Tag Archives: Sheri Dillon

TRUMP TEACHES BIG LAW A LESSON

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Sometimes, a client isn’t worth the billable hours it brings to the firm. But long ago, Upton Sinclair revealed why some big law firm partners don’t accept that truism: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Except when a court appoints an attorney for a defendant who can’t afford one, lawyers choose their clients. In most firms, partners “eat-what-they-kill.” The resulting culture creates short-term incentives that cause business development efforts to focus on a single question: How much revenue will the prospective client generate?

Sheri Dillon, William Nelson, and their firm, Morgan, Lewis & Bockius, are teaching the profession an important lesson: such myopia is a mistake.

Sliding Down Trump’s Slippery Slope

In 2016, candidate Trump was pushing a flimsy “under audit” excuse for not releasing tax his returns. On March 7, 2016, Dillon and Nelson signed a letter confirming that, in fact, Trump’s tax returns for 2002 through 2008 were no longer under audit. However, the letter explained, his returns for 2009 forward “are continuations of prior, closed examinations.” Needless to say, Americans will never see those returns—at least, not because Trump releases them voluntarily. But Trump used Morgan Lewis to suit his immediate public relations needs.

In a Jan. 11, 2017 press conference, Dillon, Nelson and their firm took a more prominent role in Trump’s circus. They unveiled a plan to deal with Trump’s business conflicts of interest made a mockery of American presidential ethics. Attorneys were quick to condemn it. Subsequent events have demonstrated that the plan remains useless in preserving the integrity of the presidency.

By April, even reliable stalwart Trump defender Rep. Jason Chaffetz (R-UT) wanted to know what Trump was doing to implement his attorneys’ earlier public promises. On May 24, The New York Times reported the Trump Organization’s response: a slick brochure explaining why it was impractical to comply “fully and completely” with Sheri Dillon’s earlier assurance that Trump would donate to the US Treasury all profits from Trump hotels and similar businesses derived from foreign governments.

Recently, The Washington Post summarized just one of small slice of the ongoing scandal: “This is nothing Washington has ever seen. For the first time in presidential history, a profit-making venture [the Trump International Hotel in DC] touts the name of a U.S. president in its gold signage. And every cup of coffee served, every fundraiser scheduled, every filet mignon ordered feeds the revenue of the Trump family’s private business.”

“I Put Out a Letter”… (from somebody)

The most recent hit to the reputations of Sheri Dillon, William Nelson, and their firm came during Trump’s now infamous July 19, 2017 interview with The New York Times. Reporters asked him what would happen if special counsel Robert Mueller’s investigation included Trump and Trump family finances unrelated to Russia. Would that be would a breach of Mueller’s charge?

“I would say yeah,” Trump answered. “I would say yes. By the way, I would say, I don’t — I don’t — I mean, it’s possible there’s a condo or something, so, you know, I sell a lot of condo units, and somebody from Russia buys a condo, who knows? I don’t make money from Russia. In fact, I put out a letter saying that I don’t make — from one of the most highly respected law firms, accounting firms.”

Trump’s last remark referred to the March 8, 2017 letter that Dillon and Nelson had signed. But he couldn’t even remember whether Morgan Lewis was a firm of attorneys or accountants.

Substantively, the March 8 letter had actually raised far more questions than it answered. It even seemed to rebut Trump’s prior denials of income from Russia. Dillon and Nelson stated that “with a few exceptions”—totaling about $100 million—Trump’s tax returns for the past 10 years “do not reflect” any “income from Russian sources,” “debt owed by you or [The Trump Organization] to Russian lenders,” “equity investments by Russian persons or entities,” or “equity or debt investments by you or [The Trump Organization] in Russian entities.”

Among notable omissions were: the definition of “Russian”; whether Russian funds flowed into Trump projects more than 10 years ago; whether money from other former Soviet-bloc countries made its way into Trump projects; and what, if anything, Morgan Lewis had done to determine whether individuals or entities from Russia, Ukraine, or other former Soviet-bloc countries used shell corporations for transactions involving Trump businesses.

And Then There’s This

Investigative reporters—who aren’t Trump’s lawyers—have discovered that, since the 1990’s, tens of millions of dollars from former Soviet-bloc countries have found their way into Trump projects as investments, construction financing, and condominium purchases. No one outside Trump’s immediate orbit—except, perhaps, Vladimir Putin—knows the full extent to which that money contributed to his current fortune.

