The two Emoluments Clauses in the U.S. Constitution forbid federal officials from accepting “any present, Emolument, Office, or Title, of any kind whatsoever” from foreign or domestic governments. President Donald Trump’s business interests generate numerous opportunities to use public office for his personal benefit. This article examines the history of the Emoluments Clauses and the Framers’ conception of corruption. The conflicts of interest alleged in pending emoluments lawsuits against President Trump would not be allowable in the private sector, and various plaintiffs argue that the Emoluments Clauses apply to all public officials, including the President. The President’s lawyers have claimed he is exempt from the application of these clauses and have raised numerous procedural objections, such as challenging who might have” standing” to bring a lawsuit to compel his compliance with the clauses. Out of three cases filed in 2017, one has been dismissed, while two judges have recognized that the plaintiffs have standing. In each lawsuit, the President’s lawyers insist on a conception of corruption that is quid pro quo, where only bargained for exchanges count as corruption. While the Emoluments Clauses require public officials to get Congressional permission before receiving such benefits, the President’s position is that Congress must first demand an accounting of any personal benefits, rather than the burden being on the President to ask permission. Thus far, two courts have rejected that approach, and as of this writing, further appeals can be expected.
Donald Trump has stated that he can discharge his public duties as President while he benefits from—and his immediate family continues to run—his global businesses without any conflicts of interest. 1 In this article, the ethics of public service and the two Emoluments Clauses 2 of the U.S. Constitution will be examined, along with the first reported federal judicial opinions about who can bring a lawsuit under either of the two Emoluments Clauses, and what “emoluments” meant to the Framers of the Constitution. U.S. law regarding conflicts of interest in the private sector––as well as findings in behavioral psychology––will be used to compare the President’s public duties with the duties of fiduciaries in the private sector.
For business ethics, as well as ethics in public service, Part IV describes the insights of behavioral psychology to demonstrate how often people and politicians overlook their own conflicts of interest, even where those conflicts strongly influence their decisions. 6 Part V summarizes observations related to conflict of interest laws and fiduciary duties in business, lending support to the conclusion that Trump’s attempt to maintain a stake in his private interests while serving in public office would be untenable in other contexts. 7 Returning to legal issues raised by the President’s conflicts of interest, Part VI describes three federal lawsuits filed in 2017, two of which have survived motions to dismiss and have addressed the meaning of “emoluments” as understood by the Framers of the Constitution. 8 We conclude that both the courts and Congress as the ultimate judges of the President’s conflicts of interest should support the original intent and plain meaning of the Emoluments Clauses in the U.S. Constitution.
The Framers saw their work as creating a system that would curb excessive greed and abuses of power. 26 They believed that controlling and channeling the self-interested motives of political leaders was the central political problem of their time. In their deliberations, the Framers expressed deep concern not only about corruption through bribery transactions––the quid pro quo that the U.S. Supreme Court often sees as the only kind of recognizable corruption 27––but also the greater and more insidious potential of public officials being influenced to serve the interests of the powerful by gifts from those who would seek to influence them.
Candidate Trump was expressing the notion––a correct one––that corruption involves more than taking cash in a briefcase in exchange for conferring special favors, or stashing bribe money in offshore accounts. His statements about Ms. Clinton are entirely congruent with the definition that “corruption is the misuse of public power by an elected official or appointed civil servant for private gain.” 39 Clinton could not, according to Trump’s “crooked Hilary” characterization, be an objective public servant for the average American, as she was “bought and paid for” by Wall Street.
Given what the Framers understood of human nature, and what behavioral psychologists confirm empirically, concern over the private interests of public officials was entirely reasonable, and in keeping with the Framers’ intentions in the Emoluments Clauses. Those concerns were amplified when President-Elect Trump said, just before his Inauguration, “I can be President of the United States and run my business 100 percent, sign checks on my business.” 41 Such claims implied that Mr. Trump could not even see that there might be conflicts of interest between his private business interests and the public interest. Mr. Trump then added, “The law is totally on my side, meaning, the president can’t have a conflict of interest.” 42 In saying this, the President-elect arguably (and erroneously) conflated a statement of law with a judgment on what is right, as if the law had already determined that Presidents could never have conflicts of interest. But he is wrong to think that all conflicts of interest are defined and resolved by law, and he is also wrong on what the law requires.
This part proceeds in two sections. First, facts and analysis about known conflicts of interest are listed. Second, Trump’s plan to distance himself from his businesses is examined.
Some foreign leaders have already reached out to Mr. Trump through business channels; they could easily believe that pleasing him personally could create personal or public benefits for themselves or their nations. 57 Ingratiating themselves with Mr. Trump, they think, will be generally advantageous. 58 Mr. Trump has also reached out to foreign leaders for reasons not relevant to U.S. policy interests. For example, Mr. Trump opposes wind farms because he believes that they ruin the view from his golf course in Aberdeen, Scotland. While President-Elect, he openly lobbied Nigel Farage—a British political ally of his—to oppose wind farms in the United Kingdom. While this is not an exchange of money, and nowhere near bribery, this use of public office to create private gain conflicts with his duties as a public servant. To put it more bluntly, it does not serve the U.S. public for a U.S. president, or President-elect, to spend any time or effort trying to influence wind farm policy in the United Kingdom.
The lease had provided, pursuant to pre-Inauguration regulations, that “no … elected official of the Government of the United States … shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom.” This sudden reversal appears to be a clear violation of the Domestic Emoluments clause.
To make matters worse, as mentioned earlier, foreign government officials stay there in order to please the U.S. President, 69 a likely violation of the Foreign Emoluments Clause. With considerable public fanfare, the Kingdom of Bahrain decided to mark the seventeenth anniversary of King Hamad bin Isa Al Khalifa’s accession to the throne by hosting a reception at the Trump International Hotel. 70 The total value to Mr. Trump from hotel profits could eventually make the diamond-encrusted snuffbox gifts of Louis XVI look comparatively inconsequential. The Framers of the U.S. Constitution included explicit prohibitions on receiving any such benefits, due to a clear awareness of their potentially corrupting effects.
Much of what Trump proposed was more show than substance; handing over control to his sons, with whom he is in regular contact, is anything but a blind trust, which is the gold standard of removing conflicts for public officials. Critical financial matters will almost surely be discussed between father and sons. Despite his pledge to end all new foreign investments, the Trump Organization was reportedly pursuing new investment in the United Arab Emirates. 77 Given the frailties of human nature and Mr. Trump’s particularly strong loss-aversion bias, 78 the better public policy is to follow President Reagan’s “trust, but verify” 79 approach, by requiring transparency and accountability for all public officials. The Framers would undoubtedly agree.
All people have a tendency to gather information in a self-serving way and also to process that information in a way that is self-serving. Fans of two teams watching a video of a football game between the two will tend to disagree completely about which team got the most breaks from the referees. 86 Studies show that even people who are trained to be objective and skeptical, such as auditors and scientists, tend to find more persuasive the information that is consistent with their self-interest or their previously drawn conclusions. In general, people tend to see what they expect to see in the facts that they take in.
In the case of a narcissistic politician, the self-serving bias can become even more pronounced. 87 But there are two other well-known biases that are also exaggerated by this particular personality: loss-aversion and overconfidence. Empirical studies show that people enjoy their gains only about half as much as they suffer from their losses. That is, people feel losses more deeply than gains of the same value. 88 This loss aversion is connected to what Kahneman and Tversky call “the endowment effect,” which is evident in the attachment most people have with what they own, and the “status quo bias,” where people unconsciously yet consistently resist change. 89 For loss aversion, once someone sees an item they identify as “theirs,” it usually becomes more valuable to them, often more than what the market would bear. This may partly explain why Mr. Trump finds it difficult to part with ownership of his assets, even as he cedes temporary control of them to his sons.
This can also lead to a distinct double standard: being overly confident in your own moral compass can short-circuit your own interest in moral self-reflection. If you are overconfident, you already “know” you are a good person, having a “strong but wrong” belief that you are entirely ethical. Numerous empirical studies show otherwise. For example, a large majority of physicians who routinely get free merchandise from drug companies will deny that this compromises their objectivity in any way, but only a small percentage believed that other physicians could retain their objectivity. 92 In short, we humans routinely give our own ethics higher marks than they deserve.
