The White House Is Now A Family Business
Conflicted
President Trump has always run his businesses as closely held corporations where the decision power and profits are doled out to family and his latest business venture, the White House, is no exception. It’s official, Ivanka Trump and Jared Kushner are now overworked and underpaid civil servants. In their case, underpaid may be a slight understatement as neither will draw a paycheck during their tenure as government employees. As official government employees Ms. Trump and Mr. Kushner will be legally bound by far stricter ethics rules than the President.
Nepotism
The Law: Title V, 3110
A public official may not appoint, employ, promote, advance, or advocate for appointment, employment, promotion, or advancement, in or to a civilian position in the agency in which he is serving or over which he exercises jurisdiction or control any individual who is a relative of the public official. An individual may not be appointed, employed, promoted, or advanced in or to a civilian position in an agency if such appointment, employment, promotion, or advancement has been advocated by a public official, serving in or exercising jurisdiction or control over the agency, who is a relative of the individual.
Seems straightforward at first, but it gets complicated because of another law gives the President the authority to appoint “employees in the White House office without regard to any other provision of law regulating the employment or compensation of persons in the government service.”
The Department of Justice decided back in January that because of this other law, the anti-nepotism statutes do not apply to the White House.
A President wanting a relative’s advice on governmental matters therefore has a choice: to seek that advice on an unofficial, ad hoc basis without conferring the status and imposing the responsibilities that accompany formal White House positions; or to appoint his relative to the White House under title 3 and subject him to substantial restrictions against conflicts of interest.
Hiring your daughter even if she does not take a paycheck is absolutely nepotism, questionably ethical, but legally permitted. The result of violating nepotism laws is that you forfeit your pay, so Ms. Trump and Mr. Kushner are not drawing paychecks to stay in compliance with a possible different interpretation of the law. Ethics, however, is not just about legality. If we only acted as we are required to by law rather than as we should the country would be a poorer place for it. Requiring ethics compliance through laws or regulations is an approach that is applied after tradition and social pressure has failed. The spirit of the nepotism laws suggests that you should not hire family, but it appears that once again the President and his White House are exempt.
Government Ethics Statutes
By becoming Federal employees, Ms. Trump and Mr. Kushner are now bound by the laws that apply to all federal employees and elected officials except for the President. To paraphrase 18 U.S. Code 208:
Whoever, being an officer or employee of the executive branch of the United States Government shall be subject to the penalties set forth in section 216 of this title if they participate personally and substantially as a Government office in any matter in which, to their knowledge they, their spouse, minor child, general partner, organization in which they are serving as officer, director, trustee, general partner or employee, or any person or organization with whom they are negotiating or has any arrangement concerning prospective employment, has a financial interest.
To summarize: As a government official you cannot engage in any activity where you have a financial stake in your official capacity. Take note that the statue does apply to trustees, so the legal gymnastics of placing assets in a trust that President Trump employed will not excuse Ms. Trump or other White House staff.
The Office of Government Ethics (OGE) was setup to help civil servants maintain compliance with these statutes and others like them. OGE has a preventative role, offering guidance so that employees do not end up suffering the civil and criminal penalties of violating the ethics code which include fines and up to five years in jail. It is common practice for incoming officials to divest from their holdings to avoid even an appearance of a conflict of interest. Many new appointees, advisers, and others, including family members, have chosen to follow the example of their boss and have not effectively divested leaving them vulnerable to both present and future conflicts of interest.
In fact, executive branch officials have already begun to find themselves in the ethical hot-seat. Two of President Trump’s cabinet appointees withdrew their names because they could not resolve the potential for conflicts of interest in their daily work. Steve Mnuchin and Kellyanne Conway have already had to apologize for using their offices to promote specific products, another action forbidden to government employees. Ms. Conway had the now famous plug for Ms. Trump’s clothing brand while Mr. Mnuchin had to apologize for promoting the Lego Batman movie.
Perhaps the most serious violations are those of Christopher Liddell, assistant to the president and director of strategic initiatives. Mr. Liddell participated in policy meetings with CEOs of 18 companies in which he had a financial interest. Mr. Liddell did not publicly divest until almost a week after the meetings took place, a move which has drawn an official complaint from the watchdog group Citizens for Responsibility and Ethics in Washington. It will be up to the White House Council and Attorney General to decide what, if any, action is necessary to address these various ethics violations.
