Donald Trump's business choices spark fears of conflicts of interest

Donald Trump's second administration risks being plagued by potential conflicts of interest given the sprawling business and financial interests of several cabinet picks and allies, ethics watchdogs and experts warn.

Trump's Cabinet is shaping up to be one of the richest on record after bringing in a number of financiers and business executives, including nominees Scott Bessent for Treasury Secretary, Howard Lutnick to lead of the Department of Commerce and Chris Wright as Secretary of Energy. Elon Musk, the richest man in the world, has also become a close advisor and confidant of the president-elect.

It is not uncommon for top officials from American business and Wall Street to join the U.S. government. Goldman Sachs' Hank Paulson was Treasury secretary in George W Bush's administration, and ExxonMobil chief Rex Tillerson served as secretary of state during Trump's first term.

But critics say the intersection of business interests and government policy during Trump's second term could be more complex and potentially problematic than under previous administrations, increasing the risk that government ethical standards will be flouted or ignored .

We are potentially facing the greatest ethical cataclysm in the history of our government, said Walter Shaub, former head of the Office of Government Ethics, a federal agency. There is no reason to believe that these potential conflicts of interest will be resolved.

Elon Musk, left, and Donald Trump. Tesla's CEO has lashed out at government agencies, which he sees as having crippled his businesses. Brandon Bell/Reuters

Brian Hughes, Trump's transition spokesman, insisted the new administration would play by the rules. All candidates and appointees will respect the ethical obligations of their respective agencies, he told the Financial Times.

The Trump transition team announced Tuesday that it signed an agreement with the Biden White House several weeks late that included an ethics plan for those involved, which will meet requirements for staff to smoothly integrate into the Trump administration.

Lutnick said he would divest my interests in these companies to comply with government ethics rules and would not expect any deals involving the sale of shares on the open market.

Bessent, a hedge fund manager and founder of Key Square Group, and Wright, chief executive of Liberty Energy, did not respond to a request for comment.

The Trump transition team declined to say whether the nominees had submitted to the OGE a financial disclosure form that is required for all cabinet members and would begin the process of reaching an agreement on recusals and divestments necessary.

There is concern that the business and financial interests of Trump's nominees are so broad that it is very difficult to separate them from government business.

Added to this are fears that the Justice Department, under Trump, will choose not to prosecute any violations of conflict of interest laws. The president-elect has called for prosecutions against his political opponents, leaving some lawyers to fear for the department's independence.

Daniel Weiner, director of the Brennan Center for Elections and Government Agenda, said: “The concern isn't necessarily about people's backgrounds, I think it's more about whether this administration is going to take conflicts of interest seriously and avoid conflicts of interest.

If confirmed, Bessent, Lutnick and Wright will play critical roles guiding the nation's economic, trade and energy policies in areas Trump has pledged to make major changes to, including tax cuts, tariffs radical customs measures and deregulation that will have a broad impact on businesses and markets around the world. the world.

Archon Fung, a professor at the Harvard Kennedy School, said the concern for candidates who are businesspeople is that because of their experience in the industry, they will either be beholden to a… network of relationships that will affect their judgment of what the project will be. Public interests demand, otherwise they will have completely absorbed a particular point of view, rather than the various views on what would be good… policy.

Howard Lutnick, pictured, is Donald Trump's choice to lead the Commerce Department Evan Vucci/AP

Musk's role as co-chair of Trump's proposed Department of Government Effectiveness, or Doge, is expected to come under particular scrutiny. The billionaire owns X, the social media company as well as Tesla, the electric car maker and SpaceX, the space exploration group.

Trump has charged him with cutting government spending and increasing the productivity of federal agencies, including some that have multibillion-dollar contracts with business moguls.

He has previously denounced government agencies, including the Securities and Exchange Commission and the Federal Aviation Administration, which he sees as having crippled his businesses. Tesla, from which Musk derives most of his wealth, has also clashed with the Environmental Protection Agency.

Because Doge would be an independent agency, Musk is not subject to the same ethical rules and laws as federal officials, but his heavy involvement in government policy raises concerns about possible conflicts of interest.

Kathleen Clark, a law professor at the University of Washington in Missouri, said: “This venture by Musk is simply an attempt to circumvent government ethics laws while still being able to wield enormous government power.

Musk did not immediately respond to a request for comment.

Chris Wright, chief executive of Liberty Energy, has been chosen to lead the energy department. Lucas Jackson/Reuters

Divestments that might be necessary for Trump's nominees to meet ethical standards won't necessarily be a financial blow and might even be beneficial. If nominees are forced to sell financial assets, the government issues them a certificate of transfer which allows them to defer capital gains tax indefinitely.

Deferral can be lucrative if Congress passes a tax cut as Trump has considered and candidates ultimately sell their investments at a lower tax rate in the future. Democrats attacked the tax provision as a giveaway to wealthy candidates elected by the president.

Donald Trump is once again filling his cabinet with billionaires, offering them a special tax break just for signing up, Senator Elizabeth Warren said. These candidates should pledge not to use loopholes to avoid paying taxes because of their government service.

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John Paulson, Trump's financier and major donor, appears to have chosen to avoid the question altogether. Shortly after the election, he declared that he would not be part of the new administration due to his complex financial obligations.

Jordan Libowitz, vice president of communications for Citizens for Responsibility and Ethics in Washington, said Paulson's removal gives us courage to know they are having these conversations and considering following the rules.

But he added: The question I get asked a lot these days is: What happens if Trump installs loyalists and tells them not to enforce the law? It's a scary question, top to bottom. And the answer is: we don't know.

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