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Lining Trump's Pockets

Tuesday, March 21, 2017

By Ron Fein and Brianne Gorod

All kinds of accusations have been leveled against President Donald Trump, but few people have questioned his ability to find creative ways to pay himself with other people's money. It's how he managed to extract millions of dollars from his casino in Atlantic City even as it slid into bankruptcy, leaving investors and creditors on the hook. It's how he leveraged the Trump Foundation to use other people's money to make charitable contributions for expenses that went to pay his businesses. And he's brought this approach to the White House.

But there's one big problem: When the money he receives comes from the federal government or state governments and their instrumentalities, it violates the Constitution.

A little-known provision of the U.S. Constitution, known as the Domestic Emoluments Clause or the Presidential Compensation Clause, provides: "The President shall, at stated Times, receive for his Services, a Compensation, which shall neither be increased nor diminished during the Period for which he shall have been elected, and he shall not receive within that Period any other Emolument from the United States, or any of them." (This is a separate provision from the Foreign Emoluments Clause, which applies to presents and emoluments from foreign governments and their instrumentalities.)

Congress has complied with its part of the Domestic Emoluments Clause: It set a fixed salary of $400,000 for the president. Trump has said he won't keep that salary, but either way, his failure to give up ownership of his businesses means that he may end up receiving well more than $400,000 from the federal treasury before he leaves office. And that's exactly what the Domestic Emoluments Clause prohibits.

It's not difficult to imagine the various ways in which the federal government may end up paying Trump's businesses. In fact, it's already happening. The Department of Defense is looking into renting a floor of Trump Tower, which could cost $1.5 million per year. On top of that, the Secret Service is apparently also considering renting space there. Similarly, when Trump visits Florida's Mar-A-Lago resort, whether on vacation or on official travel (such as his trip with the prime minister of Japan), he is accompanied by other federal employees: Secret Service officers, White House aides, a military attaché and so on. Recently, he had dinner there with multiple members of his Cabinet and the White House counsel. These other federal employees may not stay in the presidential suite, but every expense they incur at Mar-A-Lago, from a bottle of Trump Ice to rental of space for a secure command center, will ultimately put money in Trump's pocket.

These certainly seem like "emoluments" from the United States. The Founders may not have envisioned secure command centers at Trump Tower, but corruption is an old song. And they would have recognized, and deplored, the grift of federal dollars going toward businesses owned by the head of the federal government.

As if that were not enough, Trump also has the potential to line his own pockets through what we might call regulatory emoluments.

The power of the modern presidency means that Trump can direct policy changes that will benefit his business interests. Of course, all presidents direct policy – that's their job. But previous presidents, some of whom were quite wealthy before taking office, divested real estate and other investments, and re-invested their funds either into widely-held, "conflict-free" assets (such as Treasury bonds), or appointed an independent trustee to manage their money in a "blind trust," in which a trustee might buy specific stocks or other investments, but only the trustee (and not the president) would know what investments the trust holds.

Trump's trust is not like that. He knows exactly what assets the trust holds. Indeed, for many of the assets, the name "Trump" is plastered over the front door. That means he has the unprecedented ability to use the federal government's regulatory power to benefit his businesses.

Consider, for example, Trump's recent executive order directing the Environmental Protection Agency and the Army Corps of Engineers to re-open and repeal an environmental protection for wetlands, known as the "waters of the United States" rule. The changes that Trump wants would not only hurt the environment and the American people, they would also help his bottom-line by bringing enormous financial benefits to real estate developers and golf course owners.

Is this type of regulatory wealth extraction an "emolument" from the United States? Again, the Founders didn't envision the specific scenario of executive action on wetlands affecting golf courses owned by the president. But they used a broad term – "emolument" – precisely to ensure the clause would address all manner of different kinds of self-dealing, including those they might not have been able to predict.

At the time of the Founding, the term "emolument,"derived from the Latin emolumentum(profit), was understood broadly. Samuel Johnson's influential 1755 dictionary defined "emolument" as "Profit; advantage." Other Founding-era dictionaries defined it as "opportunity, overplus, unlawful advantage," or "favorable circumstances. Overplus; something more than the mere lawful gain," as well as "to grow rich." Trump's use of the power of the federal government to change rules in a way that would benefit his own businesses would surely seem to meet these definitions.

Trump can't say he wasn't warned. During the 10 weeks between the election and the inauguration, leading experts in government ethics and constitutional law advised him to divest his businesses and re-invest the money in conflict-free assets or a blind trust.

He chose to reject that advice, and put the country into the uncomfortable position of having to ask a critical question about nearly every policy decision this president makes: is he trying to advance the national interest, or his own personal financial interests? Now Trump should be prepared to face the costs of that decision in the halls of Congress, in federal and state courts, and in the court of public opinion.

Trump may not be interested in the Constitution, but the Constitution is interested in him.