Sunday, November 27, 2016

A Framework for Understanding Presidential Conflicts of Interest

A conflict of interest is potentially created when there is a overlap between a federal government official's duties and his or her personal financial interests:  official duties + person financial interests = potential conflict issue.

There is a complex set of civil and criminal federal laws, regulations, and processes that relate to gift giving, personal financial holdings, and bribery.  Yet, they all boil down to small number of core principles, which I summarize below.  I'll also explain below why the President is exempted from some, but not all, of the legal rules governing conflicts of interest.  

Why Conflicts of Interest Rules Exist

In 1989, the Office of Government Ethics, under President George H.W. Bush, published a set of 14 ethical standards that apply to all government agencies, codified in the Federal Regulations, 5 CFR 2635, and that begin with the following statement:  "Public service is a public trust, requiring employees to place loyalty to the Constitution, the laws and ethical principles above private gain."

Said a different way, the simple reason for the longstanding tradition of conflicts of interest rules is that government officials must act impartially and in the best interests of the US generally, and not in their own person financial interests.  (See US v Miss. Valley Generating Co. (1960)(conflict created when the gov't hired a consultant to work on a power plant transaction, and the consultant was also an employee of a bank that was financing the power plant)). 

From the perspective of the country as whole, the rules recognize a need for decisions to be free of even the potential of a conflict to avoid having the validity of decisions eroded.  From the perspective of the individual government official, the rules recognize that even the most honest person could have their independent judgment impaired in subtle ways by personal financial interests.  

Different Types and Severities of Conflicts - Gifts, Financial Interests, and Bribery

There are a range of potential conflicts that a government official may face, including: 

(i) minor gifts (like a President getting a signed sports jersey from a winning pro team) which the regulations pre-authorize as not creating a conflict; 

(ii) more valuable gifts that exceed pre-authorized acceptable $ values and categories, 

(iii) conflicts created by overlaps between an official's government responsibilities and his or her financial interests which may impact impartiality, and 

(iv) outright bribery (which is a express agreement to give or receive money or something of value in exchange for corruptly doing an official act). 

See 18 USC 203 (criminal conflicts and bribery), 5 CFR 2601 (gift giving regulations), and the"emoluments" clause of the US Constitution.

The 3 Primary Ways to Fix Conflicts of Interest

Depending on the individual facts and circumstances, conflicts may be fixed by: 

(i) disqualification (under certain circumstances, the person with the conflict just has to be removed from making the decision), 

(ii) transparency/disclosure and approval (under certain circumstances, being transparent and disclosing the underlying issues can result in approval by an authorized government entity), or 

(iii) divestiture (in some circumstances, rather than the individual being removed from making the decision, the decision-maker removes the person financial interest).  

In sum, either the government official removes himself from the decision (item i above), the person removes his financial interest, such as with a divestiture and blind trust (item iii above), or the person gets clearance from a third party after transparently demonstrating that there's no conflict (item ii above).  

If a conflict doesn't get fixed in 1 of the 3 ways described above, then there are potential legal and ethical ramifications - even for a President - as described below.  

Why is the President Exempt From Certain Conflicts Rules?

It may seem counter intuitive, but the President is exempted from most of the federal conflicts laws because the President sets policy that effectively could impact everything.  Thus, if a President were not exempted, then all of his decisions might need to be subject to review in a way that could be disruptive and inconsistent with the separation of powers.  Since there is no easy way to do this, we have what is in part an honors system that depends on the President do the right things even when not compelled to do so.

There is a body of law regarding Presidential immunity, which for example prevents the President from being sued civilly (for $) by anyone who wants to drag him into court for matters relating to a President's official duties.  The President is not above the law, but as a matter of public policy, we don't want the President spending inordinate time defending lawsuits or having private citizens second guess Presidential policy in court actions.  (Presidents are, however, subject to lawsuits for non-official duties - see Clinton v Jones, 520 US 681 (1997)).

The Emoluments and the Impeachment Clauses of the US Constitution 

The "Emoluments Clause" of the US Constitution, Article I, Section IX, states:

No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.

