securities can be sold to public or private investors with the help of Wall Street investment bankers, and the proceeds can be used to buy land and construct a project. In boom times it is win-win for the bondholders and the developer, although the developer gets the lion’s share of the profits and the bondholders only get interest. In bad times the developer has to decide whether to inject more funds into the project to make payments on the bonds until the economy improves, or to simply walk away and allow the bonds to go into default.
In the late 1980s, Trump insisted his major qualification to build a new casino in Atlantic City was that he wouldn’t need to use junk bonds. Then he used junk bonds to build the Trump Taj Mahal at a cost of nearly $1 billion.
When his company couldn’t keep up with the interest payments, it declared bankruptcy in 1991. Trump sold his yacht, his airline, and half his ownership in the casino.
A year later another of Trump’s Atlantic City casinos, the Trump Plaza, went bust after losing more than $550 million. He gave up his financial stake and managed to avoid personal losses while remaining CEO. His debt exceeded $900 million.
By 2004 Trump Hotels & Casino Resorts was $1.8 billion in debt. The company filed for bankruptcy and became Trump Entertainment Resorts. In 2009, after the real estate collapse, Trump Entertainment Resorts went bankrupt. Donald Trump resigned from the board and had to sue to take his name off the building.
When these defaults on bonds and other loans began in the early 1990s, Trump ruined his relationship with New York’s financial establishment. Both commercial bank lenders and investment banks shunned him. He was always insecure in New York society and business circles, but he was now persona non grata. Nobody with large amounts of money to lend would deal with him (or at least nobody on this side of the ocean).
To make matters worse, bondholders believed not only that Trump had been extraordinarily reckless with their money, but they also believed he had lied to them. They sued. In a high-profile case—In Re Donald J. Trump Casinos Securities Litigation—the United States Court of Appeals for the Third Circuit in 1993 made a highly controversial decision that has been the subject of securities law seminars and law school courses ever since.
In establishing the so-called “bespeaks caution” doctrine, the court held that the bond issuer and its officers, here Donald Trump, could not be sued. Even if Trump did lie, said the court, there were enough other disclosed facts to make it clear that Trump couldn’t pay off the bonds like he said. In other words, the bondholders had trusted Trump, but they should have known that his word wasn’t worth the paper it was printed on.
Richard Painter, one of the authors of this book, has frequently lectured about the Trump Casino Securities Litigation case, criticizing the court’s opinion because the federal securities laws were intended to provide investors with more protection than the old adage “buyer beware.” Yet the court, in a nutshell, was telling investors:
People who trust what Donald Trump promises to do, and make decisions based on those promises, get what they deserve.
The country should have paid attention, but few Americans outside of New York City and the banking community knew much about Trump’s business reputation.
So where did Trump get the money he needed to recover financially and restore his business reputation?
There is scant record of Trump having any significant relationship with any large American financial institution since the mid-1990s. He has had a relationship with Deutsche Bank, Germany’s largest bank with a major office in New York and other cities worldwide, including Moscow. Deutsche Bank has lent the Trump Organization a lot of money, and hundreds of millions of dollars of those loans are still outstanding. It is not clear where Deutsche Bank got that money, whether Deutsche Bank is really taking the risk associated with those loans, or whether there has been a guarantee and perhaps even a deposit to secure that guarantee from some other place.
Very little is known about the Trump Organization’s finances, particularly its debt and equity capital, because it is a private company that doesn’t have to file reports with the SEC. You cannot look up its balance sheet and profit and loss statement online. The only people who know are Donald Trump and those who work for him.
As a presidential candidate or even as president, Trump does not have to disclose any of this. The financial disclosure form 278 only requires reporting of his personal assets and debts (and Melania’s). His personal assets are his ownership interest—often 100 percent—of dozens of separately incorporated entities that make up the “Trump Organization.” He simply reports their names and descriptions (golf courses, hotels, condos, real estate, etc.). He is not obligated to say where these entities get their money. In sum, all of the borrowing, equity investments by other people, and joint corporate ventures need not be disclosed. Only if Donald Trump personally guarantees a debt does it have to go on the “liabilities” schedule on his form 278.
As the holders of $900 million in casino bonds found out in the early 1990s, Donald Trump does not like to personally guarantee much of anything.
We have known very little about where Trump gets his money for over twenty years, but we do know that hundreds of millions in capital were required for the projects that bear his name around the globe. We also know that in the mid-1990s he had relatively little money, a few million at best, to call his own. We also know where Trump has been expanding his business, and something about the people and projects he’s been involved with.
