Among the innumerable questions raised by the election of Donald Trump is what he will do with his business endeavors when he assumes office. Though there is precedent for presidents coming into office with tricky financial situations—George W. Bush, for example, had a sizable fortune from oil interests and his ownership stock in the Texas Rangers, and Lyndon Johnson’s radio holdings in Texas remain a point of scrutiny—none has entered with business interests nearly as vast as President-elect Trump’s multi-billion-dollar real-estate empire. Already, Elijah Cummings, a representative from Maryland and the ranking Democrat on the House Oversight Committee, has requested hearings to discuss the potential conflicts of interest the situation creates and what Trump could do to mitigate them—should that be something he were to want to do.

One of the major questions is whether Trump will be willing to place his assets in a blind trust—that is, whether he will cede de facto control of his businesses and properties to an independent actor with whom he will have little to no contact during his administration. In response, Trump has repeatedly said that he intends to hand operations over to his three adult children, Donald Jr., Ivanka, and Eric, which would not, in fact, constitute a blind trust: Not only are they on his transition team and among his top advisers, they are, well, his children, and therefore not nearly independent enough to be trustees.

That his proposed arrangement is not in any way a blind trust is a relatively minor concern compared to the potential for conflicts of interest under a Trump presidency. Even if he were to establish an actual blind trust, it would do little to stop him from considering the aspects of his business he already knows, such as the buildings and stocks he already owns. A report in The Guardian characterized the situation as “uncharted territory” and noted that, according to his FEC financial-disclosure forms, Trump holds significant investments in: Energy Transfer Partners, the company behind the embattled Dakota Access Pipeline; Bank of America, which will likely benefit from Trump’s proposed rollback of banking regulations; and Facebook, on whose board transition-team member Peter Thiel sits. Perhaps most worrisome is that, as Rudy Giuliani pointed out on CNN’s “State of the Union” on Sunday, the executive branch’s blind-trust rules “don’t apply to the president.”

I spoke with Kenneth Gross, a lawyer whose extensive experience on the subject includes arranging the trust into which Michael Bloomberg put his assets while mayor of New York City, about the truth behind Giuliani’s Nixonian observation and some of the other ethical questions at play in a Trump presidency. The transcript that follows has been lightly edited for length and clarity.


Jeremy Venook: What exactly is a blind trust, and what would creating one entail for President-elect Trump?

Kenneth Gross: If he were to set up a blind trust, according to the Office of Government Ethics’ executive-branch blind-trust rules, which apply to all employees in the executive branch who want to set one up, he would have to meet a number of requirements, most notably having an independent trustee. The trust that he has suggested as a possible blind trust, with his children running it, doesn’t meet any of the requirements of a blind trust under government-ethics rules.

It’s further made difficult by the fact that the assets that he’s putting into this blind trust are fully known to him. As a matter of law, he has either “actual” or “constructive” knowledge. Actual knowledge is, “Yeah, I know I own the Trump Hotel. I know I own this piece of land.” Constructive knowledge is things you may not actually know, but you should know, because it’s something you own—perhaps some land that he kind of forgot he owns, something like that. Just because you put it in a blind trust, you’re not going to rid your knowledge of it. You can’t blind something by putting it into a trust—if you own the World Trade Center, and you put it into a blind trust, you don’t forget that you own the World Trade Center. Now, I’m not saying that he knows everything that he owns, but certainly major holdings he has actual knowledge of, and the rest of it, he has constructive knowledge. So putting it in a blind trust doesn’t do any good in terms of blinding his knowledge of the assets in the trust.

In terms of conflicts of interest, his self-interest is co-extensive with those of his family interest, most notably his children. So saying that he has a blind trust and saying to the kids, “Well, have fun, go run these companies,” the only thing it does is to give him the time that he needs to be president of the United States rather than run the company, but doesn't have any benefit in terms of relieving conflicts of interest. The other blind trusts that have been set up by former presidents—President Reagan, President George H.W. Bush, President Bill Clinton, President W. Bush—all had independent trustees. President Obama, he didn't need to set up a blind trust. He did something I actually urge people to do if they’re able to, and put all of his funds into widely diversified funds such as index funds or ETFs. I did that largely with a man much, much richer than Donald Trump who I represented, which is of course Michael Bloomberg.

Venook: Are there any specifics of your arrangement with Bloomberg that you think would be particularly applicable here?

Gross: He removed himself from the functioning of his business. The Bloomberg business did have a business relationship with the city of New York through the leasing of terminals. They were all gifted to the city so there was no business relationship, and he left the running of his business to his lieutenants and took himself out entirely of the day-to-day running, and he was extremely diligent about that. The only involvement he would have, since he was a major owner and remained a major owner, was over some very large decisions, like buying and selling things. The rest of his assets were held in widely diversified funds, like index funds, except for some investments where we did create a blind-like trust, and that again was approved by the conflict-of-interests board. A lot of care and attention was put in to avoid even a suggestion or appearance of conflict with regards to his holdings, which far exceed those of Mr. Trump, although obviously Mr. Trump’s responsibilities will be greater than being mayor of New York.

