CBS Radio Interviews Matthew Sanderson on the Potential for Trump to Monetize the Presidency

An in-depth look at president-elect Trump's businesses and what needs to happen to make sure there aren't any conflicts moving forward. Caplin & Drysdale’s Matthew Sanderson joined CBS Radio’s Chad Hartman with the latest.  To hear the full interview, please visit CBS Radio’s website, go to the January 12, 2017 segment on Matthew Sanderson, and click and drag to minute 19:33.

HARTMAN: What is your overall assessment of what president-elect Trump said yesterday and did he go far enough?

SANDERSON: Hi Chad.  Nice to be with you. 

You’re right that there were a lot of issues were addressed or discussed in the press conference yesterday.  The goal is -- from the Trump perspective -- was to lay out an ethics structure to manage his business and the conflicts of interest that would be presented between his business continuing to operate and Mr. Trump holding the highest office in the country.  And, I think this arrangement it’s decidedly a mixed bag.  There were some good measures, some laudable steps that they took, but there are quite a few remaining problems. 

For example, on the positive side, they announced that they would freeze all new foreign deals so during his administration there will be no foreign deals, they would also donate any payments – for example, through his hotels that come from foreign governments, the business will be donating those proceeds to the U.S. Treasury.  So there are a few steps that they took…but the issue though is that he is still conflicted.  Because what he did is he handed off the management tasks and responsibilities to his sons and to a management team, but he has retained his ownership interest in the Trump organization which means that if any new business comes in from people trying to curry favor with the government or if the U.S. government makes a favorable decision that affects one of his pro…, his net worth would go up. 

He still is ultimately conflicted and he might have solved this problem, but he didn’t go far enough.  He took some steps, but he didn’t go quite far enough.

HARTMAN: What does he need to do then?

SANDERSON:  Well I think he has to do more than just hand over management to his sons.  I’d love to run my legal practice like this…tell somebody else that they have to bill all the hours, I’ll just watch the paychecks roll in.  That’s effectively what he’s done.  What he should’ve done, the steps he should’ve taken was he could have solved this by transferring the ownership of the Trump organization over to a trusth which he actually did, he did that first step …, but the second step that he should have taken was then committing that he would receive only fixed payments from that trust for the remainder of his life.  If he had done that, he would have solved a lot of problems for himself that will placate him throughout his administration and most importantly this would have been a way for him to leave his business empire in tact while still assuring the American people that he won’t personally profit from his administration and its decisions.

HARTMAN: Do you accept what he offered up, what his representative offered up yesterday and also other people leading up to this that it would be extraordinarily complicated for him to completely divest himself from the company and it would put him in a very difficult financial position to do that?

SANDERSON: It is complicated and I will say that I think those that are demanding that he have an initial public offering or totally divest himself totally get out of the business and dismantle this organization, they’re a bit unrealistic and perhaps unreasonable.  He has built this business over his lifetime and while it’s true that he is now in office and should be focusing 100% on that, there are ways I think to mitigate, not only … entirely, but mitigate some of the conflicts of interest and I think the approach that I just described would do that.  The problem with selling off his assets is that then you have a buyer on the other side to purchase these assets.  You have to gauge what  their motives are and whether they’re paying too much.

HARTMAN: Let’s say he completely separates, right, and he just finds out about this I guess on his Twitter feed, is probably the most likely way he’d find out about it, but at the same time the company is having successful partnerships where the company is going to have success and it is undeniable that benefit how much we don’t know is because his profile is even higher than when he’s president of the United States.  He’s a very successful man now, already with his brand out there, but it is going to increase.  It’s going to go up.  It’s going to go down, and so to say that isn’t going to be tied in some way to his occupation now as the leader of the free world that just doesn’t pass the “smell test.”

SANDERSON:  I think that’s exactly right and that’s why he should have committed to transferring it over to a trust and then only receive a fixed payment.  That way, if the value goes up, if it goes down, he would not personally profit from his administration. 

But now he’s left himself, by not going all the way with it, by not completing the job so to speak, he’s really left himself open to the accusation that he is monetizing the presidency.  That’s the core issue and that remains.

One instance of that, and this is perhaps the most visible symbol of this is that yesterday they made no indication he will sell off the Trump International Hotel which is just right down the street from The White House, where Mr. Trump after taking office be both the tenant – because that’s a government building -- and the landlord because he will now be president.  There was no indication that he will dispose of that property and sell it off to someone else.  That’s certainly a very important, symbolic step that he could’ve taken.

HARTMAN: Well, here’s another step and I think you may have eluded to it before so let’s stay with it.  If you’re then going to have an ethics adviser who is a part of this, you can’t have the Trumps hire the ethics adviser, right?  Don’t you say we’re going to …  Then, again some people might say whomever you pick if you pick them then pick the person but there’s a conflict of interest.  I don’t know exactly how you do this but you can’t have your selection is the ethics adviser and that person is viewed as completely neutral when you’re the one who selected the person.

SANDERSON: I think that’s absolutely right.  They did not indicate who would be involved in selecting and most importantly firing or supervising the ethics – they announced two positions: one is an ethics adviser who is part of the management team at the Trump organization and then another is chief compliance officer. 

One of the concerns and one of the unanswered questions is will they be under the thumb of the other business managers?  Will they be under the thumb of Eric and Don Jr. if they try to nix a valuable deal? 

One of the other concerns is there is no ongoing mechanism that was announced for transparency.  For example, they’ve committed to, like I said this is one of the good steps they took, they’ve committed to donate profits from any foreign government to the U.S. Treasury.  Who’s in charge of that accounting?  Will they make a regular report?  There’s some holes in the transparency regime there that they might have built in and you also have another hole which is that currently we have no idea who has given loans to the Trump organization.  That’s one of the excluded parts from the personal financial disclosure form that he filled out.

HARTMAN: Even though he says often that I have very little debt.  He says that, he might be telling the truth, but Matthew as you just laid out, we don’t know that to be true.

SANDERSON: That’s exactly right, and so they should have, in my opinion, committed to disclose all of the business loans because that’s the lifeblood of a real estate business.  If the funding dries up or if the lender is affected in some way, that can cause a project to fail and so that’s a conflict.  If he has a loan with Citigroup or JPMorgan Chase, he or his sons or someone in the administration might pull their punches when they’re trying to regulate the financial services industry or pursue some sort of case against those firms.  It would cause the lender to falter. 

Like I said, there are a lot of unanswered questions.  There are a number of steps that they should have taken.  The fact that they didn’t take it I think will plague his presidency and be a drag on his agenda moving forward.  There will be a steady drip of these stories. 

HARTMAN: And the last thing…Which part of either the House or the Senate along with the media and then will get into the idea that his critics say well they’re just against him or then the people on the other side will say they’re just praising him and they’re just for him.  Which part of government will be watching this most closely?

SANDERSON: I think that’s one of the open questions, as well.  What kind of oversight we would see from the Republican committees in Congress?  Will his activities be as closely scrutinized as one would hope and expect?  I think that still remains to be seen.