Except for some parts of the United States and Scotland, Trump has generally avoided countries that could be characterized as long-standing representative democracies. He has taken a position (even if he has not invested his own money) in enormous projects in authoritarian regimes including Saudi Arabia and China, titular representative democracies with “elections” (Russia and most of the former Soviet republics), or actual democracies that are moving in a decidedly undemocratic direction including Turkey and the Philippines.
Going into the presidential election of 2016, Trump was involved with 144 companies doing business in twenty-five countries. His interests ranged from management deals with golf courses in the United Arab Emirates (UAE), branding agreements with real estate projects in India, and companies that have been involved with beverage sales in Israel.
Trump was doing business in Argentina, Bermuda, India, Indonesia, Canada, UAE, Scotland, China, Brazil, Panama, Saudi Arabia, St. Martin, Azerbaijan, Saint Vincent, Ireland, Israel, Qatar, Dominican Republic, Egypt, Georgia, Mexico, Philippines, South Africa, Turkey, and Uruguay.
Trump created multiple companies to handle his deals, and much of his foreign business involved licensing agreements. The Donald J. Trump collection of clothing had shirts made in China, Bangladesh, Honduras, Vietnam, and South Korea. His sport coats were made in India. Trump eyeglasses were made in China. The Trump home brand of luxury furniture had production facilities in Turkey and Germany. Trump china was made in Slovenia. His vodka was distilled in the Netherlands and Israel.
His Make America Great Again hats, however, were made in Southern California.
Donald Trump has in the course of these business dealings met a lot of foreign dictators and oligarchs. Almost all of these he says he likes. The autocrats in his circle include Anar Mammadov, a millionaire playboy in Azerbaijan, a country known as the “world’s most corrupt regime.” In 2015 Anar and his father, “the Corleones of the Caspian,” helped finance the Trump Towers Istanbul. Turkey’s government apparently had a hand in the project as well, as acknowledged by Ivanka Trump in April 2012 in a Tweet saying: “Thank you Prime Minister Erdogan for joining us yesterday to celebrate the launch of #TrumpTowers Istanbul!”
Speaker of the House Nancy Pelosi and her colleagues in the House leadership had finally seen and heard enough. On September 23, 2019, Pelosi announced that the House would initiate a formal impeachment inquiry against President Trump. The House formally voted to approve the impeachment investigation, making it very likely that Trump would soon be charged in articles of impeachment with betraying his oath of office and the nation’s security, and perhaps also extortion and soliciting a bribe, when he sought to enlist the president of Ukraine to dish dirt on political rival Joe Biden in exchange for US military aid to Ukraine. Other charges—particularly with respect to the Mueller investigation—might be included as well.
“Mr. Trump must be held accountable,” Pelosi said. “No one is above the law.”
Since his election in 2016 Trump has tried to convince his followers to disregard the overwhelming evidence that the Russians had helped him win. He has done this advancing a patently false conspiracy theory—spread by Fox News and other right-wing media outlets—that the Ukranians had helped Hillary Clinton in that election. Getting the Ukrainian president to announce he was investigating this fake charge about the 2016 election would be Trump’s way of making it more real. Getting Ukraine to investigate Joe Biden and his son Hunter would also help Trump in 2020. To get President Zelensky to conduct both investigations, Trump was willing to withhold American aid when Ukraine desperately needed that money to fight rebels backed by the Russians. Trump was willing to withhold US military aid to commit extortion and solicit a bribe (help for his 2020 political campaign) from a foreign power. Even more reprehensible, Trump was enlisting White House officials, State Department officials, and even persons not employed by the United States Government—mostly notably his “Sancho Panza” Rudy Giuliani—in his illegal scheme.
When a whistleblower (identity unknown as this book went to press) let the world know what Trump was doing, and this story was corroborated by multiple witnesses, Pelosi, the Democrats, and most of the country had all had enough. It was time to hold this rogue president accountable.
The House Impeachment Committee called twelve witnesses, who testified one after another that Trump had been behind a scheme to try to force the Ukranian president to broadcast two phony conspiracy theories, about Ukraine interfering in the 2016 election and about the corruption of the Bidens. If Ukraine didn’t do this, no US aid would be forthcoming. It was only the whistleblower’s report—the fact that Trump had been caught red handed—that moved Trump to release the aid.
