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The Office of Congressional Ethics Throws a Hand Grenade into the Foreign Emoluments Clause Litigation

The debate over the Foreign Emoluments Clause took an interesting twist yesterday when the House Ethics Committee released this report (hat tip Paul Singer) from the Office of Congressional Ethics (OCE) regarding Delegate Madeleine Bordallo (D-Guam).

The relevant facts are as follows. Delegate Bordallo owns a residential property in Guam, which she has leased to the Japanese government since 1993, some 10 years before she was first elected to Congress. During the period of her congressional service, Bordallo renegotiated this lease on several occasions, but it does not appear there were any unusual or inordinate increases in the rent, and OCE found the “rental amount fell within a normal range for rental properties in the residential community.” OCE Rep. at 11.

(It should be noted that the OCE report addresses other allegations against Bordallo involving more obviously questionable conduct, but the first count against her is based solely on this ordinary market transaction with the Japanese government.)

According to OCE, Bordallo’s arrangement with the Japanese government may have violated the Foreign Emoluments Clause. For the period looked at by OCE (2008-17), during which Bordallo has been serving in the House, she received about $800,000 in rent from the Japanese government. OCE explains that this rent may have constituted a prohibited “emolument”:

The U.S. Constitution prohibits federal employees from accepting “any” emolument of “any kind whatever, from any king, prince, or foreign state.” The House Ethics Manual advises that the emoluments clause should have the “broadest possible scope and applicability.” To this point, the House Ethics Manual unambiguously defines “emolument” to include any “profit, gain, or compensation for services rendered.” There is no exception or limitation under this definition in the House Ethics Manual for when the Member generates the profit from a fair market value commercial transaction.”

OCE Rep. at 12 (emphasis added) (footnotes omitted).

At the outset, we should note that the OCE assumes, without analysis, that a delegate is covered by the Foreign Emoluments Clause, i.e., that she holds an “office of profit or trust” within the meaning of that Clause. This assumption is perhaps understandable in light of the House Ethics Manual’s suggestion that the Clause applies to all federal officials, including members or employees of the House. See House Ethics Manual at 205. Delegates are not members, but for these purposes they can be regarded as employees of the House. Accordingly, OCE was correct in reading the Ethics Manual to say that the Clause applies to delegates.

As an original understanding of the Clause’s meaning, this is a dubious proposition, and Bordallo’s lawyers, in their response to the OCE report, rely heavily on the argument that she does not hold an “office of profit or trust” covered by the Clause. See Perkins Coie letter at 10-13 (July 3, 2017). Although there is a strong constitutional argument in support of this position (albeit not quite the one that Perkins Coie makes), under ordinary circumstances I think the Ethics Committee would give it short shrift. Accepting Bordallo’s position would mean that not only delegates but all House employees would be exempt from prohibitions of the Foreign Emoluments Clause, a result that the Ethics Committee would find hard to swallow. Instead, the Committee could simply decide that the Ethics Manual effectively applies those prohibitions to all House personnel as a matter of ethics rules, thus obviating the need to decide the constitutional issue.

But in this case the Committee, or at least half the Committee, has a strong incentive to resolve Bordallo’s case without reaching the question of whether the rents she received from the Japanese government constitute “emoluments” within the meaning of the Foreign Emoluments Clause. That’s because the latter issue presents squarely the question the Blumenthal v. Trump plaintiffs have raised in their lawsuit, contending that President Trump is violating the Clause by continuing to own interests in businesses which receive revenue or profits from foreign governments or instrumentalities. Thus, as I noted in a prior post, the plaintiffs assert the following proposition: If a federal officeholder (a) has a financial interest in a business and (b) that business derives revenues from foreign governments, then the officeholder receives prohibited emoluments within the meaning of the Clause. This is more or less precisely the proposition the OCE has endorsed in the Bordallo matter.

As it happens, the authorities that OCE cites in support of this proposition do not really substantiate it. All of them involve some sort of personal service that the officeholder is being paid to perform for a foreign government or instrumentality. None of them appear to involve rental or other investment income that an officeholder derives from foreign government sources.

Moreover, as Perkins Coie points out, adopting OCE’s broad reading of the Foreign Emoluments Clause would have rather dramatic consequences for the millions of federal personnel who are subject to it. See Perkins Coie letter at 14 (“[T]his question affects not simply Delegate Bordallo, but millions of retired military and federal employees, who are covered by the Clause, any yet might foreseeably engage in just this sort of commonplace household transaction.”). If merely generating income from fair market commercial transactions can constitute an “emolument,” there are a lot of people besides President Trump and Senator Blumenthal who could be affected.

Bordallo’s lawyers (not surprisingly) approach the parallels with Trump’s situation rather gingerly, but in a footnote they cite this blog post regarding the Trump case. Id. at 14 n.76. As the blog post observes:

One beginning word of caution:  while those who oppose Donald Trump will find attractive any argument that can be used to defeat him, this issue will affect many others as well.   While the Emoluments Clause might seem obscure to many, this provision is not at all obscure to the over 2 million military retirees and 2.8 million federal employees.  They are subject to the Emoluments Clause, and the issue of the Emoluments Clause could have consequences for federal employees and retirees.  For example, if the Trump Organization’s sales to foreign governments gives rise to an Emolument, this would also be true of a small veteran owned business that makes sales to foreign governments–which is not that rare in the government contracting world.

All this puts the House Ethics Committee in a difficult position. If it reaches the question of whether Bordallo was receiving “emoluments” from the Japanese government, its decision will have direct implications for the Trump case. This is a particular problem for the five Democratic members of the Committee, each of whom is a named plaintiff in Blumenthal v. Trump. If they stick with their litigation position, they will not only have to find against Bordallo, but they will potentially create problems for other members of Congress and countless federal employees who derive income in some way from foreign governments.

So what to do? In my next post I will have a suggestion.

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