But there are clues. In September 2008, Donald Trump Jr. told a real estate conference: “In terms of high-end product influx into the US, Russians make up a pretty disproportionate cross-section of a lot of our assets; say in Dubai, and certainly with our project in SoHo and anywhere in New York. We see a lot of money pouring in from Russia. There’s indeed a lot of money coming for new-builds and resale reflecting a trend in the Russian economy and, of course, the weak dollar versus the ruble.”

Trump’s Reward

The fact that Trump couldn’t recall whether Sheri Dillon, William Nelson, and their firm practiced law or accounting is the least of their problems now. Trump has elevated the Dillon/Nelson/Morgan Lewis letter to a new status: evidence that the Russia investigation is a hoax. Depending on how special counsel Robert Mueller proceeds, those involved in preparing and signing that letter may need lawyers, too.

Other prominent law firms appear to have learned from the Morgan Lewis experience. In June 2017, Michael Isikoff reported that when Trump sought to bolster his legal team, four of the nation’s leading firms refused:

“The concerns were, ‘The guy won’t pay and he won’t listen,’ said one lawyer close to the White House who is familiar with some of the discussions between the firms and the administration, as well as deliberations within the firms themselves.”

Even if Dillon, Nelson, and Morgan Lewis have hedged the “won’t pay” problem by requiring a big retainer from their famous client, it won’t compensate for the potential impact on their professional reputations. And like all nightmare clients, Trump couldn’t care less about that.

TRUMP AND THE MORGAN LEWIS MESS — CONTINUED

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On March 7, 2016, Sheri Dillon and William Nelson put their firm, Morgan, Lewis & Bcckius, on a slippery slope with their letter purporting to justify Trump’s refusal to release his tax returns. It’s been downhill ever since. Confirming that the IRS had closed its audits through 2008, they reinforced Trump’s “under audit” excuse for not releasing any returns at all. His returns for 2009 forward, they said, “are continuations of prior, closed examinations.” On January 22, Kellyanne Conway confirmed that Trump was never going to produce those returns. Period.

As I wrote on April 12, 2017, the descent continued with the Trump/Dillon press conference on January 11. “President-elect Trump wants there to be no doubt in the minds of the American public that he is completely isolating himself from his business interests,” Dillon explained amid a mountain of paper. Some of the documents appeared to be blank and some of the folders lacked labels. Why the esteemed Fred Fielding lent his name to the cause is a mystery. Substantively, attorneys knew immediately that the Dillon/Nelson/Fielding/Morgan Lewis plan was a joke.

Farce Turns to Tragedy

To recap the failures of the plan itself, Dillon said that Trump would put his business holdings in a revocable trust—meaningless window dressing. He would continue to own and benefit from every Trump asset in his portfolio. And he wasn’t selling any of the most valuable ones involving the family business. Still, she explained, no one should worry because his sons, Eric and Donald Jr., would run the company.

Six weeks later, Eric Trump told Forbes that he would continue to update his father on the family business: “’Yeah, on the bottom line, profitability reports and stuff like that, but you know, that’s about it.’ How often will those reports be, every quarter? ‘Depending, yeah, depending.’ Could be more, could be less? ‘Yeah, probably quarterly.’ One thing is clear: ‘My father and I are very close. I talk to him a lot. We’re pretty inseparable.’”

Meanwhile, Donald Jr. has been campaigning for Montana GOP congressional candidate Greg Gianforte—who stands accused of assaulting a reporter.

Fallout

Shortly after Dillon’s press conference, H. Scott Wallace, co-chair of the Wallace Global Fund, sent a blistering termination letter to Morgan Lewis chair Jami Wintz McKeon. My previous post reviewed it in detail. Suffice it to say that Wallace was not pleased with Morgan Lewis’ willingness to help Trump sell democracy in return for billable hours.

“We believe that the legal advice given to [Trump] by your partner Sheri Dillon, in the January 11 press conference and background ‘white paper,’ is not just simplistic and ill-founded,” Wallace wrote, “but that it empowers and even encourages impeachable offenses and undetectable conflicts of interest by America’s highest official, and thus is an unprecedented invitation to corruption and an assault on our democracy.”

“It is painfully obvious that Trump is using his office for personal gain,” Wallace continued. “And Morgan Lewis is enabling and legitimizing this… Americans deserve a president of undivided loyalty. Your firm has denied them that.”