Because of the lack of judicial precedents related to the Emoluments Clauses, it makes sense to look for persuasive legal authority on conflicts of interest in areas other than constitutional law. As a matter of federal statutory law, officers of the executive branch of the federal government are barred from participating in matters that may impact their financial interests. 95 This is unambiguous in the context of federal contracting: losses or bad intent do not need to be shown, and penalties, including nullification of contracts, have been characterized as deliberately harsh. 96 Another area where conflicts of interest are addressed is in corporate governance. Numerous state corporation laws govern the conduct of officers and directors. 97 As discussed above, it is a fair summary to say that the United States now has a chief executive of the federal government, making important domestic and foreign policies, and at the same time having businesses that receive money and benefits from representatives of foreign governments and from states and the District of Columbia. Would an analogous scenario be tolerated in private enterprise? Clearly not.
The legal brain trust behind CREW’s lawsuit was an impressive roster of leading Constitutional law scholars, including Edward Chemerinsky, Laurence Tribe, and Zephyr Teachout. The lawsuit was filed in the Federal Court for the Southern District of New York on January 23rd, and claimed standing on the basis of the considerable drain on the organization’s resources for education and research needed because of Mr. Trump’s continuing foreign interests.
Washington politics––especially the workings of the U.S. Congress for many years––now seem neither purposeful nor noble, and a strong case can be made that because of gerrymandering, money in political campaigns, and other factors, Congress has become radically dysfunctional. 134 While some members of Congress are concerned about the emoluments issue, they are all Democrats, and are–as of the time of this writing–in a minority in both the House and Senate. 200 Democrats brought an emoluments lawsuit in June of 2017, 135 and predictably the threshold arguments were about standing and “the political question” doctrine. 136 Norm Eisen, who is co-counsel on the case and also a principal of CREW, noted that since Judge Daniels had pointed to Congress as the appropriate branch to provide a remedy, members of Congress had “special standing” to claim injury for not being able to vote on (consent to) the President’s ongoing train of emoluments. 137 In moving to dismiss the CREW lawsuit, Department of Justice attorneys had argued that Congress had a special capacity to deal with questions related to emoluments.
Attorneys for the Congressional Democrats argued that members of Congress had an individual right to vote on each emolument. 138 However, the language of the Constitution speaks about Congress collectively, and does not seem to give individual Senators or Representatives a right to vote on every emolument. Accordingly, the President’s attorneys argue that Congress must speak collectively, not individually. 139 But if the President does not ask for Congressional consent, and Mr. Trump clearly will not, what does Congress do then? Suppose a bipartisan resolution asking the President to provide a listing of all emoluments passes both chambers, but Mr. Trump then refuses to comply. Or suppose that, in 2019, the new Chair of the House Ways and Means Committee subpoenas Trump’s tax returns from the IRS? Will the President order the IRS not to cooperate? Could he invoke executive privilege over tax return information about his business dealings undertaken prior to the Presidency?
The attorneys general of Maryland and the District of Columbia do believe that the judiciary has a role to play in interpreting and applying both the foreign and domestic Emoluments Clauses. Shortly before the Congressional Democrats filed their lawsuit, Maryland and the District of Columbia filed suit in the federal district court of Maryland. 142 In March 2018, Judge Peter J. Messitte found that the plaintiffs had standing to bring the lawsuit, and declined to dismiss on the basis of the “political question doctrine.” 143 In July 2018 in a second opinion, Judge Messitte dealt extensively with the definition of emoluments. 144 As these opinions are the most in-depth examination of the two Emoluments Clauses as of September 2018, we will describe his findings and rationale for all three key issues.
The issues on standing are sufficiently complicated that readers may lose patience with all of the argumentation. But for the sake of completeness we will here survey Judge Messitte’s findings and conclusions regarding those issues in the Maryland––D.C. emoluments case against President Trump. In brief, he finds that there are sufficient grounds to grant standing to the plaintiffs, and rejects some of the President’s positions. But, as noted below, his determinations may be overturned on appeal, just as Judge Daniels’ findings as to lack of standing for CREW and its individual plaintiffs may be overturned on appeal.
Judge Messitte recites the usual tests for standing, 145 but emphasizes that states are not “normal litigants for the purposes of invoking federal jurisdiction” and are entitled to “special solicitude” in the standing analysis. 146 There could, he noted, be an “ invasion of three types of unique State interests justifying standing that were identified by the Supreme Court in being (a) sovereign interests; (b) non-sovereign interests; and (c) quasi-sovereign interests.” 147 Judge Messitte’s opinion focuses on the quasi-sovereign interests of both D.C. and Maryland, and includes its capability to sue based on parens patriae, the principle that political authority carries with it the responsibility for protection of citizens.
The President’s position is that these claimed injuries are based on a “speculative chain of possibilities,” such that they cannot be deemed “certainly impending.” 154 Maryland, the President’s lawyers point out, “has not alleged that it is faced with any threatened need to grant concessions to him or his Organization. In fact, according to this argument, the Amended Complaint does not even allege that the Trump Organization or the President do any business in Maryland.” 155 While the District of Columbia is home to the Hotel, the President argues that if the District were to provide special treatment, it would be a “self-inflicted injury.” 156 Moreover, it is “purely conjectural” that other States might grant favors or concessions to the President’s businesses in violation of their own laws, and even more conjectural to suppose that he would retaliate against Plaintiffs if they failed to grant such concessions. 157 Thus, there is no “injury-in-fact” that would grant recognizable standing status under Article III.
The State of Maryland does have 39,000 square feet of meeting and event space at the Bethesda Marriott Conference Center, which competes directly with the Trump Hotel’s 38,000 square feet of meeting and event space. The Conference Center has a large ballroom, has hosted embassy events in the past, and, compared with the Hotel, is roughly equidistant from many foreign embassies. In fact, Plaintiffs cite specific instances of foreign governments foregoing reservations at other hotels in the arena and moving them to the President’s Hotel (noting that both Kuwait and Bahrain moved events from the Four Seasons and Ritz Carlton to the Hotel after the President was elected). 165 Statements from foreign diplomats have confirmed that they will almost certainly be doing likewise.
Against this, the President argues that even if Plaintiffs could bring this suit against the Federal Government, parens patriae standing would still fail because Plaintiffs have not alleged a concrete injury, and to bring a parens patriae action, the State must be “more than a nominal party,” it must allege an injury suffered by a “substantial segment of its population.” 166 According to the President, the Amended Complaint does not plausibly allege such an injury, positing instead a general injury caused by a single Hotel to no more than an “identifiable group of individual residents,” which is not sufficient.
Yet Judge Messitte was satisfied that both the District of Columbia and Maryland are more than nominal parties. “They allege competitive injuries affecting a large segment of their populations. The Amended Complaint alleges that in 2014, visitors to the District of Columbia generated approximately $6.81 billion in spending and drove $3.86 billion in wages for 74,570 employees engaged in the hospitality industry.” 167 In the Court’s view, that is enough, as a “large number of Maryland and District of Columbia residents are being affected and will continue to be affected when foreign and state governments choose to stay, host events, or dine at the Hotel rather than at comparable Maryland or District of Columbia establishments, in whole or in substantial part simply because of the President’s association with it.” 168 He sees the Plaintiffs as trying to protect a large segment of their commercial residents and hospitality industry employees from economic harm.
These arguments could have gone the other way. A different trial judge, like Judge Daniels, could have determined that the damages were speculative, not well-enough defined, and therefore not a traceable “injury-in-fact” that would create standing. As the question of standing is a mixed question of law and fact for judges to determine, appellate judges are free to overturn such findings if they believe the law was incorrectly applied to all the facts of the case that are part of the record on appeal. The Fourth Circuit could so do without having to give a presumption of a fair hearing to the trial judge; ordinarily, appellate courts will accept a trial judge’s findings of fact and conclusions of law that are not “clearly erroneous.” Given the importance of this issue, the Fourth Circuit Court of Appeals could determine that the motion to dismiss should have been granted, either on standing or the political question doctrine issue.
In his March 2018 opinion on standing, described above, Judge Messitte also addresses the political question doctrine, stating that the Emoluments Clauses do create a private right of action, that equitable relief against the President was well within the Supreme Court’s earlier precedents, and disagrees with the conclusion reached by Judge Daniels in CREW et al. v. Trump that the Framers did not have competitors in mind when they composed the Emoluments Clauses. Judge Messitte writes that this would imply that “no competitors anywhere are ever within the zone of interests of the Clauses. But the Emoluments Clauses clearly were and are meant to protect all Americans.” 169 Under the President’s interpretation, he notes, only Congress would ever be able to enforce these constitutional provisions.
