Archive for the 'Business Law' Category

Why A Blind Trust Is So Important for a Trump Presidency

Not every U.S. President has used blind trusts during their time in office.  In fact, Obama was the most recent president that chose not to use a blind trust.  However, the Obamas had bank accounts, treasury notes, index funds and college savings that were unlikely to pose any direct conflicts of interest while in office. President elect Donald Trump can’t say the same thing regarding his financial portfolio—he’s set to be the wealthiest president in American history.

Trump’s attorney, Michel Cohen, recently announced that Trump’s massive business holdings would in fact be placed into a blind trust to be controlled by his three eldest children.  If you’re not sure whether that sounds like a conflict of interest in and of itself, let’s take a look at what a true blind trust should look like.

“Blind” means Blind

A blind trust is a trust in which the trustee has full discretion over the assets and the trust beneficiaries have no knowledge or communication of the holdings of the trust.  These are typically used by federal officials to avoid any potential conflicts of interest that may arise during their time in office.  The federal government recognizes “qualified blind trusts” (QBT), but in order for them to be qualified, the trusts must not be affiliated with, associated with, related to, or subject to the control or influence of the federal official.

A trustee has full discretion over the assets within a blind trust, which means a trustee should not be a current or former investment advisor, accountant, attorney, or relative.  In other words, in order for a trust to be completely blind, the trustee needs to essentially be a stranger.  At the very least, it should be someone that doesn’t have any personal incentive or ties to the federal official.

Not only do Trump’s children have financial beneficiary conflicts with managing the trust, but they continue to advise Trump on his transition team, making the details of the trust extremely accessible to Trump.  It’s a bit misleading for Cohen to represent Trump’s plans as a blind trust.  It’s not blind at all.

What’s another important requirement of a blind trust?  It’s hard for a trust owner to be truly bling to their holdings unless assets are liquidated and then transferred into the blind trust.  Doing so allows the the trustee to reinvest and/or manage the assets at their discretion, leaving a trust owner completely blind.  This would require Trump to sell everything, some of which he doesn’t even have the power to do without partner consent.  Letting his children take over and run the businesses isn’t enough for him to be completely blind.

Unprecedented Business Dealings Present Greater Conflict of Interest Threats

So, we’ve settled on the fact that, as of now, Trump’s blind trust will not actually be a blind trust.  Why should it matter, you ask?

Trump is unique from any other president in that so much of his wealth is tied to the “Trump” brand.  Trump has listed roughly 500 companies on his latest FEC filing and has business deals in more than half a dozen countries.  There has never been a president with as vast of business conflicts both domestically and internationally before and, even despite the best of intentions, anyone with the sheer number of companies as Trump would be hard pressed to make completely unbiased decisions.

A blind trust, a true one, would prevent impartial decision making for personal economic interest, which is why conflict of interest laws were created in the first place.

In the wake of the Nixon Watergate scandal, the Ethics in Government Act of 1978 was passed, creating mandatory public disclosure laws for public officials and their immediate family.  In addition to public disclosure, the Act mandates that officials cannot use their public office for personal gain.  Congress has, however, exempted presidents and vice presidents from these conflict-of-interest laws on the basis that a presidency has so much power that any possible decisions or actions would be nearly impossible to be kept free from conflicts of interest; requiring the executive office to remove themselves from decision making when there’s a conflict could create constitutional issues.

There’s a deep seated principle that an official shouldn’t use public office for private gain and, even despite the looser legal requirements, most presidents have have opted to take measures to separate themselves from their personal financial assets in order to avoid conflicts of interest.  Nevertheless, Trump has construed these looser requirements to mean “the president can’t have a conflict of interest.”  I do believe that’s quite the opposite of the intent of the exemption but, even so, there isn’t really anything stopping Trump from continuing to operate business as usual.

So How About that Wall?

President-elect Donald Trump made building a wall on the US-Mexico border a pillar of his campaign. Post-election interviews reveal he intends to keep and act upon this campaign promise. No matter one’s opinion on whether building such a wall is right course of action, there are many practical concerns to be addressed.

How Big and How Expensive will it be?

The US-Mexico border is 1,989 miles long and the President-elect has proposed 35-foot-tall walls. As far as cost, some good estimates can be made as US Customs and Border Protection already began building some fences in 2007 and the Government Accountability Office released a report on the costs and issues faced. The GAO reported that the amount of fence constructed already has cost up to $5 million per mile. Basic math then tells us that this could cost $10 billion just for a fence along the entirety of the border. However, the President-elect has promised a “wall”, this may prove to be even more expensive. Furthermore, the current work was done to tackle areas of public land first to avoid dealing with private land owners. Eventually, the government must either get permission to build across private land or take the land through a process called eminent domain.