One after another, the witnesses, proud long-time professionals from the State Department and armed services, spoke about Trump’s Ukraine scheme and their opposition to it. These State Department stalwarts were implementing a longstanding US policy of trying to protect Ukraine from domination by Russia, all while Trump was trying to get the Ukrainian president to become a part of his own corrupt campaign for re-election.
“I couldn’t believe what I was hearing,” said Lt. Col. Alexander Vindman, the National Security Council’s Ukraine expert. An Iraq war combat veteran who appeared in his Army dress uniform covered with ribbons, Vindman told the House Impeachment Committee that what Trump wanted President Zelensky to do would have “significant implications for US national security.”
Sitting next to Vindman was Jennifer Williams, a career diplomat on Vice-President Pence’s national security staff. She said that Trump’s phone call to President Zelensky asking for dirt on the Bidens was “unusual and inappropriate.”
Both said that Trump was holding up the $391 million that Ukraine needed to defend itself against the Russians. No national security official supported holding up that aid, they said.
Some Republicans on the Intelligence Committee, toeing the line that Trump had done nothing wrong, went after Vindman with a vengeance. When Representative Jim Jordan questioned Colonel Vindman’s judgment, the officer brought out a performance evaluation by his boss Dr. Fiona Hill.
“Alex is a top 1 percent military officer and the best Army officer I have worked with in my fifteen years of government service,” he read with pride.
That shut Jordan up, at least for a while.
Colonel Vindman decried the smears on government officials called to testify.
“The vile character attacks on these distinguished and honorable public servants is reprehensible,” he said.
The next day the star witness was wealthy hotel owner Gordon Sondland, who had made a $1 million contribution to President Trump’s inaugural fund. As a reward he had been appointed as ambassador to the European Union. Sondland was eating at a restaurant in the Ukraine when President Trump called him to ask whether he had spoken to Ukrainian President Zelensky about announcing his investigations into the 2016 election and into the Bidens. Trump spoke so loudly that the conversation was overheard by several diplomats.
When asked by Democratic counsel Daniel Goldman whether American aid was contingent on Zelensky doing as Trump was asking, Sondland responded, “Was there a quid pro quo? As I testified previously, with regard to the requested White House call and White House meeting, the answer is yes.”
Sondland was making it clear that Trump, not just Rudy Giuliani, was behind the extortion. Sondland later said, “We all understood that if we refused to work with Mr. Giuliani, we would lose an important opportunity to cement relations between the United States and Ukraine. So we followed the president’s orders.”
In this testimony from a high-ranking Trump political appointee, the House Intelligence Committee had a smoking gun.
Dr. Fiona Hill, the White House’s former top expert on Europe and Russia, was present during meetings in which Ukrainian officials were pressed to announce investigations to help President Trump. When she was called to testify, she pleaded with Republicans to stop trying to spread the phony conspiracy theory that Ukraine had interfered in the 2016 election to help Hillary Clinton.
Russia’s “goal is to weaken our country,” said Hill. Spreading phony conspiracy theories plays into Vladimir Putin’s hands. “These fictions are harmful even if they are deployed for purely domestic political purposes.”
Dr. Hill added, “In the course of this investigation, I would ask that you please not promote politically driven falsehoods that so clearly advance Russian interests.” She said that “right now Russia is seeking to interfere in the 2020 election. We are running out of time to stop them.”
Republicans on the Committee made it clear that they would not vote to impeach Trump. It appeared that they would follow Trump to the end—whatever that end might be.
Said Paul Krugman in an op-ed piece in the New York Times, “Anyone imagining that the mountainous evidence of Trump’s malfeasance will lead to a moral awakening, or that Republicans will return to democratic political norms once Trump is gone, is living in a fantasy world.
“The big question is whether America as we know it can long endure when one of its two major parties has effectively rejected the principles on which our nation was built.”
Will House Republicans—and more importantly Senate Republicans—adhere throughout 2020 to this stubborn support for Trump, notwithstanding the overwhelming evidence against him? Or will we reach the point we reached in August 1974, when Senate Republicans finally called President Nixon to tell him that the game was over? As evidence mounts in a scandal far more egregious and far more dangerous for our national security than Watergate, we can only hope that the answer to this latter question will be in the affirmative.
In November 2004 Trump paid $41 million for a 62,000-square-foot mansion in Palm Beach named the Maison de L’Amitie, and in the summer of 2008 he sold it to forty-one-year-old Russian billionaire Dmitry Rybolovlev, who spent a year in a Russian prison on murder charges but who was acquitted. Rybolovlev paid $100 million for the property.
