(Bloomberg) -- Donald Trump is the richest person to become US president, and his far-flung business empire has only expanded since he last held the post. Then as now, he is wont to name other rich people to positions of power. He’s nominated several super-affluent individuals to lead government departments — hedge fund manager Scott Bessent for Treasury, Cantor Fitzgerald LP chief executive officer Howard Lutnick for Commerce, North Dakota Governor Doug Burgum for Interior, World Wrestling Entertainment co-founder Linda McMahon for Education, and oil and gas executive Chris Wright for Energy. And he’s named the world’s richest person — Elon Musk — to a senior position outside the cabinet.
Because having sizable financial holdings can present conflicts of interest for people working in government, US ethics laws require them to disclose assets and, in many cases, dispose of them. In the case of some of the millionaires around Trump, that can make for gigantic sell-offs. During his first term as president from 2017 to 2021, some of Trump’s wealthy appointees ran afoul of government ethics officials for failing to fully follow the rules. Trump himself was criticized for not observing the tradition of presidents before him in distancing himself from his assets.
With conflicts of interest again shaping up to be an issue in a Trump presidency, here’s what to know about federal ethics rules and how they might impact the new administration taking office Jan. 20.
What are Trump’s potential conflicts of interest?
Trump’s business empire has long been focused on real estate. His enterprises build and sell luxury condos in high rises and resorts, and lend his name to hotels around the world in places such as India, the United Arab Emirates and Indonesia. After Trump left office in 2021, he ventured into the digital assets market, selling nonfungible tokens with his likeness and amassing a virtual wallet that holds at least $1 million in cryptocurrency. He also started up the Trump Media & Technology Group Corp., which owns his social media platform Truth Social and went public in early 2024. He’s now estimated to be worth $6.1 billion, according to the Bloomberg Billionaire’s Index.
Trump’s holdings give those with an interest in influencing the US government – including companies seeking regulatory relief, sovereign wealth funds and well-heeled individuals — opportunities to do business with him. And that, critics say, raises the question of whether Trump the president considers what’s best for Trump the mogul when he makes decisions.
What are the rules affecting the president?
Some laws concerning conflicts of interest apply to the US president while others do not. A president could suffer consequences for violating a related criminal statute — for example, by accepting a bribe or awarding a lucrative government contract to his own company (although decisions about contract awards aren’t usually made in the Oval Office). While the Justice Department has a policy against prosecuting sitting presidents, Congress has the power to hold the president, vice president and other high-level federal officials accountable for crimes, including bribery specifically, through the impeachment process.
The US president, like other high-level government officials, is obliged under the Ethics in Government Act of 1978 to file an annual, public disclosure listing all income sources, assets and debts. Values must be assigned to each item, mostly using broad ranges such as $5 million to $25 million. Some kinds of income — including salaries, management and licensing fees, and partnership distributions — must be reported to the exact value.
Passed in the wake of the Watergate scandal that forced Richard Nixon to resign the US presidency, the act aims to limit conflicts of interest in government, in part by compelling officials to be transparent about their financial interests. It applies to the president, vice president, members of Congress, candidates for those offices, political appointees in the executive branch, and congressional staffers. It also covers civil servants who have the authority to make decisions, though their financial disclosures are not released to the public.
Under the act, the president, vice president and members of Congress aren’t required to divest — that is, sell or give away — their interests in businesses whose operations might be impacted by their decisions in office. Nevertheless, since the law’s passage, every president until Trump either turned over his holdings to blind trusts, which are managed by independent trustees who don’t disclose to beneficiaries how they are managed, or limited his investments to assets such as diversified mutual funds, which are exempt under the law. In his first term, Trump was criticized for not going so far as either of those options.
What is Trump’s approach to ethics concerns?
After Trump was first elected president in 2016, his lawyers set up a trust to handle his business affairs. It was managed not by independent trustees but by Trump’s sons, Donald Jr. and Eric, and Allen Weisselberg, a Trump Organization executive. Its provisions included some measures to mitigate potential conflicts of interest involving Trump, including a ban on seeking new business abroad. Still, government ethics experts said the arrangement didn’t meet the standard set by previous presidents. Shari Dillon, one of the attorneys who drew up the trust agreement, said that even if a blind trust had been set up, Trump would know whether or not he owned Trump Tower, his iconic skyscraper in midtown Manhattan.
