Presidential Conflicts of Interest

To The Teacher:
 

While many politicians in the United States have significant business or stock holdings, most politicians entering office for the first time go to great lengths to avoid what could be seen as “conflicts of interest.” According to the Merriam-Webster’s dictionary, a conflict of interest is “a conflict between the private interests and the official responsibilities of a person in a position of trust.”

As Donald Trump commences his term as U.S. President, questions loom about how he can avoid any real or apparent conflicts between his business interests and the interests of the people he represents. In particular, critics are concerned that President Trump’s businesses across the globe could affect the decisions he makes about public policy.

This lesson is divided into two readings designed to have students think critically about potential conflicts of interest the U.S. president might face. The first reading provides background on recent historical precedents set by the past few presidents on avoiding conflicts of interest. The second reading considers the particular case of Donald Trump and his efforts to avoid conflicts of interest during his time in the White House. Questions for discussion follow each reading.
 

 



Reading 1:
What are Conflicts of Interest and How Have Past U.S. Presidents Avoided Them?
 

In the United States, politicians generally make a great effort to ensure that the public does not sense that they are acting out of self-interest rather than the interest of the people they represent. According to the Merriam-Webster’s dictionary, a conflict of interest is “a conflict between the private interests and the official responsibilities of a person in a position of trust.”

The U.S. Constitution includes a section called the “Emoluments Clause” that is designed to help prevent conflicts of interest. The clause forbids any U.S. president from receiving gifts from foreign leaders. The clause itself has never before been tested in court, so there is no precedent for how the law might be applied to a president. However, past U.S. presidents have gone to great lengths to avoid the appearance of any conflict of interest, especially one related to the Emoluments Clause.

Often, presidents address this concern by putting their investments or financial interests into a “blind trust”: that is, they hand over the administration of their private business interests to a third party. This third party manages the interests without providing the person any specifics about how their investments are doing. In a November 15, 2016 article for Forbes, reporter Jennifer Wang detailed what previous presidents have done with their investments before taking office:

…presidents in recent history have generally tried their best to adhere to the conflict of interest laws that govern their fellow executive branch colleagues, keeping plain vanilla portfolios during their time in office. “You do not want to hold financial interests that present a potential conflict of interest with your official duties,” says [Leslie] Kiernan, [a former Deputy White House Counsel under President Barack Obama].

For example, Bill Clinton used blind trusts while he was in office, as did George W. Bush. When Hillary Clinton launched her first presidential run in 2007, she went so far as to [liquidate] her blind trust to eliminate any investments that might create a problem down the road. Since then, she has kept the proceeds in bank accounts, treasury notes and mutual funds.

Outside of the blind trusts that held their investments, the Bushes and Clintons kept personal real estate, cash accounts, life insurance, bonds and mutual funds. The Obamas bucked the trend when they decided against using blind trusts, but their mix of bank accounts, treasury notes, index funds and college savings was unlikely to pose a direct conflict of interest.


As Donald Trump has taken office as U.S. president, there has been major controversy surrounding the potential conflicts of interest created by his many his business dealings. While past presidents have also had significant business holdings that could create conflicts, Trump’s position is unique. In a November 21, 2016, article for The Christian Science Monitor, reporter Peter Grier discussed what makes Donald Trump’s conflicts of interest different than those of past presidents. Trump, he wrote,

may bring with him the greatest potential for business and financial conflicts of interest of any U.S. president, ever...

A quick look at numbers shows the scale of the problem. Donald Trump has at least 500 businesses – hotels, casinos, golf courses and brand deals stretching from Azerbaijan to Ireland. He’s borrowed a lot to amass this empire, and currently owes banks and other lenders an estimated $650 million. Like many tycoons he’s involved in litigation: he just settled a big fraud case against Trump University, but he still has at least 74 lawsuits wending their way through the courts.

It’s the international aspect of his empire that might pose the biggest conundrums. For instance, Trump’s formed eight companies in Saudi Arabia since the beginning of his campaign, according to a new report in the Washington Post. All are apparently linked to a hotel project.

Business and politics in Saudi Arabia are famously intertwined, as a small group of elite figures control both. Does this mean Riyadh now has a new lever with which to nudge Washington in its desired direction?

In Turkey, Trump gets millions in licensing cash from an Istanbul luxury building that bears his name. Its owner has been increasingly outspoken in supporting the country’s president, Recep Tayyip Erdogan, as he cracks down on domestic dissent in the wake of a failed coup.

Trump himself acknowledged that he has “a little conflict of interest” in Turkey in an interview on Stephen Bannon’s Breitbart News radio show taped prior to his presidential run.

Back in the United States, foreign diplomats are already flocking to book rooms and hold events at Trump’s new hotel on Pennsylvania Avenue. To do otherwise, they say, might be seen as a sign of disrespect.
 

While many recent former presidents, and even presidential candidates, have placed their personal financial interests into blind trusts or funds that present few conflicts of interest, it remains to be seen how Donald Trump will resolve potential conflicts between his businesses and the office of the president.
 



For Discussion

  1. How much of the material in this reading was new to you, and how much was already familiar? Do you have any questions about what you read?
     
  2. Do you think it is important for presidents and other politicians to avoid potential conflicts of interest between their private affairs and their responsibilities as elected officials? Explain your position.
     
  3. Many past U.S. presidents have placed their investments in blind trusts before entering office. According to the reading, what is a blind trust? Do you think the use of a blind trust is adequate to resolve conflicts of interest? Why or why not?
     