In 2013, Trump partnered with the Russian real estate mogul Aras Agalarov to bring the Miss Universe pageant, which Trump owned at the time, to Moscow. Trump later boasted that “all the oligarchs” attended the event. While in Moscow, Trump discussed plans for real estate projects there.
In the fall of 2015, Trump was introduced via satellite to a crowd of people attending the Yalta European Strategy (YES) conference. The conference was set up by Ukrainian billionaire philanthropist Victor Pinchuk. During his twenty-minute teleconference, Trump referred to Pinchuk as his friend, and afterwards Pinchuk made a $150,000 donation to the Donald J. Trump Foundation.
Trump’s love for foreign dictators is amazing—troubling but amazing.
Trump in 2018 said of China’s president Xi Jinping, “He’s now president for life. President for life. No, he’s great. And look, he was able to do that. I think it’s great. Maybe we’ll have to give that a shot someday.”
In September 2016, while Barack Obama was still president, Trump said about Vladimir Putin, “If he says great things about me, I’m going to say great things about him. I’ve already said, he is really very much a leader.” Comparing Russian’s political system to ours, Trump concluded, “He’s been a leader, far more than our president has been a leader.”
Philippines president Rodrigo Duterte had boasted about killing suspected drug dealers. Commented Trump in April of 2017, “I just wanted to congratulate you because I am hearing of the unbelievable job on the drug problem.”
Trump also heaped praise on Turkish president Recep Tayyip Erdoğan, whose crackdown on the Turkish people, the media, and especially his opponents, was brutal. In September 2017, Trump said of Erdoğan, “Frankly, he’s getting very high marks. He’s also been working with the United States. We have a great friendship and the countries—I think we’re right now as close as we’ve ever been—a lot of that has to do with a personal relationship.”
Another dictator, Egyptian president Abdel Fattah el-Sisi, gained power in a coup after Egypt flirted with democracy following its Arab Spring. El-Sisi quickly suppressed civil liberties and crushed all opposition under the pretext of fighting terrorism. Said Trump about el-Sisi, “We agree on so many things. I just want to let everybody know in case there was any doubt that we are very much behind President el-Sisi.”
Trump has similarly kind words for North Korean dictator Kim Jong-Un, particularly when Chairman Kim strokes his ego or insults American Democrats such as Joe Biden.
Trump has also praised earlier dictators Benito Mussolini, Saddam Hussein, and Muammar Gaddafi. He also commended China for its crackdown on protestors in Tiananmen Square in July 1989.
“It shows you the power of strength,” Trump said.
In sum, Trump has broken his financial relationship with American bankers and investors beyond repair and needs to turn elsewhere. But we have no idea where. He has extensive business dealings abroad, mostly in dictatorships. And he loves foreign dictators.
So what happens when a businessman with this portfolio and these attitudes moves into the White House?
We have never experienced this before, but imagine what it would have been like in the 1940s when Western civilization faced its greatest threat in history if the President of the United States had substantial foreign financial interests.
Before World War II, many American businesses and banks had millions of dollars invested in Nazi Germany. John Foster Dulles, a New York lawyer, managing partner of Sullivan & Cromwell, and future secretary of state, had a thriving Berlin practice and an office in Berlin late into the 1930s. Money invested in Germany would be lost if Germany were to be bombed or invaded by the allies. Millions down the drain. Many American businessmen supported the America First movement, dedicated to keeping the United States out of the war. Pacifism was the proclaimed rationale, but financial interests (and in the case of Henry Ford, a strong dose of anti-Semitism) were part of the explanation. Many American businessmen supported neutrality as did many newspapers, particularly the Hearst chain. Money was on the line.
But not for FDR. His administration constantly pushed back against America Firsters. At least our president at the time, and presumably many of the people working for him, did not have great financial exposure to Germany and the rest of Europe. When Lend Lease of military equipment was being arranged with Churchill in 1940 and 1941, and later when the Japanese attacked us on December 7, 1941, there were no “Roosevelt Towers” in Berlin and Frankfurt or “Roosevelt casinos” in Rome and Paris. American voters would not have accepted such blatant conflicts of interest, even if they supported neutrality.
But then was then and now is now. The world is still a dangerous place, but today, eighty years later, are such global financial conflicts of interest for our leaders presumably acceptable?
