This morning, Julia Harte at Reuters published a story showing how seven state governments are paying millions of dollars a year to Trump. The story seems complicated, but it’s not. There are only two steps:
- State pensions from New York, California, Texas, Montana, Missouri, Michigan, Arizona (all state entities or semi-state entities, managed by state officials) pay millions of dollars to CIM, a real estate investment firm.
- CIM pays millions to a Trump LLC. And Trump LLC is the legal alter ego of Donald Trump because he is a) the sole beneficiary of the trust, b) takes profits at any time, and has recently taken profits, from the trust, and c) can revoke the trust at will anytime.
So it’s only two steps. And it really is only one step as a formal legal matter, because the state pensions together make up a majority of CIM’s payment funds to Trump. As a matter of corporate law, 10% control is enough to constitute legal control, and in some contexts, 5% is the relevant legal threshold. Most of these states, if not all, cross that line to become legally accountable for these payments.
There is some legal question about which of these pensions are fully public or mixed public-private. But they all seem to be state-run, and state officers are investing and paying public money to Trump LLCs. If you take a look at the structure of CalPERS, it’s a public fund run by state officials:
And the NY Common Retirement Fund, supervised by the State Comptroller:
[Update: I confirmed this analysis with a California statute and a 2d Circuit precedent here].
Harte’s article has a helpful chart to clarify the steps, but remember that all those arrows really are just one legal arrow from state coffers to Trump’s pockets.
It’s also important to take a step back and observe a shocking fact: state officials were risking millions from their employees’ pension by investing in a bankruptcy artist fraudster in 2015 — after Trump University had been exposed as a fraud, after the entire American banking industry would not lend him a dollar for the last two decades. Regardless of the emoluments question, this investing strategy was a risky fiduciary breach for a state pension.
In 2015, CIM purchased the Trump SoHo hotel. Public pension funds made up about half of CIM’s investment, and CIM has struggled to sell condos since then. The California Public Employees’ Retirement System (CalPERS) is the largest investor at about $700 million. New York State Common Retirement Fund and the Teacher Retirement System of Texas are the next biggest investors at about $225 million each. The state pensions continue to pay quarterly management and performance fees to CIM. CalPERS has paid $6 to $9 million per year to CIM. CIM turns around and pays millions each quarter to the Trump LLC.
It started out as an unwise investment, and seems to have been a big mistake financially and morally. Now it’s an unconstitutional emolument. We are working on the meaning and context of the word “emolument,” and it is increasingly clear that the word regularly applied to private business transactions and payments, not just office-based transactions. See John Mikhail’s excellent work, and more is forthcoming.
Ron Fein, my emoluments partner in anti-crime, blogged about this news here.
So what can YOU do about any of this unconstitutional conduct?
New York: Contact Attorney General Eric Schneiderman. @AGSchneiderman, 800-771-7755.
Texas: Contact the Teacher Retirement System of Texas, @TRSofTexas, 1-800-223-8778