To become secretary of state, Rex Tillerson will have to do what Donald Trump has so far refused to: give up his stake in the company that has been his life’s work.
Unlike the president, the secretary of state is subject to federal ethics laws that for Tillerson will probably mean selling his ExxonMobil shares and putting his assets in a blind trust, ethics lawyers said.
And while Tillerson will also have to recuse himself from matters directly involving Exxon, he will probably always face questions about whether his actions favor the company he used to lead, making his confirmation particularly complicated because the scale of Exxon’s foreign entanglements dwarfs Trump’s own. Exxon has a presence in more than 50 countries on six continents, including many that have sensitive relationships with the United States, such as Russia, Iraq, Turkey and China.
Comparing Trump to Tillerson, one energy industry consultant said: “You can describe his conflicts in the most lurid way and it wouldn’t come close to being the CEO of Exxon Mobil.”
Tillerson is one of seven Cabinet nominees who come with sprawling portfolios that will need to be unwound. The White House counsel will have to coordinate with the nominees to determine what measures they take to eliminate conflicts of interest or else face questions about why their approaches varied, said Matt Sanderson, a political law attorney at Caplin & Drysdale.
“This is as complicated as it gets,” Sanderson said. “This is a unique situation in that you have multiple whales here.”
Hanging over them all is Trump’s own reluctance to address his own conflicts of interest. He abruptly delayed plans this week to reveal how he will remove himself from his business’s operations, saying only that his adult sons would run the company and he would not complete any “new deals” during his presidency.
Trump has some legal leeway because the main federal conflicts-of-interest law exempts the president. But Tillerson will have to work out an arrangement with the Office of Government Ethics affecting his roughly $228 million worth of Exxon stock and his pension benefits.
The simplest approach is for Tillerson to put all his assets in a blind trust and instruct the manager to sell his Exxon stake over time so that Tillerson wouldn’t know how much he owned, according to Craig Engle, a political law attorney at Arent Fox. Hank Paulson, who left the top job at Goldman Sachs to become President George W. Bush’s treasury secretary, sold an estimated $500 million of the bank’s stock and set up a blind trust.
“He can put the matter to rest by putting his assets in a blind trust and then representing the United States,” Engle, a Republican, said of Tillerson. “He will be exposed to complaints of conflicts of interest regardless of what he does, and that’s unfortunate.”
Tillerson’s pension payments, even if the amounts are fixed, still meet the definition of a financial conflict, Sanderson said. Tillerson could negotiate with Exxon to cash out in advance or suspend the payments while in office.
For stock options, Tillerson’s lawyers and the ethics office could find a way to let Tillerson keep his stock options, perhaps by having the trust manager execute them as soon as they vest and donating any profits above yesterday’s share price, Sanderson said.
Vice President Dick Cheney, who was CEO of Halliburton, bought an insurance policy that flattened out his deferred payments from the energy company, removing any potential upside for him based on the company’s performance. Even so, political opponents attacked him for benefiting the company with contracts in Iraq after the 2003 invasion.
Divesting isn’t the only option. Penny Pritzker, the billionaire who is Obama’s commerce secretary, agreed when she took the job in 2013 to sell hundreds of stocks and investment funds, resign from more than a hundred companies, and quit her positions with Hyatt and Wrigley. She did not sell her stake in those companies (her family founded Hyatt) and she continued to receive deferred compensation from Wrigley, but she recused herself from matters involving the companies.
But Exxon is bigger than Hyatt, and state is bigger than commerce. Exxon routinely cautions investors that its business is sensitive to governments and politics around the world, including sanctions, unstable or unreliable legal systems, taxes, price controls, environmental regulations, security and expropriation.
Democratic senators — and even some Republicans — are already promising to use Tillerson’s confirmation hearings to probe his financial conflicts and Russian ties.
“The next secretary of state must be someone who views the world with moral clarity, is free of potential conflicts of interest, has a clear sense of America’s interests, and will be a forceful advocate for America’s foreign policy goals to the president, within the administration, and on the world stage,” Sen. Marco Rubio (R-Fla.) said in a statement.
If Tillerson doesn’t divest, his conflicts would include negotiating global climate change agreements, according to Norm Eisen and Richard Painter, the former ethics lawyers to Presidents Obama and George W. Bush who now lead the watchdog group Citizens for Responsibility and Ethics in Washington.
“It may be that the appearance of conflict and the need for repeated recusals is so profound that the Senate concludes he cannot do the job,” Eisen and Painter said in a statement.
Tillerson could go beyond legal requirements and soothe concerns by recusing himself from any energy policy and delegating those responsibilities to a deputy, Sanderson said.
“If you were to give a gold star for trying to avoid conflicts, it would be divestment plus this extra measure to assure the American public their interests are being pursued and not the interests of certain energy firms,” Sanderson said.
Darren Samuelsohn contributed reporting.
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