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Why Deutsche Bank Remains Trump’s Biggest Conflict Of Interest

Reprinted with permission from ProPublica.

If you measure President Donald Trump’s conflicts of interest by the amount of money at stake, or the variety of dicey interactions with government regulators, one dwarfs any other: his relationship with Deutsche Bank.

In recent weeks, Deutsche Bank has scrambled to reach agreements with American regulators over a host of alleged misdeeds. But because the president has not sold his company, the bank remains a central arena for potential conflicts between his family’s business interests and the actions of officials in his administration.

“Deutsche poses the biggest conflict that we know about in terms of dollar amounts and the scale of legal exposures,” says Brandon Garrett, a University of Virginia law professor and author of Too Big To Fail: How Prosecutors Compromise with Corporations. In trying to clear up its outstanding regulatory troubles, the bank “may have tried to do its best to avoid the appearance of impropriety but it may be impossible for them to do so.”

Deutsche is Trump’s major creditor, having lent billions to the president since the late 1990s even as other American banks abandoned Trump, who frequently bankrupted his businesses. While the president hasn’t released his tax returns, he has made public some information about his debts. According to these incomplete disclosures and reports, the Trump Organization has roughly $300 million in loans outstanding from the bank. Trump continues to own the business, although he has turned over day-to-day management to his sons.

At the same time that it is Trump’s biggest known creditor, Deutsche is in frequent contact with multiple federal regulators. While the bank agreed last week to pay $630 million to settle charges by New York state’s top financial regulator as well as the U.K.’s Financial Conduct Authority that it had aided Russian money-laundering, it’s still undergoing a related federal investigation into those activities, which it is also trying to settle. That will be an early big test of the Justice Department under Attorney General Jeff Sessions. The Justice Department also has an ongoing probe of foreign exchange manipulation by several banks, including Deutsche Bank.

Even if the bank clears up the ongoing federal cases, it will remain weighed down by past transgressions. During the housing bubble, Deutsche Bank misled buyers about the quality of its mortgage securities and omitted important information. In 2015, its London subsidiary pleaded guilty in connection with the multi-bank conspiracy to manipulate global interest rates and paid $775 million in criminal penalties.

Deutsche will soon have an astonishing six independent monitors monitoring its conduct — the most ever for one company, according to Garrett. Drawn from the ranks of consultancies and law firms, these overseers make sure Deutsche complies with previous state and federal settlements and regulations relating to its foreign exchange manipulations, global interest rate fraud, sales of dodgy mortgage securities, derivatives trading, and sanctions evasion.

Indeed, the independent monitor of Deutsche’s derivatives reporting, Paul Atkins from Patomak Partners, has his own conflict of interest. Atkins served on Trump’s transition team and played a role in appointing federal financial regulators. He is now monitoring whether Trump’s business partner complies with the terms of a settlement with the Commodity Futures Trading Commission on derivatives reporting.

A Patomak spokeswoman declined to comment.

Meanwhile, the Federal Reserve has regulators sitting in Deutsche’s offices, as it does with every big bank, keeping a watchful eye on the firm’s safety and soundness. Last year, the Fed failed Deutsche Bank during its annual stress test, finding that it had insufficient capital and could not withstand another financial crisis. And the Securities and Exchange Commission and the CFTC regulate its investment banking and trading activities.

A Deutsche Bank spokeswoman declined to comment. The White House did not return an email seeking comment.

The Trump Organization’s wide-ranging business dealings could raise quandaries for an array of government agencies, from the Department of Labor, which regulates the company’s employment practices, to the General Services Administration, which leases Trump his hotel in Washington, D.C. “Just about everything that every branch, every type of enforcement, every action from every agency could touch on Trump’s conflicts. There is no end to the corruption and ethics concerns,” Garrett says.

But the potential conflicts may be most acute at the Justice Department. Whether the Justice Department walks away from an investigation or takes a hard line against Deutsche Bank, its every move will be scrutinized as either too tough or too weak.

With new management, Deutsche Bank has embarked on an effort to rebuild its reputation. Deutsche CEO John Cyran has conducted an apology tour for the bank’s multiple and serial misdeeds. The money-laundering settlement isn’t Deutsche’s only recent move to close out government probes. In January, it agreed to pay $95 million to end a tax fraud investigation by the U.S. Attorney for the Southern District of New York. And in December, it became one of the last of the global banks to resolve civil charges over the creation and sale of misleading mortgages investments, agreeing to pay a penalty of $3.1 billion.

