Donald Trump

Reading the Office of Legal Counsel on Emoluments: Do Super-Rich Presidents Get a Pass?

By Jane Chong
Saturday, July 1, 2017, 3:00 PM

wrote last November that the Foreign Emoluments Clause “is on its face a national security provision designed to protect the country from officers too enmeshed with foreign interests.” If the Justice Department’s recent court filing is to be believed, that protection is exceedingly limited. This new position marks a decisive break from the more conscientious approach long espoused by both the Comptroller General and the Office of Legal Counsel (OLC).

At the heart of the emoluments controversy is President Trump’s refusal to liquidate his business holdings. He has instead maintained ownership of the Trump Organization, a multibillion-dollar umbrella company with thousands of domestic and international investments, and placed the assets in a revocable trust managed by his sons Donald Trump, Jr. and Eric Trump. Trump now faces three lawsuits alleging that he is profiting from his business empire in violation of the Constitution. Three days after his inauguration, Citizens for Responsibility and Ethics in Washington (CREW), a government accountability watchdog group, filed the first suit in the Southern District of New York. This month, two more complaints were filed by the attorneys general of Washington D.C. and Maryland and 196 congressional Democrats, in federal district courts in Maryland and the District of Columbia, respectively.

All three suits center on the meaning and scope of the Foreign Emoluments Clause, which provides that “no person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept any present, Emolument, Office or Title of any kind whatever, from any King, Prince or foreign state” (U.S. Const. art. I, § 9, cl. 8). Citing Trump's business dealings with state governments and federal agencies, such as its lease on the Old Post Office Building that now houses the Trump International Hotel, two of the suits also allege violations of the Domestic Emoluments Clause. This provision applies specifically to the president and provides that he shall receive “for his Services” a fixed compensation during his tenure and not “any other Emolument from the United States, or any of [the states]” (U.S. Const. art. II, § 1, cl. 7).

Serious procedural challenges like standing notwithstanding, given the House and Senate’s failure to address head-on the risks posed by Trump’s financial conflicts pose, the lawsuits could prove important in forcing a much-needed conversation: Is Trump taking in profits in violation of the Constitution? And just as critically, are future presidents entitled to pull a Trump—or does the Constitution dictate that they, like Jimmy Carter, must give up their family peanut farms as a condition of taking office?

No Article III court has ever rendered an opinion on how either Emoluments Clause should be interpreted, though the Supreme Court has offered interpretations of the term “emoluments” as it appears in Foreign Emoluments Clause-related statutes periodically enacted by Congress since 1881. Because of the limited judicial precedent, the internal memoranda from the Comptroller General and the Office of Legal Counsel that have been made public over the years are among the most important sources of guidance we have on emoluments issues. And though these memoranda do not directly address the question posed by the Trump business empire, making some amount of inference and legwork necessary, in critical respects they quite clearly contradict the sweeping defense that the Justice Department put forward this month in its 70-page motion to dismiss the CREW case against Trump.

The key issue in these suits—once you get behind a set of justiciability questions that may prove dispositive—is what constitutes an emolument (though with respect to the Foreign Emoluments Clause there’s also some disagreement about what kind of entity constitutes a “foreign state”). In plain English, we are looking at an exotic presidential twist on the biggest and oldest challenge to enforcing any anticorruption law: What counts? Do the forbidden “emoluments” cover only goodie boxes, blatant quid pro quo arrangements, and employment-related compensation? Or are the profits that Trump enjoys by way of his business transactions also prohibited when they come from foreign states and domestic government entities? And if the latter, more expansive definition is the appropriate one, are the profits prohibited only when the take is in excess of  “fair-market-value”—and if so, does that definition serve as a meaningful limitation when at issue are luxury goods whose value or sales may be inflated by the fact that Trump is president and the products are prominently branded with his name?

Predictably, the dispute has taken the form of a battle for the original meaning of “emoluments.” An array of historical materials support both a limited and broad definition. The two possible interpretations are well summed up by the Oxford English Dictionary, which provides two definitions dating back to the Founding: “1. Profit or gain arising from station, office, or employment . . . . 2. Advantage, benefit, comfort.”