Venook: It sounds to me like one of the big steps that a lot of previous politicians have taken is to diversify their interests.

Gross: It’s basically been one or the other or a combination of both. It's either put them in blind trusts with an independent trustee, and/or put them in diversified holdings. I don’t know why more people don’t do that, frankly. I don't know why every member of Congress doesn't do it.

Venook: So a blind trust is something with a lot of precedent, but it’s not strictly necessary.

Gross: There’s a lot of precedent, and a lot of rules. But the interesting thing is that, while the rules apply to every individual in the executive branch, the cabinet and undersecretaries on down, they don’t apply to the president or the vice president, the only elected officials, so he can set up whatever kind of trust he wants. He doesn’t have to go to the Office of Government Ethics and say, “Does this meet all your standards?” because there are no rules that apply to him.

Venook: Is that because of how large the scope of the president’s interests is?

Gross: I think that’s largely it. It actually has a long historical basis, even going back to the 1780s when the first ethics laws were really coming into play. Even issues of slavery were in play, and presidents had to advise on issues involving slavery while they owned slaves. There was a recognition that the powers of the presidency are so vast that it was impractical to try to regulate conflicts. There was also a hope and an expectation and a sense that a president would rise above such issues.

Venook: What would the potential ramifications be if at some point in the Trump presidency he was found to be acting in a manner that was intended to support his business interests?

Gross: I don't know that there would be any implications, since the conflict rules don't apply to him. I think that if he were to be using confidential information, if he had knowledge that the FDA was going to approve a drug, and he bought a company or shares in a company that had that drug, that would be a serious violation of the law. But if he tries to get favorable treatment for some property or put a national park next to a golf course that he may own that would increase its value, I don’t know if that would violate any rule. Now, if he directs an employee of the executive branch to give a sweetheart deal to some property that he owns, perhaps that employee would be operating outside of the proper bounds of what is necessary, but the conflict-of-interest laws themselves do not apply to the president.

Venook: A lot of Trump’s business as it currently exists involves branding, the licensing of his name for use on businesses that he does not personally operate. In your view, how do you think that complicates what is already a very complicated matter?

Gross: It is a very complicated matter, and a very serious matter that needs to be dealt with, and not by simply handing over the reins of his company to his children. In terms of his name, his name is his name, and if it helps the valuation of some hotel that he owns or some golf course that he owns because he’s now the president of the United States, good for him. I don’t necessarily think that's a problem. But if there’s government contracting that goes on that favors Trump properties or something like that, it would have to be very carefully done, at arm’s-length fashion, and I would expect that he wouldn't go near it. A bit of a wall would have to be built around it, which I would expect he would do. But even there, I think the issues would be more political than legal.

Venook: Are there precedents of people who have run afoul of these rules?

Gross: Not for presidents that I can think of. I think there are examples where people have used their official positions to fatten their wallets, to engage in contracts that would benefit them, and there are also examples in the legislative branch that have not been prosecuted.

Some of the more pernicious areas, at least from an appearance standpoint, are the international holdings in countries that are not so friendly. We didn't know that he had a large indebtedness to the Bank of China until The New York Times did reporting on this, and Kurt Eichenwald with Newsweek did a lot of good reporting on holdings in Russia and Azerbaijan and Turkey and other places where we have either unfriendly relations or very tricky relations on a number of topics. In many of those countries, the businesses are directed or owned in some fashion by the government, and that’s a little worrisome as well, to make sure that there’s no entanglement of his business activity with his official activities. Those are the ones that I would seek to sell first. Just rid yourself of those assets, and if it's a debt situation, which we don't have much (or any) visibility of because he hasn't disclosed his tax returns, there’s a serious potential conflict with that indebtedness.

Some people have brought up the Emoluments Clause of the Constitution, which prohibits a foreign leader from giving a gift to the president. If a business or enterprise that’s owned by a foreign government confers some benefit or favor on one of Trump’s businesses, it could violate this Emoluments Clause. I’ve never seen it applied, but it’s an interesting point. I don’t know of any statutory law that says if you violate that provision of the Constitution, you could be subject to criminal action, but I suppose it could be used for impeachment. This is something that Richard Painter, who was Bush’s ethics guy, came up with, and discussed it. It all seems rather interesting, but at this point, remote.

Venook: Do you think that if issues arise, they’re more likely to come from his domestic holdings or his international holdings?

Gross: Probably international, although there's more domestic. But who knows?

Venook: So your prescription to avoid a conflict of interest would be putting the business under a blind trust and making sure that the investments are diversified in a way where there's not going to even appear to be any conflict of interest.

Gross: That would be ideal. If he could actually sell his holdings and put it into a diversified fund, he wouldn't even need a blind trust, but that’s not realistic. He has an interest in over 500 businesses, maybe more, and the nature of his investments, many of them are illiquid, they’re golf courses or hotels. Many of them he just has his name on, but some of them he does own, and that’s not easily sold overnight. But certainly debt that may be held internationally, or property that may be held in these issues, that’s where I would focus my attention at first. The idea that you can just flip your business over to your kids and say, “Have a good time”—that doesn’t resolve any of these issues.