From Mar-a-Lago initiation fees to the travel ban to China trademarks, Wallace observed that “the ethical carnage is mounting.” It still is.

Meanwhile, the Kushner family was trading on Trump ties to woo Chinese investors “into wealthy luxury developments” with $500,000 “investor visas.” So it’s not just the presidency that’s for sale, it’s America itself.

Bottoming Out

On May 12, the White House released another Dillon/Nelson letter that was supposed to take the heat off Trump’s financial connections to Russia. But it became fodder for another round of jokes—just as Dillon’s January 11 press conference had.

Then on May 20, the Associated Press reported that Dillon “initially wanted [Trump] to submit an updated financial disclosure without certifying the information as true” because he was filing voluntarily this year. After discussions with the director of the Office of Government Ethics, Walter Shaub, Dillon evidently agreed that Trump would sign and file by mid-June. Let’s see if that happens.

On May 24, The New York Times reported on another January 11 promise that Dillon made and Trump isn’t keeping: to give the U.S. Treasury all profits from Trump hotels and similar businesses derived from foreign governments. In response to a House Oversight Committee request, the Trump Organization produced a slick brochure explaining why it was impractical to comply “fully and completely” with that promise.

Here is my next prediction: In corporate boardrooms and law school campuses, the damage to the Morgan Lewis brand will continue. Business leaders will act on the belief that preserving critical norms of democracy should outweigh a firm’s desire to do almost anything for a client’s billable hour. But the most discerning of general counsels will leave Morgan Lewis for an entirely different reason that has nothing to do with Trump, politics, the appropriate limits of a lawyer’s role as client advocate, or every attorney’s sworn duty to protect the U.S. Constitution. Substantively, the Trump conflicts plan and the related disasters that have followed constitute embarrassingly bad lawyering.

One more note of interest to leaders of big law firms obsessed with growth for the sake of growth: Sheri Dillon and William Nelson are recent lateral hires. Both were at Bingham McCutchen until a few months before it collapsed in 2014.

ABOUT THOSE CONFLICTS

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Does anyone remember Trump’s first post-election press conference in January. That’s when his tax lawyer, Sheri Dillon at Morgan, Lewis & Bockius, assured everyone that Don Jr. would stay out of politics while he ran his father’s business. Do they think no one notices when Don Jr. shows up four months later at a campaign rally in Montana?

(Photo from 5/5 NYT).

That’s just a sample of the obvious stuff emanating from the charade that Dillon touted as the comprehensive solution to the Trump family’s ongoing conflicts of interest.

In the latest ethical failures, the State Department promoted Mar-a-Lago and Ivanka’s new book. And the Kushner family is trading on Trump ties to woo Chinese investors “into wealthy luxury developments” with $500,000 “investor visas.” So it’s not just the presidency that’s for sale, it’s America itself.

When will it end? Whenever the public starts to care. And even then, maybe not.

TRUMP AND THE MORGAN LEWIS MESS

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On January 11, 2017, Sheri Dillon and Fred Fielding sullied themselves and imperiled the reputation of their firm, Morgan, Lewis & Bockius. They shilled for a plainly insufficient plan to deal with Donald Trump’s massive business conflicts of interest. In doing so, they traversed far beyond the principle that an attorney should advocate zealously on a client’s behalf. I predicted that Dillon, Fielding, and the firm would regret their roles in the charade. If they haven’t seen the light by now, they never will.

Lawyers Without Boundaries; Clients Without Shame

When it comes to dealing with Trump, ignorance of his tendencies affords his attorneys no excuse. Throughout his life, he has destroyed reputations whenever it helped him fulfill an agenda item of the moment. Once his allies outlive their usefulness — or whenever Trump needs a scapegoat — they become expendable. Remember the rumors about cabinet positions for Chris Christie, Rudy Giuliani, and Newt Gingrich? And how quickly Mike Flynn went from loyal patriot to dishonest traitor!

Trump’s January 11, 2017 press conference made for great theater as he claimed yet another victim. “President-elect Trump wants there to be no doubt in the minds of the American public that he is completely isolating himself from his business interests,” Dillon explained amid a mountain of paper. Some of the documents appeared to be blank and some of the folders lacked labels. Substantively, attorneys knew immediately that the Dillon/Fielding/Morgan Lewis plan was a joke. Every day, it becomes less humorous.

