Backlash is rising against Donald Trump’s unprecedented business conflicts of interest

ByJames Dennin

Before the presidential election, some warned that now-President-elect Donald Trump's foreign business entanglements would be unprecedented and unparalleled for a sitting president.

Now that Trump has won, the warning call has become a rallying cry — for transparency as well as solutions.

Phone lines for the House Oversight and Government Reform Committee were jammed Friday for much of the day thanks to a viral Facebook post calling for an investigation into Trump's finances, according to the Washington Post.

One reason?

Trump's daughter Ivanka Trump, who is on the president-elect's transition team with her brothers, sat in on a meeting Thursday with Japan's Prime Minister Shinzo Abe that was closed to the press — a move that was not only highly unusual but seemed to belie earlier promises that Trump's children would stay away from policy discussions that could influence how they would lead the family company.

But recent reports reveal it is not just Trump's children crossing the line: On Sunday an Indian businessman confirmed to the New York Times that he and his partners met with Trump himself this week — and the group discussed the intention to expand deals with the Trump family.

And on Monday Talking Points Memo reported that the president-elect is already using his clout to cut through permitting red tape for a Trump office building project in Buenos Aires, Argentina: He reportedly asked Argentina's president Mauricio Macri to authorize the building (though a spokesman for Macri has denied the veracity of TPM's report to BuzzFeed).

"We were told they were going to separate the business from the presidency," Richard Painter, chief White House ethics lawyer for Republican President George W. Bush, told the Wall Street Journal in a report published last week. "Within the first week, they've contradicted that."

On Thursday, Massachusetts congresswoman Katherine Clark introduced a bill that would force the Trump to take steps to eliminate potential conflicts of interest that could arise from his many businesses. 

That followed news on Monday that the ranking Democrat on the House Committee on Oversight and Government Reform, Rep. Elijah Cummings, sent a letter to Republican chair Jason Chaffetz asking that the group review the potential conflicts "to ensure that our government operates effectively and efficiently and combats even the perceptions of corruption or abuse."

Even celebrities have piled on, with comedians Sarah Silverman and Patton Oswalt jumping into the fray and sharing on Twitter the phone number for the oversight committee — which had a full mailbox as of 6 p.m. Eastern on Friday.

Why, exactly, is everyone so upset? Here's a little explainer.

What are some of Trump's business conflicts of interest?

There are numerous examples of how Trump could potentially use his office to enrich himself and his family.

"In the past 200 years, we have never had a president with such egregious conflicts of interest with family business holdings," Painter told the New York Times

For one, Trump's latest hotel project — the Trump International Hotel — sits on government land, and the Trump Organization is currently suing the government on the grounds it was overtaxed.

So it matters that Trump will appoint the next head of the Internal Revenue Service as well as of the General Services Administration — which owns the land on which the hotel sits and whose head will have to negotiate with Trump's children, should they run the Trump Organization in his stead.

More obviously, perhaps, the very existence of the hotel poses a conflict-of-interest problem: by giving foreign dignitaries a clear way to curry favor.

That hotel made headlines on Friday, after reports that a reception — which wooed foreign diplomats with Trump-branded champagne and raffle prizes like stays at global Trump properties — was having an effect: One diplomat told the Washington Post, "Why wouldn't I stay at his hotel blocks from the White House, so I can tell the new president, 'I love your new hotel!' Isn't it rude to come to his city and say, 'I am staying at your competitor?'?" and another said, "Believe me, all the delegations will go there."

There's also Trump's outstanding debt to Deutsche Bank, which was recently fined $14 billion — and which will be regulated by Trump's appointments to the Securities Exchange Commission — as well as Trump's debt to the Bank of China, a partially state-owned corporation.

And on Tuesday Mother Jones reported that Trump has invested between $500,000 and $1 million in the company building the Dakota Access Pipeline — which means he has a financial interest in seeing it built.

That controversial crude oil pipeline saw construction halted Monday so the government could investigate possible environmental hazards to the water supply used by the Standing Rock Sioux.

Then violence erupted Sunday night in North Dakota when police officers reportedly used force — including rubber bullets and water canons — on unarmed protesters who were objecting to the pipeline because of the danger it might pose to the Sioux's drinking water.

