The question of whether President-elect Donald Trump will run afoul of federal conflict-of-interest rules or the Constitution because of his extensive foreign investments has been the subject of intense scrutiny among legal and ethics scholars.
Legally, his foreign licensing deals could violate the Constitution. An example: During his presidential run, Trump’s name was used to market a never-finished luxury hotel in Azerbaijan, built by the billionaire son of the country’s transportation minister. The deal earned Trump more than $2.8 million between January 2014 and May 2016, according to financial-disclosure filings he filed as a candidate. (See his 2015 and 2016 reports here.)
If this type of deal occurs during his presidency and fetches anything above what’s considered fair market value, it would almost certainly violate the Emoluments Clause, a provision of the Constitution meant to head off conflicts between the national interest and presidents’ self-interest. The clause, in Article 1, Section 9, of the Constitution, prevents the president from accepting “any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.” A more stringent interpretation of the clause — which has never been tested in the courts — would bar a president from receiving any payment from a foreign government entity. A violation of the Constitution could result in impeachment proceedings.
But how will we know if Trump is violating the clause? Because of limited financial-disclosure requirements, we might not.
There are two reasons for this: One is that the disclosures required from presidents are limited. The other is that Trump has refused to voluntarily release his tax returns or other business details, a significant break from presidential administrations dating back to Jimmy Carter.
“You can’t grasp all the potential conflicts and issues that the Trump empire poses by just looking at a personal financial disclosure,” said Matthew T. Sanderson, an attorney at Caplin & Drysdale who has served as legal counsel on three Republican presidential campaigns.
And Trump won’t have to file a comprehensive annual report of his assets, income, gifts and stock portfolio until May 2018, according to U.S. Office of Government Ethics requirements. (Trump has so far refused to release his federal or state income tax returns; three pages of his 1995 New York state income tax return obtained by The New York Times showed he declared $916 million in losses but few other details.)
Trump Organization executives and lawyers did not respond to ProPublica’s requests for comment.
As a presidential candidate, Trump filed two financial-disclosure reports detailing his private companies and assets. More than 100 of the companies listed have licensing or management agreements in other countries, including China, India, Saudi Arabia and the United Arab Emirates. Among his most prized assets: 12 U.S. golf courses, three more in Ireland and Scotland, and two underway in the United Arab Emirates, along with a 30 percent stake in two office towers in New York and San Francisco.
Trump Organization officials have said the president-elect’s business empire will be overseen by his three adult children — Donald Jr., Eric and Ivanka. (Former Presidents Carter, Ronald Reagan, George H.W. Bush, Bill Clinton and George W. Bush all put their assets into blind trusts during their terms; Obama’s portfolio in Treasury bills and index funds was not seen as a conflict.)
But Trump hasn’t heeded calls from ethics and legal experts (and others including the Wall Street Journal editorial page) who say his foreign assets should be sold off en masse and his businesses be placed in the hands of an independent trustee during his presidency. Trump addressed the issue on Twitter, saying it was “well known that I have interests in properties all over the world” and arguing that “only the crooked media makes this a big deal!”
The potential for Trump’s decisions as president to impact his business holdings loom large. “What happens if there are federal activities in the proximity of these golf courses or hotels that positively or negatively impact their value,” said Lawrence White, a professor of economics at New York University’s Stern School of Business and a former federal antitrust regulator. “He’s got a zillion things going on and I don’t see how he can effectively disengage.”
Barring more disclosures, an outside review of Trump’s business activity is difficult. In the days following his election, at least five Trump-affiliated holding companies, most of them long inactive, have been dissolved in Delaware and New York, ProPublica has found. But it’s unclear if Trump is consolidating his empire before he takes office or simply shuttering dormant companies.
And getting an accounting of how much he’s profiting, or losing, from his business dealings is near impossible. Shortly after the election, Trump met with three Indian business partners who are building a Trump-branded apartment complex in Pune, just outside of Mumbai. In his 2015 financial disclosure, Trump noted several foreign licensing deals, including the one for the 23-story Pune towers.
Trump reported between $100,000 and $1 million in income from the deal in his 2015 disclosure. The next year, he reported no income from the deal. The estimated value of the contract in both years, according to the financial disclosure: between $1,000 and $15,000. (Federal disclosures rules only require a range of income amounts for things like stock dividends, rent and royalties.) To put this incongruity in context, Trump’s licensing deals typically fetch between $5 million and $10 million.
Meanwhile, a 75-story Mumbai skyscraper currently under construction by the Lodha Group is also reported in the filings. The royalty income from that deal reported in 2016 is in line with previous Trump deals: between $1 million and $5 million. The Mumbai deal’s valuation was one of several listed that was deemed “not readily ascertainable.”
As president, Trump will be required to file both annual and periodic financial-disclosure reports under the Ethics in Government Act of 1978. But unlike a balance sheet or an audit, the financial disclosures are limited and don’t provide a complete picture of Trump’s businesses. “They are the very, very tip of the iceberg,” said Richard W. Painter, an outspoken critic of Trump’s business conflicts who served as the White House’s chief ethics lawyer under George W. Bush. “They don’t get at the second and third layers.” Among the things excluded from the disclosures: tenants in Trump-owned buildings and their rents, along with debts owed to government-owned sovereign wealth funds.
And if he makes any errors in his filings, it’s generally up to the White House counsel’s office — a Trump appointee — to decide what action to take.
Trump will have some additional disclosure requirements as president that he didn’t have as a candidate: He will have to list all gifts he’s received and any transactions within 45 days of a purchase or sale of a stock. Obama Commerce Secretary Penny Pritzker, a Chicago billionaire who started five companies and who has served on the boards of several Fortune 500 firms, routinely files such disclosures; so far in 2016, she has filed 17 of them.
But company liabilities are exempt from federal reporting requirements. Trump owes Deutsche Bank, his largest lender, roughly $300 million in loans against his recently opened hotel in Washington, D.C., and a resort in Doral, Florida. But it’s unclear what his companies might owe and to whom. And presidents aren’t subject to federal laws prohibiting members of Congress from government dealings that overlap with their own financial interests.
The extent of Trump’s potential conflicts is unique, but he’s one of many elected officials and executive branch appointees to grapple with such issues. Hank Paulson was forced to sell off nearly $600 million in Goldman Sachs stock before taking over as Treasury Secretary in 2006. Lyndon B. Johnson’s wife, Lady Bird Johnson, purchased a radio station, KTBC-AM in Austin, in 1943 and, when her husband was in the Senate, directly approached an official at Federal Communications Commission about a regulatory review.