The Economist Europe – July 22-28, 2017

50 Business The EconomistJuly 22nd 2017

1

2 ing to Vornado’s recent filings—eclipses the

value of the office building itself, says Jed

Reagan of Green Street, a research firm.

That is partly Kushner Companies’ own

doing, because of the price it paid and be-

cause it is intentionally letting the building

slowly empty of its office tenants so it can

be rebuilt. The new design, created by Zaha

Hadid, an architectwho died last year,

would include a hotel, luxuriousflats, new

space for shops and would cost $7.5bn.

The talks with Anbang fell apart in

March amid protests from ethics experts

and from Democrats, who fretted about

conflicts of interest and threats to national

security. Another avenue also recently

closed. For over two years, Kushner Com-

panies has talked to Sheikh Hamad bin Jas-

sim al-Thani, an eminent Qatari, about in-

vesting in 666 Fifth. This month The

Intercept, a newssite, reported thatHBJ, as

he is known, had agreed to invest $500m if

Mr Kushner could raise other money else-

where. Kushner Companies confirmed on

July 11th that talks had recently ended and

that it is reassessing the financing structure

of the redevelopment project.

Some speculate that MrKushner has

looked elsewhere, too. In December he

met with the head of a government-

owned Russian bank that issubject to

American sanctions. Vnesheconombank

said it was a business meeting. The White

House said that Mr Kushner was “acting in

his capacity as a transition official”.

The proposed One Journal Square de-

velopment has also hit trouble. In May Ni-

cole Meyer, Mr Kushner’ssister, courted

Chinese investors as part of America’s

“EB-5” visa programme, which offers a

path to citizenship for certain investors. In

Beijing Ms Meyer touted One Journal

Square, explained Mr Kushner’s new role

in Washington and said the building

“means a lot to me and my entire family”.

That sparked accusations that the family

was exploiting Mr Kushner’spublic role.

Kushner Companies apologised “if that

mention of her brother was in any way in-

terpreted as an attempt to lure investors”.

On May 7th Jersey City’s mayor, Steven

Fulop, said the project would not receive

the tax breaks and bonds that Kushner

Companies had sought. The city might not

have granted them in any circumstance—

the Kushners had asked for a particularly

generous package. But Mr Fulop, a Demo-

crat, and city councilmen are up for re-elec-

tion, and Mr Trump received just14% of the

city’s vote in November. Kushner Compa-

nies had already lost its anchor tenant, We-

Work, a shared-office company.

If Kushner Companies is not yet bene-

fiting from proximity to the presidency, the

potential for conflicts remains enormous.

Corporate-tax reform would have a size-

able impact on property firms, for exam-

ple. Mr Trump has said he wants a 15% cor-

porate tax to apply to pass-through

entities, which would include the LLCs

that comprise much of the Kushner busi-

nesses (and Mr Trump’s as well). Loosen-

ing of financial regulation, expected under

Mr Trump, ought to benefit lenders to

Kushner Companies. Citigroup, for exam-

ple, recently provided $425m to refinance

one of its projects in Brooklyn. Blackstone,

which lent $375m for Panorama, is raising

an infrastructure fund that might be ex-

pected to find investment opportunities in

Mr Trump’s infrastructure plan. And so on.

Richard Painter, the chief ethics lawyer

under President George W. Bush, says that

some of this “stinks to high heaven”. That

does not mean that Mr Kushner has or is

likely to violate any law. The rules govern-

ing conflicts of interest bar him from “per-

sonally orsubstantially” participating in

matters with a “direct and predictable” ef-

fect on his finances. But policies that bene-

fit Mr Kushner’s parents or Kushner Com-

panies’ partners may be allowed,

depending on circumstances. “That’s the

grey area,” saysLarry Noble of the Cam-

paign Legal Centre in Washington, DC.

What seems to have developed, in sum,

is a lose-lose situation. Mr Trump’s presi-

dency appears to be doing Kushner Com-

panies as much harm as good. If potential

business partners continue to be wary of

the scrutiny that comes with involvement

with a firm bearing his name, Mr Kushner

might end up having to choose between

his property interests and his public role.

Yet the list of potential conflicts is so

long that public confidence in policymak-

ing is at risk. A White House spokesman

says Mr Kushner will recuse himself in any

matter with “a direct and predictable ef-

fect” on entities in which he retains a finan-

cial interest. Those issues include EB-5 fi-

nancing and affordable housing, he notes.

But the White House has notpublished a

complete list of matters in which Mr

Kushner would decline to participate. And

no such list is planned. 7

The sky’s no limit

Source: Real

Capital Analytics

*Deals worth at least $2.5m

†To June 27th

Kushner Companies, investment activity*, $bn

Buys 666 Fifth

Avenue, Manhattan

2

1

0

1

2

+

20010305070911131517 †

Acquisition Disposal

Net investment

“P

RETTY close to a laughing stock.”

That is Walter Shaub’s verdict on

America’s standing in the world, at least

from an ethics point of view, under Presi-

dent Donald Trump. MrShaub’sview

counts: he stepped down this week as

head of the Office of Government Ethics, a

federal watchdog.

He is leaving his job six months early,

frustrated at the president’s failure to sepa-

rate himself from his businesses, at White

House foot-dragging on disclosing ethics

waivers for staff, at its failure to admonish a

Trump adviser who plugged the family’s

products in an interview, and more. “It’s

hard for the United States to pursue inter-

national anticorruption and ethics initia-

tives when we’re not even keeping our

own side of the street clean,” Mr Shaub

told the New York Times.

No American leader has ever entered

office with such wide business interests as

Mr Trump. In the context of the country’s

corporate landscape, his group is small,

mostly domestic and rather mediocre, but

encompasses hundreds of firms that run

hotels, golf courses, licensing agreements,

merchandise deals and more, in over two

dozen countries. Keeping tabs on the po-

tential for self-dealing is “a monumental

task”, says Kathleen Clark, an ethics expert

at Washington University. In some areas,

particularly abroad, increased scrutiny ap-

pears to be making deals harder to pull off.

But in others, such as his American hotels

and golf clubs, Mr Trump already appears

to be monetising the presidency.

On becoming president, Mr Trump put

his businesses in a trust. But it is run by two

of his sons, Eric and Donald junior, and it is

“revocable”, meaning its provisions can be

changed at any time. Eric has since said he

will update his father with profit reports,

even though Mr Trump pledged not to talk

business with his children while in office.

Mr Trump, the Trump Organisation and his

daughter, Ivanka, who owns a fashion

business and is a White House adviser,

have all hired ethics advisers to review

deals for potential problems. But how the

The Trump family’s businesses (2)

Not one to avoid a conflict

Six months into his presidency Donald Trump’s conflicts ofinterest look worse,

and his handling of them less principled, even than many expected