  4. Why might Donald Trump’s business dealings present unique possibilities for conflicts of interest, relative to the private activities of past presidents? Do you think private business concerns could affect Trump’s public policy decisions? If so, is this a bad thing? Why or why not?

 

 


 

Reading 2:
Can Donald Trump Resolve Potential Conflicts of Interest?
 

As he has taken office as President of the United States, Donald Trump has retained vast business holdings across the globe. Many political observers have argued that this creates many potential conflicts of interest. 

President Trump argues that conflict of interest laws do not apply to him as president, but he has stated that he will nevertheless act to avoid the appearance of conflicts by turning the operation of his businesses over to his adult children. In a January 11, 2017, article in The New York Times, journalists Susanne Craig and Eric Lipton reported on President Trump’s plans for his businesses as he serves in office:
 

The steps Mr. Trump outlined include turning over to the United States Treasury any profits received at his hotels from foreign government clients. An ethics officer and, separately, a chief compliance counsel will be appointed at the Trump Organization to watch its operations and ensure that it is not receiving special terms, payment or favors as a result of its ties to Mr. Trump, even as the organization is managed by a trust controlled by his two oldest sons and a longtime legal associate…

The president-elect, speaking at a news conference… in Trump Tower, repeated his view, expressed shortly after his election, that as president, he will be exempt from conflict of interest laws that apply to all other federal employees except the vice president. But he and his legal team said he would still take voluntary steps to avoid even a perception of a conflict, such as the appearance that a decision he made as president might benefit one of his business ventures.
 

Despite Trump’s reassurances, critics have expressed concern that simply passing the leadership of his businesses over to Trump’s children would not create enough separation to eliminate conflicts of interest. In a November 21, 2016, article in the Christian Science Monitor, reporter Peter Grier cited government transparency experts who hold this position. Grier writes:
 

The sort of trust Trump is proposing couldn’t be truly blind, since he well knows what his assets are and family members are unlikely to be truly independent.

They say the best solution is for Trump to liquidate his holdings and put the money in a   true blind trust run by non-family executives. That’s what the Wall Street Journal called for in an editorial last Friday. An open letter from Common Cause, Public Citizen, the Sunlight Foundation, and other DC good government groups makes the same point.

“We understand that this arrangement would require you to sever your relationship with the businesses that bear your name and with which you have invested a life’s work. But whatever the personal discomfort caused, there is no acceptable alternative,” says the letter.
 

On January 9, 2017, Senator Elizabeth Warren introduced a bill to Congress that would make the president and vice president “disclose and divest” any conflicts they may have, similar to what is required of other public officials. Reporter David Sherfinski for the Washington Times described the proposed bill:

Sen. Elizabeth Warren and other congressional Democrats introduced legislation Monday that would require President-elect Donald Trump to completely divest from any business assets that pose a potential conflict of interest.

The Presidential Conflicts of Interest Act of 2017 would require the president, vice president, their spouses, and their minor or dependent children to divest interests that create such conflicts and place them in a blind trust.

“The only way for President-elect Trump to truly eliminate conflicts-of-interest is to divest his financial interests by placing them in a blind trust,” said Mrs. Warren, Massachusetts Democrat.

“This has been the standard for previous presidents, and our bill makes clear the continuing expectation that President-elect Trump do the same,” she said.
 

The nonpartisan watchdog group Citizens for Responsibility and Ethics in Washington filed suit enforce the Emoluments Clause of the U.S. Constitution. In a January 26, 2017, op-ed for the Washington Post, Zephyr Teachout, a professor of law at Fordham University and one of the attorneys who filed the lawsuit, argued for the importance of the lawsuit:
 

Today...the president of the United States is receiving payments from foreign countries. The money comes to President Trump by way of his companies, although the details and scope of his profits are secret; he refused to disclose his tax returns. After the election, Trump had several months to move toward liquidation and putting his assets in a truly blind trust. He has chosen, instead, to keep his ownership interests in his businesses, turning over operating decisions to his children but remaining an owner. His decision threatens the integrity of American democracy and national security, and it should ring alarm bells for all citizens, regardless of political party.

Trump’s choice violates one of the most overlooked but important sections of the U.S. Constitution, the foreign emoluments clause, which was framed to avoid problems of split loyalty such as that posed by Charles II.... The clause represented a deliberate break from European traditions, where financial relationships between a country’s representatives and other governments were common. And it epitomized “the particularly demanding notion of corruption” held by our framers.

I never expected the clause to be litigated: Presidents and federal officials have gone out of their way to avoid violating it. Until now. But Trump’s blatant violation of the clause is a violation of our fundamental document and our fundamental principles.
 

If President Trump is correct in his assessment that turning his businesses over to his family to manage will provide adequate separation, issues of conflicts of interest may be resolved. If, however, Senator Warren and Zephyr Teachout are correct, there could be legal consequences if President Trump fails to take further action—even including possible impeachment.
 



For Discussion

  1. How much of the material in this reading was new to you, and how much was already familiar? Do you have any questions about what you read?
     
  2. According to the reading, what would the bill that Senator Warren introduced into Congress require of the president in terms of resolving possible conflicts of interest? Do you think that this bill is needed? Why or why not?
     
  3. Donald Trump has expressed surprise at the amount of attention being given to his potential conflicts of interest, claiming that the American public knew about his business interests before he was elected. What do you think of this argument?
     
  4. In the past, presidents have gone out of their way to avoid lawsuits charging that they have violated the Emoluments Clause of the constitution. Why do you think they have done this? Why do you think that Donald Trump has a different attitude about this issue than past presidents?

 

-- Research assistance provided by Ryan Leitner.