U.S. President-elect Donald Trump plans to announce next month that he’ll hand over control of his global real estate and other businesses to his children and executives. His stated goal: to take potential conflicts of interest off the table so he can concentrate on the job of running the country.
But when Trump is sworn in January 20, his Department of Justice (DOJ) will be stuck with ongoing entanglements involving his biggest lender: Germany’s Deutsche Bank. The predicament shows just how hard it will be for Trump to completely inoculate his administration from conflicts.
For decades, Deutsche Bank has served as a reliable lender to Trump’s real estate businesses, opening its coffers even as other major Wall Street banks have balked at its business practices. Most recently, Trump turned to Deutsche Bank to finance redevelopment of the Old Post Office Building in Washington, D.C., into the newest luxury hotel under his global brand.
In his latest financial disclosure form, Trump lists four loans from Deutsche Bank dating to 2012.They total at least $364 million and include $170 million borrowed for the Trump International Hotel, just a few blocks down Pennsylvania Avenue from the White House. The other loans financed his Doral golf resort near Miami and a high-rise in Chicago.
Conflict-of-interest concerns have mostly focused on Trump’s vast business assets around the globe. The Deutsche Bank situation presents a different type of dilemma: a longtime business partner facing high-stakes legal sanctions under what will soon be Trump’s Justice Department.
Deutsche Bank, Germany’s largest, is the target of two ongoing cases that are expected to carry over onto Trump’s watch. In one, the DOJ is negotiating a proposed $14 billion civil penalty related to Deutsche Bank’s sale of risky mortgage securities ahead of the 2008 financial crisis.
In the other, the department is examining the bank’s role in enabling Russian investors to move billions of dollars out of that country using sham stock transactions known as “mirror trades.”
Although the Justice Department declined to comment, a British financial regulator confirmed the matter was under investigation there, in Germany and the U.S. The Justice Department’s criminal investigation was first reported in August by the Bloomberg financial news service.
As concerns about his business conflicts mounted during the campaign, Trump sold off his limited stock holdings, transition spokesman Jason Miller said last week. Just how Trump will separate himself from dealings involving lenders or other business partners is unclear. He recently told Fox News he has no plans to sell his businesses.
This week, Trump said he was working on legal arrangements to hand over the organization to his sons, Donald Jr. and Eric.
Trump transition officials did not respond to VOA’s questions about Deutsche Bank, nor have they answered specific questions about his interests in Azerbaijan, the Philippines and elsewhere.
Richard Painter, the chief ethics lawyer for former President George W. Bush, said Trump’s indebtedness to a bank that’s under federal investigation poses two fundamental conflicts. First, it’s going to make it "awfully hard” for Justice Department officials to negotiate civil penalties "in an objective manner," Painter said. Second, it puts Trump in an awkward position as the nominal enforcer of laws and regulations meant to keep banks and Wall Street in check.
"The question is whether the president should be indebted to large banks," Painter said, "while supervising people who are looking at our posture toward bank regulation and enforcement — including pending actions against Deutsche Bank."
Federal conflict-of-interest laws don't apply to the president, as Trump has emphasized. But that won't stop questions about his motives as long as his businesses retain a relationship with Deutsche Bank, said Hana Callaghan, director of the government ethics program at Santa Clara University.
"Should the case go against the bank, and the bank suffers financially, Mr. Trump’s business interests may be impacted," Callaghan said. "However, if, under an attorney general appointed by Mr. Trump, the case goes in favor of the bank, it might appear that the attorney general is currying favor with his boss rather than fulfilling his legal obligations to the people."
Not everyone sees it that way. Trump can protect himself by steering clear, said Jan Baran, a former general counsel for the Republican National Committee and an ethics expert at the law firm Wiley Rein in Washington.
"It would only be a conflict of interest if in some fashion he intervened in the disputes as president of the United States," Baran said, "and there’s no indication or likelihood that he will."
Origins of the Deutsche Bank cases date back several years. The civil suit is the latest in a series of cases the department has pursued against Wall Street firms accused of defrauding investors into buying risky mortgage securities during the U.S. housing bubble before 2008.
Deutsche Bank has said that it does not intend to settle for the $14 billion penalty sought by the Justice Department and that other similar cases also have resolved for less than initially proposed. A bank spokeswoman declined to discuss the matter with VOA.
The "mirror trades" investigation centers on as much as $10 billion in suspicious transactions the bank’s Moscow branch carried out for Russian clients over a three-year period ending in 2015.
A $14 billion penalty would be a major blow to Deutsche Bank, which already has spent more than $10 billion in fines and legal settlements since the start of 2008, according to Bloomberg.
A big penalty could impede the bank’s ability to lend to the Trump Organization or others, said Gerald Hanweck, a former Federal Reserve economist now at George Mason University.
Trump lists nine other lenders in his latest financial disclosure. But The Wall Street Journal reported in March that Deutsche Bank has led or participated in $2.5 billion worth of lending for Trump’s companies and affiliated businesses since 1999.
Last month, Sen. Richard Blumenthal, D-Conn., a member of the Senate Judiciary Committee, asked Attorney General Loretta Lynch to appoint a special prosecutor for Deutsche Bank cases.
The DOJ rejected the request, saying the agency had "full confidence in its law enforcement professionals and career attorneys" to handle the matters with integrity.