On January 22, 2017, Kellyanne Conway confirmed what everyone should have known all along: Donald Trump is never going to release his tax returns. Lawyers who rose to defend Trump’s silly “under audit” excuse from a man seeking the nation’s highest office might want to think twice before embracing his plan to deal with his business conflicts of interest.
“Fool me once….”
The first installment in this series dealt with the unfortunate role of Sheri Dillon and her firm, Morgan Lewis & Bockius, in shilling for Trump. This and future posts detail some of the Morgan Lewis Plan’s deficiencies.
The clash between Donald Trump’s businesses and the integrity of the presidency creates three separate issues: violation of the U.S. Constitution’s emoluments clause prohibiting federal officials from accepting benefits from foreign countries, conflicts of interest generally, and federal statutes relating to those conflicts.
Trump conflates and confuses these three issues with a single imprecise and inaccurate phrase: “The President can’t have conflicts.” Let’s keep the issues straight, starting with the emoluments clause.
In the final minutes of her speech, Dillon discussed Trump’s constitutional problem. Her framing of the issue adhered to an accompanying Morgan Lewis “White Paper” that was as masterful as it was disingenuous:
“Some commentators have claimed that the Constitution prevents the President-elect from owning interests in businesses that serve foreign customers. In particular, they object to the Trump International Hotel in Washington, D.C.”
In that nifty sleight-of-hand, Dillon elided past Trump’s even bigger foreign-state problems: loans from banks to the Trump Organization and its projects, tenants paying rent for office space in its buildings, investors, and unknown other foreign-state connections to his assets. Never mind Trump’s tax returns. Ascertaining the financial structure of Trump’s empire goes far beyond whatever they might show. Just ask any real estate developer.
Dissecting the Plan
The Morgan Lewis White Paper’s emoluments defense starts with this premise: “The scope of any constitutional provision is determined by the original public meaning of the Constitution’s text.”
Yes and no. The late Justice Antonin Scalia championed such “originalism.” The White Paper’s sole supporting citation for its premise is a book that Scalia co-authored. But as recently as 2005, even Justice Scalia acknowledged that originalism was a minority view:
“I am one of a small number of judges, small number of anybody — judges, professors, lawyers — who are known as originalists. Our manner of interpreting the Constitution is to begin with the text, and to give that text the meaning that it bore when it was adopted by the people.”
More importantly, Justice Scalia noted that even for originalists, the text is only the beginning of constitutional interpretation, not the endpoint. In a 1988 lecture, he offered this example:
“What if some state should enact a new law providing public lashing, or branding of the right hand, as punishment for certain criminal offenses? Even if it could be demonstrated unequivocally that these were not cruel and unusual measures in 1791, and even though no prior Supreme Court decision has specifically disapproved them, I doubt whether any federal judge — even among the many who consider themselves originalists — would sustain them against an eighth amendment challenge.”
Moving Beyond the Words
Justice Scalia understood that a slavish adherence to the Constitution’s language can produce “medicine that seems too strong to swallow.” (Scalia also had things to say about presidential conflicts of interest generally, but we’ll get to those next time.)
Morgan Lewis’s argument qualifies as originalist medicine “too strong to swallow.” Among the founding fathers’ foremost concerns was foreign influence over America’s political leaders. In Federalist No. 68, Alexander Hamilton wrote about the necessity of protecting elections from foreign interference. In Federalist No. 22, he wrote, “One of the weak sides of republics, among their numerous advantages, is that they afford too easy an inlet to foreign corruption.”
Discussing the emoluments clause in 1986, then-Assistant Attorney General Samuel A. Alito, Jr. wrote, “[T]he answer to [an] Emoluments clause question must depend [on] whether the [arrangement] would raise the kind of concern (viz., the potential for ‘corruption and foreign influence’) that motivated the Framers in enacting the constitutional prohibition.”
None of those principles made the cut in the Morgan Lewis presentation. But consistent with Sheri Dillon’s expertise as a tax lawyer, technical legal arguments did.
Words Not Found in the Constitution
“So long as foreign governments pay fair-market-value prices,” the Morgan Lewis White Paper continues, “their business is not a ‘present’ because they are receiving fair value as a part of the exchange.” It argues that any transaction at “fair-market-value” between Trump businesses and foreign states is not a violation of the emoluments clause.
That’s another nifty and unpersuasive sleight-of-hand. For good reason, the words “fair-market-value” are nowhere in the Constitution. The concept does not satisfy the Constitution’s core concern. Any foreign state patronizing a Trump-owned or licensed business knows that it confers a financial benefit on Trump. So does Trump.
As Sheri Dillon put it, “President Trump can’t unknow he owns Trump Tower….” And as her client told The New York Times on November 22: “The brand is certainly a hotter brand than it was before.”
“The Constitution does not require President-elect Trump to do anything here,” Dillon asserted. Nevertheless, he’ll “donate all profits from foreign government payments made to his hotel to the United States Treasury.” The Morgan Lewis White Paper broadens his largesse to include “his hotels and similar businesses,” whatever that means.
In one sense, that concession is a tacit acknowledgement of his larger problem. How about other Trump enterprises? Foreign loans to his projects? Royalties and licensing fees? And how will the Trump Organization calculate profits from foreign governments’ individual stays at his hotels?
On January 18, 2017, The Wall Street Journal reported Trump spokeswoman Hope Hicks’ response to some of those questions: Accounting and financial personnel “will perform the profit calculation and would track payments from foreign governments” which will be done “through its accounting systems.”
Pressed for clarification, Hicks answered, “Profit is calculated as revenues minus expenses = profit.”
Winners and Losers
The January 23 complaint against Trump details just some of his known business interests that collide with his presidential duties. It’s a safe bet that Trump’s attorneys will do everything they can to avoid testing the substantive arguments that Sheri Dillon and the Morgan Lewis White Paper presented on January 11.
Instead, they will try to prevent any court from reaching the merits of their originalist argument. They’ll probably focus on whether the plaintiff in this and other cases has suffered a sufficient injury to sue (“standing”). They might assert that only Congress can resolve the issue because it presents “political questions.” Perhaps they’ll urge that the only remedy for a presidential breach of the emoluments clause is impeachment.
One great danger is that if any of those preliminary defenses prevail, Trump will overstate his victory as proof that he was right all along: “The president can’t have conflicts.”
If a court gets to the merits of the claims, the Morgan Lewis legal arguments will get a severe test that they aren’t likely to pass. If Trump’s lawyers lose, their client still wins: Trump will have lawyers to blame.
However it turns out, the country is the loser. It already is.