Monthly Archives: September 2016

Donald Trump’s Best Investment

Economics, Politics

 

There has been a lot of discussion whether there was any quid pro quo  associated with donations to the Clinton Family Foundation while Hillary Clinton was Secretary of State. The Merriam-Webster Dictionary defines the term as “something that is given to you or done for you in return for something you have given to or done for someone else.”

To date, there is no evidence the State Department granted any value that would not have otherwise been available to the donor.  In some cases, a donor’s request was denied based on the substance of the inquiry and departmental policy.  At best, a donor’s contribution may have increased the probability the department would consider the request.  If one stretches the definition of quid pro quo to include this kind of access or consideration, every politician and businessperson in America is technically guilt of similar transgressions.  Every loyalty program offered by airlines and hotels is a quid pro quo.  

The American justice system would be inundated with nuisance law suits if the exchange of value was broadly defined as questionable political or commercial behavior.  Perhaps this is why the Supreme Court unanimously overturned former Virginia Governor Bob McDonnell’s corruption conviction earlier this year.  Chief Justice John Roberts wrote the decision which included the following:

Officials might wonder whether they could respond to even the most commonplace requests for assistance, and citizens with legitimate concerns might shrink from participating in democratic discourse.

So how do we distinguish between preferential treatment in the course of doing business versus potentially criminal behavior associated with the exchange of goods and services?  One red flag might be whether there is another violation of laws or regulations by the individual who initiates the exchange.  This is where Donald Trump enters the discussion.

Consider the following.

  • Since 2008, more than 20 individuals previously enrolled in Trump University in Florida filed suit alleging fraud totaling over $500,000 in payments to the unaccredited entity.
  • In 2010, Pam Bondi was elected State Attorney General in Florida.
  • In 2013, Bondi announced she was considering joining the New York attorney general’s class action suit against Trump University.
  • Three days later, Trump’s charitable foundation made a $25,000 donation to Bondi’s re-election campaign.  NOTE:  The IRS charged the foundation with several violations including illegal political activity and failure to report the donation.  The Trump foundation was fined $2,500 for violations of Section 501(c)(3) of the IRS code which governs charitable foundations.
  • Following the donation, Attorney General Bondi declined to pursue charges against the Trump Institute, a Florida affiliate of Trump University.
  • A follow-up report in the Washington Post revealed the foundation listed the $25,000 as a donation to a non-existent non-profit in Kansas.
  • The Trump foundation attributed the donation to a clerical error and paid the fine.  Bondi’s campaign treasurer claimed he had unsuccessfully tried to return the donation.

You might be asking, “Shouldn’t you have titled this post ‘A REAL Case of Quid Pro Quo’?” No, and here is why!  Based on a 2016 survey of 391 lawyers, class action defense attorney Carlton Fields reported a routine class action suit costs the defendant an average of $8.5 million in legal fees.  As the complexity of the class action increases, legal costs can exceed $1.0 billion.  Including the IRS fine, avoiding a Florida class action suit cost the Trump Foundation a total of $27,500.  Taking the lowest cost of a class action defense in the Fields survey ($300,000), this represents a 1091 percent return on investment in three days.

There is one other consideration.  Although Trump started the foundation with royalties from The Art of the Deal, it has been reported he has not made additional contributions from personal resources for several years.  Therefore, the illegal contribution and fine were paid with other people’s money.  In other words, Trump’s personal return of investment is actually infinite (potential legal defense fees divided by ZERO).

I wonder if this episode will appear in the next edition of The Art of the Deal.

UPDATE:  After being exposed, Trump paid the fine out of personal funds and reimbursed his foundation for the $25,000 illegal contribution.  One more example of Trump settling without admitting he did anything wrong and blaming staff for a clerical error.

For what it’s worth.
Dr. ESP

 

The Dog Days of Summer

Media, Politics, Uncategorized

 

In baseball, the “dog days of summer” refers to the period from mid-July to the end of August when temperatures and humidity reach their peak.  It is also the time when a team’s outcome is pretty much determined.  You are either a contender or already declaring “wait ’til next year.”

For politicians running for election or re-election, baseball’s “dog days” represent an appropriate metaphor.  Playoff contenders traditionally use August as the time to assess the remaining schedule and look for proven talent (most often pitchers), fill gaps in the line-up and make sure the team is healthy and mentally prepared.  General managers, field managers and owners know you do not win the pennant in August, but what you do during that period may determine if you’re still in the race in October.

In contrast, the also-rans promote minor league players to determine their value in the future.  They also focus on window-dressing (e.g. special events and bringing in aging superstars) to fill seats once any hope of a championship season has vanished into the ether.

I thought about the “dog days of summer” when I saw the following headline in this morning’s New York Times, “Where Has Hillary Clinton Been? Ask the Ultrarich.”  The article included the following.