The Justice Department, like Trump’s lawyers at Morgan Lewis, latches onto the first definition  to argue that “the Emoluments Clauses apply only to the receipt of compensation for personal services and to the receipt of honors and gifts based on official position.” That is, President Trump is precluded only from receiving benefits in exchange for services provided to a foreign state in his official capacity as president, or—and this is crucial, given the subject matter of the OLC opinions—services provided “in a capacity akin to an employee of a foreign state.”

The plaintiffs in the three suits, on the other hand, argue for the much more expansive definition. Marshaling its own set of historical evidence, CREW asserts that emoluments are "anything of value, including money, permits, approvals, tax benefits, any other benefits, and anything else monetary or nonmonetary, regardless of whether it is given in exchange for goods or services, and regardless of whether it is part of a transaction at, above, or below market rates."

A close examination of the relevant Comptroller and OLC opinions reveals that the current Justice Department is reading the Emoluments Clauses too narrowly, while CREW and the other plaintiffs are reading them too broadly. None of the opinions approves the receipt of benefits that can even arguably be attributed to the prestige or influence conferred by an office, and together they do not support the Justice Department’s claim that presidents may, as a categorical matter, collect profits from business transactions with foreign entities and domestic government entities as long as fair value is extracted on both sides. But notwithstanding the plaintiffs’ hard pull in the other direction, the opinions also suggest that presidents may in limited cases accept certain fixed benefits—as I will explain, these might be pensions from the U.S. state that used to employ them or money damages from a foreign country against which, in a past life, they successfully won a judgment. The key is that those benefits cannot be subject to foreign or domestic government manipulation or adjustment in connection with the presidential office.

This happens to be a sensible position that accords with what the opinions repeatedly underscore as the purpose of the Emoluments Clauses and the ultimate touchstone for interpreting their meaning: “to prevent corruption and foreign influence” and to bar “payments which have a potential of influencing or corrupting the integrity of the recipient.”

 

Why Language About Emoluments Is Easily Misused

A threshold issue before turning to the OLC literature is the confusion created by cherry-picking historical materials without consideration of their factual context. For example, in its motion to dismiss, the Justice Department followed the lead of some scholars in pulling some Supreme Court language that suggests the term “emoluments” applies only to salary and other duty-related benefits. Most notably, in Hoyt v. United States, 51 U.S. 109 (1850), the Court defines emoluments as “every species of compensation or pecuniary profit derived for a discharge of the duties of office” (emphasis added).

But in Hoyt, the Supreme Court was specifically asked to decide what constitutes an “emolument of office” per a statute governing Treasury Department collectors in their official capacity; the case did not require the Court to consider or rule on the existence of emoluments of other kinds. This is a key point for purposes of properly construing any Comptroller or OLC opinion that cites Hoyt and regurgitates its definition of “emoluments.” These opinions, like Hoyt, have to be read with an eye to their facts: they do not assert that “emoluments” must derive directly from discharge of duty; rather, the kind of emoluments at issue in those opinions was the kind derived for discharge of duty. As a consequence, the reliance on Hoyt in these opinions does not serve as evidence of a limiting principle for emoluments in general.

In short, as pointed out by the plaintiffs and by assorted scholars, the proper question for purposes of discerning the historical scope of “emoluments” is not whether the term could be interpreted in a restricted way, to refer only to benefits derived from discharging the duties of an office, but whether it was necessarily so interpreted at the time the Emoluments Clauses were drafted. As John Mikhail has painstakingly documented, the answer is no—and we don’t have to look at secondary sources, however authoritative (e.g., Black’s Dictionary) to draw that conclusion. Consider, for example, some of the constitutions ratified during the first of two major waves of state constitution-making in the Founding decade. Several included “common benefits clauses” that used the word “emoluments” in a way that simply defies narrow interpretation. The Pennsylvania Constitution (1776) provides: “That government is, or ought to be, instituted for the common benefit, protection and security of the people, nation or community; and not for the particular emolument of advantage of any single man, family or sett [sic] of men, who are a part only of that community[.]” Very similar language appears in the Virginia (1776), Vermont (1777), and New Hampshire (1784) constitutions. Far more elaborate historical arguments demonstrating the broad uses of the term have been presented elsewhere: see here, here and here. The bottom line is that there is an abundance of primary Founding-era material making use of the broad definition of emoluments, so it is wrong to use language from fact-bound case law to assert that the term is an inherently limited one.