In these agreements, Deutsche capitalized on the Obama Department of Justice’s eagerness to settle, according to defense attorneys who don’t represent the bank but are familiar with the cases. Outgoing administrations desire to wrap investigations up so departing prosecutors may shine their resumes on the way out the door.

The Obama administration had an added incentive to reach settlements because it worried the Trump administration Justice Department might seek smaller penalties or otherwise go soft on corporations. That helps explain why Deutsche Bank’s mortgage securities settlement, which included $4.1 billion in credit for consumer aid in addition to the penalty, was far below the $14 billion figure reported in the fall as Justice’s opening bid. While most observers expected that figure to come down sharply, Deutsche’s terms were still widely considered favorable.

Even so, Deutsche’s share price remains depressed as investors worry about the bank’s future payouts and ongoing fragility. The bank faces class action suits alleging efforts to manipulate interest rates and the currency markets.

Given the government’s responsibilities, Trump’s regulators face a fraught and sensitive task of proving their independence and fair-mindedness when it comes to Deutsche Bank. Prior White Houses have taken great care to avoid interfering in Justice Department investigations and prosecutions. Despite his early support for Trump’s campaign and their personal friendship, Sessions has said he will not recuse himself from any Justice Department probe into the president, the Trump family or any of his political advisors.

The relationship Deutsche Bank has with the president cuts two ways, defense lawyers and former prosecutors say. It might be advantageous to be in business with a president who appears to regard the office as an opportunity for brand enhancement and enrichment. The bank might hope for leniency from the president’s regulators because of its business ties to him.

There are signs that Deutsche’s new management is not eager to continue serving as Trump’s financier. Trump sued the bank in 2008 to avoid paying a loan for a Trump hotel in Chicago. The parties settled, but lawsuits have a way of fraying friendships. A former top executive at Deutsche Bank says the current top management does not like the real estate developer. “They don’t want to do business with him anymore,” he says.

Given the tension, Deutsche may worry about the mercurial president. The bank’s concern is that the Trump administration could use its regulatory powers to secure better business terms. Nationalist strains course through his inner circle. A top Trump economic advisor recently accused Germany of currency manipulation. Trump, some observers fear, may seek to boost American financial institutions over foreign ones like Deutsche.

In recent months, Deutsche has also sought to renegotiate its loans with Trump, according to a Bloomberg report, in an effort to reduce its exposure to the president. The bank hoped to eliminate the president’s personal guarantee on loans. But such a move would not eliminate the conflict of interest, since the president’s company, which Trump still owns, would remain on the hook to pay back the loans.

IMAGE: Deutsche Bank CEO John Cryan addresses the bank’s annual general meeting in Frankfurt, Germany, May 19, 2016. REUTERS/Kai Pfaffenbach 

Trump Blasts Nordstrom, Raising New Concern On Business Ties

WASHINGTON (Reuters) – U.S. President Donald Trump’s Twitter attack on Nordstrom Inc on Wednesday for dropping his daughter Ivanka’s clothing line raised concerns about the use of his White House platform for his family’s businesses.

In response to the Twitter comment Trump posted criticizing Nordstrom, which has said its move was based on the sales performance of the Ivanka Trump products, White House spokesman Sean Spicer characterized the company’s action as a “direct attack” on the president’s policies.

“My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person — always pushing me to do the right thing! Terrible!,” Trump said on Wednesday in his post on both his personal and official presidential Twitter accounts.

Trump’s comments underscore the complicated relationship that the wealthy New York real estate developer who became president on Jan. 20 has with his sprawling family business interests amid criticism from Democrats and others about the ethics and legality of the arrangement.

During a White House briefing, Spicer painted Nordstrom’s action as an attack on the president’s daughter.

“For someone to take out their concern with his policies on a family member of his is just not acceptable. And the president has every right as a father to stand up to them,” Spicer said.

Nordstrom did not respond to requests seeking comment. A spokeswoman for the Ivanka Trump brand declined to comment.

The Republican president’s complaint, however, drew swift criticism from Democrats. Asked about the Nordstrom tweet, U.S. House of Representatives’ minority leader Nancy Pelosi said:

“I think it’s inappropriate, but he’s a totally inappropriate president, so it’s totally in keeping with who he is. What I think is more inappropriate, though, is for him to refer to a judge who made a ruling that he didn’t agree with as a ‘so-called judge.’ Now we’re talking about the separation of power, not the thin skin of an incompetent president,” Pelosi told reporters in Baltimore for House Democrats’ retreat.