How will the Government Get the Land?

TrumpCan the government really take land from private land owners? Yes, it can, both state governments and the federal government may do so. The Constitution specifically allows the government to do so as long as they pay fair market value for the land. That is, if the government wishes to seize the land and the owner refuses to sell it willingly the government may seize it against the owner’s wishes as long as the government pays fair market value.

Another requirement is the seized land must be used for some public purpose. This mean that eminent domain cannot be used to seize land for purely private purposes. For example, a state governor could not use eminent domain to seize land for their friend to build a private home on the land. On the other side, clearly public uses are easily approved, such as seizing land for public utility purposes like electricity poles and telephone cables. Many projects fall in the middle of this spectrum so the legitimacy of eminent domain is questionable in these areas. However, Supreme Court cases on this issue though have found this to be almost a non-issue. In particular, the Supreme Court case of Kelo v. City of New London rendered this issue almost unimportant. In Kelo, the city of New London, Connecticut wished to seize Ms. Susette Kelo’s home so that the headquarters of a private company could be built on the land. While Ms. Kelo asserted that this was a private use, the Supreme Court disagreed. The ruling in Kelo has set precedent that questionable eminent domain takings will usually be upheld by US courts.

Overall, a border wall would likely not encounter any issues with eminent domain. It’s clearly for a public purpose, national security and immigration. With this hurdle passed, the only issue would be fair market value for the land. US Customs and Border Protection has already estimated this cost to be about $800,000 per mile.

Is This Already Happening?

Yes, it is already happening. When US Customs and Border Protection began building these border fences in 2007 they needed some private land that is on the US-Mexico border. Many land owners willingly sold their land, while others chose to fight the taking in court. Unfortunately for the land owners, courts consistently ruled for the federal government. This very thing happened when US Customs and Border Protection needed Dr. Eloisa G. Tamez’s ancestral land to build a border fence. Dr. Tamez took the federal government to court. In 2013 a US court ruled that US Customs and Border Protection could take Dr. Tamez’s land that had been inhabited by her family since 1767. Dr, Tamez’s case is not unusual and similar incidents are very likely to occur if the President-elect carries out his campaign promise.

Is This Really Going to Happen?

It looks like the President-elect’s plan is entirely possible and plausible. The federal government would likely be able to acquire any border land it needs for the wall through eminent domain. The only hurdle would be the cost, which would have to be set aside by Congress. However, this likely will not be an issue either as Congress has consistently approved funding for border fencing and border patrols. Overall, if the President-elect decides the act upon this campaign promise there will be very little to stop him.

Marijuana is Legal for Recreational Use in Four More States; Now What?

On November 8th, California, Maine, Massachusetts, and Nevada joined the current four states and DC in the legalization of marijuana for recreational use. Some herald this as success, others decry it as a tragedy. What is beyond question is that those who do choose to use marijuana should keep in mind the limitations of the legalization measures and the continuing risks.

Possession Limits

As a baseline, all the passed measures require that you be at least 21 years old to possess marijuana. Under the new measures, there are limits to how much an individual may possess and grow for personal use. Possessing or growing more than allowed is still illegal, even under state law. California allows a person over 21 to possess 28.5 grams of marijuana, Maine allows two and a half ounces, and Massachusetts and Nevada allow one ounce. All four states allow a person over 21 to grow up to 6 marijuana plants and to keep the harvested marijuana for their personal use.

Growing Restrictions

In addition to the possession limits, there are requirements upon how you must go about growing marijuana. First, the marijuana must be for your own personal use or given in limited quantities to dc marijuana lawsothers over 21. You may not accept payment for marijuana grown for personal consumption and can only give away a limited amount. The four measures vary slightly on location requirements for growing. Overall, all four require any marijuana be grown in a place where it is kept safely out of the reach of children.

Sale and Giving Away

Both selling and giving away marijuana are addressed in the new measures. In all four states, under the new measures, you may give away, without any sort of payment, up to one ounce of marijuana. Sale is absolutely forbidden unless you follow new state licensing and regulatory procedures to become a marijuana business.

Where and When?

All four measures also limit where and when marijuana may be used. The measures all prohibit marijuana use in public, including public establishments like bars. They also prohibit marijuana use in or near premises frequented by children such as community centers and schools. None of the measures change DUI laws so driving under the influence of marijuana is still a criminal act in these 4 states.

Effective Date

Each of these measures has their own effective dates. That is, the day that the measures become law. California’s measure was quickest, it was effective the day after the election, November 9, 2016. Massachusetts’ measure will take effect on December 15, 2016. Nevada’s measure will take effect on January 1, 2017. Maine has yet to establish a clear effective date due to a battle currently raging in Augusta.