After an extensive review of Executive Branch precedent and practice, 200 Judge Messitte applies the Emoluments Clauses and finds potential violations of the Foreign Emoluments Clause with foreign governments patronizing the Trump International Hotel. 201 As to the Domestic Emoluments Clause, he finds that the President may have unlawfully benefitted from the Government Services Administration (GSA) lease of the Old Post Office Building to the hotel, 202 and from patronage of the Hotel by state governments, and by tax concessions from the D.C. Government. 203 On a motion to dismiss by the President, a trial judge must only judge whether the allegations “plausibly state a claim” under either emoluments clause. Depending on the evidence at trial, then, the plaintiffs could establish that the President’s receipt of these emoluments is unconstitutional. Discovery of relevant evidence for trial purposes was left to a joint recommendation process, with agreement due in September 2018. 204 Regardless of the outcome of the D.C.––Maryland lawsuit and the Congressional Democrats lawsuit, all the emoluments lawsuits filed since the Inauguration of the 45th U.S. President identify a fundamental problem of governance in the public interest colliding with the private interests of Donald J. Trump. He appears to see no separation, and what remains is whether either Congress or the Courts will address a Constitutional issue that has been dormant for nearly 230 years.
The Emoluments Clauses are federal public officials’ equivalent of the fiduciary duty owed by trustees and corporate managers and directors. It is difficult to discern why the public sector should have different “ethics” from the private sector, since both are managed by people with possible conflicts of interest. Absent any specific law on point, one could attempt to argue that there are differences, in that a trustee takes care of other people’s money with very specific obligations to particular people, and a corporate manager has fiduciary duties (“the utmost care”) to the company and its investors, while a public official’s duties are to a more general set of stakeholders. However, as we have reviewed, there is a basis in the U.S. Constitution, the Federalist Papers, historical precedent, and related scholarship that public officials, like private sector managers, have duties to avoid conficts of interest.
We contend that, for purposes of interpreting the Emoluments Clauses, it is unlikely that the Framers would have assumed that the President could not have conflicts of interest. Given their historical experience, their reading of Gibbons’ Decline and Fall of the Roman Empire, and the influence of John Locke’s philosophy, the Framers would have seen the government generally––and not just particular offices of the government––as being trustee of the rights of the citizenry. 205 To the Framers, the social contract was clear: government received its power from the consent of the governed, and was to insure the rights of life, liberty, and the pursuit of happiness. The people retained the right to overthrow that government if it failed in its duties to protect those rights. In short, government (including the Executive branch) only has the power accorded to it by the people. Likewise, a trustee or a corporate manager should only exercise the powers given to them, and must do so in care of the rights of others.
This article has tried to make clear that the Framers had a clear understanding of corruption, an understanding that deeply mistrusted power and influence in all of its forms. They hoped for political leaders with civic virtue, but were realistic enough to provide a restraining effect on those public officials that might prefer power and money to serving the public good. We can see this in the separation of powers provided for in the Constitution: “checks and balances” as safeguards against what they understood to be well-known temptations and systemic corruption.
Those safeguards include the Emoluments Clauses. The notion that they were directed only toward quid pro quo exchanges does not withstand historical scrutiny. In that light, President Trump’s businesses, his refusal to divest ownership while carrying out his sworn duties to protect and defend the Constitution of the United States, added to his apparent intention to profit from his position as President, are all violations of the Emoluments Clauses.
As of this writing, the D.C. and Maryland emoluments lawsuit may survive to enter into discovery phase. The 2018 mid-term elections resulted in a Democratic majority in the House of Representatives, triggering possible subpoenas for tax returns and other information by the House Ways and Means Committee. In either scenario, whether it is the result of litigation or a Congressional subpoena, the current constitutional crisis could escalate. Given the complexity of selling of assets that are essentially the Trump name itself, and the probability that Trump might ignore orders to do so, public pressure could increase upon the House of Representatives to take some further action, such as voting on articles of impeachment. But unless two-thirds of the Senate would vote to convict, the President would survive even that process; unless his own party were to agree, which is highly unlikely, there will be no impeachment process for the President’s violations of the Emoluments Clauses.
It is emblematic of the political atmosphere in Washington, D.C. that only Congressional Democrats have brought up the Emoluments Clauses. A sustainable political society requires “an aristocracy of virtue and talent” rather than an aristocracy of power and wealth, and political leaders that will put love for the nation’s well being above love of self or political power. It is likely that some segment of voters in the U.S. 2016 electorate confused power and wealth with virtue and talent.
Revelations related to potential obstruction of justice by Trump and his associates are rapidly emerging as this article is being written. The Trump presidency may well end for reasons other than conflicts of interest and repeated violations of the Emoluments Clauses. However, when a businessperson with an eponymous global brand also serves as the U.S. President, the political and judicial systems of a functioning democracy should be able to determine the boundaries of what is acceptable in terms of conflicts of interest. We remain hopeful that the U.S. judiciary, or perhaps even Congress, will acknowledge the clear text of the Emoluments Clauses, and affirm the Framers’ understanding that a Republic can be corrupted from within by failing to deal with clear conflicts of interest among all of its public officials.
“I can be president of the United States and run my business 100 percent, sign checks on my business.” He also said, “The law is totally on my side, meaning, the president can’t have a conflict of interest.” The Editors, Donald Trump’s New York Times Interview: Full Transcript, N.Y. Times, Nov. 23, 2016 (hereafter, N.Y. Times Interview).
The Foreign Emoluments Clause, U.S. Const. art. I, § 9, cl. 8; the Domestic Emoluments Clause, U.S. Const. art II, §1, cl. 7.
See infra notes 9–43 and accompanying text.
See infra notes 44–54 and accompanying text.
See infra notes 55–75 and accompanying text.
See infra notes 76–96 and accompanying text.
See infra notes 97–113 and accompanying text.
See infra notes 114–201 and accompanying text.
U.S. Const. art 1, § 9.
See infra, notes 13-32 and accompanying text.
John Bassett Moore and Francis Wharton, A Digest of International Law (1906), at 579.
Zephyr Teachout, Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United, 24-25. (2014).
Alexander Hamilton, James Madison, and John Jay, The Federalist (#22), Gideon Edition (1818) at 121-22.
Teachout, supra note 14, at 38.
Id. at 40. Research has shown that a self-interest bias is fairly common, coupled with related biases such as overconfidence and loss-aversion. President Trump is no exception. See infra, notes 85–94 and accompanying text.
Teachout, supra note 14, at 40-44.
See Citizens United v. FEC, 558 U.S.310, 360 (2010) (Kennedy, J.). “The McConnell record was ‘over 100,000 pages’ long ... yet it ‘does not have any direct examples of votes being exchanged for ... expenditures,’ .... This confirms Buckley’s reasoning that independent expenditures do not lead to, or create the appearance of, quid pro quo corruption.” Instead of seeing access and influence as corrupting factors, the majority opinion of Justice Kennedy shrank the definition of corruption down to the explicit exchange of money for votes. See also Lawrence Lessig, Republic Lost: How Money Corrupts Congress––and a Plan to Stop It (2011), discussing the moral confusion around corruption in the majority opinion by Justice Kennedy. Id. at 240-45.
Teachout, supra note 14, at 27. Pinckney had “urged the necessity of preserving foreign Ministers & other officers of the U.S. independent of external influence.” Id.
Max Farrand, 3 The Records of the Federal Convention of 1787, 327 (1911).
See infra, notes 76–89 and accompanying text.
See generally Kevin Phillips, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism (2008) (describing how the financial sector has hijacked the U.S. political economy). See also Luigi Zingales, A Capitalism for the People (2011) (describing a corrupt crony capitalism and how it has come to replace competition and merit in both business and government).
Philip Bump, Donald Trump’s Favorite Topic While Introducing Mike Pence? Donald Trump. Wash. Post, July 16, 2106.
N.Y. Times interview, supra note 1.
See infra notes 130-32, and 167-73 and accompanying text.
Eisen et al., supra note 32, at 11–12. See also District of Columbia v. Trump, 315 F. Supp. 3d 875 (D. Md. 2018) (Messitte, J.).
Eisen et al., supra note 32, at 9–10.
David J. Barron, Applicability of the Emoluments Clause and the Foreign Gifts and Decorations Act to the President’s Receipt of the Nobel Peace Prize, 33 Op. O.L.C. 1, 4 (2009).
