Donald Trump’s aides are considering a business arrangement that critics say would allow him or his appointees to sidestep conflict-of-interest laws governing the incoming administration and large investments in private-sector business.

Aides responsible for setting up ethics firewalls have held discussions with officials at the Office of Government Ethics about establishing what’s known as a “discretionary trust,” according to two sources briefed on the talks.


Such an arrangement could allow Trump or his family members to reap some of the legal benefits of a blind trust, but could also give them some insight into how the Trump businesses are faring while also allowing Trump and his family to continue to make money from those investments.

The sources said it was unclear whether Trump’s aides were exploring the arrangements for the president-elect, for Trump family members or for a series of wealthy individuals nominated for his Cabinet.

But the conversations provide a window into the Trump team’s high-stakes deliberations over how to address ethical and conflict-of-interest concerns as the new administration moves to install in top-ranking positions individuals with vast business holdings.

The discussions with the Office of Government Ethics about discretionary trusts suggest the Trump team is still weighing options that fall short of what ethics watchdogs have demanded, such as selling off assets that could pose a conflict of interest or parking wealth in classic blind trusts.

“It’s highly inappropriate,” said Richard Painter, a former ethics lawyer in President George W. Bush’s White House who recently joined watchdog group Citizens for Responsibility and Ethics in Washington. “To have someone baby-sit your conflict-creating assets while you go around and do whatever you want, in my view that’s a violation of at least the spirit of the rules and that’s an abuse.”

An OGE spokeswoman declined to comment on the reported discussions.

In a typical blind trust arrangement approved by federal ethics authorities, an incoming official’s investments are transferred to an institutional financial manager who oversees them without reporting details to the owner. Assets that risk a conflict of interest are sold off over time and replaced with assets the official is not informed about.

Even with a blind trust, the conflicts are not considered resolved until the original problem-creating assets are sold off.

But with a discretionary trust, the conflicts almost magically disappear because the investments aren’t considered to belong to the incoming official at all — even if they’re producing a steady stream of income for the official. Instead, the assets are held in a trust that is often overseen by a family member who can, but is not legally required to, send revenues from the assets to the government official. Another benefit: there’s no explicit prohibition on the official talking with the trustee about the financial holdings.

“You don’t have to disclose it, since you don’t own it, Aunt Millie owns it,” Painter said. “And it cures your financial conflicts of interest under the criminal statute. ... If you really have a discretionary trust, you can participate in government decisions that affect those assets — if they let you get away with it.”

Longtime observers of OGE believe the office’s current chief, Walter Shaub, is unlikely to approve any expansion of the discretionary trust policy already in place. Shaub was nominated by President Barack Obama and confirmed by the Senate in early 2013. His five-year term runs into January 2018.

“My impression is OGE is certainly not going to expand the use of discretionary trusts,” one legal observer said, predicting that a move in that direction would erode the incentives to seek a true blind trust. “Nobody can fit within the definitions of ‘qualified blind trust’ for any useful purpose, [so] people are pushing the envelope. ... OGE realizes this, but they don’t want people using [discretionary trusts] to get around the rules. They’re concerned about this.”

The search for a wall between public and private interests has been a politically painful one for Trump. He initially promised to announce an ethics plan at a news conference last week, but days before the conference Trump canceled the announcement, tweeting instead that his adult sons Donald Trump Jr. and Eric Trump would run the business in his absence and that he would announce a comprehensive arrangement before taking office in January.

Asked whether the Trump team is exploring discretionary trust arrangements, Trump spokeswoman Hope Hicks replied: “No decisions have been made. We look forward to sharing more details next month.”

The option the Trump team is said to be exploring seeks to build on legal memos the Office of Government Ethics issued in 2008 and 2013, ultimately concluding government officials who are beneficiaries of trusts did not have to report them on financial disclosure forms if the officials were not legally entitled to payments or assets from the trusts.

The use of a discretionary trust would not be without its own complications.

If President-elect Trump or his family members moved existing assets into new or existing trusts, that could create capital gains or gift tax liabilities, lawyers said. However, OGE can issue a certificate to defer the capital gains bill when such moves are made to comply with federal conflict-of-interest laws or policies.

Another wrinkle the Trump team will have to consider: OGE’s opinion on what constitutes a conflict of interest under federal law usually carries the day with ethics officers at various government agencies, but it is not binding on federal prosecutors, who have the ultimate enforcement authority. So even a stamp of approval from OGE doesn’t guarantee someone won’t face investigation in the future.

Painter said the Trump team is unlikely to prevail if it presses OGE to approve a discretionary trust arrangement, at least as long as Shaub is in charge.

“They’re going to create a conflict with OGE, if they continue to push this,” said Painter, who is calling for Trump to divest his assets completely into a blind trust that would then sell them off. “So long as Walter Shaub is director of OGE, these abuses ... are very unlikely to occur — he will not let anyone get away with it. If he were ever to leave for any reason, I have no idea what would happen.”