The Maine Problem

The marijuana legalization measure in Maine prescribed that it would take effect 30 days after Governor LePage signs it. However, LePage has been a vocal opponent of the measure ever since it was allowed onto the ballot. Currently, LePage is making statements that the measure violates federal law and will require legislative tinkering to even be viable. The opponents of the measure are currently demanding a recount, as the measure passed on a margin of 4,000 votes. Needless to say, with the recount demands and his personal opposition, LePage is currently refusing to sign the measure. This leaves Maine law on the subject in limbo.

Still Illegal

Even with these measures passed, marijuana is still illegal across the US. Federal law still designates marijuana as a schedule one drug. This means, even if you follow all the rules set forth in the new measures, federal law enforcement such as the Drug Enforcement Agency, Bureau of Alcohol, Tobacco, and Firearms, Federal Bureau of Investigation, and Federal Marshalls may still arrest and prosecute you for possession, growing, or giving away marijuana. This comes from the fact that the United State’s federal system gives federal law supremacy over state law as explained here. To summarize, the new measures communicate to state, county, and city level police that they cannot arrest or prosecute anyone following the rules outlined in the measures but do not hold any sway over federal law enforcement.

Federal law enforcement trends on prosecuting marijuana possession have not been consistent. In this area, the President holds a lot of sway. Under the administrations of Presidents George W. Bush and Barack Obama, federal investigators and prosecutors have prosecuted those using or growing marijuana even in states that have legalized medical or recreational use. President-elect Donald Trump has not been clear in his views on marijuana. Years ago, he asserted that all drugs should be legalized. However, on the campaign trail, he proclaimed that he is ok with medicinal marijuana but not with recreational use. It is difficult to predict how a Trump administration will handle marijuana prosecution.

Overall, marijuana laws are changing. Marijuana is still not legal in the US, even for medicinal use. State laws, like the recreational marijuana measures, only protect marijuana users from state law enforcement. If you do choose to use marijuana under a state recreational marijuana measure, keep in mind the limits placed by the measure and the risks of federal prosecution.

Take Trump Tower

With President-Elect Trump using Trump Tower as his base of operations for his transition team, 5th Avenue in Manhattan is swamped by police, secret service, and security guards. If the rumors that Trump plans to spend weekends at Trump Tower are true, than New Yorkers could face diverted traffic, rerouted subways, and a no-fly zone over the city for the next four years. Security concerns are also abound, as having the President live in a skyscraper in the city will be a magnet for terrorists and madmen alike.

So far, New Yorkers have had to contend themselves with protests and taking the Trump name off some buildings. However, there may be a legal option that New York could pursue that would save them from this nightmare: Take Trump Tower.

Eminent Domain

Eminent Domain should be a familiar term to the President-Elect. Mr. Trump has spent years abusing eminent domain, a process whereby government can seize private property for public use if the property owner is given just compensation. New York may have the opportunity to turn the tides on the alleged billionaire. 

Eminent domain requires that the government seize property for public use, such as a highway. New York requires a determination that a property is necessary for construction of a public improvement. Although the state could come up with a feasible “public improvement,”  like a public park or charity, here the mere act of taking the tower could also be considered a public use. Trump’s mere presence is congesting traffic and disrupting the local economy. Having Trump in New York on a regular schedule for the next four years would destroy any public use around Trump tower and potentially endanger the lives of many Americans.

Trump’s lawyers would likely argue that Trump is putting his tower to public use, as he is the President-Elect and running the nation. However, America already has a location for that kind of use: the White House. It would be a huge waste of money to maintain both the White House and Trump Tower as headquarters for the nation’s Executive branch.

Civil Asset Forfeiture

Civil Asset Forfeiture allows the government to take property from alleged criminals. In order for the government to seize property under civil asset forfeiture, the property has to be associated with the crime. This definition allows the government to bypass traditional criminal due process – the defendant need not be found guilty for the government to seize the property. States have often abused civil asset forfeiture to seize all kinds of property, including cash, cars, and even real estate.

New York is probing the Trump Foundation for fraud. If New York were to bring criminal charges against Mr. Trump, they could assert civil forfeiture over Trump Tower if the state could show that Trump ran his foundation from his tower.

Conflicts of Interest

If New York were to seriously threaten Trump Tower, the President-Elect would almost certainly take to Twitter to insult everyone involved. Republicans would no doubt accuse New York of harassing the President-Elect through shady legal avenues.

Trump and his supporters should ask themselves though, how is it that Trump is the first President who could have his property taken from him ? Although Trump’s property is more prominent than most – Trump loves to put his name on buildings in big gold letters – there is another reason. Unlike prior Presidents, the President-Elect has neglected to place his businesses into a blind trust. Instead, he’s letting his kids run his businesses.