President Trump’s financial conflicts of interest, his closeness to foreign oligarchs, and his admiration for dictators were issues during the campaign. But these were not issues that the Hillary Clinton campaign chose to emphasize, in part because the Clinton Foundation had its own alleged conflicts of interest, and Hillary Clinton was unwilling to promise to close or hand over the foundation to others outside her family, even if she were elected president.
Trump’s financial conflicts of interest were enormous. And he refused to do anything about them.
In November 2016, two weeks after the election, Director of the Office of Government Ethics Walter Shaub urged Trump, like every other recent president, to divest himself of conflict-creating business holdings and put the sale proceeds either in a blind trust or conflict-free assets such as mutual funds. Many billionaires appointed to high-ranking government jobs have done just this. They have sold conflict-creating assets and invested sale proceeds in a way that avoids conflicts of interest.
In his November 2016 speech, OGE Director Shaub simply asked Donald Trump to do the same.
Trump refused. He insisted on holding on to his hotels, clubs, and real estate and licensing interests at home and around the world. In doing so he also retained his financial ties all over the globe, many of which have not been disclosed.
Trump’s response to critics was a blanket “the president cannot have a conflict of interest,” an attitude more fit for a kinglike ruler such as King George III than for a president.
Even if Trump’s moral argument on conflicts of interest is vacuous, he does have a technical legal argument, and it is there that he hangs his hat (where no recent president before him has done so). There is no specific law that directly prohibits the president from owning assets—of any kind—that conflict with his official duties. The criminal conflict of interest statute, 18 US Code 208, does not technically apply to the president even if his business holdings in fact create massive conflicts of interest.
His conflicts are so serious that if Trump were in any executive branch position other than president or vice president, they would be criminal offenses. This long-standing provision of the United States criminal code specifically states that it is a crime for a federal executive branch employee to participate “personally and substantially” in any “particular matter” affecting their or their spouse’s financial interest, whether a company they hold stock in, a hotel or golf club they own, or any other financial interest.
A treasury secretary may not own Goldman Sachs stock while regulating Wall Street. A Health and Human Services secretary may not own healthcare stocks; an Energy Department secretary may not own oil company stocks; an Education Department secretary may not own for-profit education stocks, unless they recuse themselves from any and all government matters that have a predictable effect on those stocks. Otherwise they risk indictment and even jail.
Given that choice, most government officials sell the stocks and put the sale proceeds in diversified mutual funds, other conflict-free assets, or a blind trust. That was exactly the advice given to incoming Bush administration officials by one of the authors of this book (Painter), and that must be given to executive branch officials.
Perhaps because members of Congress did not want to apply this law to themselves, however, they chose not to apply it to any elected official, including the president. 18 USC 208 does not apply to the president, the vice president, or members of Congress.
There’s a potential problem in prosecuting presidents for a financial conflict of interest while they are fulfilling their constitutional duties. Prosecution of a president or vice president under the financial conflict of interest statute could be unconstitutional. The Department of Justice Office of Legal Counsel came to this conclusion in the mid-1970s. However, this does not mean that the president “cannot have a conflict of interest,” as Trump claims. It means that the criminal code is not used to penalize this conflict of interest. It is up to Congress, and ultimately voters, to penalize a president in this circumstance.
When Trump looked for examples of previous presidents with financial conflicts of interest, he had to look very far back because recent presidents have avoided such conflicts. Herbert Hoover had some modest mining interest, but Trump dismissed that. (Hoover is not often associated with a strong economy.) So Trump went farther back, to George Washington and Thomas Jefferson at the founding of our nation. Trump repeatedly claimed that his holdings in the Trump Organization were perfectly fine because they both owned plantations, Mount Vernon and Monticello, while they held office.
These two presidents could not possibly be “unethical,” Trump argued, so neither was he.
Washington and Jefferson were indeed two of our greatest presidents. But they had flaws. Their flaws—and those of so many other wealthy men of their time—were the most tragic flaws in United States history. Their plantations made Washington and Jefferson fabulously wealthy, but they used slave labor, as did many other wealthy business owners throughout the South, many of whom served as representatives, senators, governors, and even presidents, including Presidents Madison and Monroe.
Conflicts of interest of high-ranking government officials have consequences. Trump’s repeated references to these presidents and their plantations shows not only how tone deaf he is to the legacy of slavery and racial injustice, but what contributed to that tragedy: financial conflicts of interest of very wealthy men in Washington.