Samuel A. Alito, Jr., Deputy Assistant Attorney General, Office of Legal Counsel, Re: Emoluments Clause Questions Raised by NASA Scientist’s Proposed Consulting Arrangement with the University of New South Wales.
Memorandum for H. Gerald Staub, Office of Chief Counsel, NASA, from Samuel A. Alito, Jr., Deputy Assistant Attorney General, Office of Legal Counsel, Re: Emoluments Clause Questions raised by NASA Scientist’s Proposed Consulting Arrangement with the University of New South Wales at 4–5 (May 23, 1986).
See infra notes 130-32 and notes 167-73 and accompanying text.
51 U.S. (10 How.) 109, 135 (1850).
Sherburne v. United States, 16 Ct. Cl. 491, 496 (1880).
Adam Davidson, A Theory of Trump Kompromat: Why Trump Is So Nice to Putin, Even When Putin Might Not Want Him to Be. New Yorker, July 19, 2018. It would be hard to show that Trump’s indebtedness, and seeming deference to Putin, is a violation of the Foreign Emoluments Clause. The “favors” may not have come from the government itself, but rather a network of people close to the government, yet who are not formally official agents of the government. Davidson however, notes that Trump’s business deals ... were with tertiary figures. Sistema is rooted in local, often familial, trust, so it is common to see networks rooted in ethnic or national identity. My own reporting has shown that Trump has worked with many ethnic Turks from Central Asia, such as the Mammadov family, in Azerbaijan, Tevfik Arif, in New York; and Aras the Mammadov family, in Azerbaijan and Emin Agalarov, in Moscow... . Trump’s partners and their rivals would likely have gathered any incriminating information they could find on him, knowing that it might one day provide some sort of business leverage—even with no thought that he could someday become the most powerful person on Earth ... . Under Putin, sistema has become a method for making deals among businesses, powerful players, and the people. Business has not taken over the state, nor vice versa; the two have merged in a union of total and seamless corruption. (emphasis added).
For U.S. judicial system, however, this seamless union is probably not sufficient to recognize that Russian funds supplied to Trump outside the regular banking system were “emoluments” from the government of Russia or “instrumentalities” of Russia.
Brian Klass, Jamal Khashoggi’s Fate Casts a Harsh Light on Trump’s Friendship with Saudi Arabia, Wash. Post, Oct. 10, 2018.
“In 2015, when asked about his relationship with the Saudis, Trump said: ‘I get along great with all of them. They buy apartments from me. They spend $40 million, $50 million. Am I supposed to dislike them?’” Id.
District of Columbia v. Trump, 291 F. Supp. 3d 725, 741 (2018)(Messitte, J.).
O’Connell & Jordan, supra note 67.
Venook, supra note 71. During January and February of 2017, the Trump organization began moving forward with its plans to expand its golf course in Aberdeen, Scotland. It also renewed discussions with Ricardo and Fernando Hazoury, the brothers who own the Cap Cano resort in the Dominican Republic. Id.
See infra, notes 88-89 and accompanying text.
President Reagan had deep suspicions about the Soviets during the “Cold War.” When talks were underway with the Soviets for the Intermediate-Range Nuclear Forces Treaty (INF), he often used the Russian proverb “Doveryai, no proveryai” (“Trust, but verify.”).
Dan Ariely, Predictably Irrational (2008). (Ariely makes the case that people are constantly susceptible to irrelevant influences from their immediate environment, shortsightedness, and other forms of irrationality, contrary to the model of “economic man” as a reasoning, calculating utility maximizing machine.).
Daniel Kahneman, Thinking, Fast and Slow (2011). (Kahneman makes a thorough case that the human animal is systematically illogical. We routinely fail to assess situations, yet do so in fairly predictable patterns that are grounded in our primate ancestry.).
Lessig, supra note 27, at 138.
Id. at 151-52. See also Martin Gillers and Benjamin I. Page, Testing Theories of American Politics, Elites, Interest Groups, and Average Citizens, 12(3) Perspective on Politics 564, at 564 (2014) (“Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.”).
Robert A. Prentice, Ethical Decision Making: More Needed Than Good Intentions, Fin. Analysts J. 63(6), (2007), at 22.
Albert H. Hastorf & Hadley Cantril, They Saw a Game: A Case Study, 45(1) J. Abnormal Psychol. 129-34 (1954).
Dan P. McAdams, The Mind of Donald Trump, The Atlantic, June 2016, https://www.theatlantic.com/magazine/archive/2016/06/the-mind-of-donald-trump/480771/.(“Narcissistic people like Trump may seek glorification over and over, but not necessarily because they suffered from negative family dynamics as children. Rather, they simply cannot get enough.”) Id. It seems likely that it’s just not possible for President Trump to acknowledge that he could be wrong on occasion.
Daniel Kahneman, Jack L. Knetsch, & Richard H. Thaler, The Endowment Effect, Loss Aversion, and Status Quo Bias, 5(1) J. Econ. Persp. 193, 193-206.
Prentice, supra note 85, at 20.
Marianne M. Jennings, Ethics and Investment Management: True Reform, 61(3) Financial Analysts Journal, 45 (2005). Studies indicate that 74 percent of us believe our ethics are higher than those of our peers and 83 percent of us say that at least one- half of the people we know would list us as one of the most ethical people they know. An amazing 92 percent of us are satisfied with our ethics and character. Id. at 52.
The trustee of a blind trust keeps certain information secret from the trust beneficiaries, who do not know the nature of the assets held in trust. Moreover, they have no power, directly or indirectly, to participate in the management or distribution of those assets. In the case of President Trump, “blindness” would be difficult at best, as he already knows the nature of his real estate assets and where his branded properties are.
18 U.S.C. § 208 as cited in Appendix, 36 Fed. B. News & J. 129 (1989).
Padideh Ala’i, Civil Consequences of Corruption in International Commercial Contracts, 62 Am. J. Comp. L. 185, 191 (2014).
See, e. g., Craig Palm & Mark A. Kearney, A Primer on the Basics of Directors’ Duties in Delaware: The Rules of the Game (Part I) 40 Vill. L. Rev. 1297 (1995).
Claire Hill & Richard W. Painter, Compromised Fiduciaries: Conflicts of Interest in Government and Business, 95 Minn. L. Rev. 1637, 1644 (2011).
See Richard W. Painter, Getting the Government America Deserves: How Ethics Reform Can Make a Difference, 3 (2009).
Hill & Painter, supra note 98, at 1645, citing Kathleen Clark, Do We Have Enough Ethics in Government Yet? An Answer from Fiduciary Theory, 1996 U. Ill. L. Rev. 57, 74 (“Numerous courts have recognized the fiduciary obligation of government employees, even in the absence of specific legislative or regulatory endorsements of such duties, and these courts have imposed fiduciary-like remedies in response to violations of the conflict and influence components of that obligation.”). Hill and Painter also cite Exec. Order No. 12,674 § 101(a), 3 C.F.R. 215 (1990) (“Public service is a public trust.”), as modified by Exec. Order No. 12,731, 3 C.F.R. 306 (1991) (codified at 5 U.S.C. §§ 7301, 7351, 7353 (2006)).
See David J. Seipp, Trust and Fiduciary Duty in the Early Common Law, 91 B.U. L. Rev. 1011 (2011).
See John H. Langbein, The Contractarian Basis of the Law of Trusts, 105 Yale L. J. 625 (1995).
Julian Velasco, How Many Fiduciary Duties Are There in Corporate Law? 83 S. Cal. L. Rev. 1231, 1233 (2010).
Edwin W. Hecker, Jr., Fiduciary Duties in Business Entities Revisited, 61 U. Kan. L. Rev. 923, 924-25 (2013).
See Gantler v. Stephens, 965 A.2d 695, 708-09 & n.37 (Del. 2009) (holding that officers have fiduciary duties equal to those of directors, though consequences may differ), and Lawrence A. Hamermesh & A. Gilchrist Sparks III, Corporate Officers and the Business Judgment Rule: A Reply to Professor Johnson, 60 Bus. Law. 865 (2005) (stating that the protection of the business judgment rule should apply with equally to officers and directors).
Leo E. Strine, Jr. et al., Loyalty’s Core Demand: The Defining Role of Good Faith in Corporation Law, 98 Geo. L.J. 629, 696 (2010).
E.g., as noted in District of Columbia. v. Trump, 315 F. Supp. 3d at 877-78.
