Giuliani: President Trump will be exempt from conflict-of-interest laws

How President-elect Donald Trump will handle his extensive businesses and financial holdings — and the potential conflict of interest that comes with them — when he gets into the Oval Office remains an open question.

Trump has said his children will manage his business dealings. Many presidents in the past have put their assets in a blind trust, which is when an independent trustee manages another person’s assets without the person’s input.

But Trump doesn’t actually have to do any of this because the financial conflict-of-interest laws don’t apply to him as president, said former New York City Mayor Rudolph Giuliani, who is reportedly on the short list for a seat on Trump’s cabinet.

"Well, first of all, you realize that those laws don't apply to the president, right?" Giuliani told CNN’s Jake Tapper Nov. 13. "So, the president doesn't have to have a blind trust. For some reason, when the law was written, the president was exempt."

Giuliani has the law pretty much right. Trump, as president, has no legal obligation to detach himself from his businesses and financial interests.

The law at issue is Title 18 Section 208 of the U.S. code. It says federal executive branch employees can’t participate in government matters in which they or their immediate family has a financial interest.

Because of this law, some federal employees put their investments in a blind trust. This allows them to sidestep the regulation and participate in a matter that might otherwise pose a conflict of interest.

But the president and the vice president, despite being executive branch employees, are exempt. According to the law’s definitions, Title 18 Section 208 does not apply to them, nor does it apply to members of Congress or federal judges.

"It appears that presidents have mostly escaped the normal web of ethics and conflict-of-interest laws," said Scott Amey, general counsel at the Project on Government Oversight, a nonpartisan government accountability watchdog.

Amey added that presidents are allowed to accept gifts in many cases, too.

It’s been this way since at least 1974, when the Justice Department issued a letter saying Title 18 Section 208 did not apply to the president. Congress expressly codified the exemptions in 1989.

In the 1974 letter, the Justice Department said the legislative history of this conflict-of-interest provision indicated that it was never intended to apply to the president. Additionally, the Justice Department said placing conflict-of-interest laws on the president could constrain him in a potentially unconstitutional manner, though it did not give specific examples.

"As the head of the executive branch, the president may not be able to — and arguably under the Constitution it might not be possible to require the president to — recuse from government decisions," said Richard Briffault, a professor of legislation at Columbia Law School.

While Title 18 Section 208 is the primary conflict-of-interest provision, there are other relevant rules, including a couple that don’t exempt the president.

Trump and Vice President Mike Pence will have to disclose their finances, which is required of all high-level federal employees, Briffault said. But the disclosures are not as detailed as federal tax returns, which Trump has not released.

Then there’s the Constitution’s Emoluments Clause, which bans U.S. government employees from accepting presents or compensation from foreign governments, noted Kathleen Clark, an expert on legal ethics and a law professor at Washington University in St. Louis.

The Trump Organization has numerous foreign ties, including several overseas real estate deals with possible foreign government connections. In 2012, for example, Turkish Prime Minister Recep Tayyip Erdogan attended a ribbon cutting ceremony for Trump Towers Mall in Istanbul.

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"If any of Trump’s business arrangements involve the receipt of payments from foreign governments, I believe that he, or his entities from which he receives money, would have to forgo those payments, or he would have to detach from those entities," Clark said.

But it's not fully clear that presidents are bound by the Emoluments Clause, and no court has weighed into answer this question.

The way the clause is constructred —  that it doesn't specify the president, unlike other provisions in the Constitution, for example — and the fact that President George Washington himself took gifts from the French government without asking Congress for permission, together make a good case that it doesn't apply to presidents, said Seth Barrett Tillman, a professor at Maynooth University in Ireland who has studied the clause.

Our ruling

Giuliani said financial conflict-of-interest "laws don't apply to the president, right? So, the president doesn't have to have a blind trust."

The president is, in fact, exempt from the primary conflict-of-interest provision in the U.S. code. So presidents do not have any legal obligation to put their financial holdings in a blind trust or to detach themselves from their financial interests in any way.

As president, Trump will have to comply with financial disclosure requirements, however, and it's possible he is constrained by a clause in the Constitution regarding income from foreign governments.

We rate Giuliani’s claim True.

Update Jan. 12, 2017: We have updated this story to add more information about the Emoluments Clause. Our rating remains unchanged.

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Rudy Giuliani

Former New York Mayor

In CNN's State of the Union

November 13, 2016

2016-11-13