Corporate Accountability

The obscure constitutional provision that could be trouble for Trump

By David Savage

President-elect Donald Trump is set to take an oath next month to “preserve, protect and defend the Constitution of the United States.”

But a previously obscure provision in the nation’s founding document has now become the focus of special attention because of Trump’s worldwide real estate holdings and business ventures.

Known as the “emoluments clause,” the provision says “no person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office or Title, of any kind whatever, from any King, Prince or foreign state.”

The word emolument was used often in the 18th century to refer to the compensation or profit that would go with holding an office. Beyond that, the precise meaning of the ban remains in question because, unlike other parts of the Constitution, it has not been interpreted in the courts.

But as long as Trump and his family retain ownership in business enterprises that involve foreign governments, state-owned entities or foreign government officials, the Constitution’s ban on “emoluments” is likely to hang over his presidency.

Here’s a closer look at the provision and what it means.

Why was this provision included in the Constitution?

Because the framers feared foreign influence, in particular wealthy Europeans such as kings and princes, trying to exert influence or even control over the new nation. When Alexander Hamilton explained why it was decided the president would be elected through specially chosen state “electors” who held no office, he pointed to “the desire in foreign powers to gain an improper ascendant in our councils” by interfering in the presidential race. Officeholders could be “tampered with” or “prostituted,” Hamilton explained in  No. 68 of the Federalist Papers, but the newly named electors would be free of the “corrupting” influence from abroad.

And the framers knew of the potentially corrupting influence of foreign gifts. When Benjamin Franklin, the first U.S. ambassador to France, decided to return home in 1784, King Louis XVI gave the beloved American a gold case with a portrait of the French monarch, encircled by 408 diamonds. When John Jay was sent to Spain for negotiations, the king presented him with a horse. The new Constitution let ambassadors keep such “presents,” but only if they were disclosed and Congress gave its consent.

How does this prohibition apply, if at all, to Trump’s business holdings?

Of course outright gifts would be banned. But many legal experts agree that it would also violate the Constitution if, for instance, the state-owned Bank of China decided to forgive its multimillion-dollar loan against a Trump office tower in New York. Such a sweetheart deal would certainly look as though the president had accepted a “present” from a foreign state.

But lawyers disagree over whether other business transactions could be considered violations. If, for example, foreign diplomats visiting Washington now decide to stay at the new Trump International Hotel on Pennsylvania Avenue, is that a routine business decision or a foreign gift to the new president? Indeed, there have already been reports of numerous groups, including some from abroad, opting to hold events or stay at the Old Post Office building.

Some ethics experts and lawyers say these transactions amount to violations if it appears the foreign officials are staying at Trump’s hotel to curry favor with the new president. But many other lawyers argue that ordinary business transactions of this sort are not gifts or presents. If a visiting diplomat pays what the hotel charges for other guests, that is a merely payment for a service, not a “present” to the company’s owner, they say.

But there is a considerable gray area. What if a diplomat decides to book an entire floor or the entire Trump Hotel for a party? What if a state-owned bank shaves a couple of points off the interest rate of a loan to a Trump entity, or agrees to let a monthly payment slip? What if a Persian Gulf prince agreed to invest in a Trump venture and paid an exorbitant price for what some might view as a risky venture.

Brianne Gorod, a lawyer with the Constitutional Accountability Center, a progressive group, said the ban should be interpreted broadly to cover business deals. “The framers had a deep and abiding concern for corruption, and the word ‘emolument’ had a broad meaning to encompass profit of any kind,” she said. “If Trump is trading on his name, there is no exception for ‘fair market’ deals. I think there is a strong argument he is ineligible to serve as president if he is receiving these emoluments.”

Erik Jensen, a law professor at Case Western Reserve University in Cleveland, said he believed earlier this year that the “emoluments” ban would cause a problem for Hillary Clinton because foreign officials had given money to the Clinton Foundation. He agreed that it is hard to interpret the clause because the “founders weren’t thinking of the sorts of business structures and transactions we have now. My bottom line is the clause’s underlying concern is to prevent government officials from having divided loyalties, so it should be interpreted broadly. If there’s any appearance of impropriety, a reasonable official should stay far away from a suspect arrangement.”

Isn’t there a question about whether the clause even applies to the president?

It’s a subject of some debate, though generally presidents have acted as though it does.

Some scholars say the drafters of the Constitution intended the ban to apply only to appointed officers of the United States, not elected officials. When Hamilton listed the officers of the new government, he did not include the president or members of Congress. And when President Washington was given gifts by visiting diplomats, he kept them and did not ask for consent from Congress.

Washington lawyer Jan W. Baran, who advises Republicans on ethics laws, said he doubts the foreign emoluments clause applies to the president. Federal conflict-of-interest laws specifically exempt the president and vice president, he said.

“President-elect Trump has no legal obligation to do anything with his financial holdings,” Baran said. But he will probably “step away from the management of his companies” because of a “desire to retain public confidence in his judgment and performance as president.”  That will satisfy most voters, but probably won’t stop the criticism, he said. “Trump is a very rich and very successful deal-maker. All of that was known before the election and may in fact be one of the primary reasons he was elected. The voters will not punish him for being and staying rich,” Baran said.

But since at least the 19th century, U.S. presidents, including President Obama, have acted as though the ban applies to them.

Does the “emoluments” ban apply only to foreign money?

No. A separate provision of the Constitution forbids the president from taking extra compensation from the United States government or any state. It says he shall “receive for his Services, a Compensation, which shall neither be increased nor diminished” while he is in office, and he “shall not receive within that period any other Emolument from the United States, or any of them.” 

This means a president may not receive a bonus from a state such as Texas for doing a good job, or more significantly, receive more money from the federal government. This provision could be invoked by critics of the new president if, for example, the Trump Organization sells products or services to federal agencies or if U.S. taxpayers are charged for renting space at Trump properties or paying the cost of operating his airplane.

During the campaign, Trump frequently favored his own properties for events and meetings, charging his campaign for the use of them.

How has the provision been interpreted in the past?

Courts have not ruled on claims that the president has violated the ban on emoluments, but the Justice Department’s Office of Legal Counsel has issued internal opinions interpreting its meaning and stressing that it applies only to foreign governments, not to other foreign entities. In 1994, the OLC advised U.S. scientists on leave in Canada that they may accept payment to teach at a university, but only if the school was independent of the government. And in 2009, the OLC advised Obama that he was bound by the ban on foreign emoluments because “the President surely ‘holds an Office of Profit or Trust,’ but its lawyers said he nonetheless could accept the Nobel Prize, valued at $1.4 million, because the Nobel Committee is a private foundation, not a foreign state.

So who would decide if President Trump is violating the emoluments clause?

The answer may depend on the political system, not the legal system. It is not clear whether the emolument ban may be enforced privately through the courts. Litigants are required to have standing, which means they are suing over a personal injury of some sort. Gorod and other lawyers say that a business owner who suffers losses because of favorable treatment for Trump’s business may have a claim. “This is uncharted territory, but if I were a competitor, I would bring that suit,” she said.

But the Supreme Court has ruled that taxpayers who are upset about a government policy or a U.S. official do not have standing to sue in court.

The only certain remedy for ousting a president who violates the Constitution is impeachment by the majority of the House of Representatives and a conviction by two-thirds of the Senate. A congressional committee would have grounds to investigate if there were evidence of corrupt deals involving Trump-related businesses. And in a future Congress, such an investigation might gain steam if Democrats win a majority in the Senate or House.     

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