Sheri Dillon, the Morgan Lewis & Bockius lawyer who spoke at then-President-elect Donald Trump’s news conference [transcript here] this month and described the plan that Morgan Lewis has devised to “assure the American people the decisions [Trump] makes and the actions that he takes as president are for their benefit and not to support his financial interests,” did not exactly cover herself (or her firm) with glory by her performance.
The deal supposedly involves “a structure for his business empire that will completely isolate [Trump] from the management of the company”:
“He has relinquished leadership and management of the Trump Organization to his sons Don and Eric and a longtime Trump executive, Allen Weisselberg. Together, Don, Eric and Allen will have the authority to manage the Trump Organization and will make decisions for the duration of the presidency without any involvement whatsoever by President-elect Trump.”
That’s a step. Removing Trump from any decision-making authority in the Trump Organization may help to eliminate one potential conflict: the ability of the Trump Organization to use inside, non-public information, obtained by the president in order for him to carry out the public’s business, for its own private gain.
But it does nothing to deal with the other, far more serious potential conflict: the possibility that Trump will, as Dillon put it, exploit “the office of the presidency for his personal benefit,” i.e., allow the prospect of private gain rather than public benefit to sway his decision-making as president.
I care a lot more about management of the country than I do about management of the Trump assets. How does relinquishing his management role in the Trump Organization protect against those conflicts of interest? After all, Trump will, under the plan, continue to own the Trump Organization, and any benefits it reaps during his presidency will appear in his pocket the moment he finishes his presidential term — as he, no doubt, knows full well. As a Post report put it a few days ago:
Airplanes belonging to Donald Trump’s businesses will be inspected over the next four years by employees of the Federal Aviation Administration that he will lead.
Disputes over Trump’s trademark registrations could be reviewed by judges appointed by his hand-picked commerce secretary. His Department of Housing and Urban Development could reverse its past opposition to a potentially lucrative sale of a large subsidized housing complex in New York partly owned by the president-elect. And Trump’s Environmental Protection Agency will have the power to roll back clean-water rules he and other golf course owners have said are harmful to their industry.
When Trump takes office on Friday, he will assume control of a federal bureaucracy with enormous power to bolster nearly every corner of his real estate, licensing and merchandising empire — and enhance his personal fortune.
There’s one obvious way that Trump can eliminate this conflict potential: by divesting himself of ownership of the company. Let’s look closely at what Dillon said about that:
“Some have asked questions. Why not divest? Why not just sell everything? …
Selling, first and foremost, would not eliminate possibilities of conflicts of interest. In fact, it would exacerbate them. The Trump brand is key to the value of the Trump Organization’s assets. If President-elect Trump sold his brand, he would be entitled to royalties for the use of it, and this would result in the trust retaining an interest in the brand without the ability to assure that it does not exploit the office of the presidency.”
“First and foremost,” this is BS, legally speaking — thoroughly misleading at best, blatantly incorrect at worst. While it is true that he could sell his assets under a structure that would enable him to obtain royalties for the use of his brand, that is, as any first-year Morgan Lewis intellectual property transactions associate could have informed Dillon, hardly the only way a sale could work. Nothing prevents him from assigning all of his trademark rights, along with all associated “goodwill,” to the purchaser lock, stock, and barrel, in which case he would not “[retain] an interest in the brand,” and his decisions would be free from the suspicion that they are tainted.
That is a standard, commonplace transaction structure for a deal of this kind — as Dillon surely knows. (Another commonly used structure would involve a simple flat-rate royalty structure, where continuing royalty payments are set in advance and do not fluctuate with the value of the brand — another means by which Trump could assure us that he gets no private benefit from his public actions.)
Suggesting that a sale of the Trump assets “would not eliminate” the conflicts, but would instead “exacerbate” them because it would require retaining a royalty interest in the brand, is insidious nonsense.
Another way that Trump can divest himself of ownership of the assets is by going public. Here, in its entirety, is what Dillon had to say about that:
“Some people have suggested that President-elect Trump could bundle the assets and turn the Trump Organization into a public company. Anyone who has ever gone through this extraordinarily cumbersome and complicated process knows that it is a non-starter.”
That, too, is utter nonsense.
Imagine Trump walking into Dillon’s office in, say, 2014, before he announced his run for the presidency, and telling her that he wanted to take the Trump Organization public. Do you believe, for one millisecond, that she would have said, “Oh no, you can’t do that! It’s so extraordinarily cumbersome and complicated! That is a non-starter.” Her partners in the securities department at Morgan Lewis would surely have fired her on the spot. Cumbersome and complicated is the bread and the butter of large securities practices like the one at Morgan Lewis, which advertises itself as having a “strong background” in taking companies public, “historically … a leader in handling IPOs.” The idea that this would somehow be too complicated for Morgan Lewis to handle is risible.
But I guess anyone who is planning a complicated and cumbersome IPO will look elsewhere for legal help.
The only way to truly eliminate Trump’s conflicts is to sell off his interest in those businesses and his interest in the Trump trademarks — and, contrary to Dillon’s suggestions, that can be done in a perfectly reasonable manner. Trump’s business model has rested on a franchise of his name, whose value heretofore came from his status as real estate mogul and TV celebrity and which now will be based on his status as our president. The value of the Trump brands (and, therefore, of the Trump Organization as a whole) will rise and fall based on the actions taken by Trump-as-president (as they already have based on the actions of Trump-as-president-elect). Trump will benefit — personally, and financially — from any increases in that value, and will be harmed by any decreases. That is, in my opinion, the very definition of a conflict of interest.
StartFragment Claiming that the Morgan Lewis plan “creates a complete separation from President-elect Trump” is pernicious bunkum, plain and simple. It is not sufficient to give “the American people confidence that his sole business and interest is in making America great again” as opposed to making money for Trump and his family. If you’re not concerned about that, you should be.
[After I composed this post, news arrived that the group Citizens for Responsibility and Ethics in Washington (CREW) has filed suit against President Trump “to stop and prevent the violations of the Foreign Emoluments Clause" — which provides that “no Person holding any Office of Profit or Trust under [the United States], shall, without the Consent of the Congress, accept any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State” — “that Defendant Donald J. Trump has committed and will commit.” [The complaint can be found here.] I haven’t had a chance to look these over carefully, and will take a more in-depth look at the issues raised there in a subsequent post.
And in addition, the ACLU has just filed a Freedom of Information Act request, seeking documents relating to “President Trump’s actual or potential conflicts of interest relating to his business and family connections.”]