While the president and vice president are largely exempt from government ethics rules, President-elect Donald Trump’s proposed wealthy cabinet isn’t.
Stephen D. Potts helped create the U.S. government procedures to root out conflicts of interest. He admits he never contemplated Donald J. Trump.
“I never had a situation where we had someone who was covered that had expansive wealth and holdings in as many varied forms as Donald Trump has,” said Potts, who led the Office of Government Ethics in two separate five-year terms under President George H.W. Bush and President Bill Clinton.
Now 86 and retired, Potts says that at least for Trump’s nominees – some who are wealthier than the president-elect – the Office of Government Ethics does apply and they will have to “rid themselves of the conflicts.”
The OGE, which strives to have a uniform ethics code across the federal government, has virtually no reach into the Oval Office once Trump is in it nor does it have influence over Vice President Mike Pence.
These disclosure and divestiture rules will apply to ExxonMobil chief Rex Tillerson, chosen for secretary of state, and Wilbur Ross, a corporate raider tapped to become commerce secretary. They’ll apply to Amway heiress Betsy DeVos at the Education Department, former World Wrestling Entertainment CEO Linda McMahon at the Small Business Administration and fast-food mogul Andre Puzder at the Department of Labor.
History suggests they could be forced to sell large quantities of stocks or stakes in private companies. They may choose to hand the proceeds over to an independent steward who will reinvest with no input from them. That’s called a blind trust.
Trump’s cabinet picks first face a thorough vetting process by congressional committees, which are allowed to demand tax returns and other financial disclosures about their business holdings. If they are confirmed by the Senate, they then fall under the watch of the Office of Government Ethics.
The agency has held extensive training for ethics officials across the federal government, plus separate technical meetings with the Trump campaign transition team, according to a Dec. 12 letter from Office of Government Ethics Director Walter Shaub to Sen. Tom Carper, D-Del., the top Democrat on the Senate Homeland Security and Governmental Affairs Committee.
In the same letter, Shaub intimated that Trump’s suggestion that he’ll avoid conflicts by handing over operational control of his companies to his children is insufficient.
“Transferring operational control of a company to one’s children would not constitute the establishment of a qualified blind trust, nor would it eliminate conflicts of interest,” wrote Shaub, whose five-year term will end in January 2018, one year after Trump takes office.
Shaub hasn’t made public statements since the Nov. 8 election. But in September he told Federal News Radio that presidential appointees are often shocked to learn how much the rules limit their financial interests while serving in government.
“This can be a bitter pill to swallow, and in fact, coming into the federal government to engage in public service at a high level really is a significant sacrifice,” Shaub said.
Failing to heed the agency’s advice has risks.
When Marvin Runyon became postmaster general in 1992, the former Ford Motor Co. executive was brought in to make the postal system work more like a business. The Office of Government Ethics determined he had violated conflict-of-interest rules by participating in negotiations to put Coke machines in postal lobbies while holding a significant amount of Coca Cola stock.
“We were not there to catch people. I was really distressed to be in the situation we were in,” recalled Potts, who said the agency tries to educate government employees to avoid conflicts.
Runyon stepped down in 1998, after the Justice Department ended a long investigation without filing charges.
Although the Office of Government Ethics has no investigative powers, certain government appointees and employees, including the president and vice president, must annually file financial disclosure forms to the agency. These forms are scrutinized for potential conflicts. The agency can also act on tips, as it did with Runyon.
The Office of Government Ethics would determine, if the nominees are confirmed, whether they can be granted waivers from ethics rules. During the eight years of the Obama White House, the agency did so 49 times.
These waivers historically have dealt more with lawyers and consultants and their former clients. Securities and Exchange Commission Chair Mary Jo White, a lawyer, received two waivers, one that let her make decisions involving a law firm and another involving Swiss bank Credit Suisse, also a former client. Energy Secretary Ernest Moniz, who consulted before taking a Cabinet post, got one to deal with issues involving General Electric.