Both the Congressional Democrats case (Blumenthal et al. v. Trump) and the D.C.–– Maryland v. Trump cases have thus far overcome the “standing” objections of the President. See Blumenthal et al. v. Trump, 2018 U.S. Dist. LEXIS 167411 (Sept. 28, 2018), and District of Columbia v. Trump, 315 F. Supp. 3d 875 (D. Md. 2018).
See Adam J. Sulkowski, Ultra Vires Statutes: Alive, Kicking, and a Means of Circumventing the Scalia Standing Gauntlet in Environmental Litigation, 14 J. Envtl. L. & Litig. (2009).
Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992)).
Id. at 1548 (quoting Lujan, 504 U.S. at 560).
Citizens for Responsibility & Ethics in Washington (CREW) v. Trump, 276 F.Supp.3d 174 (S.D.N.Y. 2017).
Reasonable minds –– and reasonable judges––can and will differ in analyzing standing issues. There is merit in Judge Daniels’ opinion dismissing the CREW lawsuit for lack of standing, and there is merit in Judge Missette ’s opinion approving standing for D.C. and Maryland in their emoluments lawsuit.
CREW v. Trump, 276 F. Supp. 3d at 185.
Citing Baker v. Carr, 369 U.S. 186, 217 (1962). Note that “or” denotes that any of these conditions may give rise to judicial abstention in a particular case.
CREW v. Trump,, 276 F. Supp. 3d at 193.
Thomas Mann & Norman Ornstein, The Broken Branch: How Congress is Failing America and How to Get It Back on Track (2006).
Id., at 37-39. Ultimately, Judge Sullivan rejected the President’s arguments, and found that the Congressional plaintiffs have standing to argue for declaratory and injunctive relief on the basis of the foreign Emoluments Clause. Id. at 60-61.
Alicia Parlapiano & Wilson Andrews, Limits on Presidents Acting Alone, N.Y.Times, Jan. 20, 2015.
District of Columbia v. Trump, 291 F. Supp. 3d 725 (D. Md. 2018).
District of Columbia v. Trump, 315 F. Supp. 3d 875 (D. Md. 2018).
291 F. Supp. 3d 725,737.
Id. (citing Massachusetts v. EPA, 549 U.S. 497, 518, 520 (2007).
Id. at 737 (citing Alfred L. Snapp & Son, Inc., v. Puerto Rico ex rel. Barez, 458 U.S. 601, at 607).
Id. (citing Shelby Cty. v. Holder, 570 U.S 529, 544 (2013)). (“At the same time, as we made clear in Northwest Austin, the fundamental principle of equal sovereignty remains highly pertinent in assessing subsequent disparate treatment of States.”).
Id. (citing Georgia v. Pennsylvania Railroad, 324 U.S. 439, 451 (1945)).
Id. at 743 (quoting Sherley v. Sebelius, 610 F.3d 69, 73 (D.C. Cir. 2010)).
Id. at 746 (citing Snapp & Son, Inc. v. Puerto Rico ex rel Barez, 458 U.S. at 607 (1982)).
District of Columbia v. Trump, 291 F. Supp. 3d 725, 755 (2018).
See T.J. Halstead, The Separation of Powers Doctrine: An Overview of its Rationale and Application, Congressional Research Service (1999).
Clinton v. Jones, 520 U.S. 681, 703 (1997).
District of Columbia v. Trump, 291 F. Supp. 3d 725, 756 (2018).
District of Columbia v. Trump, 315 F. Supp. 3d 875, 901-04 (2018).
Id. at 880 (referencing Def.’s Mot. Dismiss, Sept. 29, 2017).
The argument was made by Professor Seth Tillman, as amicus curiae. Br. for Scholar Seth Barrett Tillman & The Judicial Education Project as Amici Curiae in Support of Def. (Oct. 6, 2017), ECF No. 27- 1 (Professor Tillman), at 2, 4. Tillman’s argument was based on a distinction between appointed positions and elected ones. Judge Messitte noted the potentially “bizarre consequences” from Tillman’s interpretations: District of Columbia v. Trump, 315 F. Supp. 3d 875, 884 (fn 17), citing Saikrishna Prakash, Why the Incompatibility Clause Applies to the Office of the President, 4 Duke J. Const. L Pub. Pol’y 143, 149-51 (2009).
District of Columbia v. Trump, 315 F. Supp. 3d 881.
Id. at 889 – 94 and 899 –903.
District of Columbia v. Trump, 315 F. Supp. 3d 881, at 885-89.
District of Columbia v. Trump, 315 F. Supp. 3d 881, at 888.
District of Columbia v. Trump, 315 F. Supp. 3d 881 at 891.
District of Columbia v. Trump, 315 F. Supp. 3d 881, at 892-93.
District of Columbia v. Trump, 315 F. Supp. 3d 881, at 896.
See supra, notes 14-26 and accompanying text.
District of Columbia v. Trump, 315 F. Supp. 3d at 881, 897.
Id., quoting Teachout, supra note 14, at 2.
District of Columbia v. Trump, 315 F. Supp. 3d 881, at 898.
See supra notes 95-112 and accompanying text.
District of Columbia v. Trump, 315 F. Supp. 3d 875, 901-05 (2018).


In the Matter of Ray VELASQUEZ, Respondent.
*146 Fern Flanagan, Asst. Bar Counsel, with whom Thomas H. Henderson, Jr., Bar Counsel, Washington, D.C., was on brief, for petitioner.
Albert H. Turkus, Washington, D.C., with whom Carrie A. Simon and Alan J. Goldstein, Greenbelt, Md., were on the response, for respondent.
Before TERRY and STEADMAN, Associate Judges, and REILLY, Senior Associate Judge.
On November 24, 1984, respondent Velasquez was disbarred by the Maryland Court of Appeals for actions involving the deposit of personal and business funds into his client's escrow account and the use of that account to carry on the firm's business for a period of five years in order to conceal the firm's funds from creditors. The facts are fully set forth in Attorney Grievance Commission of Maryland v. Velasquez, 301 Md. 450, 483 A.2d 354 (1984), and in the attached Report and Recommendation of the Board on Professional Responsibility (Board) dated April 15, 1985.
Proceedings were begun in this jurisdiction on January 11, 1985, when Bar Counsel as required by D.C.Bar R. XI, § 18(1) filed a copy of the Maryland Court of Appeals decision with the clerk of this court and with the Board. On February 1, 1985, we requested that the Board determine whether reciprocal discipline should be imposed, or whether the Board would elect to proceed de novo pursuant to D.C.Bar R. XI, § 7. On February 12, 1985, Bar Counsel notified the Board that he did not oppose the imposition of reciprocal discipline in respondent's case; respondent's objections were filed by his counsel on February 19, 1985. On April 15, 1985, the Board issued its attached Report and Recommendation that reciprocal discipline be imposed and that respondent be disbarred in the District of Columbia.
(5) Discipline to be imposed. . . . [T]his Court shall impose the identical discipline [as in the other jurisdiction] unless Bar Counsel or the attorney demonstrates, or the Court finds upon the face of the record upon which the discipline is predicted, that clearly. . . (c) The imposition of the same discipline by the Court would result in grave injustice; or (d) The misconduct established warrants substantially different discipline in this jurisdiction. . . .
Respondent invokes subsections (c) and (d) in seeking a lesser discipline than disbarment.
[The Court] shall adopt the recommended disposition of the Board unless to do so would foster a tendency toward inconsistent dispositions for comparable conduct or otherwise would be unwarranted.
A showing that action would "foster a tendency toward inconsistent dispositions" or otherwise be "unwarranted" contemplates a greater degree of latitude in application than a showing that "clearly" the misconduct warrants "substantially different *147 discipline," or that identical discipline would result in "grave injustice."
The rationale behind the use of a more rigid standard in reciprocal discipline cases is plain. First, another jurisdiction has already afforded the attorney a disciplinary procedure that includes notice, an opportunity to be heard, sufficient proof of misconduct, and a determined sanction. There is no need for a de novo repetition of the entire process, and the burden of persuasion is reversed. Second, there is merit in the idea of granting due deference for its sake alone to the opinions and actions of a sister jurisdiction with respect to attorneys over whom we share supervisory authority.
Put another way, in dealing with proceedings involving our jurisdiction alone, we concern ourselves with inconsistent dispositions of cases involving comparable conduct by different attorneys. In a reciprocal discipline proceeding, we also must factor in the effect of an inconsistent disposition involving identical conduct by the same attorney.