 

The Plaintiffs Define “Emoluments” Too Broadly

Does that mean, as plaintiffs assert, that all types of benefits conferred on the president by foreign countries and U.S. states are prohibited emoluments? According to the Comptroller and OLC opinions, clearly not.

A number of opinions explain that officers do not need to forego fixed benefits to which they are entitled for reasons manifestly unrelated to and uninfluenced by their office. This is a common-sense interpretation of the Clauses that avoids rigidity for rigidity’s sake, where denial of benefits would do nothing to serve the Clauses’ anti-corruption, anti-influence purpose.

For instance, the Comptroller and the OLC each independently concluded that President Ronald Reagan could collect ordinary retirement benefits from California, where he had served as the state governor, without violating the Domestic Emoluments Clause’s prohibition against the receipt of “emoluments” from a State. In its 1983 opinion, the Comptroller determined that President Reagan’s pension from California “cannot be construed as being in any manner received in consequence of his possession of the Presidency.” Coming to the same conclusion in its earlier 1981 opinion, the OLC also noted that “those [retirement] benefits are not emoluments in the constitutional sense” and their receipt does not “violate the spirit of the Constitution.” To support its reasoning, the OLC in turn relied on a 1964 opinion (not published) where it similarly decided the estate of President Kennedy was entitled to the naval retirement pay that had accrued during his presidency. Interpreting the Foreign Emoluments Clause “in the light of its basic purposes and principles,” it concluded he could receive payments to which he was entitled as a matter of law “prior to his taking office.”

The same principles support allowing officers to collect on certain kinds of money judgments, even from foreign powers. In a 1955 opinion, the Comptroller decided that an attorney in the Justice Department could receive a lump sum payment and lifetime annuity from the German government for his wrongful removal from the judgeship he held before he emigrated to the United States, as provided by German indemnification legislation. The Comptroller reasoned that those payments did not constitute emoluments from his former office, but rather “represent damages payable as a direct result of a moral and legal wrong.” Turning to its “spirit of the Constitution” analysis, the Comptroller had no trouble determining the payments were not problematic: they were “obviously . . . not intended to influence him as an officer of the United States,” were made under laws not specific to him, and were not payments voluntarily made by the German government but rather mandatory indemnification required by the Allied powers. In a 1954 opinion on the same matter, the OLC came to a slightly different place—the payments were not permitted to the extent they amounted to German retiree benefits—but like the Comptroller, it found that damages intended to redress injury were not prohibited emoluments.

Note what these opinions have in common: they generally allow the officer in question to collect payments or benefits that, patently, have nothing to do with and cannot possibly have been affected by his U.S. office. That 1983 Comptroller opinion put it best, and contains a line worth repeating: President Reagan was entitled to his pension because it “c[ouldn’t] be construed as being in any manner received in consequence of his possession of the Presidency.”

Applying this general rule, it makes sense that presidents are permitted to invest in U.S. Treasury bonds; and the rule also explains why wealth management solutions like blind trusts have long been accepted as workable resolutions to problems of conflict of interest. But it certainly doesn’t provide clearance for all profits derived from discretionary, “fair-market-value” transactions where the president is obviously and individually on one end of the sale.

 

The Justice Department Defines “Emoluments” Too Narrowly

A key move in the Justice Department’s brief is to rely heavily on a point of dubious significance: it asserts that “in every published OLC or Comptroller General opinion in which proposed conduct was determined to involve prohibited emoluments, the determination involved an employment relationship (or a relationship akin to an employment relationship) with the foreign government.”

If you think about it, there’s at least one common-sense explanation for the limited precedent: In general, the government employees on whose behalf these opinions were sought probably didn’t own hotel chains, lucrative licensing agreements, or hundreds of trademarks from which they derived significant foreign-based or domestic government-based income. Their thing of value, as civil servants, was their skill set, and thus the relevant question was whether they were constitutionally permitted to lend out that skill set to foreign governments or organizations with foreign state ties for payment.