Fast-forward to more recent times. Financial conflicts of interest of elected officials—even if not banned—have consequences, whether those interests include real estate, healthcare, fossil fuels, the defense industry, banks, or any other. While perhaps not criminal, it is unacceptable.
Financial conflicts of interest on an international scale can be a direct threat to our national security.
As we pointed out, Donald Trump does not invest heavily in democracies. He prefers wealthy but non-democratic countries in the Middle East and Asia, including Russia and the former Soviet Republics. He is the first president in American history to have enormous financial exposure in nations outside the United States, on top of the fact that most of the countries he has financial relationships with are not our close allies.
Some are long-standing adversaries.
The consequences could be catastrophic. An international crisis involving one or more of these countries where he has financial exposure, even if not as big as the crisis we faced with Germany and Japan in the early 1940s, could end disastrously for the United States. Donald Trump has been known to put himself first. Indeed that may be something he has never been known not to do.
As pointed out in a Washington Post op-ed written by one of this book’s authors (Painter) with former US ambassador to the Czech Republic Norman Eisen:
Even more serious [than his domestic conflicts of interest] are the questions raised by Trump investments abroad. Those relate to some of the United States’ most important—and most sensitive—relationships, among them ones with Russia, China, India, South Korea and Turkey. When the United States must support or confront those nations, or their adversaries, would Trump act to benefit the national interest, or his and his family’s investments? Moreover, who are the foreign individuals with whom he has had financial ties, and how would those relationships affect his decisions? As the electorate considers those questions, it is entitled to more information.
American voters never got to see the information. Trump—with help from Russia, where he may have business dealings—won anyway.
Furthermore, a subset of Trump’s investments, revenue streams, and sources of financing is illegal. The profits and benefits he derives from foreign governments and entities controlled by foreign governments are specifically prohibited under the foreign emoluments clause of the Constitution unless Congress provides explicit consent. (It hasn’t.) Profits and benefits from dealings with individual states within the United States are also prohibited by the domestic emoluments clause of the Constitution, but the foreign government emoluments present the gravest risk to our national security. Donald Trump is the first president in US history to come into confrontation with this clause.
Before Trump, most Americans, including most lawyers, had never heard of the emoluments clause. It was not taught in constitutional law classes and was almost never discussed in the media. Until 2018, when a federal district court issued a ruling against the president in District of Columbia and Maryland v. Trump, no federal court had ever interpreted the clause.
Things are very different now.
First the problem. Again, as Painter warned in the Washington Post op-ed written with Ambassador Eisen:
Because of Trump’s seeming unwillingness to set up a true blind trust, and the difficulty of his doing so, his potential foreign conflicts could raise immediate legal issues. Most federal ethics rules, surprisingly, do not apply to the president. But Trump would be covered by bribery laws and the Constitution’s emoluments clause, which broadly prohibits the president from accepting gifts “from any King, Prince, or foreign State.” The emoluments clause has been interpreted by the Justice Department to include any payment from a foreign government, except with the consent of Congress. Every time there was a financial transaction between a foreign government—or a company controlled by a foreign government—and any Trump entity, there would be a potential for favorable treatment that could violate this limitation, as well as the antibribery laws.
The point of the emoluments clause is to prevent a crime that is often impossible to prove—bribery.
In the case of foreign governments, our Constitution prohibits any emoluments (profits and benefits) to a federal office holder. It doesn’t matter whether there is quid pro quo bribery, which is extremely difficult to prove. Avoiding these risks was so important to the founders that they made the ban on foreign government emoluments absolute unless Congress gives consent. The clause applies to every single United States government employee, and unlike the financial conflict of interest statute, it applies to the president.
How extensive are Trump’s emoluments from foreign and state governments? Very. As Painter noted in a December 2016 paper for the Brookings Institution co-authored with Norman Eisen and Laurence Tribe:
As things already stand, that risk is higher than it has ever been. By way of illustration, consider these examples of all the ways in which Mr. Trump’s global business empire creates the conditions for his ongoing violation of the Emoluments Clause to surface in obviously dubious transactions—transactions casting doubt on the ability and inclination of a President Trump to conduct himself with a singular focus on the Nation’s interests and of foreign leaders dealing with him to treat his motives as public-spirited:
• Mr. Trump has recently completed the Trump International Hotel, a major new project in Washington, D.C. and a new hot spot for foreign diplomats.