Applying the foregoing considerations in the review of this case, we are unable to conclude that either exception invoked by respondent is clearly met. As is pointed out in the Board report, disbarment is a usual sanction in cases of this type. In re Hines, 482 A.2d 378, 384-85 (D.C.1984). Respondent invites us to compare several decisions imposing a lesser sanction than disbarment. Besides the two which the Board found to be distinguishable, as do we, he invokes In re Gilchrist, 488 A.2d 1354 (D.C.1985). That case involved a single instance of commingling spanning a short period; it does not approach the seriousness of respondent's misconduct in this case.
ORDERED that respondent, Ray Velasquez, is disbarred from the practice of law in the District of Columbia. This order shall take effect 30 days from the date of this opinion.
Respondent is a member of the bar both in the State of Maryland and the District of Columbia. The Court of Appeals of Maryland has recently disbarred Respondent for conduct in violation of Disciplinary Rule 1-102 (A)(1), (3), (4), (5), (6); Disciplinary Rule 9-102 (A)(1), and Disciplinary Rule 9-102(B)(3) and (4). The District of Columbia Court of Appeals has now ordered the Board of Professional Responsibility to recommend either reciprocal discipline in this jurisdiction or a de novo proceeding pursuant to Rule XI, Section 7. The Board recommends that reciprocal discipline be imposed and that Respondent be disbarred from practice in the District of Columbia.
The charges in this matter arise from proceedings of the Attorney Grievance Commission of the State of Maryland. Acting pursuant to the provisions of Maryland Rule BV IX on behalf of the Commission, Bar Counsel filed a petition with the Court of Appeals of Maryland seeking disciplinary action against Ray Velasquez, a member of the Maryland Bar. The petition alleged that Velasquez violated DR 1-102(A)(1), (3), (4), (5), (6), which states that a lawyer shall not engage in illegal conduct *148 involving moral turpitude, dishonesty, fraud, or misrepresentation, or conduct that is prejudicial to the administration of justice, or any other conduct that adversely reflects on his fitness to practice law, DR 9-102(A), which prohibits a lawyer from commingling funds of his separate clients, and DR 9-102(B)(3), (4), which requires that a lawyer maintain complete records with respect to the receipt and disbursement of clients' funds coming into his possession.
The matter was referred for hearing to a trial judge of the Seventh Judicial Circuit of Maryland. The facts pertaining to Velasquez's activities are not in dispute. Respondent was admitted to the Maryland Bar in 1963 and the Bar of the District of Columbia in 1972. In 1974, Mr. Velasquez formed a partnership with Joseph A. Finlayson, Jr. Five years later, Mr. Finlayson developed a severe alcoholism problem. As Mr. Finlayson's drinking problem worsened, his absences from the firm became more frequent. His ability to contribute to the financial support of the law practice also declined. In 1982, Mr. Finlayson was brought before the Maryland Court of Appeals on charges of misconduct, including neglect of his clients' interests and was suspended indefinitely, with the Court taking note of the special circumstances of his alcoholism. See 293 Md. 156, 442 A.2d 565 (1982).
During this period, Mr. Velasquez faced the difficult tasks of holding the partnership together, serving the firm's clients, and meeting financial responsibilities to the firm's creditors. The income of the partnership steadily decreased until regular payments to the firm's creditors became impossible. Respondent made attempts to negotiate payment plans with the firm's creditors to satisfy the indebtedness owed to them by Messrs. Finlayson and Velasquez. Some accepted his offer; others rejected it. In 1979 certain creditors placed a lien on the partnership's bank account as well as Mr. Velasquez's administrative account.
In an effort to save the law firm and to continue his representation of existing clients, Mr. Velasquez deposited personal and business funds into his client's escrow account and used that account to carry on the firm's business. By 1984, Mr. Velasquez had succeeded in making full payment to virtually all of the firm's former creditors. The remaining creditors agreed to payment schedules.
In November, 1982, Mr. Velasquez received a check from an insurance company in settlement of a client's claim. Mr. Velasquez deposited the proceeds of the check in the escrow account and wrote a check to the client for her share of the amount. He agreed with the client to pay her physician's bill out of the remaining amount. In December, 1982, Velasquez provided the doctor with a check drawn on the escrow account. At the time the check was presented to the bank for payment, however, the balance of the escrow account was insufficient to cover the check. Three months later Mr. Velasquez made full payment to the client's physician in the form of a treasurer's check. At no time did Respondent's client ask for the funds owed to the doctor nor did she request that Respondent pay the doctor prior to March, 1983.
The record demonstrates that Respondent knowingly, albeit misguidedly, utilized the escrow account to carry out the firm's business. Although Respondent was successful in utilizing this scheme to satisfy outstanding debts with creditors and to keep the firm afloat, he admits, and the Court of Appeals found, that his actions clearly violated the disciplinary rules of Maryland.
At the evidentiary hearing, the judge filed his findings of fact and conclusions of law based upon stipulations of facts and evidence presented at the hearing. Mr. Velasquez represented himself throughout the disciplinary proceedings. The trial judge found that, although Respondent had violated DR 9-102(A) by commingling his clients' funds and DR 1-102(A)(4) by concealing his firm's assets from its creditors, *149 Respondent had not engaged in any act of fraud or moral turpitude. In addition, the trial judge concluded that Respondent had not violated DR 9-102(B)(3) or (4) since there was no evidence that payment had ever been demanded of Respondent by his client at any time.
The Court of Appeals of Maryland made an independent review of this matter based on the final report of the trial judge and rendered its opinion on November 8, 1984. The Court concluded, and we agree, that the hearing judge's findings of fact relating to commingling and failure to keep accurate and safe records of clients' property are supported by clear and convincing evidence on the record. We further agree with the Maryland Court of Appeals that, notwithstanding the findings of the trial judge, the activities of the Respondent constituted illegal, dishonest conduct and misrepresentation.
Under these circumstances, the Maryland authorities rationally concluded that Respondent committed those acts with which he was charged. The record does not support Respondent's claim that his unfamiliarity with the disciplinary proceedings of Maryland, the absence of self-interest as his motivation and the absence of any evidence that the client demanded funds or was in any way harmed by his conduct should result in a lesser sanction in this case.
All the violations found in the Maryland proceeding would be violations of the Code of Professional Responsibility as it applies in the District of Columbia. Ironically, the motivation for Respondent to commit these violations was the effort to pay off the debts of the partnership owed by him and his disabled partner to various creditors.
We are not unsympathetic to the commendable efforts of Respondent to maintain the viability of the law practice. We cannot, however, permit these sympathies to obscure the fact that the conduct of Respondent was intentional, and not inadvertent. The use of clients' funds, deposited in the escrow account, for general firm administration purposes is an unequivocal violation of the disciplinary rules. In addition, Respondent's conduct amounted to a fraud on creditors and is unworthy of any member of the bar under the standards established by the Court of Appeals in this jurisdiction.
Pursuant to Rule XI, Section 18, we are directed to recommend reciprocity to the Court of Appeals when, inter alia, the imposition of reciprocal discipline would not result in a grave injustice or where there is not a gross disparity between the sanctions that would be imposed in the District of Columbia with the sanction imposed by the other jurisdiction. We are bound to analyze the actions of the Maryland authorities in view of the standards set out in the Rules of our Court.
In this jurisdiction, disbarment is the usual sanction for misappropriation. See, e.g., In re Burton, 472 A.2d 831, 848 (D.C. 1984) (per curiam); In re Quimby, 359 F.2d 252 , 258 (D.C. Cir.1966) (per curiam). Respondent not only misappropriated client funds, he did so over a five-year period and as part of a scheme to conceal funds from creditors. The Maryland Court of Appeals found that Respondent not only commingled and misappropriated client funds, but also, inter alia, that his activities were illegal conduct involving moral turpitude.
Respondent's reliance on In re Harrison, 461 A.2d 1034 (D.C.1983), and In re Hines, 482 A.2d 378 (D.C.1984), is misplaced. Respondent's conduct is clearly beyond the scope of Harrison and Hines. Therefore, it appears to the Board that the reciprocal discipline of disbarment is well within the range of appropriate sanctions in the District of Columbia and is warranted in this matter. See In re Kyle, 446 A.2d 837 (D.C.1982); In re Leach, D-12-76 (D.C. February 18, 1976).