Trump Still Owns Everything

Dillon assured the public that Trump would put his business holdings in a revocable trust — meaningless window dressing. She didn’t mention he still owned and benefited from every Trump asset in his portfolio. And he wasn’t selling any of his most valuable ones involving the family business. Still, she explained, no one should worry because his sons, Eric and Don Jr., would run the company. Trump even joked that he’d return to management in eight years, hoping that they’d done a good job and saying that he’d fire them if they didn’t.

Har-dee-har-har-har.

Six weeks later, Eric Trump told Forbes that he would continue to update his father on the family business: “’Yeah, on the bottom line, profitability reports and stuff like that, but you know, that’s about it.’ How often will those reports be, every quarter? ‘Depending, yeah, depending.’ Could be more, could be less? ‘Yeah, probably quarterly.’ One thing is clear: ‘My father and I are very close. I talk to him a lot. We’re pretty inseparable.’”

It Gets Worse

On April 4, ProPublica reported — and Trump Organization attorney Alan Garten confirmed — that a February 10 version of the revocable trust agreement states: “The Trustees shall distribute net income or principal to Donald J. Trump at his request, as the Trustees deem necessary for his maintenance, support or uninsured medical expenses, or as the Trustees otherwise deem appropriate.”

The Trustees are Don Jr. and Allen Weisselberg, who started his career working for Donald Trump’s father Fred in the 1970s. In other words, Trump can watch his wealth grow and get at his money whenever he wants.

Fallout

At the time of the press conference, self-proclaimed law firm public relations experts urged that mere proximity to Trump would make Morgan Lewis a client magnet. At least one prominent client went the other way. The co-chair of the Wallace Global Fund expressed outrage over the firm’s willingness to aid and abet Trump’s undermining of democracy.

On March 28, H. Scott Wallace sent a blistering termination letter to Morgan Lewis chair Jami Wintz McKeon: “We believe that the legal advice given to [Trump] by your partner Sheri Dillon, in the January 11 press conference and background ‘white paper,’ is not just simplistic and ill-founded, but that it empowers and even encourages impeachable offenses and undetectable conflicts of interest by America’s highest official, and thus is an unprecedented invitation to corruption and an assault on our democracy.”

Wallace, a Villanova Law grad, walked McKeon through the patent defects in the Dillon/Fielding/Morgan Lewis conflicts plan. In great detail, he covered issues that I outlined in my three-part series on the plan’s inadequacies. And he added a few zingers:

  • “Ms. Dillon has legitimized a complete non-solution to Trump’s manifold conflicts of interest….”
  • “She adds a few window-dressing safeguards….”
  • “She absolutely denied the existence of any Emoluments Clause problems….”
  • “The result is an illusion of protection against the President using his office for personal gain. Trump’s entire life has been devoted to personal gain, not a moment to public service.”

Presidential corruption matters, and the Dillon/Fielding/Morgan Lewis plan facilitates it. As Wallace observed, “the ethical carnage is mounting”:

  • Just days after Trump reaffirmed the “one China” policy, it granted 38 new Trump trademarks.
  • Trump’s newly hired director of diplomatic sales at his DC hotel has enjoyed tremendous success in foreign bookings, including Azerbaijan, Bahrain, and Kuwait.
  • Trump’s bans on Muslin-majority nations excluded countries where Trump has business interests.
  • China’s government-owned bank is the single largest tenant in Trump Tower and the lease will come up for renewal during Trump’s presidency.
  • Since Trump’s election, initiation fees at Mar-a-Lago have doubled to $200,000.

Wallace could have added that Trump has yet to make good on Dillon’s promise to donate all Trump hotel profits from foreign governments to the U.S. Treasury. And his organization’s post-election success in registering Trump trademarks around the world has been phenomenal.

“It is painfully obvious that Trump is using his office for personal gain,” Wallace continued. “And Morgan Lewis is enabling and legitimizing this… Americans deserve a president of undivided loyalty. Your firm has denied them that.”

What’s Next? Nothing Good for Morgan Lewis

Here is my next prediction: more clients will fire Morgan Lewis. Corporate boards and CEOs will shun a firm willing to tolerate Dillon’s unprofessional performance on January 11. They’ll act on their belief that preserving critical norms of democracy should outweigh a firm’s desire to do almost anything for a client’s billable hour.