A 1986 OLC opinion written by then-Deputy Assistant Attorney General Samuel Alito cuts against the assertion that whether the profit in question is derived from employment or personal services should be, by itself, dispositive. There, Alito determined that a NASA employee could indeed accept a fee for reviewing a PhD candidate's thesis for an Australian university. To get to this conclusion, Alito made two significant moves. First, uncertain as to whether a public university should be regarded a "foreign state," Alito instead decided to turn to the features of the proposed consultancy and consider whether they "raise[d] the kind of concern . . . that motivated" the prohibition’s enactment. This marks a functional, purpose-driven approach to the question of permissible benefits. Second, he suggested the following facts weigh against finding the fee a prohibited emolument: (1) the NASA scientist was not selected because of his position with the U.S. government, (2) the fee was an ordinary amount given the service to be rendered, (3) there was no reason for the officer to have "direct contact" with the university officials, and (4) the consultancy was "limited both in time and in substantive scope," and no "continuing relationship" was anticipated.

Note that the fact the scientist would be acting in an employment or personal services capacity did not automatically render the payment an emolument. This is the key takeaway from this opinion, and it is at odds with the Justice Department’s claim that employment is the make-or-break issue when it comes to determining whether a benefit or payment is an emolument. Second, consider the implications of the first and fourth points Alito highlighted. The scientist’s selection for the job and associated payment had nothing to do with his U.S. office, which is not a conclusion that can be readily drawn about the services purchased by foreign and state government employees newly flocking to Trump International Hotel. It may suggest the permissibility of accepting profits from truly routine transactions by truly routine hotel customers, including some government diplomats—but this possibility is undercut by Alito’s reference to the extremely limited nature of the permitted relationship and transaction in question.

The Justice Department is understandably leaning hard on the idea that an emolument must be received specifically as a function of office or employment. After all, without this very specific qualification, its argument for the permissibility of accepting profits from ordinary transactions falls apart. Two OLC opinions make this clear.

A 1982 OLC opinion determined that the Foreign Emoluments Clause barred an employee of the Nuclear Regulatory Commission from working on his leave time for an American firm contracted by a Mexican government agency to review the design of a government-owned nuclear power plant. And a 1993 OLC opinion concluded that law firm partners serving as non-government advisors on the Administrative Conference of the United States could not accept partnership earnings “where some portion of that share is derived from the partnership’s representation of a foreign government” without triggering the constitutional prohibition. In the 1993 opinion, the OLC actually dismissed the argument that the conference member was not subject to the foreign government's “control” as “not decisive.” Instead, the OLC concluded that the portion of partnership profits the conference member would receive "would be a function of the amount paid to the firm by the foreign government," such that "the partnership would in effect be a conduit for that government." Acceptance of that portion of income was therefore a prohibited emolument (OLC reconsidered this opinion in 2010, but only with respect to whether the members held an “Office of . . . Trust” for purposes of the Foreign Emoluments Clause).

In these opinions, the OLC simply did not care that there was nothing out of the ordinary about the payments in these cases from a transactional or fair-market perspective. This runs contrary to the crux of the Justice Department’s argument for the innocuousness of Trump’s business-related foreign and domestic government income.

The textual kicker in all this is that even accepting the Justice Department’s insistence that “emolument” is best read to mean “profit arising from an office or employ” (Barclay’s A Complete and Universal English Dictionary on a New Plan (1774)), it doesn’t follow that all ordinary business transactions are okay: What if those transactions are, in number or value, enhanced by the prestige of the president’s office? Couldn’t the profit thereby derived then constitute “profit arising from an office or employ”? [Update, 5:17 pm: This is a line of argument that Marty Lederman compellingly and more thoroughly details here.]

