There has understandably been growing attention over the last week about potential ethical problems arising out of President-Elect Trump’s far flung international financial and commercial interests.
Mr. Trump, of course, is not the first highly successful businessman to go into politics after building a very valuable company.
In his private life, President George H.W. Bush built a company that pioneered off-shore drilling — an innovation at the time, perhaps equal in scope and significance to today’s fracking developments. But Mr. Bush sold his company upon being elected to Congress, so by the time he became vice-president he had a diversified portfolio and was able to avoid the kind of problems Mr. Trump now faces.
As a starting point, it is worth noting that the most serious ethics rules do not apply to the president or vice-president. Even the Constitution's Emoluments Clause — which outlaws foreign gifts to persons holding offices of “profit or trust” — may be inapplicable. George Washington, for example, accepted personal gifts from the French government.
On the other hand, the Department of Justice has long held the view that our two highest officials — the president and vice president—should act as though the rules apply to them, and presidents seem to have do so consistently.
And while there may be little actual legal risk arising from presidential conflicts, there is the problem of a long-standing practice, which can become so ingrained in our culture that it strongly influences popular understanding of the law.
Indeed, in case after case, the Supreme Court reminds us that tradition is relevant to legal understanding (the Noel Canning case, where the Court accepted the long-standing practice of what minimum number of days was required to have a recess long enough for a recess appointment, particularly comes to mind).
There are numerous ways by which a president could comply with this practice and avoid the perceived ethics law and Emoluments Clause issues that global financial holdings are likely to generate.
A president could, for example, set up a blind trust, totally divest into widely held mutual or exchange funds, or fashion a recusal system. The last option, more appropriate for a cabinet officer with a defined set of obligations, might make sense, if at all, for a president with limited holdings. But it would be exceedingly difficult to apply to a president with substantial assets, especially when the value of those assets is tied closely to the president’s name.
Blind trusts sound good — and often suffice — but their effectiveness at resolving conflicts issues can be limited. The word “blind” can be a bit deceiving because no trust is truly blind until the Trustee disposes the assets used to form it. And if the Trustee simply holds the assets, the blind trust is of little value from a conflicts perspective.
Given the scope of the president’s job, immediate divestiture usually makes the most sense. Although the president-elect has not said so directly, he does not appear to be leaning in this direction.
Rather, he has made very clear statements about giving his grown children managerial control over his assets, without any mention of also transferring ownership rights.
But giving up complete ownership to his adult children — by means of a sale or leveraged buy-out — and letting them take the risks and reap benefits of failure and success may not be as unattractive as it sounds. Such a solution would leave the president-elect free to fully enjoy the fruits of his business success in his retirement years without worry.
A key element here is how the ethics laws interact with the tax laws.
Under governing ethics rules, taxes are not assessed against the proceeds of asset sales carried out for ethical conflict reasons. The law allows officials to rollover the tax basis of the assets sold into an index fund, for example, thus deferring taxes until the newly purchased asset is sold. Such a sale may, in fact, never occur in Mr. Trump’s lifetime — meaning divestiture could generate substantial tax savings for him.
Detractors might argue that there would still an appearance of conflict problem, since Mr. Trump would arguably still have an incentive to help his grown children, even if he could not himself benefit from a given action or inaction.
But this is a pervasive issue that ethics laws have long tolerated by not attributing children’s investments to their parents. Moreover, there are rules regarding coordination between the family members about the assets — rules that can be enforced, politically or, sometimes, legally.
Note here that while the law does not treat non-dependent children as the equivalent of their parents, it does treat spouses as equivalents of each other.
This means that with respect to rumors that Trump’s son-in-law Jared Kushner might take a White House job, Mr. Trump’s divestiture would not resolve his conflict-of-issue problems, even if Mr. Kushner were to put his assets into a blind trust.
As the spouse of an owner of the divested company, Mr. Kushner's White House employment would revive all of the problems eliminated by his father-in-law’s divestiture. Put another way, because Mr. Trump’s daughter Ivanka — as an owner and manager of the Trump Organization — could not take a job in the White House (with or without pay) — neither could her husband.
Mr. Trump recently said he “would like to do something” to address the issues arising from his substantial holdings. His finances are no doubt exceedingly complicated. But he should not rule out divestiture to his grown children, and the substantial political and tax benefits it would entail, as an option.
Ambassador C. Boyden Gray is a former white house counsel and former U.S. ambassador to the European Union.
The views of Contributors are their own and are not the views of The Hill.