Our Customers: The Citizens
In interviews with Trump voters, many of them said they valued his business experience and wanted to see how that would translate into running the country. They got their wish, President Trump is indeed running the country like he ran his business, the problem is he runs his business like a family and not in a good way. Two main features of the structure of the Trump Organization are his reliance on family and close friends, and that the Trump Org. is a privately held company. You can see these two features in many decisions President Trump and his family make in government, for example the prevalence of nepotism in the current White House.
By running privately held companies, Donald Trump, Ivanka Trump, and Jared Kushner have never had to report to a board of directors or shareholders and it shows. Mr. Kushner came out this week and said that his “hope is that we can achieve successes and efficiencies for our customers, who are the citizens.” Push back suggested that citizens are more like shareholders, a relationship Mr. Kushner and the Trumps cannot appreciate because they have never experienced it. All three have a structure of businesses around them designed to protect and shelter their wealth, webs upon webs of LLC’s with no end in sight. Privately held companies are by definition opaque to public scrutiny, completely from the public transparency demanded by working in government. Almost the only successful pressure applied to the Trump family has been legal pressure, shaming does not work, and their response is just to search for new loopholes.
When confronted with a traditional demand, that of placing your assets in a blind trust, the Trump family seemed to take a few steps as they could legally get away with. Mr. Trump promised to set up a trust so he could not access his assets and would be “completely isolated” from his business. He has not done so and just this week it was revealed that Mr. Trump can remove money or assets from his trust, merely requiring the approval of his sons. Mr. Trump is indeed informed on the dealings of his business and has access to his assets, the two items his lawyers went out of their way to assure the public would not happen. Mr. Trump’s trust asks for precisely that while more closely resembling a game of follow the queen.
Ms. Trump has followed a similar pattern with her assets being managed by relatives of her husband and she too will receive regular financial updates. Before becoming a government employee Ms. Trump has this to say on her status in the White House: “There is no modern precedent for an adult child of the president,” suggesting that there is no legal precedent so Ms. Trump can decide for herself the appropriate action. Depending on your opinion of how closely Ms. Trump mirrors her father, this statement will mean different things to you.
Government and business have always enjoyed a close relationship, especially with the managing the economy being such an important part of the government’s obligations, but Mr. Trump and his family/staff have brought these two parties even closer. Many of the worst aspects of business have come in with the new administration including an emphasis on money over people and reliance on a legal rather than ethical frameworks when making decisions.
It has yet to be seen if President Trump will be able to successfully separate his decisions as President from his businesses that operate around the world. While President Trump is so closely tied to his business empire, and his closest advisors Mr. Kushner and Ms. Trump are as well, one can only wonder what choice they will make when presented with a decision that benefits America but negatively affect their business.
Looking Forward
President Trump and his staff have caused and continue to cause massive headaches for ethics officials. Newsweek hit the nail on the head with the title of their article “U.S. GOVERNMENT’S ETHICS ENFORCEMENT NO MATCH FOR TRUMP” It opens by stating:
One realization that has emerged during a chaotic week in our nation’s capital is that America’s system for preventing ethical conflicts in government is supremely overmatched by President-elect Donald Trump and his cadre of billionaire advisers. As they prepare to sweep into the White House in a little more than a week, the offices, officials and standards designed to promote so-called good government are being overwhelmed and, in many cases, shunted aside. Critics are finding they have few immediate recourses, aside from public shaming — and that has worked only in scattered instances.
The lack of effective ethics oversight has been shocking to many. What were people thinking when they designed the system of ethics compliance in Washington? Noah Bookbinder, executive director of the watchdog group Citizens for Responsibility and Ethics in Washington, had this to say on the matter:
[Ethics] sort of starts from the premise that everybody wants to be in compliance. This idea of, ‘What if they’re not interested in getting into compliance?’ has not really been tested.
As we see more and more business people and millionaires serving in government the demands for stricter ethics laws, ones with real teeth, will increase. The argument is that ethics should be governed by laws and not customs because forcing compliance is more important than encouraging compliance. How much new ethics laws can help by themselves remains to be seen as they can never take the place of good practices and appropriate intentions. I leave you with a comment from Alexis de Tocqueville, perhaps one of the greatest writers on American democracy, on the matter.
The best laws cannot make a constitution work in spite of customs; and customs can make advantage of the worst laws.
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