Is Trump Too Underwater to Divest His Business Interests?

During the presidential campaign there were some journalists - albeit far too few - who sought to shine a spotlight on Donald Trump's potentially precarious business empire, including Trump's rumored dependency on Russian money and/or loans from the Bank of China.  Sadly, these stories never got the traction they deserved and Trump's vulnerability to Russian extortion remains an open question.  Now, with critics demanding that Trump divest his business interests to avoid conflicts of interest and violation of the U.S. Constitution's emoluments clause,  Trump is refusing to do so.  A piece in Talking Points Memo suggests that he cannot do so because he is too "underwater" to divest. If such is the case, it underscores that Trump is not the business success he claims.  Here are column highlights:

Since Donald Trump's surprise election one month ago, there's been a bubbling conversation about the mammoth conflicts of interest he will have if he is running or even owning his far flung business enterprises while serving as the head of state. I've suggested that the whole notion of 'conflicts of interest' doesn't really capture what we're dealing with here, which is really a pretty open effort to leverage the presidency to expand his family business. But a couple things came together for me today which make me think we've all missed the real issue.

Maybe he can't divest because he's too underwater to do so or more likely he's too dependent on current and expanding cash flow to divest or even turn the reins over to someone else.

Late this afternoon we got news that Trump will remain as executive producer of The Apprentice, now starring Arnold Schwarzenegger. That is, quite simply, weird. The presidency is time consuming and complicated, even for the lazier presidents. Does Trump really need to do this? Can he do it, just in terms of hours in the day? Of course, it may simply be a title that entitles him to draw a check. But does he need the check that bad?

The idea that Trump is heavily leveraged and reliant on on-going cash flow to keep his business empire from coming apart and collapsing into bankruptcy was frequently discussed during the campaign. But it's gotten pretty little attention since he was elected.

After Trump got into that scuffle with Boeing, reporters asked about his ownership of Boeing stock. Trump replied that he'd already sold that stock. So there was no problem. But there's a bit more to it than that.

According to his spokesman, Trump sold all of his stock back in June, a portfolio which his disclosures suggest was worth as much as $38 million. Trump told Matt Lauer that he sold the stock because he was confident he'd win and "would have a tremendous ... conflict of interest owning all of these different companies" while serving as President.

Now, c'mon. Donald Trump sold off all his equities more than six months before he could become president because he was concerned about conflicts of interest? Please. That doesn't pass the laugh test.

But consider this. During the primaries Donald Trump loaned his campaign roughly $50 million. Over the course of the spring, as it became increasingly likely he'd be the nominee, that loan became increasingly conspicuous. 

It was only in June that Trump finally gave in and forgave the loan; this was confirmed in the June FEC disclosure that came out in late July. Who knows why Trump sold off all his stock holdings? Maybe he just had a feeling. Maybe he thought the market was too hot. Maybe he just had a spasm of prospective ethical concern. But let's be honest. The most obvious explanation is that forgiving that debt from his campaign required him - through whatever mix of contingencies - to free up more cash, either for the campaign or personal expenses or perhaps to have a certain amount of cash on hand because of terms of other debts. It does not seem plausible at all that the timing is coincidental.

Since we don't have Trump's tax returns, there's just a huge amount we don't know about his businesses. What we do know is that Trump appears to wildly exaggerate the scale of his wealth and exhibit a stinginess that is very hard to square with a man of the kinds of means he claims. A heavily leveraged business, one that is indebted and dependent on cash flow to keep everything moving forward, can be kind of like a shark. It has to keep moving forward or it dies.

This is all necessarily speculative because Trump has kept the details of his business empire hidden from the public. But behavior, circumstantial evidence and lots of evidence of tight reliance on cash flow to service debts of various sorts suggest that Trump may not be able to divest or separate himself from his business. Why doesn't he? Why does he court all this controversy? Because he can't.

If all this is true, the peril of Trump's foreign deals is larger than we may realize. It's not just a matter of hitting the billionaire big time. It could be a matter of staying afloat at all.

Will the Emoluments Clause be Trump's Undoing?