This presents serious conflicts of interest. If Trump had to choose between defending America and defending his property, which would Trump choose? Trump properties are in many locations around the country, including California and New York. It would not be difficult for the states most opposed to Donald Trump to threaten to seize his properties if Trump tries to push policies that those states do not want.

If blue states in America can threaten Trump’s properties, what about Trump’s real estate abroad? If Trump’s property in Scotland or Dubai were threatened, would Trump threaten military action to save his businesses, even if his businesses have nothing to do with America’s interests?

Hyperlink Hysteria: When is Posting a Hyperlink Breaking the Law?

It’s no understatement to say that hyperlinks are essential to a functioning internet. You clicked one to get here and you’ll probably click plenty more today. However, under a new Court of Justice of the European Union (CJEU) ruling, posting the wrong link in the wrong way can get you in legal hot water.

The case pitted Playboy magazine against a Dutch company whose business and website involved posting links to unauthorized replications of stills from Playboy magazine. Playboy took issue with this and sued, arguing that posting these links infringed their copyrights in the photos.

In their recent explanation of their initial opinion from a few months back, the CJEU sided with Playboy and created brand new rules describing the situations where posting a hyperlink can get you in trouble in the EU.

The EU’s New Ruling

First and foremost, where freely available content is posted to the internet with the copyright owner’s consent there is never copyright infringement. However, when the link posted is to unauthorized material, access to which would otherwise be restricted, the situation changes.

Under the new rules, a person posting such a link is liable for copyright infringement in two situations. First, where the link was posted “in pursuit of financial gain,” there is a presumption that the person posting knew they were not authorized to post the link and guilty of copyright infringement unless they produce evidence to rebut that presumption. Second, where the link is not posted for financial gain but the poster knew or should have known that the content they linked to was illegally published the poster is also guilty of copyright infringement.

The CJEU found that the Dutch company, GS Media, had posted both for profit and with knowledge they were linking to unauthorized content. However, the court was notably sparse as to the details of what counted as “for profit.” This means that the law, while certainly a boon to content creators seeking to protect the works they put on the internet, leaves many businesses in lurch.

The presumption of copyright infringement, barring any other legal defense, is something quite uncommon in law. Does a poster have to profit from the link itself? Is it enough that the website with the link makes profit from additional web traffic? As it stands, those who directly profit from links by putting them behind a pay wall and small bloggers posting links on articles earning ad revenue could both be in the same copyright infringement boat.

What’s more, the CJEU ruling makes it clear that when a post is “for profit” the onus is on the poster to ensure the legality of anything they chose to link. This puts a pretty hefty burden on small bloggers who may not have the money or legal expertise to ensure that every link they post is above board.

As for here in the U.S. of A, this ruling is unlikely to impact the links you post on social media. However, businesses that operate internationally will have to be especially careful about what and how they post. The ruling will have a substantial effect on companies offering internet search engines, such as Google, because these companies must take extra steps to determine if their listed sites contain unauthorized material so as to avoid the effects of the infringement presumption. They also will need to deal with increased instances of demands from companies wanting them to delist links to websites that include infringing material.

EU Law Compared to US Law

These new developments abroad probably have you asking, how does U.S. law treat hyperlinks? Well, rest easy, your usual posts on Facebook are unlikely to get in trouble.  It is long settled U.S. case law that the mere posting of a link does not give rise to a direct copyright infringement claim without more. This being said, you can still commit infringement where—as in the EU—a link is posted either for profit or with knowledge of it connecting to infringing material.  However, these facts don’t create a presumption against you as they do in the EU.  Instead, they are relevant evidence in an alternative cause of action to direct infringement—contributory infringement. While in the EU these facts could now leave you on the backfoot in a claim against you, they are the bare minimum to a plaintiff establishing a claim here in the states.

In practice, unless the posting is en masse and coming from a known company with deep pockets, most links to infringing material are dealt with through the safe harbor provisions of the Digital Millennium Copyright Act (DMCA). The DMCA provides protection for websites which host content so long as they have a statutorily compliant takedown policy in place and respond appropriately to takedown requests—requests to remove infringing content from a hosting site—from content owners. This obviously doesn’t apply where the website itself is posting the infringing links, but when it comes to links posted by private parties the expense of litigation and difficulty of identifying the person behind the computer make it preferable for content creators to focus on taking down the infringing links.

The CJEU ruling has pushed the potential for copyright infringement through posting hyperlinks to unprecedented levels. Unless these changes make the unlikely jump across the pond, they will only really impact internationally operating business within the U.S.  However, it is still important to be careful what links you post—especially if you make any sort of profit off those posts.



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