But the most discerning of general counsels will leave Morgan Lewis for an entirely different reason that has nothing to do with Trump, politics, the appropriate limits of a lawyer’s role as client advocate, or every attorney’s sworn duty to protect the U.S. Constitution. Substantively, the Trump conflicts plan is embarrassingly bad lawyering.

TRUMP CONFLICTS PLAN – Part 3

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It seems like a long time ago. On January 11, Donald Trump’s lawyers revealed a plan to resolve the clash between his business interests and his presidential duties. Whether the result of impulse, intention, or incompetence, his subsequent chaos has accomplished one objective: He diverted attention from his plan’s assault on one of American democracy’s central pillars: a presidency free of institutionalized corruption.

This installment addresses his conflict of interest problems. They are related to — but distinct from — his constitutional Emoluments Clause violations addressed in Part 2 of this series. Part 1 described the unfortunate role that Sheri Dillon and her law firm, Morgan, Lewis & Bockius, played in shilling for Trump’s plan.

A Lawyerly Approach

Dillon, a tax lawyer, focused on a technical legal question: Does the federal conflict of interest statute applicable to all other federal employees apply to the president?

By its terms, the answer is no. But just because something is legal doesn’t make it right. And when it comes to preserving the integrity of the presidency in ways that protect it from corruption and impropriety, legal permissibility is just the beginning of the relevant inquiry. But not for Trump.

Trump’s attitude in making the deal that resulted in the Morgan Lewis Plan was that of a negotiator who held all the cards. Whatever he offered, his opposing parties — the office of the president and the country — could not refuse. He admitted it:

“[A]s you know, I have a no-conflict situation because I’m president….it’s a nice thing to have… I have something that others don’t have…”

Bigger Stakes

To counter Trump’s continuing conflation of the issues, Walter Shaub, director of the Office of Government Ethics, set him straight:

“Now, some have said that the President can’t have a conflict of interest, but that is quite obviously not true. I think the most charitable way to understand such statements is that they are referring to a particular conflict of interest law that doesn’t apply to the President…”

As Shaub explained, “Common sense dictates that a President can, of course, have very real conflicts of interest. A conflict of interest is anything that creates an incentive to put your own interests before the interests of the people you serve.”

Who Represents America? 

Shaub then cited Chief Justice Earl Warren’s opinion in a 1961 U.S. Supreme Court decision. The chief justice observed that a conflict of interest is “an evil which endangers the very fabric of a democratic society, for a democracy is effective only if the people have faith in those who govern, and that faith is bound to be shattered when high officials and their appointees engage in activities which arouse suspicions of corruption.”

Shaub outlined the implications for Morgan Lewis’s assignment:

“That same Court referred to what it called a ‘moral principle’ underlying concerns about conflicts of interest. The Court cited…’the Biblical admonition that no man may serve two masters, a maxim which is especially pertinent if one of the masters happens to be economic self-interest.’ 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.”

“For this reason,” Shaub emphasized, “it’s been the consistent policy of the executive branch that the president should act as though the financial conflict of interest law applied.”

The question isn’t mere technical compliance with a statute; it’s preserving a central norm that underlies the moral authority of the nation’s highest office.

What Would Scalia Say

Even Trump’s model U.S. Supreme Court Justice, Antonin Scalia, lands on Shaub’s side of the argument. In a 1974 memorandum, then-Justice Department attorney Scalia concluded that the text of a particular conflict of interest law didn’t apply to the president. Remarkably, Dillon cited that memorandum to support her position. She didn’t discuss Scalia’s final recommendation in that memo:

“Notwithstanding the conclusion that neither the Executive Order nor the regulations pursuant to it legally bind the President or Vice-President, it would be undesirable as a matter of policy for the President or Vice-President to engage in conduct proscribed by [them]…. Failure to observe these standards will furnish a simple basis for damaging criticism, whether or not they technically apply,”

Shaub emphasized Scalia’s point: Those at the top of government set the example for everyone else — at least they should.

“The sheer obviousness of Justice Scalia’s words,” Shaub continued, “becomes apparent if you just ask yourself one question: Should a President hold himself to a lower standard than his own appointees?”

Missing the Big Picture

The Morgan Lewis Plan ignores that big picture. In waiving the attorney-client privilege by divulging Trump’s directives for developing a plan, Dillon opened the door to several unanswered questions:

— What limits did put he on removing himself from his business?