The Founding Fathers were very suspicious of potential efforts of foreign powers to influence the new nation's leaders, especially the president. As a result, they wrote the so-called emoluments clause into the United Sates Constitution which provides in relevant part as follows:

"no Person holding any Office of Profit or Trust under [the United States] shall, without Consent of Congress, accept ... any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State."

The goal was to prevent bribery of government officials and office holders and to seek to ensure that the best interest of the nation rather than personal financial gain was the guiding motivation for decisions made by office holders.  Up until now, there has been little focus on the Emoluments Clause because (i) most office holders were not in positions to be easily bribed or influenced by financial benefits and (ii) for decades Presidents have liquidated assets and placed them in blind trusts to avoid even the appearance of out right conflict of interest.  With the election of Donald Trump - a man obsessed with enriching himself and satiating his unrestrained narcissism - suddenly the Emoluments Clause is looming large. Indeed, it could be what leads to Trump's impeachment early on during his term.  A piece in NPR looks at the likely coming scandals and controversies.  Here are highlights:

Donald Trump's extensive business dealings around the globe have focused attention on an obscure provision of the Constitution most law professors barely look at — the Emoluments Clause. Now, one of the hottest legal debates around is whether the president-elect is going to violate the Constitution if he continues doing business with companies controlled by foreign governments.

Emolument is defined by Merriam-Webster as "the returns arising from office or employment usually in the form of compensation or perquisites."

The Foreign Emoluments Clause can be found in Article I, Section 9 of the Constitution. It provides that "no Person holding any Office of Profit or Trust under [the United States] shall, without Consent of Congress, accept ... any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State."

The clause has been interpreted as an anti-bribery provision by constitutional scholars.

"The underlying concern of the clause is divided loyalties," said Erik Jensen, a law professor at Case Western Reserve University. "The founders wanted U.S. officials not to have any arrangements under which there could be questions about whether they were acting in the best interests of the United States, or in the interests of a foreign state."

Trump's companies do deal with businesses that are controlled or influenced by foreign government officials. Legal experts say the potential for constitutional violations is high.

Take the Bank of China, for example. It's a lender for one of Trump's buildings in Midtown Manhattan. If the Bank of China were to offer Trump a lower interest rate on that loan after he takes office, it might raise an Emoluments Clause issue. Some legal scholars say it could be perceived as an attempt to curry favor with the president or influence policy.

Not only have prior presidents been careful to steer clear of any perceived violations of the clause, there's never been a president like Trump, whose companies have such vast global reach. And Trump hasn't fully disclosed the full extent of his global business dealings.

"The services theory would be along the lines of, 'Well, if Donald Trump himself as president could not perform services for the foreign government, he can't have his hired help — people who work for him in that hotel — provide those services, and then he receives the payment.' That would be an end-run around the prohibition on any type of emolument," said Painter.

The issue of whether a U.S. government official is violating the Emoluments Clause for services rendered actually does comes up in real life, says Ken Gross, a government ethics lawyer in Washington, D.C. Sometimes government officials go on a foreign detail or sabbatical and want to earn compensation for teaching at a government-funded university in that foreign country. In those cases, Gross said, U.S. government officials have had to forego pay to avoid violations of the clause.

Legal standing depends on how you articulate the injury. Here's one theory of injury: Trump is enriching himself at the expense of companies that can't compete for business the way the president of the United States can. So maybe a company that's lost business because of some financial transaction between Trump Organization and a foreign government could articulate a legal claim.

Or, the perceived harm could be more nebulous. Here's another theory: Trump is opening himself up to attempts by foreign governments that want to influence U.S. policy. But who would have standing to bring a legal claim in that case? Legal experts say it's not clear.

[T]he best option for Trump is to simply liquidate his stake in his company — that is, take the company public, sell off all his shares and put the cash proceeds in a blind trust. That way, if there are any entanglements between the Trump Organization and foreign countries — he'll be cleared of any conflicts.

But nobody's holding their breath for that to happen anytime soon.

Given Trump's documented history of shady business dealings and selling others down the river financially so as to benefit himself, it is, in my opinion, a pretty safe bet that Trump will put his personal finances ahead of the interest of the nation.  This is why a greed driven narcissist should never be elected to high political office.