BY Frank Vogl
A version of this article was first published by The Globalist on December 21, 2016
Will the tangled finances of vastly wealthy leaders of the US administration become a possible cause for corruption concerns?
When government officials have conflicts of interest then suspicions of corruption frequently arise. There can be a perception that the individual concerned may be abusing the public trust and serving himself, rather than the citizens.
While there has been media attention on the potential conflicts of interest facing president-elect Donald Trump, others in his entourage may emerge with their own complicated situations and staggering sums of cash.
Finances of top officials
The finances of four of the top prospective officials are bound to attract a good deal of scrutiny as each of them is worth hundreds of millions of dollars.
Rex Tillerson, head of ExxonMobil and future Secretary of State, Gary Cohn, president of GoldmanSachs and the next chief White House economic adviser, Wilbur Ross the Wall Street tycoon and prospective Secretary of Commerce and future Treasury Secretary Steven Minuchen, a former GoldmanSachs partner and currently the top executive at the New York hedge fund, Dune Capital Management.
Cohn is appointed directly by the president but the three others will have to be confirmed in the new posts by the U.S. Senate. That requires provision of highly detailed financial accounts, including tax returns.
Trump’s conflict of interest
Donald Trump is exempt of such rigorous Congressional investigation. He must, however, divest himself of ownership ties to the lease of the brand new Trump Hotel in Washington as this is a contract for a U.S. government owned building and by law no government official can be party to such a deal.
He also will have to be exceptionally careful about any ties, direct or indirect, that his businesses have with foreign partners of any kind as this may violate the so-called “emoluments” clause of the U.S. Constitution. Just giving his businesses to his children is unlikely to suffice.
For cabinet secretaries, the road is somewhat clearer. I remember — in the Nixon Administration in the early 1970s — that David Packard, the co-founder of computer engineering company Hewlett Packard had placed all his company shares in a blind trust when he became Deputy Secretary of Defense.
He was then offered the post of Secretary of Defense but declined it when he learned that he would be required to sell all his shares and divest himself entirely of any connection with the company that he loved so much. That was a bridge too far for him.
Tillersen’s sketchy dealings
Rex Tillersen has been with ExxonMobil for 41 years and the longer he has stayed, the greater has been his accumulation of corporate stock.
According to the firm’s last shareholder proxy statement, his assets include voting shares worth around $166 million, shares that had not been vested worth about $149 million, a further $18 million in stock options and pension benefits, which may be in stock, valued at $69.5 million.
It is probable that he also owns a portfolio of non-Exxon/Mobil stock. To place well over $300 million of Exxon/Mobil stock in a blind trust would not dispel a perception that any action taken as Secretary of State would not have an impact on the world’s largest non-state owned oil company.
He will need to sell every last one of his company shares and find ways to divest himself of the shares he has not yet vested and to monetize his pension benefits.
Situation more complicated for others
Gary Cohn may have to act just as decisively even if he does not face Senate confirmation. He knows that GoldmanSachs is constantly viewed across the political spectrum as enjoying special influence on American politics.
He’ll have to sell the more than $300 million of shares he owns in the bank and no doubt, thereafter, like Tillersen establish a blind trust to manage all his financial assets.
For Ross and Mnuchen, the situation may be more complicated. Many of their financial assets are in private companies. Some may even be in holding companies registered in the U.S. state of Delaware, or even offshore, to hide their true beneficial ownership.
Trump’s cavalier attitude
Some of their interests may be in partnerships that may be difficult to unwind quickly. Their financial accounts will make fascinating reading.
Will the tangled finances of these vastly wealthy leaders of the United States become a future source of embarrassment and a possible cause for corruption concerns?
Much depends on the lead that Donald Trump provides. When it comes to business ethics, the “tone at the top” makes a key difference. So far, Trump has taken a rather cavalier attitude to the issue. He refused to publicly release his tax returns during the election campaign.
He said he would announce plans to deal with his businesses on December 14 but then cancelled the announcement.
The money-politics nexus
On the other hand, with the Republicans enjoying majorities in both houses of Congress, there is not an oversight committee that is likely to ensure a storm over the finances of the incoming government leaders.
If the campaign’s course is any guide, then investigations by The New York Times and other such publications may well be ignored by the Trump Administration or receive a derisory tweet or two from the new President.
As in so many other areas, the combination of money and politics in the U.S. Administration in 2017 may take us into unchartered waters. And journalists seeking to follow the money may find powerful opponents in their path.