Pursuant to District of Columbia Court of Appeals Rule XI, Section 18(2), the Board hereby recommends that the District of Columbia Court of Appeals order that *150 Respondent, Ray Velasquez, be reciprocally disbarred in the District of Columbia.
All members of the Board concur in this recommendation except Messrs. Webb and Alexander who dissent in a separate opinion.
DISSENTING OPINION OF EDWARD B. WEBB, JR.
I dissent from the Board's opinion because I believe that the imposition of reciprocal discipline in this case is not required pursuant to Rule XI § 18. In my view, the sanction of disbarment would result in a grave injustice; Thus, the recommendation should be against reciprocal discipline.
Neither the Court of Appeals nor this Board has announced a per se rule with respect to the sanction in cases involving misappropriation. Rather, the Board is required to consider each case (of misappropriation) on "its own particular facts." In re Hines, 482 A.2d 378, 386 (D.C.1984). In so doing, I believe that disbarment is too harsh a sanction in the circumstances of this case. The actions of the Respondent do not parallel those found in In re Burka, 423 A.2d 181 (D.C.1980) (en banc) nor In re Burton, 472 A.2d 831 (D.C.1984). I find that In re Hines, supra, is a comparable case on the facts and that a suspension of not more than two years would be warranted. Similarly, I believe that the imposition of reciprocal discipline would result in a gross disparity between the sanction that would be imposed in the District of Columbia with the sanction imposed by Maryland. Consequently, I respectfully dissent.
/s/ Edward B. Webb, Jr. by JLM EDWARD B. WEBB, JR.
Dr. Alexander joins in this dissent.
 Two members of the Board dissented from that recommendation on the ground that the exceptions in D.C.Bar R. XI, § 18(5)(c) and (d) were applicable to this case.
 Similarly, § 18(5)(a) and (b) contains strong language giving rise to a more stringent requirement for accepting the Board's recommendation than does § 7(3). Though the language of § 18(5)(e) is not as forceful, it envisions a more straightforward test and still must be "clearly" demonstrated.


This action was brought in one of the courts of the State of New York to adjudicate conflicting claims against property held to satisfy a mortgage debt. The immediate controversy arises out of the reorganization in a United States District Court of a large New York guaranty company, another phase of which was before us in Prudence Realization Corp. v. Geist, 316 U.S. 89, 62 S.Ct. 978, 86 L.Ed. 1293.
Petitioner's predecessor, the Prudence Company, Inc, loaned money on real estate and issued guaranteed mortgage participation certificates. (For an exposition of the business details see In re The Westover, Inc., 2 Cir., 82 F.2d 177.) The enterprise was on a vast scale, running into the hundreds of millions. Our immediate concern is with certificates of participation issued by Prudence in a bond and mortgage made by Burnside Improvement Company. Prudence guaranteed the certificate holders the payment of interest and principal when due or within eighteen months thereafter. Burnside, the mortgagor, defaulted in the payment of an instalment of principal due January, 1932. After this default, Prudence itself purchased, either directly from the holders or through a concealed brokerage account and usually at a discount, certificates aggregating $431,212.86, approximately 42% of the amount of outstanding certificates. In June, 1932, the mortgaged premises securing the Burnside certificates were conveyed to Amalgamated Properties, Inc., a wholly-owned subsidiary of Prudence.
In 1935 Prudence went into reorganization under § 77B of the Bankruptcy Act, 48 Stat. 912, 11 U.S.C.A. § 207, and was adjudicated insolvent in 1938. As part of the Prudence proceedings, Amalgamated, in 1936, filed a voluntary petition for reorganization, but the two were later severed. Thereafter, under a reorganization plan confirmed by the District Court, all the assets of Prudence, including the Burnside certificates reacquired by it, were transferred to petitioner, Prudence Realization Corporation. 57 F.Supp. 596.
Thereafter, respondents, the trustees under the Burnside plan, and various certificate holders brought this action in the New York Supreme Court to determine petitioner's right to participate as holder of certificates acquired by the insolvent guarantor. Petitioner's claim for parity of treatment was denied, but his denial was reversed by the Appellate Division, 266 App.Div. 543, 42 N.Y.S.2d 528, which in turn was reversed by the Court of Appeals. It held that state law governed and that New York subordinated the guarantor's certificates. 292 N.Y. 210, 54 N.E.2d 367. We brought the case here, 323 U.S. 686, 65 S.Ct. 42, because conflict with Prudence Realization Corp v. Geist, supra, was strongly pressed. Precise appreciation is therefore required of the record now before us compared with that on which the Geist decision was based.
In the Geist case, the claim of parity by the same petitioner arose in connection with different property and another certificate issue, the Zo-Gale issue. In that case also the question of parity was not settled in the order of confirmation. But, while it was reserved for a court of competent jurisdiction, the confirmation order clearly indicated that the bankruptcy court was reserving jurisdiction in itself. 'The court retains jurisdiction to hear and determine all questions arising under paragraph 7 of this order'—so ran the terms of the reservation of the parity question in the Geist case—and the trustees 'are hereby granted leave to apply at any time at the foot of this order for such adjudication.' The trustee, Geist, accordingly applied to the bankruptcy court for an order adjudicating the rights of the certificate holders and that court, 'In the Matter of a Plan of Reorganization of Amalgamated Properties, Inc., Debtor, in Respect of the Zo-Gale First Mortgage Participation Certificates' issued an order to show cause. When the Amalgamated proceeding with respect to the Zo-Gale property was subsequently closed, the order provided that 'these proceedings shall hereafter be treated as dismissed for all purposes, except the determination of the questions raised in the pending motion by A. Geist * * * for determination of the relative priorities * * *' The bankruptcy court had patently retained for decision the question affecting the distribution of the bankrupt's property, although in all other respects it had wound up the proceedings. 'The bankruptcy act prescribes its own criteria for distribution to creditors. * * * The court of bankruptcy is a court of equity to which the judicial administration of the bankrupt's estate is committed, * * * and it is for that court—not without appropriate regard for rights acquired under rules of state law—to define and apply federal law in determining the extent to which the inequitable conduct of a claimant in acquiring or asserting his claim in bankruptcy requires its subordination to other claims which, in other respects, are of the same class.' Prudence Realization Corp. v. Geist, supra, 316 U.S. at page 95, 62 S.Ct. at page 982, 86 L.Ed. 1293. Accordingly we held that the District Court, sitting as a bankruptcy court, was under duty to apply federal and not state law, and that, in the circumstances of the Geist case, there was 'no agreement and no equitable basis for depriving the Prudence Company and its creditors of the benefits of the usual bankruptcy rule of equality.' Prudence Realization Corp. v. Geist, supra, 316 U.S. at page 97, 62 S.Ct. at page 983, 86 L.Ed. 1293.
To be sure, the Securities and Exchange Commission, as amicus curiae, suggests that the bankruptcy court was in error in failing to retain jurisdiction for determining this aspect of distribution. But the different treatment of the same problem by the same court in the Geist case and in this, together with acquiescence by the petitioner in the closing order without seeking a review of the nonretention of jurisdiction, give ground for believing that the arrangement was the product of bargaining between the parties. In any event, since no appeal was taken, it is not now open to find error by the bankruptcy court in failing to retain jurisdiction. The order confirming the plan of reorganization is res judicata. Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 378, 60 S.Ct. 317, 320, 84 L.Ed. 329.
We find no warrant in the statute for so holding. Section 77B, under which this reorganization was accomplished, provides in subsection g, that upon confirmation 'the provisions of the plan and of the order of confirmation shall be binding.' The rights are thus fixed as the plan and the order provide and are not otherwise affected. Subsection h provides that upon final confirmation the debtor or its successor corporation 'shall put into effect and carry out the plan and the orders of the judge relative thereto * * * and the property dealt with by the plan * * * shall be free and clear of all claims of the debtor, its stockholders and creditors, except such as may consistently with the provisions of the plan be reserved in the order confirming the plan * * *.' The final decree, discharging the trustees and closing the case, 'shall discharge the debtor from its debts and liabilities, and shall terminate and end all rights and interests of its stockholders, except as provided in the plan or as may be reserved as aforesaid.' Here the court entered appropriate orders to secure the execution of the plan and the termination of the proceedings. But the relative priority of participation was passed upon neither in the plan nor by the court. Instead, it was specifically reserved. And it was reserved for determination, as the parties saw fit to have it determined, by the New York courts without restriction by the federal adjudication. The parties were out of the federal bankruptcy court with their original rights modified by the terms of the reorganization plan. When they came before a New York court seeking a determination of their present rights, that court was obliged to ascertain whether any rights had been fixed by the reorganization plan and, if so, to enforce them. Rights not affected by the federal proceedings the New York court was free to decide according to New York law. The bankruptcy court had refused to fix the rights of the parties as to the participation of Prudence-owned Burnside participations, and expressly left them to be fixed by the New York court as a 'Court of competent jurisdiction.' Accordingly, it was for the New York Court of Appeals to define the governing New York law.