— Did his attorneys recommend additional steps?

— Did Trump reject them?

Here’s a directive that Trump did not give:

“I want to preserve the integrity of the presidency. There can be no basis for any claim that anyone — foreign or domestic — is trying to curry favor through my family businesses. Even the appearance of a bribe, corruption, self dealing, or other impropriety is unacceptable. Tell me what is necessary, and I will do it. The presidency demands no less.”

That command would not have produced the plan that Dillon tried to sell Americans on January 11:

— Rather than divest Trump from his business, it allows him to reap its benefits while in office.

— Rather than establish an independent trustee to manage his business assets, it places control in the hands of his two adult sons and a current Trump executive.

— Rather than maintain even the pretense of a blind trust, it permits Trump to see periodic reports of how his business is doing.

The plan’s failures are equally evident from its illusory window dressing: a “trust” that is far from blind; a promise that the Trump Organization won’t do any new foreign deals; an “Ethics Advisor” to sign off on new domestic deals (backsliding from Trump’s December 12 tweet, “No new deals will be done during my term(s) in office”); an unenforceable assurance that Trump will learn about new deals “only through the media, as the American people would.” (The last promise is another violation of a blind trust principle, namely, that he should know nothing whatsoever about his personal financial affairs while in office.)

And then there is the ultimate window dressing in human form — Fred Fielding, who served as associate and deputy counsel for President Richard Nixon from 1970 to January 1, 1974. He was there for Watergate. He was there for the “Saturday Night Massacre” when Nixon fired his attorney general and deputy AG before finding someone willing fire independent counsel Archibald Cox, who had asked Nixon to produce his White House tapes.

“Mr. Fielding has been extensively involved with and approved this plan,” Dillon declared at the press conference.

Fielding didn’t say a word.

It’s hard to believe that it was only three weeks ago. I wonder what Fred Fielding thought on January 30, when Trump fired acting Attorney General Sally Yates. In eroding the integrity and dignity of the presidency, Trump has already made Richard Nixon look like an amateur — and a saint.

TRUMP’S CONFLICTS PLAN – Part 2

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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.

Emoluments

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.”

Self-Refuting Arguments

“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.

TRUMP’S CONFLICTS PLAN – Part 1

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Someday, Sheri Dillon and her colleagues at Morgan, Lewis & Bockius may regret her performance at Donald Trump’s January 11 press conference. Public relations people saw the event as “beautiful” and “the best thing ever.” It wasn’t. For the legal profession, it was ugly.

Everyone Gets a Lawyer

Dillon represents a controversial client. So did Clarence Darrow. That’s part of any attorney’s job description. Like all citizens, Donald Trump is entitled legal counsel. In fact, the country’s best hope is that he heeds sound advice from lawyers who aren’t afraid to tell Trump when he’s wrong.

Sheri Dillon is Donald Trump’s tax lawyer. Again, that’s fine. His complex financial affairs require capable tax counsel. But on January 11, Dillon allowed herself and her great law firm to become Trump’s prime public defender of a patently insufficient plan to address his business conflicts of interest and wholly separate Emoluments clause problem under the U.S. Constitution.

Future installments in this series will detail the flaws in the Dillon/Morgan Lewis plan. Based on Dillon’s remarks and an accompanying Morgan Lewis memo, here’s a bottom-line preview from Office of Governmental Ethics Director Walter Shaub:

“[T]he plan does not comport with the tradition of our Presidents over the past 40 years.”

The Lawyer’s Role

Like any client, Trump set the parameters of Sheri Dillon’s engagement and the limits of her authority. Faced with those constraints, she did what lawyers do: Dillon created a plan and then defended it. On January 11, she made a closing argument, just as an attorney would to a judge, a jury, or the IRS.

But this time her audience was the American people. And she had no adversary arguing the other side of the case. In fact, her opposition was a central norm of democracy, namely, an Office of the President free of even the appearance of institutionalized corruption. Until Office of Government Ethics Director Walter Shaub responded with his accurate observations of the plan’s wholesale failures, no one was representing that norm.

This is the first in a series that examines the myriad problems with the Dillon/Morgan Lewis plan and Dillon’s effort to defend it. Along the way, Sheri Dillon morphed into yet another public relations spokesperson for Trump’s talking points.

