Wednesday, January 11, 2017

The Nepotism of Donald Trump: In and Out of Government

Jerod Kushner/source unknown
This past week President Trump has appointed his son-in-law, Jared Kushner, as a senior White House adviser. There is also talk that Trump wants to involve his daughter Ivanka and one or more of his sons in the administration. Is that bad? Is it allowed?

The Life Blood of Closely Held Businesses 

Nepotism, of course, is the life blood of family businesses. My wife's family were all doctors at Kaiser in Northern California.  Not nepotism exactly, but surely more than coincidence.  They are  excellent people and have contributed greatly to their organization. My sister and broter-in-law work in a family business (his side of the family). They are energetic and competent entrepreneurs. They earn their keep. My cousins in Switzerland own a family business, a hotel in the mountains. They are in the fifth generation. They are industrious and responsible people.

Nothing wrong with this kind of nepotism that I can see. If you own the business you can run it for the benefit of your family as you will.

Many of my construction company and developer clients work in closely held family businesses. One of these is a multi-billion dollar venture. Sons and daughters don't get to run these businesses unless they are qualified. Parents often have higher expectations of their off-spring than they might have of regular employees. And, in the final analysis, offspring and in-laws usually need to prove their mettle in order to succeed. They must earn their stripes.

Not to say that nepotism in closely held businesses doesn't have its down-side.

It is joyless to be stuck with a spoiled, under-performing, over-entitled scion in any venture. Parents might keep or promote underperforming kids just because they are family. Family members may get paid more than others similarly situated, fostering resentments. Family ties might keep competent people from rising in an organization, harming the organization. Nepotism undermines organizations when family members are promoted over others with more merit. Still, if you own it and you want to run it into the ground by enabling your lazy, incompetent family members to rest on your laurels... knock yourself out.

With publicly held corporations, not Trump's situation, we frown on nepotism. Publicly traded corporations are owned by the shareholders, and for this reason most publicly held corporations have rules prohibiting nepotism by corporate management. Management needs to hire the best talent at the best price for the benefit of shareholders: when they hire family there is, at minimum, the suspicion that this may not be the case.

The Model of Selfless Government Service

And with public office, as Trump will hopefully learn, things are very different. Public officials don't own government: they are trustees for the public good. There is no board of directors to look out for the voters, as there might be for shareholders in a publicly traded corporation. All we have is the law and the courts.

The word "nepotism" derives from the latin for "nephew." It alludes to the practice of medieval popes who appointed nephews as cardinals in order to cement family dynasties over the papacy. The Borgias dominated politics and the church in Italy in the 15th and 16th centuries. It's an example of nepotism gone bad.

Nepotism in public office naturally leads to corruption. Think of Saddam Hussein and his sons in Iraq; Qaddafi and his sons in Lybia; the Assad clan in Syria. Ulysses S. Grant (president 1869-1877) appointed his cousin Silas A. Hudson as minister to Guatemala, his brother-in-law Reverend M.J. Cramer as consul at Leipzig, another brother-in-law, James F. Casey, as Collector of Customs in New Orleans, Louisiana, a third brother-in-law, Frederick Dent, as White House usher. Casey enriched himself by stealing customs fees and Dent enriched himself by selling insider information.  According to Wikipedia, 40 Grant relatives prospered financially by leveraging his position as President.

A consular position in Guatemala (in 1870) seems harmless enough. Yet we don't want our elected officials handing out public perks to family and friends. Even if the service provided is competent and earnest, allowing family and friends to enrich themselves from their relationship to elected officials is not healthy for democracy: it undermines competence and merit, it results in government not getting good value, it consolidates and creates family power and dynasties that can be abused.

It undermines trust in government.

We award public works projects through a competitive and open process not only because it provides the best value, but because we feel all businesses similarly situated should have the same opportunity to compete for government business. Government business belongs to the people, it does not belong to elected public officials to hand out as favors to friends and family.

Our ideal is selfless government service for the public good. It's Jefferson's vision of Roman republican virtue: the most competent landholding citizen leader assuming command of the army in time of war for the public good, only to humbly retreat to private life as soon as the need subsides.

In our era of career politicians, where politicians parlay political careers into fortunes through subsequent lobbying or speech-giving, our motives and incentives for public service are not always so pure. Prohibiting elected representatives from handing out jobs, perks, and business to family and friends is one way to keep self-dealing in check. It's a nod to our idealism.