But the conflicts of interest do not end there.

Publicists for Ivanka — who sits on the president-elect's transition team — sent out an email blast Tuesday to reporters about the $10,800 bracelet she wore Sunday during her father's 60 Minutes taping.

Though a company spokeswoman later apologized for the marketing stunt, the incident showed that the Trump family itself has not prepared for the challenges associated with separating family business interests from the uniquely powerful platform of the presidency.

Finally, there is one more worrisome data point: the Trump team's repeated insistence that he will put his business in a "blind trust" — while describing an arrangement in which his children would run the company, and he would ultimately regain ownership after leaving office.

"That's not a blind trust at all," said Jeffrey Seglin, a lecturer at Harvard's John F. Kennedy School of Government who studies ethics. "It should mean that they're restricted from calling their father for advice. He should have no stake in the business. If they're going to run it, they need to run it."

Some ethics experts were even more skeptical. 

"His children managing the company, even if they never talk to him, would still be a conflict of interest as the law is traditionally understood," said Andy Stark, a professor at the University of Toronto and author of the 2003 book Conflict of Interest in American Public Life. "Your judgment is as skewed by what benefits your kids as much as it is by what benefits yourself."

How do blind trusts normally work?

There's no official rule for how presidents must manage their finances while serving in office, though traditionally, presidents use what's called a "blind trust" to prevent conflicts of interest.

If a president cuts taxes in a way that would particularly benefit oil companies, for example, it would be unfair if he also had a concentrated investment in oil.

President Barack Obama has not used a blind trust, but his investment holdings are vanilla and diversified: a mix of Treasury notes and index funds, which tend to increase in value alongside the broader market — and therefore do not really offer an opportunity for enrichment through specific policies.

blind trust makes sense for more complex investments. The president hands over control to an outside trustee, who manages the cash during the term in office. Crucially, while the president may get updates about the value of the investments, what's actually in them is a secret.

A recent controversy involved former Vice President Dick Cheney, who held a lucrative stake in oil company Halliburton, with options set to vest after he took office. To get around criticism, Cheney agreed to forfeit any options that would vest while he was vice president and released 10 years of tax returns. 

No law requires a blind trust for the president but there is notably a double standard for Trump's own Cabinet members, who are required by law to recuse themselves from decisions in which they could benefit financially.

If Trump abused power, would there be any consequences?

While the conflict of interest laws in the U.S. code do not apply to the president, the University of Toronto's Stark points out that there is something called the Emoluments Clause that prevents presidents from receiving gifts from foreign leaders. 

Stark also said the unique nature of Trump's businesses also could present a problem for him: There is a provision in the Ethics Reform Act of 1989 that prohibits any senior "noncareer officer" — which could potentially include the president — from allowing their name to be used in any way that "provides professional services involving a fiduciary relationship."

The kink, Stark said, is that the Office of Government Ethics would have to alter a standing exemption for the president. 

"I don't think Trump is going to do anything that he's not legally compelled to do, and the problem is that the central conflict of interest laws don't legally compel him to do the right thing," Stark said. "I think that if the Office of Government Ethics' mission is to ensure that the highest ethical standards are upheld, then it has an obligation to make that change."

Doing nothing at all could be a recipe for a weakened democracy.

The danger, as liberal economist Paul Krugman has pointed out, is that when the lines between business and governing are blurred, you increase the potential for corruption. Krugman argues Trump has already led us down the road toward becoming a "kleptocracy" like Russia or Ukraine.

Even behavior that is seemingly inconsequential, like leaders playing favorites in the way they award construction contracts, can be dangerous, said Yale University law and political science professor Susan Rose-Ackerman.

A cozy relationship might inspire, for example, the choice of "a particular contractor who might not be the most competent," she said.

That sort of decision has consequences: During the 2008 earthquake in China, when a number of schools collapsed, nearby structures were unscathed.

The incident prompted outrage over suspicions that corrupt officials had cut corners and avoided following building codes for schools — and the result was shoddy construction. Some materials originally designated to go toward building the schools were instead reportedly "sold by contractors for personal gain," according to the Guardian.

More than 5,000 schoolchildren were killed.

November 21, 2016, 1:45 p.m. Eastern: This story has been updated.