Draining the Swamp

Remarks of Walter M. Shaub, Jr., Director, U.S. Office of Government Ethics, as prepared for delivery at 4:00 p.m. on January 11, 2017, at the Brookings Institution.

I wish circumstances were different and I didn’t feel the need to make public remarks today. You don’t hear about ethics when things are going well. You’ve been hearing a lot about ethics lately.

I need to talk about ethics today because the plan the President-elect has announced doesn’t meet the standards that his nominees are meeting and that every President in the past four decades has met. My hope is that, if the Office of Government Ethics can provide some constructive feedback on his plan, he may choose to make adjustments that will resolve his conflicts of interest.

I’ll limit the scope of my remarks today, and I won’t be talking about nominees whose ethics packages have not gone to the Senate. With that limitation, there’s still much that can be said. For starters, I’m happy to report that it’s not all bad news. OGE has been able to do good work during this Presidential transition. I’m especially proud of the ethics agreement we developed for the intended nominee for Secretary of State, Rex Tillerson.

Mr. Tillerson is making a clean break from Exxon. He’s also forfeiting bonus payments worth millions. As a result of OGE’s work, he’s now free of financial conflicts of interest. His ethics agreement serves as a sterling model for what we’d like to see with other nominees. He clearly recognizes that public service sometimes comes at a cost. The greater the authority entrusted in a government official, the greater the potential for conflicts of interest. That’s why the cost is often greater the higher up you go.

We’ve had similar success with some of the President-elect’s other intended nominees. Some of them haven’t quite gotten there yet, as I explained in recent letters to the Senate. But with an example like Mr. Tillerson’s ethics agreement, I anticipate we’ll get them there, too. In connection with this work, it’s important to recognize that OGE is not the enforcement mechanism but the prevention mechanism. OGE is nonpartisan and does its work independently. Our goal—our reason for existing—is to guard the executive branch against conflicts of interest.

We can’t risk creating the perception that government leaders would use their official positions for profit. That’s why I was glad in November when the President-elect tweeted that he wanted to, as he put it, “in no way have a conflict of interest” with his businesses. Unfortunately, his current plan cannot achieve that goal.

It’s easy to see that the current plan does not achieve anything like the clean break Rex Tillerson is making from Exxon. Stepping back from running his business is meaningless from a conflict of interest perspective. The Presidency is a full-time job and he would’ve had to step back anyway. The idea of setting up a trust to hold his operating businesses adds nothing to the equation. This is not a blind trust—it’s not even close.

I think Politico called this a “half-blind” trust, but it’s not even halfway blind. The only thing this has in common with a blind trust is the label, “trust.” His sons are still running the businesses, and, of course, he knows what he owns. His own attorney said today that he can’t “un-know” that he owns Trump tower. The same is true of his other holdings. The idea of limiting direct communication about the business is wholly inadequate. That’s not how a blind trust works. There’s not supposed to be any information at all.

Here too, his attorney said something important today. She said he’ll know about a deal if he reads it in the paper or sees in on TV. That wouldn’t happen with a blind trust. In addition, the notion that there won’t be new deals doesn’t solve the problem of all the existing deals and businesses. The enormous stack of documents on the stage when he spoke shows just how many deals and businesses there are.

I was especially troubled by the statement that the incoming administration is going to demand that OGE approve a diversified portfolio of assets. No one has ever talked to us about that idea, and there’s no legal mechanism to do that. Instead, Congress set up OGE’s blind trust program under the Ethics in Government Act. Under that law anyone who wants a blind trust has to work with OGE from the start, but OGE has been left out of this process. We would have told them that this arrangement fails to meet the statutory requirements.

The President-elect’s attorney justified the decision not to use a blind trust by saying that you can’t put operating businesses in a blind trust. She’s right about that. That’s why the decision to set up this strange new kind of trust is so perplexing. The attorney also said she feared the public might question the legitimacy of the sale price if he divested his assets. I wish she had spoken with those of us in the government who do this for a living. We would have reassured her that Presidential nominees in every administration agree to sell illiquid assets all the time. Unlike the President, they have to run the gauntlet of a rigorous Senate confirmation process where the legitimacy of their divestiture plans can be closely scrutinized. These individuals get through the nomination process by carefully ensuring that the valuation of their companies is done according to accepted industry standards. There’s nothing unusual about that.

For these reasons, the plan does not comport with the tradition of our Presidents over the past 40 years. This isn’t the way the Presidency has worked since Congress passed the Ethics in Government Act in 1978 in the immediate aftermath of the Watergate scandal. Since then, Presidents Jimmy Carter, Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama all either established blind trusts or limited their investments to non-conflicting assets like diversified mutual funds, which are exempt under the conflict of interest law.

Now, before anyone is too critical of the plan the President-elect announced, let’s all remember there’s still time to build on that plan and come up with something that will resolve his conflicts of interest. In developing the current plan, the President-elect did not have the benefit of OGE’s guidance. So, to be clear, OGE’s primary recommendation is that he divest his conflicting financial interests. Nothing short of divestiture will resolve these conflicts.