The relative priority of Prudence's participation in the bankrupt's estate in a 77B reorganization is a federal right governed by federal not state law. Prudence Realization Corporation v. Geist, 316 U.S. 89, 95, 62 S.Ct. 978, 982, 86 L.Ed. 1293. As the reorganization plan did not purport to alter that right, but merely provided that it should be determined by a court of 'competent jurisdiction', I cannot conclude that the adoption of the plan contemplated or effected the alteration of the federal right by requiring it to be redefined in terms of the law of New York, or of any other jurisdiction, where the parties might happen to seek its adjudication.
The fact that a federal right is to be ascertained in a state rather than in a federal court does not make it any less the duty of the court to apply federal law. Chesapeake & Ohio R. Co. v. Martin, 283 U.S. 209, 212, 213, 51 S.Ct. 453, 454, 455, 75 L.Ed. 983; Awotin v. Atlas Exchange Nat. Bank, 295 U.S. 209, 55 S.Ct. 574, 79 L.Ed. 1393; Brady v. Southern Ry. Co., 320 U.S. 476, 479, 64 S.Ct. 232, 234, and cases cited; Illinois Steel Co. v. Baltimore & Ohio R. Co., 320 U.S. 508, 511, 64 S.Ct. 322, 324, and cases cited; Steele v. Louisville & Nashville R. Co., 323 U.S. 192, 65 S.Ct. 226, at page 233. And a mere grant by the federal court of permission to the parties to litigate a federal question in a state court is not a direction that the question be determined by state law, more than is a general statutory authorization for a suit in the state court on a federal right.
The state court has held that petitioner, the holder of mortgage participation certificates, is not entitled to share in the mortgage until the holders of other certificates, which petitioner has guaranteed, are paid in full. Its judgment should be affirmed, not because the plan called for determination of petitioner's rights in the bankrupt's estate by state rather than federal law, but because in the circumstances of this case the applicable federal law is the same as that which the state court has applied. Petitioner did not, as in the Geist case, acquire its interest in the mortgage as an original investment before it sold and guaranteed certificated shares in the mortgage, nor did it acquire its own certificates independently of the performance of its obligation as a guarantor of the certificates. Petitioner is here in the position of a subrogee of a claim whose payment it has guaranteed. For it acquired its claim to participate in the mortgage through performance of its guaranty, by purchase, after default, of the certificates of participation which it had guaranteed.


text:
Canon 129. §1. Those who have received sacred orders are qualified, according to the norm of the prescripts of the law, for the power of governance, which exists in the Church by divine institution and is also called the power of jurisdiction.
§2. Lay members of the Christian faithful can cooperate in the exercise of this same power according to the norm of law.
Canon 130. Of itself, the power of governance is exercised for the external forum; sometimes, however, it is exercised for the internal forum alone, so that the effects which its exercise is meant to have for the external forum are not recognized there, except insofar as the law establishes it in determined cases.
Canon 131. §1. The ordinary power of governance is that which is joined to a certain office by the law itself; delegated, that which is granted to a person but not by means of an office.
§2. The ordinary power of governance can be either proper or vicarious.
§3. The burden of proving delegation rests on the one who claims to have been delegated.
Canon 132. §1. Habitual faculties are governed by the prescripts for delegated power.
§2. Nevertheless, unless the grant expressly provides otherwise or the ordinary was chosen for personal qualifications, a habitual faculty granted to an ordinary is not withdrawn when the authority of the ordinary to whom it was granted expires, even if he has begun to execute it, but the faculty transfers to any ordinary who succeeds him in governance.
Canon 133. §1. A delegate who exceeds the limits of the mandate with respect to either matters or persons does not act at all.
§2. A delegate who carries out those things for which the person was delegated in some manner other than that determined in the mandate is not considered to exceed the limits of the mandate unless the manner was prescribed for validity by the one delegating.
Canon 134. §1. In addition to the Roman Pontiff, by the title of ordinary are understood in the law diocesan bishops and others who, even if only temporarily, are placed offer some particular church or a community equivalent to it according to the norm of can. 368 as well as those who possess general ordinary executive power in them, namely, vicars general and episcopal vicars; likewise, for their own members, major superiors of clerical religious institutes of pontifical right and of clerical societies of apostolic life of pontifical right who at least possess ordinary executive power.
§2. By the title of local ordinary are understood all those mentioned in §1 except the superiors of religious institutes and of societies of apostolic life.
§3. Within the context of executive power, those things which in the canons are attributed by name to the diocesan bishop are understood to belong only to a diocesan bishop and to the others made equivalent to him in can. 381, §2, excluding the vicar general and episcopal vicar except by special mandate.
Canon 135. §1. The power of governance is distinguished as legislative, executive, and judicial.
§3. Judicial power, which judges or judicial colleges possess, must be exercised in the manner prescribed by law and cannot be delegated except to perform acts preparatory to some decree or sentence.
§4. In what pertains to the exercise of executive power, the prescripts of the following canons are to be observed.
Canon 136. Unless the nature of the matter or a prescript of law establishes otherwise, a person is able to exercise executive power offer his subjects, even when he or they are outside his territory; he is also able to exercise this power offer travelers actually present in the territory if it concerns granting favors or executing universal laws or particular laws which bind them according to the norm of can. 13, §2, n. 2.
Canon 137. §1. Ordinary executive power can be delegated both for a single act and for all cases unless the law expressly provides otherwise.
§2. Executive power delegated by the Apostolic See can be subdelegated for a single act or for all cases unless the delegate was chosen for personal qualifications or subdelegation was expressly forbidden.
§3. Executive power delegated by another authority who has ordinary power can be subdelegated only for individual cases if it was delegated for all cases. If it was delegated for a single act or for determined acts, however, it cannot be subdelegated except by express grant of the one delegating.
§4. No subdelegated power can be subdelegated again unless the one delegating has expressly granted this.
Canon 138. Ordinary executive power as well as power delegated for all cases must be interpreted broadly; any other, however, must be interpreted strictly. Nevertheless, one who has delegated power is understood to have been granted also those things without which the delegate cannot exercise this power.
Canon 139. §1. Unless the law determines otherwise, the fact that a person approaches some competent authority, even a higher one, does not suspend the executive power, whether ordinary or delegated, of another competent authority.
§2. Nevertheless, a lower authority is not to become involved in cases submitted to a higher authority except for a grave and urgent cause; in this case, the lower authority is immediately to notify the higher concerning the matter.
Canon 140. §1. When several persons have been delegated in solidum to transact the same affair, the one who first begins to deal with it excludes the others from doing so unless that person subsequently was impeded or did not wish to proceed further in carrying it out.
§2. When several persons have been delegated collegially to transact an affair, all must proceed according to the norm of can. 119 unless the mandate has provided otherwise.
§3. Executive power delegated to several persons is presumed to be delegated to them in solidum.
Canon 141. When several persons have been delegated successively, that person is to take care of the affair whose mandate is the earlier and has not been subsequently revoked.
Canon 142. §1. Delegated power ceases: by fulfillment of the mandate; by expiration of the time or completion of the number of cases for which it was granted; by cessation of the purpose for the delegation; by revocation of the one delegating directly communicated to the delegate as well as by resignation of the delegate made known to and accepted by the one delegating. It does not cease, however, when the authority of the one delegating expires unless this appears in attached clauses.
§2. Nevertheless, an act of delegated power which is exercised for the internal forum alone and is placed inadvertently after the lapse of the time limit of the grant is valid.
Canon 143. §1. Ordinary power ceases by loss of the office to which it is connected.
§2. Unless the law provides otherwise, ordinary power is suspended if, legitimately, an appeal is made or a recourse is lodged against privation of or removal from office.
Canon 144. §1. In factual or legal common error and in positive and probable doubt of law or of fact, the Church supplies executive power of governance for both the external and internal forum.
§2. The same norm is applied to the faculties mentioned in cann. 882, 883, 966, and 1111, §1.

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