President-elect Donald J. Trump owns many properties and companies worldwide. A conflict of interest exists if a presidential decision shaping national policy could benefit him personally. A blind trust is a customary way of hiding assets from an owner to prevent a conflict or the appearance of a conflict of interest.
An article by Dean Baker on the Center For Economic and Policy Research site, and commentary from Russ Abbott and several others, inspired my thinking on a route to divestiture.
There are complications with divesting Mr.Trump’s assets to establish a blind trust. Accurate estimates of the values of major commercial properties can escape even highly experienced appraisers, even as auctions sometimes yield prices of great works of art that surprise professionals. The properties have unique characteristics, including conditions affecting the seller, and the potential buyers have varied perceptions, opportunities and constraints.
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| Photo: trumphotels.com/las-vegas |
With the Trump properties, the brand name influences the value of the asset. And tax effects may reduce the value the seller can realize in an early sale, versus several years or indefinitely in the future.
A strategy something like the following could fairly accommodate these considerations:
1. Appoint 3 Trustees agreeable to Mr. Trump and certified professionally capable by the General Accounting Office, with the Senate Ethics Committee having general oversight. The 3 Trustees manage the divestiture and conveyance of the proceeds to the blind trust. They (and their staff) organize the Trump assets, properties and companies into suitable accounting entities to “package” the assets for sale. They prepare financial statements and projections for each asset. They hold sealed-bid auctions for each of the entities. These will be net assets, reduced by the debt they bear. Let the market set the value. Each asset not receiving bids in two years and each asset clearly having negative value would go to its own separate bankruptcy.
2. For each asset, escrow all related income occurring after Dec 31, 2016. The buyers of the properties will receive the accumulated income. At the time of the sale, the Trustees will estimate the income tax effect, based on the difference in income taxes for Mr. Trump between (hypothetically) holding the asset and selling it, and the tax effect will be escrowed and sold as part of the property. The escrow will accomplish separation of Mr. Trump from the assets. Mr. Trump will receive no income from the asset after Dec 31, 2016. Bidders at the auctions will need several months to inspect the assets, estimate incomes, and kick the tires before they bid. Prudent management of the distribution from escrow could require a few months after the sale. Disposition of all assets could possibly take three or four years.
3. With great publicity, the Trustees will change the brand of each property from "TRUMP" to "T1" on Dec 31, 2016, with new signage going up promptly. Buyers may continue operating under the "T1" brand. The "Trump" brand will divest for $1 to Trump's children, which they may not use before 2037. Thus everyone will know the "T1" brand labels the divested Trump asset.
4. For those currently using the "TRUMP" brand under license, their right to use the brand will cease at the next scheduled fee payment date, and they will not pay license fees after Dec 31, 2016.
5. For each asset, the Trustees will govern business operations after Dec 31, 2016.
6. The Trump family may not buy any of the assets before 2037.
What do you think?
Sources:
Dean Baker, “Ending Trump’s Conflict of Interest Problem in three Easy Steps”, Center for Economic and Policy Research (Nov 22, 2016) http://cepr.net/blogs/beat-the-press/ending-trump-s-conflict-of-interest-problem-in-three-easy-steps
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