Updated Nov. 29, 2016 12:00 a.m. ET
The real-estate company controlled by Jared Kushner, President-elect Donald Trump’s son-in-law, has hundreds of millions of dollars in loans outstanding from domestic and foreign financial institutions, markets condominiums to wealthy U.S. and foreign buyers and has obtained development financing through a controversial U.S. program that sells green cards.
Those and other business activities could raise conflict-of-interest issues if Mr. Kushner is named to a staff position in the Trump administration. Executive branch employees are prohibited from participating in any matter in which there is “a close causal link” between that matter and a “real possibility” of a financial gain or loss, according to the U.S. Office of Government Ethics.
Mr. Trump has floated the idea of Mr. Kushner taking a number of roles in his administration. But he also is considering not giving Mr. Kushner any staff position to sidestep the conflict issue, a person familiar with his thinking said Monday.
If Mr. Trump wanted to give Mr. Kushner an official role he also would have to comply with federal nepotism law. Even if Mr. Kushner were to serve in the new administration as an unpaid adviser, his potential influence on policy would invite scrutiny, legal experts said.
Ethics experts are divided on how strictly conflict-of-interest rules should be interpreted. Some wealthy individuals and business people who have joined previous administrations have sold stocks, bonds and a wide range of other assets to comply with conflict laws.
Henry Paulson was told “you have to get rid of your financial services stocks” when he was named to head the Treasury Department, said Richard Painter, a law professor at the University of Minnesota who was chief White House ethics lawyer for President George W. Bush. “It’s a criminal statute so you don’t want to get too close to the line.”
The president himself isn’t subject to the conflict-of-interest law, but all other government employees must follow it. That would include anyone working for the White House, even in a task-force role comparable to the position Hillary Clinton filled on President Bill Clinton administration’s health-care plan in the 1990s.
Mr. Kushner would be able avoid conflicts by selling assets just as Mr. Paulson did in 2006. Mr. Paulson was able to take advantage of a George H.W. Bush administration-era tax provision that allowed him to defer capital gains on more than $600 million in Goldman Sachs shares, Mr. Painter said.
Mr. Kushner, 35 years old, is married to Ivanka Trump, and was a confidant of Mr. Trump during the campaign. “Jared’s a very smart guy. He’s a very good guy. The people that know him, he’s a quality person and I think he can be very helpful,” Mr. Trump said in an interview last week with the New York Times.
Mr. Kushner has discussed putting his assets in a blind trust as part of accepting a federal job. But Mr. Painter said this probably wouldn’t work unless he sold assets and put the money in a trust. “You can’t pretend you don’t own something just by putting it in a blind trust,” he said.
In the past, employees have obtained waivers to the conflict-of-interest law.This happened when the U.S. invaded Kuwait in 1990 and there was concern among Bush administration members that they might be subject to the law by owning stock in oil companies.
Kathleen Clark, a government ethics lawyers and law professor at Washington University, said she didn’t think Mr. Kushner would run afoul of rules if he participated in broad policy issues involving such things as the direction of interest rates or whether the U.S. military should side with Israel in a war. “These are not specific matters involving particular parties,” she said.
A spokeswoman for Mr. Kushner said in an email: “If Jared were to serve in some capacity in the new administration, Kushner Companies would put a rigorous process in place to ensure that no conflicts exist.”
Kushner Cos. owns thousands of apartment buildings throughout the U.S. and numerous high-profile development projects and other properties in New York. These include the office tower at 666 Fifth Ave.; the Puck Building in SoHo, which Kushner Cos. converted into luxury condominiums; and Brooklyn properties it is converting into high-tech office space.
Kushner Cos. just completed a $370 million refinancing arranged by Deutsche Bank AGon a 250,000 square foot retail space in Midtown Manhattan. The company’s website also identifies a long list of domestic financial partners, including Citigroup Inc., Prudential Financial Inc., M&T Bank and Wells Fargo & Co.
Foreign banking partners include French bank Natixis SA, which led a group that lent Kushner Cos. $375 million in 2013, as well as Israeli banks Bank Hapoalim and Bank Leumi.
“I wouldn’t want him involved in regulated financial services if he has big loans out with banks,” Mr. Painter said. One way around the problem would be to recuse himself.
Mr. Kushner’s real estate interests also could be helped or hurt by other activities of the U.S. government. For example, the Treasury Department announced earlier this year new rules applying to the sale of title insurance, in part to make it more difficult for foreign buyers to conceal their identities. This might make it harder for Kushner to sell high-price units in the Puck Building, or any future condo projects.
Another potential conflict comes from Mr. Kushner’s participation in the federal EB-5 program, which allows wealthy foreign investors to obtain U.S. green cards. His company used the program to finance its Trump Bay Street rental tower that just opened in Jersey City. The $200 million project has a licensing deal with the Trump Organization to use the Trump name.
Kushner executives have declined to say how much of the financing was raised through the EB-5 program. The Kushner Co. website lists as one of its financial partners the U.S. Immigration Fund, a private firm that acts as a middleman between foreign investors who want to buy green cards for at least $500,000 each and developers seeking inexpensive financing.
The new Trump administration will likely need to take a stand on EB-5 because it has come under increasing fire in Congress and other places. Critics say it is become dominated by developers of projects in wealthy neighborhoods rather the poor areas for which it was intended.
A key provision of the program is scheduled to expire in early December but could get extended while Congress debates possible reforms. Mr. Trump hasn’t taken a formal position on EB-5.
Write to Peter Grant at email@example.com
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