Reuters: State pension funds paying millions in Emoluments to Trump

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:

  1. 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.
  2. 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:

https://www.calpers.ca.gov/page/about/board/board-members

And the NY Common Retirement Fund, supervised by the State Comptroller:

Click to access NYSCRF_Fiduciary_and_Conflict_of_Interest_Review_2016.pdf

[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. @A, 800-771-7755.

The NY Office of the Comptroller is in charge of the New York State Common Retirement Fund. Call (212) 681-6403

California: Contact Attorney General Xavier Becerra. @ (800) 952-5225. Tell the California pension, @, the nation’s biggest public pension, to divest 888-225-7377

Texas: Contact the Teacher Retirement System of Texas, @TRSofTexas, 1-800-223-8778

Author: Jed Shugerman

Jed Handelsman Shugerman is a Professor and Joseph Lipsitt Scholar at Boston University School of Law. He was at Fordham Law School 2013-2022. He received his B.A., J.D., and Ph.D. (History) from Yale. His book, The People’s Courts (Harvard 2012), traces the rise of judicial elections, judicial review, and the influence of money and parties in American courts. It is based on his dissertation that won the 2009 ASLH’s Cromwell Prize. He is co-author of amicus briefs on the history of presidential power, the Emoluments Clauses, the Appointments Clause, the First Amendment rights of elected judges, and the due process problems of elected judges in death penalty cases. He is currently working on two books on the history of executive power and prosecution in America. The first is tentatively titled “A Faithful President: The Founders v. the Unitary Executive,” questioning the textual and historical evidence for the theory of unchecked and unbalanced presidential power. This book draws on his articles “Vesting” (Stanford Law Review forthcoming 2022), “Removal of Context” (Yale Journal of Law & the Humanities 2022), a co-authored “Faithful Execution and Article II” (Harvard Law Review 2019 with Andrew Kent and Ethan Leib), “The Indecisions of 1789” (forthcoming Penn. Law Review), and “The Creation of the Department of Justice,” (Stanford Law Review 2014). The second book project is “The Rise of the Prosecutor Politicians: Race, War, and Mass Incarceration,” focusing on California Governor Earl Warren, his presidential running mate Thomas Dewey, the Kennedys, World War II and the Cold War, the war on crime, the growth of prosecutorial power, and its emergence as a stepping stone to electoral power for ambitious politicians in the mid-twentieth century.

2 thoughts on “Reuters: State pension funds paying millions in Emoluments to Trump”

  2. Pingback: Pension emoluments: The California and NY pensions are definitely state entities – SHUGERBLOG

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