There are very few court cases interpreting the Emoluments Clause, but on their face, the words are a prohibition of the receipt of gifts from foreign governments, absent the consent of Congress.   (Webster's Dictionary defines "emolument" as "the returns arising from office or employment usually in the form of compensation or perquisites.")  

The Impeachment Clause, in Article II, Section IV of the Constitution, states that the President can be impeached for “Treason, Bribery, or other high Crimes and Misdemeanors.”  

For a typical citizen, a criminal prosecution involves investigation, the decision to bring a formal charge (typically by a prosecutor or grand jury), and then a trial by jury.  In a similar way, for the President, the impeachment process is set forth in Article I, Sections II and III. The House of Representatives after investigation, acts as the prosecutorial body - the House can initiate, based on a majority vote, an impeachment action against a sitting President, which is essentially the decision to formally charge the President with a crime constituting "treason, bribery or other high Crimes and Misdemeanors".  The Senate, in turn, acts as a judiciary, hearing the case against the President, and determining innocence or guilt, which requires a 2/3rd vote of the Senate to remove the President.

What Ramifications Are There for Presidents with Conflicts of Interest?

The media has reported that Presidents are exempt from conflicts of interests rules, but there are in fact some limits.  The above-described exemptions do not apply to criminal bribery - thus, a President who were engaged in outright bribery would be subject to impeachment both under the federal law and under the Constitution.

For the majority of potential conflicts created by a Trump Presidency (those caused by the existence of the Trump Organization's financial holdings, and by the giving and receiving of gifts broadly defined including to mean anything of value received from a foreign government), there are 2 key limitations:

(i) the Emoluments Clause, with investigation by the House of Representatives, and the threat of Impeachment, and

(ii) the honors system, meaning the expectation that Trump will follow norms and precedent, and do what other modern Presidents have done - including creating a blind trust and disclosing tax forms - even thought the law may not clearly compel him do do so.

The House of Representatives Oversight Committee / Emoluments Clause

The Federal Government body most responsible for overseeing potential conflicts of President-elect Trump and his family is the House Committee on Oversight and Government Reform.

If there is one person who is most directly responsible for overseeing potential Trump conflicts, it is the House Oversight Committee Chairman, Jason Chaffetz, Republican from Utah.  Under the Committee rules, Representative Chaffetz controls the Committee's investigative agenda, meaning he can investigate the President-elect, and put significant pressure on him to divest his financial interests to eliminate conflicts.

On November 14, Representative Elijah Cummings, Democrat from Maryland, and the Ranking Member of the Committee (meaning the one with the most seniority) sent a Letter to Chairman Chaffetz asking that he initiate an investigation into potential Trump conflicts.

On November 17, two former lead ethics attorneys - one who worked for President George W. Bush and one worked for President Obama - collectively sent an open letter to Trump, asking that he divest his financial holdings.  The two leading experts - from both political parties - stated:

"Mr. Trump, you were elected to the presidency with a promise to eliminate improper business influence in Washington, to break the stranglehold that commercial interests impose on government.  There is no way to square your campaign commitments to the American people - and your even higher, ethical duties as their president - with the rampant, inescapable conflicts that will engulf your presidency if you maintain connections with the Trump Organization, including by maintaining ownership with control transferred to your children."

If any individual citizen is or becomes concerned about Trump's potential conflicts, the most direct way to engage is to reach out to the Committee and/or your representative on the House Committee on Oversight and Government Reform.

The Honors System / Precedent / Norms

As a practical matter, there are 2 strong factors that have motivated essentially every modern President to follow the ethical rules, despite being technically exempt and not obligated by the letter of the law.  First, most Presidents care about the appearance of conflicts causing the validity of decisions to be questioned.  Second, given that every other employee in the federal government has to follow the rules, basic elements of leadership would cause most people to lead by example and not expect everyone else to follow the rules which the President in turn ignores.  This is why all recent Presidents - Democrats and Republicans - have voluntarily chosen the honors system (including by instituting blind trusts).

President-elect Trump's words and actions to date suggest that his approach is and will be to try to get away with as much as the law permits, rather than to internalize the ethical norms of the most important leadership job in the world.

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