◇ As a former Mexican ambassador to the United States has candidly remarked, “The temptation and the inclination will certainly be there. Some might think it’s the right way to engage, to be able to tell the next president, ‘Oh, I stayed at your hotel.’”
◇ Speaking on the Senate floor, Senator Ben Cardin noted, “One diplomat was recorded as saying ‘Why wouldn’t I stay at his hotel blocks from the White House, so I can tell the new president, I love your new hotel! Isn’t it rude to come to his city and say, I am staying at your competitor?’”
◇ Indeed, with lots of public fanfare, the Kingdom of Bahrain already has decided to mark the seventeenth anniversary of King Hamad bin Isa Al Khalifa’s accession to the throne by hosting a reception at the Trump International Hotel.
• Since Mr. Trump’s election, long-delayed Trump projects have suddenly jump-started around the world, including in Argentina and Georgia. This may be especially noteworthy in light of Mr. Trump’s acknowledgment that he has raised business issues on calls with foreign officials.
• Mere weeks before Mr. Trump spoke by phone with the president of Taiwan, dramatically altering American foreign policy, a businesswoman claiming to be associated with Mr. Trump’s conglomerate arrived in Taiwan and made inquiries about major new investments in luxury hotels.
• Shortly before the election, President Duterte of the Philippines named Jose E.B. Antonio, a business partner of Mr. Trump and founder of a company behind Trump Tower Manila, as a special envoy to the United States.
• After Mr. Trump spoke of banning Muslim immigrants, President Erdoğan of Turkey demanded that Mr. Trump’s name be removed from Trump Towers in Istanbul, but that demand abruptly ceased after Mr. Trump defended President Erdoğan’s brutal crackdown on Turkish dissidents.
◇ Indeed, while running for President, Mr. Trump openly admitted during a radio interview that “I have a little conflict of interest because I have a major, major building in Istanbul.”
• The Industrial and Commercial Bank of China—owned by the People’s Republic of China—is the single largest tenant in Trump Tower. Its valuable lease will expire, and thus come up for re-negotiation, during Mr. Trump’s presidency.
• Even as debates rage over American/Russian relations and Russian cyberattacks on U.S. interests and even on the recent presidential election, it has been reported that Russian financiers play a significant (albeit concealed) role in Mr. Trump’s organization.
• Mr. Trump’s businesses owe hundreds of millions to Deutsche Bank, which is currently negotiating a multi-billion-dollar settlement with the U.S. Department of Justice, a settlement that will now be overseen by an Attorney General and many other appointees selected by and serving at the pleasure of Mr. Trump.
That’s a lot of emoluments, most of them probably unconstitutional. Even if only some of these business relationships involve money from a foreign government, as opposed to money from a politically connected foreign oligarch, that’s still a lot of unconstitutional emoluments.
This we knew back in 2016 even without tax returns from Trump or his organization, and without any public financial disclosure statements from the Trump Organization. As mentioned earlier, Trump’s own financial disclosure, form 278, which he files every April as president, does not list any of the financial relationships, contracts, debts, or other arrangements of the private companies he owns. Form 278 simply lists the companies he owns. Dozens of line items report that Trump owns a 100 percent interest in Trump Partnership or LLC ABC without any information about where those companies get their money.
Trump is required to report personal debts and contractual arrangements, but as we know, Trump does not like to borrow money in his own name, or be legally liable to pay it back—so he doesn’t have many debts to disclose. The money moves in and out of the Trump Organization entities and from there the profits (emoluments) move up to the owner of these entities—Donald Trump.
The economic reality behind all of these entities, however, is clear. Trump owns them. He can put his sons or someone else in charge, but he still owns them. He can create all sorts of new trusts and other entities with the details in documents hidden in brown envelopes proudly displayed on a table before television cameras. But the economic interest is still his. And when a foreign government provides profits and benefits (emoluments) to one of these entities, or several of them, the money goes to Donald Trump.
Also as mentioned, once he became president on January 20, 2017, these profits and benefits became unconstitutional unless Congress granted consent. The Republican-led Congress didn’t consent, but it also didn’t do anything about them. The Congress members, sworn to uphold the Constitution, have failed to do their job.
Thus far, three lawsuits have been filed against Donald Trump alleging violations of both the foreign and domestic emoluments clauses from revenue streams including room and ballroom rentals in Trump hotels, purchases of condominiums in Trump buildings, joint ventures, and probably Trump’s undisclosed sources of financing.
