Trump's Complex Business Ties Could Set New Precedent

Donald Trump would be navigating uncharted waters if he were to win the presidential election in November. WSJ’s Monica Langley spoke with the presumptive Republican nominee about who would run his business and how he would handle potential conflicts of interest should he enter the Oval Office. Photo: Phillip Montgomery for The Wall Street Journal

NEW YORK—Back in his 26th-floor office after a recent campaign swing, Republican presidential candidate Donald Trump sat down at his desk and began signing a two-inch stack of checks, including ones for $ 10,000 for fuel, $ 21,000 for concrete and $ 99,000 to a contractor at a hotel construction site.

Mr. Trump personally oversees many of his routine business expenses this way. Yet he also says he would separate himself from that business empire, and the many potential conflicts of interest it might create, by putting his ownership into a blind trust, most likely with his adult children as its trustees, if he were elected president.

“I wouldn’t mind a blind trust,” he said in a recent interview. “I would be doing one thing. My total focus would be on making this country great again. I wouldn’t even think about the company.”

As Mr. Trump heads into the general election, the conflicts-of-interest question is big and complex. That is because the Trump Organization, which is owned solely by him, consists mostly of operating assets, as opposed to passive investments. Hundreds of business entities, including some in foreign countries, own or manage hotels, commercial and residential real estate, golf resorts and even part of the reality TV show “The Apprentice.”

“Trump’s empire would pose unprecedented conflicts of interest due to the size of its holdings, privately held nature of the family-run business, and concentration in one industry,” said Richard Painter, University of Minnesota law professor who was the White House’s chief ethics lawyer for President George W. Bush.

“A blind trust would never work in Trump’s case, because his assets are known, not blind, and children aren’t independent trustees,” he added, noting that other modern-era wealthy presidents, such as Franklin D. Roosevelt and John F. Kennedy, were “old-money with diversified holdings” that didn’t directly manage businesses the way Mr. Trump does.

No federal law would require Mr. Trump, famous for putting his name on his swath of enterprises, to remove himself from running his empire, ethics experts say. But Mr. Trump, who has financed some of his real estate with debt and expanded his organization globally, would be closely scrutinized for any policy stance that would affect banking, real estate or the foreign countries where his properties sit.

Mr. Trump dismisses those concerns, saying his business dealings wouldn’t influence how he would approach the banking or real-estate sectors or foreign policy. He also said he would let other executives run the trust if his children would be considered too close to him to serve as trustees.

“I’ll do whatever I have to do,” the New York billionaire said in Trump Tower recently. “I’ll do whatever makes people comfortable. It’s very easy.”

Mr. Trump and a small coterie of executives and three of his adult children—Donald Jr., Ivanka and Eric—maintain a tight grip on all major assets, which are kept on a three-page list. Even though Mr. Trump controls outgoing expenditures, he has transferred most of the day-to-day management of the empire’s strategy and operations to those three children.

But Mr. Trump seems unable to help himself from meddling in operations. When he recently stopped by the Old Post Office site in Washington, D.C., which he is renovating into a luxury hotel, he inspected the finishes on wall moldings and queried the hotel manager on the size of a reception area. “Is it too late to change it now?” Mr. Trump asked.

Yet, the adult children are running much of business, including the 100% owned-and-operated properties. Ivanka Trump oversaw the $ 350 million acquisition and renovation of Trump National Doral, the 800-acre Miami hotel and spa, while her brother Eric supervised improvements to indoor and outdoor public spaces throughout its golf resort.

Donald Jr., who runs most of the company’s commercial leasing, has pushed rents higher and occupancy to 97% at the commercial office building 40 Wall Street in a “re-set” with new leases on 750,000 square feet of the building, according to a Trump executive. By far, the most lucrative commercial lease in a Trump-owned property is the street-level Gucci store at Trump Tower on Fifth Avenue, which pays $ 18 million in annual rent, the executive said.

Eric and Ivanka Trump at the Trump Organization in Midtown Manhattan on June 21. ENLARGE
Eric and Ivanka Trump at the Trump Organization in Midtown Manhattan on June 21. Photo: Pearl Gabel for The Wall Street Journal

The Trump empire also makes money on real estate it doesn’t own. Trump International Hotel and Tower in Vancouver, set to open in August, is expected to provide a sizable annual revenue stream from management fees as the hotel operator and from licensing fees for real-estate sales of the condominiums.

As Mr. Trump continued signing his stack of checks, which he occasionally does on his private jet when on the campaign trail, Mr. Trump added: “Signing checks is just one way…to know what’s really going on…I sign my own checks as much as possible.”

The potential for conflicts abounds. In his campaign financial statement, Mr. Trump disclosed loans and personal guarantees ranging from $ 315 million to $ 500 million from a total of 10 creditors. “The loans are a tiny proportion of my net worth,” he said.

The Trump Organization now has five licensing deals for mixed-use luxury properties in India and other hotel, residential and development projects around the globe, Ivanka Trump said. Foreign interests provide revenue from management and licensing fees because Mr. Trump doesn’t have ownership stakes, with the exception of Trump properties in the U.K., which are wholly owned, she said.

Democrats have said Mr. Trump’s conflicts of interest are already on display in his public comments. He questioned the integrity of a federal judge handling a civil case against his now-defunct Trump University, based on the judge’s ethnicity, and he cited an Internal Revenue Service audit of his taxes as a reason he won’t release his tax returns. Last month, he commented on the U.K. vote to leave the European Union while in Scotland promoting a newly renovated golf resort.

Significant conflicts of interest also arise over presumptive Democratic nominee Hillary Clinton and her ties with the Clinton Foundation, ethics experts say. “Clinton’s conflict also would be unprecedented with the scale and breadth of her family foundation, because it has been receiving substantial gifts from private parties, including some from outside the United States,” said Mr. Painter, of the University of Minnesota. He suggests both candidates separate themselves and their family members from their organizations.

Mrs. Clinton “stepped down from the foundation just prior to launching her campaign last year,” a spokesman said. Former President Bill Clinton has said the foundation’s work and structure would change if his wife were elected president.

Mr. Trump dismissed the idea of the need for a complete undoing of his family business. “It’s almost like there is no conflict,” the businessman said. “The better I do as president, the better it is for my business—and everybody’s business.”

Write to Monica Langley at [email protected] US Business

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