It is to prevent this reading that the Justice Department argues that prohibited benefits must arise not just from the office but from the provision of services pursuant to that office. But this argument relies on a stunted conception of the power that an "Office of Profit or Trust" confers. To lift an example wholesale from Ben Wittes: If Trump owned a nondescript hotdog truck outside the White House that charged the same price for hotdogs as any other foodtruck and sold them to some incidental foreign customers, that would not be problematic under this definition of emoluments. If the truck were Trump-branded and either charged inflated prices or enjoyed inflated sales because Trump is president, and Saudi potentates lined up to put cash in his register, that would seem to constitute impermissible “profit arising from an office,” as a textual matter and in view of the historic Comptroller and OLC perspective.

At base, this is what plaintiffs are claiming—that the profits Trump is enjoying “aris[e] from” his office—so “aris[e] from” may be a definitional phrase the Justice Department is interpreting too narrowly. Trump’s status as the most powerful man in the world affects his business transactions, which are self-branded to boot. Not only is he enjoying booming business at his exclusive properties, in part thanks to foreign guests reportedly seeking to get in the president’s good graces, but he has also won Chinese trademark protection that, according to plaintiffs, he would not have received had he not become president.

Finally, on a practical note, notice the perverse upshot of the Justice Department’s fixation on employment and personal services as the place where the river divides. This assertion—that payment for goods and business-related services is permissible but payment for employment and “personal services” is not—means that a president can’t profit off his own brain or body when it comes to cash from foreign sources or U.S. government entities, but can, almost without limitation, profit off the brains and bodies of those he can afford to employ in his private capacity. It’s what you might call a constitutional free pass for super-rich presidents.

The Comptroller and OLC opinions do not support such a result. They repudiate it.

***

Ultimately, the Justice Department’s view of emoluments marks a departure from the public Comptroller and OLC opinions in at least two critical respects. First, the new position is a clear abrogation of the practical “spirit of the Constitution” analysis on which the Comptroller and OLC have consistently relied to ensure a stringent rather than forgiving interpretation of what constitutes an impermissible benefit or undue influence (see, e.g., 1955 Comptroller Opinion, 1981 OLC Opinion, 1983 Comptroller Opinion; see also OLC 1962, noting “the sweeping nature of the constitutional prohibition”; OLC 1980, citing 1902 Attorney General Opinion stating the Foreign Emoluments Clause is “directed against every kind of influence by foreign governments upon officers of the United States” and the “prohibition should be given the broadest possible scope and application”). Second, the Justice Department’s quite specific argument that the president can profit from employing people to do business with foreign countries and government entities in the United States amounts to a strange carve-out, one that allows extremely wealthy officers with people in their employ to cash out as they wish on the advantages that the prestige of their office confers, without any consideration whatsoever of the sources of that cash. This interpretation is flatly at odds with executive branch tradition: I have yet to see a single opinion that has permitted an officer to collect profits even arguably enhanced by the power of his office, much less categorically benefit from discretionary, price-indeterminant transactions that foreign governments and U.S. government entities may enter into at will.

Note the issues I did not address here. What is not (yet) a point of debate in these particular lawsuits is whether these constitutional provisions apply to the president at all. The Domestic Emoluments Clause applies to the president by its express terms, and in its recent motion, the Justice Department doesn’t dispute CREW's claim, or the OLC’s preexisting determination, that the more obliquely phrased Foreign Emoluments Clause applies to the president as well (and notwithstanding the occasional argument to the contrary).

In addition, as the suits proceed in federal court, we can expect much of the legal discussion to focus on jurisdictional hurdles. There’s a strong argument that the courts don’t have a role to play, and that presidential corruption rising to the level of an emoluments violation is a political question whose resolution properly lies with Congress. Though the congressional suit spearheaded by Senator Richard Blumenthal and Representative John Conyers, Jr. alleges that Trump has failed to come to Congress for requisite permission in accepting foreign emoluments, Congress’s best recourse could be impeachment proceedings. (Or if it so chose, Congress could avail itself of a lot of options short of impeachment, but in the words of Charles Black, Jr., circa 1974, “what an enormous if.” Recall that the House of Representatives has the power to demand Trump’s tax returns and has not exercised it.)

But as for the substantive question of whether the Comptroller and OLC of yore would have signed off on the Justice Department’s blessing of all monies flowing into Trump's coffers by way of business transactions, the answer is “no.”

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