Senator Bob Casey, a Democrat, in a tweet indicated that the matter should be referred to the Office of Government Ethics.

In a statement last week, Nordstrom said it routinely cuts brands each year and that the decision to pass on the Ivanka Trump brand had been based on its performance.

A day after Nordstrom’s statement, luxury retailer Neiman Marcus Group also said it had stopped selling Ivanka Trump’s jewelry line on its website and a store in New Jersey, according to Yahoo News.

The move by the retailers comes amid an ongoing campaign called #GrabYourWallet, which encourages shoppers to boycott products with ties to President Trump, his family and his donors.

The president has declined to sell off his businesses despite calls to do so from critics, instead turning his empire over to his adult sons. Trump’s web of international companies remains a bit opaque since he has refused to release his tax returns, which experts have said would provide a clearer view of his business interests.

Since winning the U.S. presidential election on Nov. 8, Trump has targeted specific companies on Twitter. But this is his first tweet criticizing a business tied to his family since the victory.

Ivanka Trump ran a clothing and jewelry business bearing her name, in addition to other work for the Trump Organization, before saying she would resign when her father was sworn in as president last month.

ProPublica reported on Feb. 2 that the Trump Organization said Ivanka had resigned her positions but that it had not yet filed the changes. The Trump organization later said the filings would be done by Feb. 3, according to the report.

Shares of Nordstrom fell 0.7 percent after the president’s criticism but recovered to trade up 3.7 percent at $44.38 on the New York Stock Exchange.

(Reporting by Susan Heavey in Washington and Nandita Bose in Chicago; Additional reporting by Joseph Ax in New York and Doina Chiacu in Washington; Writing by Will Dunham; Editing by Tim Ahmann, Paul Simao and Bernard Orr)

IMAGE: Ivanka Trump attends U.S. President Donald Trump’s strategy and policy forum with chief executives of major U.S. companies at the White House in Washington, U.S. February 3, 2017. REUTERS/Kevin Lamarque

President Trump Sued Over Foreign Government Payments To His Firms

NEW YORK (Reuters) – A group of prominent constitutional and ethics lawyers sued President Donald Trump on Monday, accusing him of violating the U.S. Constitution by letting his hotels and other businesses accept payments from foreign governments.

The lawsuit filed in federal court in Manhattan by the nonprofit Citizens for Responsibility and Ethics in Washington contended that Trump is “submerged in conflicts of interest” because of ties with countries such as China, India, and potentially Russia.

It seeks to stop Trump from accepting any improper payments, citing a constitutional provision known as the “emoluments” clause that bans them.

A spokeswoman for Morgan Lewis & Bockius, a law firm representing the president on ethics matters, said: “We do not comment on our clients or the work we do for them.”

The lawsuit is part of a wave of litigation expected from liberal advocacy groups against Trump, a Republican who took office on Friday.

On Jan. 11, Trump said he would retain ownership of his global business empire while president, but hand off day-to-day control to his oldest sons, Eric and Donald Jr..

Sheri Dillon, a partner at Morgan Lewis and a Trump adviser, at the time said profit generated at Trump’s hotels from foreign governments would be donated to the U.S. Treasury.

But the plaintiff said Trump’s refusal to cede ownership or set up a blind trust has resulted in conflicts of interest that leave him “poised” to violate the Constitution repeatedly while in the White House.

The emoluments clause forbids Trump and other U.S. officeholders from accepting various gifts from foreign governments without congressional approval.

According to the complaint, that means payments by foreign governments for such things as leases at Trump Tower in New York, stays at Trump’s hotels, rounds at Trump’s golf courses, and the rights to rebroadcast or create their own versions of Trump’s reality TV show “The Apprentice” are illegal.

The lawsuit said the Constitution’s framers intended to ban such payments, believing that “private financial interests can subtly sway even the most virtuous leaders, and entanglements between American officials and foreign powers could pose a creeping, insidious threat to the Republic.”

China, India, Indonesia, Turkey, and the United Kingdom are among the countries with which Trump’s companies do or plan to do business, and Trump had been trying to do business with Russia for at least three decades, the complaint said.

The lawsuit also alleged that payments next month from a Washington hotel booking by the Embassy of Kuwait for its “National Day” celebration “will go directly to defendant while he is president.”