A Summary of the Plan’s Major Failures

The press conference came complete with theatrical props — piles of papers on a large table near the podium. But Dillon did not provide the pubic with any documents implementing the Dillon/Morgan Lewis plan. Without the ability to scrutinize the various trust instruments and related materials, it’s impossible to verify any of the claims she made about her plan’s ability to do any of the things she promised. But even based on her description, a brief summary of the fatal shortcomings include:

— Trump is not divesting. He will retain all benefits that flow from owning assets that create his massive conflicts of interest. Those conflicts compromise the integrity of the Office of the President. While in that Office, Trump and his family will benefit from any increase in the value of those assets.

— Trump’s children remain active managers of his assets.

— Trump plans to resume management of those assets after his presidency.

— Trump’s agreement to give away hotel profits from foreign governments does not solve his wholly separate Emoluments clause problem. And it’s a red herring that doesn’t even attempt to address the issues arising from his numerous other foreign entanglements — bank loans on Trump structures, payments from building tenants, royalties, and the like.

Dillon was more precise, but Trump conflates his conflicts and Emoluments clause problems. He lumps everything together and talks about “conflicts” that he “cannot have” because he’s president. The truth is that the scope and magnitude of both problems remain unknown because Trump has not revealed the detailed financial structure behind his empire. That includes loans, investors, and other information that even his personal tax returns would not disclose.

About Those Tax Returns

Trump hasn’t released those returns, and he probably never will. At his press conference, Trump reiterated, “I’m not releasing the tax returns because as you know, they’re under audit….”

As he spoke, Sheri Dillon stood nearby. She had co-signed a March 2016 letter, stating that the IRS audits had been completed through 2008. He hasn’t released those earlier returns, either. Her letter explaining why probably presages the argument that Trump will make to withhold all of them forever:

“Your returns for these years report items that are attributable to continuing transactions or activities that were also reported on returns for 2008 and earlier. In this sense, the pending examinations are continuations of prior, closed examinations.”

Hers was a lawyer’s argument. And not a particularly good one for a client who was seeking — and now has won — the Presidency of the United States.

Dillon As Trump’s Newest Minion

Dillon’s completed her transformation from legal adviser to just another Trump spokesperson with her concluding lines:

“We believe this structure and these steps will serve to accomplish the president-elect’s desire to be isolated from his business interests and give the American people confidence that his sole business and interest is in making America great again, bringing back jobs to this country, securing our borders and rebuilding our infrastructure.”

The final words in that sentence — “bringing back jobs to the country, securing our borders and rebuilding our infrastructure” don’t appear in the accompanying “White Paper” on Morgan Lewis letterhead. They’re certainly extraneous to any reasoned professional legal opinion. So are Dillon’s concluding sentences:

“The American people were well aware of President-elect Trump’s business empire and financial interests when they voted. Many people voted for him precisely because of his business success.

“President-elect Trump wants to bring this success to all Americans.”

Donald Trump, Kellyanne Conway (who has a JD), or some other Team Trump person probably wrote that ending. But Dillon spoke it, so whatever fees Trump paid Morgan, Lewis & Bockius for this assignment, he got his money’s worth.

Specifically, Dillon confirmed publicly the soundness of a fatally flawed plan. When things go badly for Trump under that plan, he’ll have lawyers to blame. For him, it’s a win-win. For Dillon and the reputation of a great law firm, not so much.

By The Way…

OGE Director Walter Shaub’s reward for his uncommon courage in speaking the truth about the Dillon/Morgan Lewis plan was an immediate summons to the principal’s office of Rep. Jason Chaffetz (R-UT), chairman of the House Committee on Oversight and Government Reform. After the infamous Access Hollywood tape surfaced, Chaffetz declared that he would not vote for Trump. Three weeks later, he reversed himself and reboarded the Trump train, promising years of investigations into Hillary Clinton if she won.

In light of Dillon’s performance at Trump’s press conference, the most ironic sentence in Chaffetz’s letter to Shaub was this: “Your agency’s mission is to provide clear ethics guidance, not engage in public relations.”

Then came the most threatening passage: “OGE’s statutory authorization lapsed at the end of fiscal year 2007 and the Committee has jurisdiction in the House of Representatives for reauthorizing the office.”

Just when you think Trump’s conflict of interest and Emoluments problems can’t descend to some frighteningly new level, they do.