Nepotism undermines government structures because family members, no matter their experience or station, may be perceived as having the ear of the family member who hired them, and having disproportionate influence stemming from family ties instead of merit. It causes resentment. It undermines morale. It undermines clear lines of authority.

For all these reasons, most states have laws prohibiting nepotism. Federal agencies have rules against nepotism. And in December 1967 Congress passed a law to prevent it.

When president John F. Kennedy appointed his brother (Robert Kennedy) as attorney general and his brother in law (Sargent Shriver) to head the Peace Corps, there was an uproar.  The New York Times was very critical of Robert Kennedy's appointment as attorney general: “It is simply not good enough to name a bright young political manager, no matter how bright or how young or how personally loyal, to a major post in government.”  The Nation called it "the greatest example of nepotism this land has ever seen."

Seven years later Congress passed a law prohibiting any officer (including the president) from appointing a family member in any agency in which he or she is serving. The law can be found at 5 U.S.C 3110. But Rep. Neal Smith (D-Iowa), who sponsored the bill, denied he was motivated by the Kennedy appointment and said he was concerned about a culture in the U.S. Postal Service of placing wives on the payrolls in small rural offices around the country.

Does the Anti-Nepotism Law prohibit Trump from Appointing his Family Members?

Kathleen Clark, a government ethics expert at Washington University believes these family appointments would pretty clearly violate the anti-nepotism law. See Washington Post 1/10/17.

Here is the relevant part of the law (5 U.S.C. 3110):
(a) For the purpose of this section—(1)“agency” means—(A) an Executive agency;....(2) “public official” means an officer (including the President...)... in whom is vested the authority ... to appoint, employ, promote, or advance individuals... in an agency; and (3) “relative” means, ... an individual who is related to the public official as ... son, daughter, ... son-in-law..... 
(b) A public official may not appoint ... any individual who is a relative of the public a civilian position in the agency in which he is serving. 
(c) An individual appointed, employed, promoted, or advanced in violation of this section is not entitled to pay, and money may not be paid from the Treasury.
The president is explicitly mentioned as one of the "public officials" bound by the law. By its plain meaning, this statute would seem to prohibit Trump from appointing his son-in-law, his daughter, or his sons from working in the White House, or in any other executive branch agency.

But when it comes to the law, bad facts make bad law, and things are not always so clear....

Association of American Physicians and Surgeons v. Hillary Clinton 

As we know, after John Kennedy, Bobby Kennedy, and Sergeant Shriver (which predated the statute), and before Trump and his kids, there was Bill and Hillary. In January 1993 (i.e. after the anti-nepotism statute was in effect) Bill Clinton, as president, established a task force on national health care and he put Hillary in charge of this task force. The task force was directed to draft health reform legislation and to submit this legislation to Congress within 100 days of the administration taking office.

Just like Jared Kushner's appointment now, this drew legal scrutiny then.

The issue presented by the case was whether the Clinton task force meetings were subject to the notice and open meeting requirements of the Federal Advisory Committee Act. The FACA was aimed at reigning in the proliferation of numerous advisory committees staffed by industry lobbyists and other individuals not employed full time by the government. Any committee staffed by such persons, Congress said, has to provide notice of its meetings and conduct its meetings in public. 

The Clinton task force held one public meeting on March 29, 1993, and subsequently met 20 times behind closed doors in April and May 1993. The task force completed its review, made its recommendations to the President, and ceased operations by May 30, 1993.

In the meantime, however, opponents of the Clinton initiative sued to be admitted to Hillary's closed-door meetings. The court concluded that the task force meetings were not subject to the notice and open meeting requirements because all of its members, including Hillary Clinton in her capacity as First Lady, qualified as a full time employee of the federal government under the FACA exception to the notice and open meeting requirement.

The plaintiffs in Association of American Physicians and Surgeons v. Clinton also argued: hey, if Hillary is a full-time officer or employee of the federal government appointed by her husband to oversee this task force, and hence exempt from FACA, isn't this then a violation of the nepotism prohibition of 5 U.S.C. 3110?

The anti-nepotism law, although it specifically mentions the President, does not include an exception for the President's spouse. The court, therefore, had to resolve whether Congress in passing the anti-nepotism law intended the statute to apply to the President's spouse. And the court concluded, no, the president's spouse is exempt from the prohibition.