Nine days before Trump took the oath of office on Jan. 20, 2017, the Office of Government Ethics, an agency that rarely makes headlines, raised the alarm about the situation. Walter Shaub, then its director, made a rare public appearance at the Brookings Institution to publicly criticize Trump’s decision to hold onto his empire.
“OGE’s primary recommendation is that he divest his conflicting financial interests,” Shaub said that day. “Nothing short of divestiture will resolve these conflicts.” He said that Trump should sell off all his companies and put the money into a blind trust or invest the proceeds in diversified mutual funds. His recommendation was not heeded.
Trump has yet to announce how he will handle his business empire during his second presidency. But his lawyer’s argument against divesting last time — that it would have caused more ethical problems than holding onto his empire — suggests Trump is unlikely to embrace divestment this time. There are only about 11 weeks between Election Day and the president’s inauguration, an incredibly short time to liquidate a business empire that includes real estate, office towers and licensing and management agreements that might be hard to break. Dillon said at the time that a sale would raise the question of whether buyers were paying too much for assets in order to curry favor with Trump.
What are the rules for presidential appointees?
Whereas the president can choose to hold onto his assets, those appointed to high office generally have no such allowance.
The main concern of federal ethics law is to prevent federal employees, including elected officials, from using their positions to benefit themselves rather than the public they serve. Divestiture is a way of removing the motivation to do the former.
If an official responsible for choosing between two fighter-jet designs proposed by competing companies has invested heavily in one of them, it would be reasonable to question her impartiality. If the same official’s money is invested instead in a broad-based mutual fund, her decision on which jet to fund won’t personally benefit her.
New appointees have to develop plans to remove their potential conflicts of interest, and then follow through on them, usually within as little as 90 days. Officials needing Senate approval sign publicly available ethics agreements that include lists of the assets they will divest and when they will do so.
What are the penalties for breaking the rules?
While OGE has no enforcement powers, the US attorney general can bring civil actions against government officials who knowingly file false information or omit relevant information from their disclosures. The maximum fine for doing so is $50,000. Federal prosecutors can also criminally charge an individual who files a false report; a guilty verdict can result in a sentence of up to one year in jail.
If an official refuses to divest an asset, he would most likely face an investigation to see if he violated criminal conflict of interest statutes. If he took part in an official matter that had an effect on the holding, he could face as much as five years in prison.
So will Elon Musk have to sell off his companies?
The short answer is no. Trump appointed Musk and entrepreneur Vivek Ramaswamy to head the so-called Department of Government Efficiency, a body that will work outside of government, advising on ways to reduce spending and regulation. Though Trump did not say so specifically in announcing the effort, it appears that he will create a federal advisory committee for the two men to lead. Such committees exist so that government can draw on the expertise of individuals in the private sector.
Those who serve on such committees are known as special government employees. They can work for the government for up to 130 days per year. Individuals serving in these positions don’t have to sell off their business interests. While they are required to report their financial interests to federal ethics officials, they don’t have to disclose them to the public.
Criminal conflict of interest statutes apply to these positions. Musk would have to recuse himself from discussions and decisions concerning matters in which he had a specific financial interest, such as whether to award a contract to his company SpaceX. But he could participate in more general deliberations, about matters such as tax or trade policy, where the impact of a decision would be broader.
Who is facing big sell-offs among Trump’s nominees?
Trump isn’t the first president to choose high-net-worth individuals for top positions in his administration. What makes him unique is that he’s picked so many. Those he’s named for his second term include:
- Treasury Secretary nominee Bessent, the founder of Key Square Group, a macro hedge fund that aims to profit from broad market swings caused by political or economic events.
- Commerce Secretary nominee Lutnick, a partner in the privately held Cantor Fitzgerald, a global financial firm whose client base includes governments and big banks. He has stakes in brokerage BGC Group Inc. and property firm Newmark Group Inc., both of which are publicly traded.
- Interior Secretary nominee Burgum. He has stakes in venture capital funds, commercial real estate and film production companies, according to the financial disclosure he filed as a presidential candidate.