The first suit was dismissed by the federal district court in New York City, not on the merits, but because the court determined that the plaintiffs, including a private organization, Citizens for Responsibility and Ethics in Washington (CREW), did not have standing to sue the president. According to the ruling, not every concerned citizen or group can sue the president for violating the Constitution; a special nexus with the facts of the case must be established.
That decision was appealed, and the second circuit reversed the holding below, saying that some of the plaintiffs, groups of hotels and restaurants that compete with the Trump Organization, did have standing to sue for the emoluments clause violations. Discovery in that case is pending.
Two other groups of plaintiffs also sued. The District of Columbia and the state of Maryland sued in federal court in Maryland arguing that some of these emoluments clause violations disadvantaged Maryland and DC businesses and cost these governments tax revenue and other losses. The Justice Department defended Trump in this lawsuit as well, but the court rejected the DOJ’s argument that the plaintiffs lacked standing. Even more important, in its decision the court interpreted the emoluments clause essentially the same way as the plaintiffs did, and as did CREW earlier. Unfortunately the Fourth Circuit Court of Appeals later dismissed this suit, not disagreeing with the district court’s interpretation of the emoluments clause, but disagreeing with allowing the state attorneys general the standing to sue.
A third suit has been brought by Senator Richard Blumenthal of Connecticut leading a group of Democrats in the Senate and House arguing that they have standing to sue Trump under the emoluments clause because it specifically prohibits the emoluments “without the consent of Congress.” Trump, likely totally in the dark as to constitutional restraints, never even asked Congress for its consent, even when both chambers were controlled by Republicans. Perhaps even the Republicans would have wanted to see his tax returns and other records before giving consent to foreign emoluments. The Justice Department defended this lawsuit as well, this time in the federal district court in the District of Columbia.
The district court rejected Trump’s motion to dismiss and held that these members of Congress had standing to sue. That suit was set to proceed to discovery. Perhaps this discovery would finally yield tax returns and other records answering that mysterious question: Where does Donald Trump get his money? Once again, however, Trump appealed that decision and the court of appeals stayed discovery while it considers whether the plaintiffs—in this instance members of Congress—have standing to sue.
The House of Representatives is also investigating foreign government money in the Trump Organization. Subpoenas of Trump financial records have been issued to private organizations including the Trump Organization itself, and the Treasury Department has been asked to turn Trump’s tax returns over to Congress. Thus far Trump himself has ordered his staff—in the Trump Organization and the federal government—to refuse to cooperate. He is using Justice Department lawyers at taxpayer expense—just as he did in defending the emoluments clause lawsuits—to fight the subpoenas. Thus far the federal courts are siding with the House, holding that most of these subpoenas must be complied with. In a 2 to 1 ruling (with Trump appointee Neomi Rao dissenting), the US Court of Appeals for the District of Columbia Circuit upheld a federal district court ruling that Trump Organization accountants must turn over eight years of records in response to congressional subpoenas. Trump has appealed to the Supreme Court, which will decide the case by June 2020.
The bottom line is that Donald Trump does not want anyone to know what he owns, and more importantly, what he owes, and to whom.
Finally, Robert Mueller investigated Trump’s financial ties with at least one foreign power, Russia. Trump got very upset about the Mueller investigation, threatening to fire Mueller when he looked into the Trump finances. Perhaps Mueller was getting warm.
There is little information about that in the unredacted portions of the Mueller Report, but the redacted portions of the report likely tell at least part of this story. Reasons for the redactions include respect for personal “privacy,” ongoing grand jury investigations, and possible future criminal indictments. (See more in Chapter 30.) Congress has asked to see the redacted portions of the Mueller Report behind closed doors, but the Justice Department, headed by Trump’s second attorney general, William Barr, has refused.
We also know that a lot of Trump associates (including lawyer Michael Cohen, campaign manager Paul Manafort, and deputy campaign manager Rick Gates) have had a lot of financial dealings in Russia. Trump asked Cohen to lie to Congress about his plans for a Trump Tower in Moscow. Half a dozen Trump associates have been criminally convicted in the Mueller investigation.
The bottom line is that Donald Trump has a lot to hide when it comes to Russia, not to mention other authoritarian regimes. The founders anticipated this danger when they drafted the emoluments clause, but enforcement in the courts has advanced at a snail’s pace, and Congress continues to do next to nothing about it. The American public remains in the dark about the extent of the problem.
The great danger for our national security and our democracy is that Vladimir Putin or some other foreign ruler knows more than we do.