To justify its standing to sue, the plaintiff said it has been “significantly injured” by having to divert resources to the lawsuit, and field hundreds of media questions about Trump’s businesses.

Among the lawyers who worked on the complaint were constitutional scholars Laurence Tribe, from Harvard University, and Erwin Chemerinsky, dean of the University of California at Irvine’s law school.

Others include Richard Painter, who was a White House ethics lawyer under former Republican President George W. Bush.

(Reporting by Jonathan Stempel in New York; Editing by Frances Kerry and Jonathan Oatis)

IMAGE: U.S. President Donald Trump speaks during the Inaugural Law Enforcement Officers and First Responders Reception in the Blue Room of the White House in Washington, U.S., January 22, 2017. REUTERS/Joshua Roberts

Trump Promised To Resign From His Companies — But There’s No Record He’s Done So

Reprinted with permission from ProPublica.

At a news conference last week, now-President Donald Trump said he and his daughter, Ivanka, had signed paperwork relinquishing control of all Trump-branded companies. Next to him were stacks of papers in manila envelopes — documents he said transferred “complete and total control” of his businesses to his two sons and another longtime employee.

Sheri Dillon, the Trump attorney who presented the plan, said that Trump “has relinquished leadership and management of the Trump Organization.” Everything would be placed in a family trust by Jan. 20, she said.

That hasn’t happened.

To transfer ownership of his biggest companies, Trump has to file a long list of documents in Florida, Delaware and New York. We asked officials in each of those states whether they have received the paperwork. As of 3:15 p.m. today, the officials said they have not.

Trump and his associates “are not doing what they said they would do,” said Richard Painter, the chief ethics lawyer for President George W. Bush. “And even that was completely inadequate.”

ProPublica’s questions to the transition team were referred to an outside public relations firm, Hiltzik Strategies, which declined to comment. The president’s team did not allow reporters to view documents, which they said were legal records separating Trump from his eponymous business empire. Dillon’s law firm, Morgan Lewis, has not released the records and they declined further comment, saying it doesn’t comment on client issues.

ProPublica looked at more than a dozen of Trump’s largest companies, which are registered or incorporated in three states. Officials in New York and Delaware said documents are logged as soon as they are received. In Florida, officials told us there is typically a day or two before documents are logged into the system.

Here is what we found:

  • Business filings for Trump Organization LLC, Trump’s primary holding company, had not been changed, according to New York’s Department of State. Wollman Rink Operations LLC, which runs the Wollman Rink in Central Park through an agreement with New York City, hasn’t been updated either. Trump is listed as the sole authorized representative of the company.
  • Ivanka Trump is still listed as the authorized officer on records for two entities related to the Old Post Office in Washington, D.C., which the Trump family bought and turned into a hotel. No changes have been filed for either of the companies, which are registered in Delaware.
  • Documents on The Donald J. Trump Foundation, which Trump has said he would dissolve, haven’t been updated. The charitable foundation has been in a swirl of controversy over its collection and disbursement of funds and an active investigation by New York’s attorney general. (The foundation cannot legally dissolve until the investigation is complete, but the New York Attorney General’s office told ProPublica that Trump can resign as an officer at any time.)
  • In Delaware, where the majority of Trump’s businesses are registered, state officials told ProPublica that no amendments have been filed for four businesses tied to the Old Post Office and that the most recent filings for two businesses related to the Trump National Golf Club in Washington, D.C., were made more than a year ago.
  • In Florida, no changes have been made for years to three key Trump businesses operating there: the Trump International Golf Club in Palm Beach, the Mar-A-Lago Club, and DJT Holdings, which has controlling interest in most of Trump’s golf courses in the U.S. and abroad, according to the state’s Division of Corporations.

Even if Trump hands over his companies to a new trust, the plan fails to solve many of his bigger business conflicts, experts say. Terms of the trust that would insulate the president from the Trump Organization haven’t been made public. Trump’s decision not to divest his assets has also been heavily criticized by several former White House attorneys and ethics chiefs.

“What are the terms of the trust? Who is going to be the ethics monitor and what standards will he or she abide by?” said Norman Eisen, who served as the White House chief ethics lawyer under President Obama. “There are 1,000 unanswered questions.”

IMAGE: U.S. President-elect Donald Trump speaks during a news conference in the lobby of Trump Tower in Manhattan, New York City, U.S., January 11, 2017. REUTERS/Lucas Jackson