This has been my view from the start. The media covered some messages I sent the President-elect through Twitter. While some people got what I was doing, I think some others may have missed the point. I was trying to use the vernacular of the President-elect’s favorite social media platform to encourage him to divest. My thinking was that more pointed language would have been too strong at a time when he was still making up his mind. I reiterated my view in a written response to questions from the Senate, which is posted on OGE’s website. I’ve been pursuing this issue because the ethics program starts at the top. The signals a President sends set the tone for ethics across the executive branch. Tone from the top matters.

I’ve had the honor and great privilege of serving as Director of the Office of Government Ethics for four years now. But I’ve been in ethics for much longer than that, having come up through the ranks as a career government ethics official. Over the years, I’ve worked closely with countless officials in administrations of both major parties. Ethics has no party.

The job hasn’t always been easy, though, especially when I’ve had to ask nominees and appointees to take painful steps to avoid conflicts of interest. I can’t count the number of times I’ve delivered the bad news that they needed to divest assets, break open trusts, and dissolve businesses. Most of these individuals have worked with us in good faith. Their basic patriotism usually prevails, as they agree to set aside their personal interests to serve their country’s interests. Sometimes these individuals have required more persuasion, but every OGE Director has been buoyed by the unwavering example of Presidents who resolved their own conflicts of interest.

As I said, every President in modern times has taken the strong medicine of divestiture. This means OGE Directors could always point to the President as a model. They could also rely on the President’s implicit assurance of support if anyone balked at doing what OGE asked them to do. Officials in any administration need their President to show ethics matters, not only through words but also through deeds. This is vitally important if we’re going to have any kind of ethics program.

Now, some have said that the President can’t have a conflict of interest, but that is quite obviously not true. I think the most charitable way to understand such statements is that they are referring to a particular conflict of interest law that doesn’t apply to the President. That law, 18 U.S.C. § 208, bars federal employees from participating in particular matters affecting their financial interests. Employees comply with that law by “recusing,” which is a lawyerly way of saying they have stay out of things affecting their financial interests. If they can’t stay out of these things, they have to sell off their assets or get a waiver. That’s what Presidential appointees do. But Congress understood that a President can’t recuse without depriving the American people of the services of their leader. That’s the reason why the law doesn’t apply to the President.

Common sense dictates that a President can, of course, have very real conflicts of interest. A conflict of interest is anything that creates an incentive to put your own interests before the interests of the people you serve. The Supreme Court has written that a conflict of interest is, and I’m quoting here, “an evil which endangers the very fabric of a democratic society, for a democracy is effective only if the people have faith in those who govern, and that faith is bound to be shattered when high officials and their appointees engage in activities which arouse suspicions of corruption.”

That same Court referred to what it called a “moral principle” underlying concerns about conflicts of interest. The Court cited, and I’m quoting again, “the Biblical admonition that no man may serve two masters, a maxim which is especially pertinent if one of the masters happens to economic self-interest.” A President is no more immune to the influence of two masters than any subordinate official. In fact, our common experience of human affairs suggests that the potential for corruption only grows with the increase of power.

For this reason, it’s been the consistent policy of the executive branch that the President should act as though the financial conflict of interest law applied. One of my tweets and my letter to Congress cited an OGE opinion issued during the Reagan administration that articulated this very policy.

Back when he was working for the Justice Department, the late Antonin Scalia also wrote an opinion declaring that a President should avoid engaging in conduct prohibited by the government’s ethics regulations, even if they don’t apply. Justice Scalia warned us that there would be consequences if a President ever failed to adhere to the same standards that apply to lower level officials. The sheer obviousness of Justice Scalia’s words becomes apparent if you just ask yourself one question: Should a President hold himself to a lower standard than his own appointees?

I appreciate that divestiture can be costly. But the President-elect would not be alone in making that sacrifice. I’ve been involved in just about every Presidential nomination in the past 10 years. I also have been involved in the ethics review of Presidents, Vice Presidents, and most top White House officials. I’ve seen the sacrifices that these individuals have had to make.

It’s important to understand that the President is now entering the world of public service. He’s going to be asking his own appointees to make sacrifices. He’s going to be asking our men and women in uniform to risk their lives in conflicts around the world. So, no, I don’t think divestiture is too high a price to pay to be the President of the United States of America.

As we all know, one of the things that make America truly great is its system for preventing public corruption. For a long time now, OGE has helped developing countries set up their own systems for detecting and preventing conflicts of interest. Our executive branch ethics program is considered the gold standard internationally and has served as a model for the world. But that program starts with the Office of the President. The President-elect must show those in government—and those coming into government after his inauguration—that ethics matters.

All of this is to say there are reasons why experts and others are expressing concern. These calls for divestiture have been bipartisan. You have the examples of President Obama’s ethics counsel, Norm Eisen, and President Bush’s ethics counsel, Richard Painter. The conservative Wall Street Journal recommended divestiture. So did conservative columnist Peggy Noonan.

It’s plain to see that none of this reflects any partisan motivation. All you have to do is imagine what will happen if the President-elect takes this advice and divests. He’ll be stronger. He’ll have a better chance of succeeding. So will the ethics program and the government as a whole. And, in turn, America will have a better chance of succeeding. We should all want that. I know I want that. In closing, I would just like to add that I’m happy to offer my assistance and the assistance of my staff.

Thank you.

 

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