- Education Secretary-designate McMahon. She disclosed more than 300 holdings when she served as Trump’s Small Business Administrator in his first term and still owns shares in World Wrestling Entertainment, which she co-founded.
- Energy Secretary designate Wright, who owns a stake worth more than $40 million in oilfield service company Liberty Energy Inc.
- Mehmet Oz, the celebrity physician Trump nominated to run the Centers for Medicare and Medicaid Services. During his unsuccessful 2022 campaign for a US Senate seat representing Pennsylvania, Oz reported at least $104 million in assets. They included his television production company and investments in companies such as Amazon.com Inc., Alphabet Inc. and Microsoft Corp.
What are the tax implications when appointees have to divest?
If an appointee is required to sell an asset to comply with ethics rules, she can request an exemption from any taxes she would otherwise owe on capital gains, which are profits from the sale of an investment. As long as she invests the proceeds of the sale in an approved asset — Treasury bills or a broadly-based mutual fund — within 60 days of the sale, she won’t owe any tax on the sale. To get the benefit, the appointee has to request and receive approval from federal ethics officers before the asset is sold.
The tax break only applies to assets an individual is required to sell. If Trump, who’s not required to divest his assets, decided to sell his stake in Trump Media & Technology Group Corp., which has ballooned in value since it was first offered to the public, he would still owe capital gains taxes on the sale.
That’s another reason Trump is unlikely to divest his empire: His tax bill would be enormous.
What were the notable sell-offs in Trump’s first term?
Some of the divestitures in the first Trump term were massive. Gary Cohn, who’d been the president and chief operating officer of Goldman Sachs Group Inc. before serving as Trump’s director of the National Economic Council, had to sell his interests in 20 companies, including the bank and the Industrial & Commercial Bank of China. The series of transactions was valued at as much as $285 million. Trump’s first treasury secretary, former banker Steve Mnuchin, sold off his interests in 43 companies. After they started working for the White House in 2017, the president’s daughter Ivanka and her husband Jared Kushner had to sell assets worth at least $7.8 million to comply with federal ethics rules.
Divestment can be a very complex undertaking. Consider the situation of Rex Tillerson, the chief executive officer of Exxon Mobile Corp who Trump named as his first secretary of state. There was no doubt that his major financial stake in Exxon, a giant energy company with interests all over the world, created conflicts of interest for the nation’s top diplomat. But Tillerson owned more than 2 million restricted shares of stock and stock units in Exxon that weren’t due to fully vest for about 10 years after his appointment, meaning he couldn’t just sell them.
To resolve the issue, Exxon set up an irrevocable trust for Tillerson and paid about $180 million — roughly the value of his restricted shares — into it. The trust started paying Tillerson according to the 10-year schedule that applied to the restricted shares. The arrangement, which severed his interests from those of Exxon, showed how difficult it can be to resolve financial conflicts for wealthy individuals with illiquid assets.
Who other than Trump ran afoul of ethics officials last time?
The Office of Government Ethics publicly criticized Trump’s first-term commerce secretary, Wilbur Ross, for not divesting all his holdings by the deadline, including at least $20 million worth of shares in Invesco, an investment management company. The agency said his refusal to do so “undermined public confidence” in the administration. The agency rejected Ross’ next financial disclosure. It does that only when a filer is either under investigation, not in compliance with ethics laws, or has filed a report that it can’t verify.
The Commerce Department’s Office of Inspector General investigated Ross while he served as secretary. It released a 152-page report in 2020 that examined in detail all potential violations of the conflict of interest statutes posed by his assets, including those he held onto after he said he would divest them as well as some that he was allowed to keep. It concluded that Ross didn’t intentionally break federal ethics rules.
OGE rejected a disclosure filed by Mnuchin related to a film production company owned by Louise Linton. Mnuchin sold his stake in Stormchaser Partners LLC, worth at least $1 million, to Linton in 2017 when she was his fiancée. When they married she retained her stake, which created a conflict for him. Also, OGE criticized Mnuchin for joking in a public appearance in March 2017 that parents should take their children to see The Lego Batman Movie, produced by Ratpac-Dune Entertainment LLC. At the time, Mnuchin held a stake in that company, though he divested it two months later. Government officials aren’t allowed to promote private interests in their official capacity. Mnuchin later apologized for the comment in a letter to OGE.
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