Trump “Trust” Misses the Mark

Donald Trump’s lawyers spent months trying to eliminate apparent conflicts of interest. When push came to shove, other agendas won out, arguably leaving critics more hostile than ever.

There were an awful lot of grumpy faces reacting to Donald Trump’s press conference on Facebook today. Last I checked, something like 65% of the response ranged from angry to sarcastic laughter.
That’s probably not the response his lawyers at Morgan Lewis were going for when they crafted his presidential plan for keeping the White House and the Trump Organization from even accidentally enriching each other.
At the end of the day it just wasn’t a visionary enough plan to satisfy lingering doubts about his ability to keep his family close while closing the door on his career as a celebrity businessman.
As it is, the proposed structure might not even pass muster as a $1 million asset protection trust, much less a way to wall off a sprawling billion-dollar empire from the most powerful office in the world.
It's a trust, but it's not a blind trust. He knows exactly what he has and is at best at arm's length from the people making the decisions. His kids will run it. What enriches them, enriches him.
And there are as yet no real teeth beyond "because I said so" to keep the business out of the White House. We basically just have to trust him, which is easier for some people than others.
Trump will keep his interest in the Trump Organization exactly where it is. He won’t run the company and won’t even get details on new ventures, but there’s no way to erase his knowledge of what he currently owns.
His sons will handle the day-to-day operation. They’ll abstain from making new overseas deals. Domestic deals will need an ethics counsel to sign off.
Ivanka is leaving because her husband is moving to a White House role and there’s no easy way to prevent information from moving to and from the Organization across the marital bond.
After all, spousal communications are privileged if the courts get involved. And I get the sense that’s the context under which these terms of engagement were created.
The primary goal here doesn’t really feel like it’s about preventing the Trump Organization from profiting from dad’s new role or acting on information from the White House.
Instead, most of this seems more concerned with walling dad off from what the Organization is doing so he won’t face even the unconscious temptation to skew policy and diplomatic relationships in the family’s favor.
It’s far from a stupid strategy. If anything, it’s the kind of risk-avoidant thinking that drives a lot of smart ultra-high-net-worth family activities.
The advisors want to protect the principal first, last and always. That’s Trump. They don’t want him sued or, if they can help it, impeached.
But all those frowning faces on Facebook indicate that a big segment of the voting public had a different set of expectations for presidential behavior.
Nothing ventured, no goodwill
Of course Trump could have followed a generation of White House protocol and divested his wealth into a real blind trust.
He evidently didn’t care to do so because it would be expensive and inconvenient. That’s all right, but this is more about impressions than dollars.
For example, rolling the illiquid and complex Trump businesses into a trust would have required forced liquidation or resorting to arcane financing structures.
Trump didn’t want to do it, his lawyers say. Maybe he would have had to sell at a loss or his kids would have had to borrow money to buy him out.
That’s life in the world of illiquid asset classes. We can all think of workarounds -- sell off one or two of the highest-profile properties and leverage the rest, engage an investment bank to find buyers on a reasonable timetable -- but Trump doesn’t want to do it, so it’s not happening.
There was a truly odd moment when the notion of taking the Organization public came up as an instant non-starter. If an IPO is so dreadful, it’s news to both the Wall Street community and Trump insiders themselves, who floated the hotel in the 1990s.
And if trailing royalties would pose a conflict of interest should he sell off his personal brand, why not (gasp) cut royalties out of the deal entirely? He has the power to ask for cash instead of participation.
But evidently that wouldn’t be the kind of deal he’s used to making, so it didn’t happen. The one concession to the public good over the private equity came when the lawyers said Trump's hotels will now return foreign governments' room bills to the Treasury.
Still, a multi-billionaire with an eye on the public good can forego a few points in order to eliminate doubts about his motives. Maybe he wanted to clean house but the advisors kept him from literally giving away the store.
It’s what good advisors do. Warren Buffett’s accountants earn him every deduction they can find, Donald Trump’s lawyers talk him out of making bad deals in order to project a presidential image.
There’s no politics here. It’s simply looking out for the client. They’ve earned their retainer and more.
If Trump’s people are like other billionaire family offices, they have three major priorities.
First, they want to help the principal pursue larger objectives, which in this case has already taken him to the White House. Now they need to help him lead the kind of administration he wants.
Second, the faster the money can grow or at least sustain expenditures, the better.
And third, there’s no point to publicizing sensitive information about the family and its operations unless there’s a good external reason to do so.
Target on the Organization
But in the meantime, the lack of real transparency effectively paints a big red target on every aspect of the Trump Organization begging for leaks, hacks and old-fashioned forensic accounting.
We could evaluate the effectiveness of his lawyers’ plan if we knew exactly where his interests begin and end.
Unfortunately, we don’t. Trump remains doggedly private about his true financial footprint, leaving a shadow that could conceal billions of dollars of assets and liabilities -- and span the globe.
As long as that shadow persists, nobody can be sure his separation from the Organization has teeth. It’s trivial to imagine any number of workarounds, inside channels, vehicle for moving money in and out of the structure in line with his policy choices.
He might not ever use them. But the mere fact that these dodges come so quickly to even financial planner demonstrates that some people will always assume the worst.
They’ll treat everything he does with suspicion. They’ll dig. Conspiracy theories will multiply endlessly.
And trust in the institution of the presidency will erode. It’s not all that strong right now to begin with. It’s going to get worse.
If he were a private citizen, this would make him a magnet for lawsuits and regulatory attention alike. As president, he’s going to be above much of the law, but he’s going to need to manage perception in order to work with foreign governments and the American people.
When the man who stage-managed Rex Tillerson’s exit from a 40-year career at Exxon calls your effort to avoid even apparent conflicts of interest a sham, you’ve already failed the sniff test.
Trump could do a lot of things to improve perception of who he is and what his motives are. Until he does, perception is going to skew skeptical at bet.
Granted, perception would have been at least as sour around the Clinton Foundation, where we know the wall between home and State was too permeable to take seriously.
But this is Trump’s chance to actually drain the swamp and bring some real fresh air to Washington, give us all a better example.
This is just going to make his term an unending cycle of second-guessing and doubt around the motives behind everything he tries to do. I’m sure he’ll still get plenty done, but if anything falls through the ethical net, things could get ugly.
The man who cleaned Rex Tillerson’s ticket just quoted Antonin Scalia -- apparently one of Trump’s heroes -- as arguing that a president needs to follow ethical guidelines even if they aren’t strict rules.
We all deserve that kind of president. Whether we get one or not remains to be seen.
I care about those tax returns. I want to read what’s in that table full of folders. Hook me up, Morgan Lewis. I’ll sign a confidentiality pact as long as you let me report anything that just doesn’t add up.

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