Trump’s business plan puts government credibility at risk

After the President-elect’s disappointing and rambunctious press conference, government ethics experts and the broader compliance community rejected, as woefully inadequate, Donald Trump’s legal strategy to mitigate his conflicts of interest.

Walter Shaub, director of the nonpartisan U.S. Office of Government Ethics, explained that the plan “doesn’t meet the standards that … every president in the past four decades has met.” Conversely, Shaub praised Trump’s Secretary of State nominee, Rex Tillerson, for his “clean break,” noting that, by “forfeiting bonus payments worth millions … he’s now free of financial conflicts of interest.”

That’s exactly what Trump’s proposal failed to do. Yes, turning over business operations to his sons will reduce his distractions. But Trump’s ownership and interest in his business remain. Shaub nails it when he said, “Stepping back from running his business is meaningless from a conflict of interest perspective.” Shaub also dispelled Trump’s attorney’s position that “the conflicts of interest laws simply do not apply to the president … [he is] not required to separate [himself] from [his] financial assets.”

Shaub correctly concedes that, indeed, one particular conflicts of interest law, does not apply to the president. But, as Shaub eloquently stated, “Common sense dictates that a president can, of course, have very real conflicts of interest … anything that creates an incentive to put your own interests before the interests of the people you serve … A president is no more immune to the influence of two masters than any subordinate official. In fact, our common experience of human affairs suggests that the potential for corruption only grows with the increase of power.”

The core problem is that Trump won’t make the sacrifices necessary to serve as a conflict-free chief executive. Public servants, whose enormous sacrifices enrich the nation, have little sympathy when Trump’s counsel complains that “selling his assets without the rights to the brand would greatly diminish the value of the assets[.]”

Too bad. Shaub reminds us that the president will “be asking his own appointees to make sacrifices… [and] asking our men and women in uniform to risk their lives in conflicts around the world. So, no, I don’t think divestiture is too high a price to pay to be the president…”

But the Trump International Hotel on D.C.’s Pennsylvania Avenue best demonstrates that Trump puts his business and financial interests first, and “draining the swamp” a distant second. As far as we know, the hotel lease for the historic Post Office Pavilion is Trump’s only business arrangement directly with the U.S. government. As of Jan. 20, Trump will be both the property’s landlord and tenant. Trump will be the landlord, because the General Services Administration (GSA) is a federal executive agency. And, of course, the lease states that the “tenant” is “Donald J. Trump.”

The arrangement illuminates why delegating management responsibilities to Trump’s sons won’t solve the problem. In fact, Trump’s failure to divest creates conflicts of interest for other government officials. The hotel lease requires extensive annual disclosure of detailed financial information, followed by negotiations over rent escalation and other payments to the government. Trump’s refusal to disclose his tax returns or detail the extent of his business debts raises questions regarding compliance with these requirements.

Yet the lease requires career GSA civil servants—who report to the GSA administrator, who will serve at Trump’s pleasure—to decide whether to ask the president’s sons for more detailed revenue and expense information, demand an audit, or call for a rent increase. Trump’s intransigence will force civil servants to choose between two masters—serving the public by rigorously enforcing the lease’s terms or enriching the president by yielding to the president’s sons.

The Trump D.C. hotel lease is unique in that it explicitly bars elected officials from participating in it or reaping its benefits. The lease states, “No … elected official of the Government of the United States … shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom…” That’s consistent with the government’s longstanding prohibition on entering into contracts with federal employees.

You don’t need to parse the Constitution’s emoluments clause to understand that Trump’s tax counsel grossly oversimplified the problem in comparing “paying your hotel bill” to a routine “value for value exchange.”

No, the problem is that foreign governments—alongside lobbyists and the other special-interest groups—will enthusiastically pay premium prices to host events, eat meals and stay at Trump’s hotel, because the president’s actions and words make clear that he appreciates and craves their patronage. That’s exactly what the drafters of the Constitution and the well-established conflict of interest prohibitions sought to avoid.

What’s so frustrating is that the D.C. hotel lease could (and should) have been transferred or cancelled long before the rapidly approaching inauguration. Any number of hoteliers could take over the property. Marriott, headquartered in the Washington metropolitan area, already operates two dozen hotels in D.C., including two Ritz Carltons and the iconic Mayflower Hotel. Or Trump could simply walk away from the lease, at which point GSA would breathe a sigh of relief.

{mosads}But Trump did nothing to resolve this blatant conflict. GSA told lawmakers that “GSA received no communications from Mr. Trump … after he won the Republican primary, when it became clear that a breach of the lease agreement was at least a possibility.” Nor did GSA hear from Trump “after he won the election in November, when it became clear that a potential breach … was imminent. In fact, … [as of Dec. 14,] GSA has received no communications … from Mr. Trump’s business organization about this issue.”

More recently, GSA’s press release last Wednesday makes clear that it was not involved in, or familiar with, the details of Trump’s conflict mitigation plan prior to the press conference. That’s extraordinary.

Ultimately, Trump misunderstands and underestimates the problems inherent in maintaining his business enterprise. Yes, voters knew of his business interests when they voted, and many may not care if he maintains the status quo. The problem is that, going forward, almost every payment to the Trump family business is suspect and raises questions whether it was intended to curry favor with the president. That’s quite a cloud under which to govern.

Ethics experts and compliance officials—in the government and the private sector—understand that employees “look up and around” for cues and models of acceptable behavior. If the president discounts the importance of avoiding conflicts, disrespects transparency, and disparages the importance of compliance with contractual and regulatory requirements, the government’s credibility is at risk. That’s an unnecessary and steep price to pay.

Steven L. Schooner is the Nash & Cibinic Professor of Government Procurement Law at the George Washington University (GW) Law School. He previously served in the U.S. Office of Management and Budget (OMB), the Department of Justice, and the Army. Daniel I. Gordon previously served as a dean and senior advisor to GW’s Government Procurement Law Program, OMB’s administrator for federal procurement policy, and acting general counsel of the U.S. Government Accountability Office.

The views of Contributors are their own and are not the views of The Hill.