In carving out an exception for the president's spouse from the nepotism law, the court pointed to the traditional supporting role of First Ladies--they have always been active in the administrations of their husbands. And the court pointed to the fact that Congress has specifically authorized the President to pay his spouse for such services as might be helpful to the president in carrying out the president's duties. 3 U.S.C. Sec. 105(e).

The presidential spouse exception for the anti-nepotism law seems uncontroversial and a proper interpretation of 5 U.S.C. 3110.

In creating this exception for the president's spouse, however, the court also questioned whether the nepotism law applied to the President at all

Here is what the court said: 
The President's implicit authority to enlist his spouse in aid of the discharge of his federal duties also undermines appellees' claim that treating the President's spouse as an officer or employee would violate the anti-nepotism provisions of 5 U.S.C. § 3110. That section prohibits any "public official" from appointing or employing a relative, such as a spouse, "in the agency in which he is serving or over which he exercises jurisdiction or control." Id. § 3110(b). Although section 3110(a)(1)(A) defines agency as "an executive agency," we doubt that Congress intended to include the White House or the Executive Office of the President. Cf. Franklin v. Massachusetts, --- U.S. ----, ----, 112 S.Ct. 2767, 2775, 120 L.Ed.2d 636 (1992) (holding that President is not "agency" for purposes of Administrative Procedure Act); Meyer, 981 F.2d at 1298 (President's advisers are not "agency" under FOIA); Armstrong v. Bush, 924 F.2d 282, 289 (D.C.Cir.1991) (President not APA "agency"). So, for example, a President would be barred from appointing his brother as Attorney General, but perhaps not as a White House special assistant. Be that as it may, it is not reasonable to interpret that provision to bring it into conflict with Congress' recognition of (and apparent authorization for) the President's delegation of duties to his spouse. The anti-nepotism statute, moreover, may well bar appointment only to paid positions in government. See 5 U.S.C. § 3110(c). Thus, even if it would prevent the President from putting his spouse on the federal payroll, it does not preclude his spouse from aiding the President in the performance of his duties.
Association of American Physicians and Surgeons v. Clinton, 997 F.2d 898. 

This is dicta, says Kathleen Clark. That part of the Association of American Physicians and Surgeons case goes beyond what was needed to decide that case and thus it should have no binding effect on later courts. We look at the plain meaning of the statute, Clark says correctly. When we look at the plain wording of this statute, we must conclude: of course it applies to the president; the president is explicitly mentioned ("'Public Official' means an officer (including the President....)!" And the Executive Office of the President, including his immediate staff, the White House Staff, and the Office of Management and Budget, are usually thought of as making up an "Executive Agency."  For example,  5 U.S.C. Section 551(a) defines "agency" as any "authority of the government of the United States." 

That and $3.50 will buy you a latte at Starbucks, as they say. 

Given the above language in Association of American Physicians and Surgeons v. Clinton, it is an open question whether a court would rule Kushner's appointment illegal. People can disagree over what the correct ruling should be, or what the more likely ruling may be, but no one will know unless the issue is framed and brought before a court. How this would happen or who might bring such a case is unclear. 

In order to bring a case to challenge the Kushner appointment any plaintiff will need to demonstrate standing; i.e., a plaintiff will need to demonstrate a connection to the action and some particular harm to him or or her that the court might address. This would seem to rule out general citizenship or taxpayer standing. Who can demonstrate a real harm or impact from the appointment of Kushner as an advisor? The Democratic party? A citizen voter? A member of Congress? Legal standing is not intuitively obvious in such a case.


The Kushner appointment presents a real concern of nepotism. This concern will be greatly heightened if Trump's children also take a direct role in the administration. But there is no clear answer to whether Trump's action is illegal. The breathless way in which some media are framing the issue, that this appointment is a litmus test for whether Donald Trump "will follow the law," is wrong. See, e.g. The Forward. The legality of it is very much an open question. And whether this issue can ever be properly framed and brought to court presents complex and interesting legal issues. 

In the meantime, Kushner is a presentable young man. He instills a lot more confidence of competence and level-headedness than Donald J. Trump does. We would have been better off with Hillary, but my guess is we're better off with Kushner in the White House than not.

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