If Mr. Trump appears to be waging his campaign in rallies and network interviews, Mrs. Clinton’s second presidential bid seems to amount to a series of high-dollar fund-raisers with public appearances added to the schedule when they can be fit in. Last week, for example, she diverged just once from her packed fund-raising schedule to deliver a speech.

Conventional wisdom tells us voters don’t start looking at the election in earnest until Labor Day.  That being the case, one has to ask, “What is the best use of a candidate’s time and energy preparing for the political equivalent of a pennant race?”  Do exactly what a contending baseball organization would do!  Assess the schedule and begin the final push with a Labor Day event in New Hampshire, the state Nate Silver’s 538 forecast suggests may be the tipping point in the election.  Fill the gaps by reinserting Bernie Sanders, Joe Biden and Elizabeth Warren into the line-up.  Make sure you have the resources so money is not an issue.  Yes, Clinton mingled with the ultra-rich and raised a record $143 million in the month of August.  (NOTE: The Trump campaign has yet to release it’s August numbers.)  Be mentally prepared for the stretch run by prepping for the three presidential debates.

As your political playoff hopes dwindle, the question becomes, “How do I stay relevant?”  Bring in aging superstars such as Rudy Giuliani and Roger Ailes.  Promote minor leaguers like Steve Bannon, Mark Burns and Marco Gutierrez. Stage special events like a surprise trip to Mexico or a scripted interview at an African-American church in Detroit.

Politics is a business in which profits are measured in votes instead of dollars.  Therefore, candidates should heed the advice of business advisers like Ken DiPrima at Corporate Business Solutions.

The finish line is in sight. Whether a business is short of meeting their profit and sales goals or are exceeding them, how they emerge from the dog days of summer will determine whether they meet their target at the end of the year.

Also good advice for Amy Chozick and Jonathan Martin, the authors of the Times  article. The headline could have just as easily read, “Which Campaign Is Best Prepared for the Home Stretch?”  The reporters wouldn’t have to change a single word.  All they need is a better understanding of the ebb and flow of election cycles.  Perhaps re-reading Aesop’s “The Hare and the Tortoise,” might help.

For what it’s worth.
Dr. ESP

 

The Windbags of War

Media, Politics

 

Let me introduce you to Evelyn Farkas.  In September 2015, Dr. Farkas resigned as deputy assistant secretary of defense for Russia/Ukraine/Eurasia after five years in the Obama administration.  Previously she served as executive director of the Commission on the Prevention of Weapons of Mass Destruction and staff member to the Senate Armed Services Committee.

Politico.com reported Dr. Farkas’ departure was in part due to divisions within the Defense Department over the U.S. response to Russian incursions into Ukraine.  The reporter covering this story provided the following synopsis of the two perspectives.

On one side are those who are open to providing lethal aid to Ukraine, including Obama’s own secretary of Defense, Ash Carter. On the other side are doves including Obama himself, who want to support Ukraine with non-lethal equipment but who fear that arming Ukraine against Russia might prompt an escalation that could bring the long-simmering crisis to a boil.

So far, the president has constrained the U.S. response, opting to provide vehicles, counter-mortar radars, body armor and other such equipment — but not the anti-tank missiles or other weapons Ukraine really wants.

Until today, I had no idea who Dr. Farkas was until she appeared on Morning Joe.  It became clear which side she was on as she suggested the United States could be doing more to counter Russian and Chinese attempts to take control of disputed territory.  To make her point, she referenced President Theodore Roosevelt’s famous quote, saying (and I’m not making this up), “Speak strongly and carry a big stick!”  For the record, no one corrected her although I assume someone at the table knew TR had actually said , “Speak SOFTLY and carry a big stick!”

Perhaps this was just a simple misstatement as I assume she too knows the correct citation.  But what if it was a Freudian slip?  Why is this important?  Because when you follow TR verbatim, you get a nuclear agreement with Iran and Syria to dispose of it’s chemical weapons without firing a shot.  But if you approach foreign relations and national security from a perspective in which bluster and overwhelming military power go hand in hand, you get the Iraq war.

I do not want to minimize Dr. Farkas’ service.  The Politico.com article included the following praise from one of her colleagues.

She has advised three secretaries of defense on Russia policy, providing steady counsel on how the U.S. should respond to Russia’s aggressive actions and has been deeply involved in securing $244 million in support for Ukraine.

I chose this example because it forced me to rethink a false assumption.  When Dr. Farkas was introduced on Morning Joe, they gave her former title but did not tell us in which administration she served.  From her comments, I assumed she was a George W. Bush appointee.  I Googled her name to confirm that assumption.  I now know a one’s approach to national security does not necessarily correlate with political affiliation.  I now understand there are both hawks and doves advising President Obama.  And that is a good thing.  But it also reminds us when a president is faced with two opposing views, he or she really is the “decider.”  If everyone in the situation room holds the same perspective, there is no decision other than how quickly to say “yes.”

MSNBC did us a service by introducing us to Dr. Farkas.  Perhaps we would be further served if the cable networks gave us an opportunity to get to know those who will be advising the next commander-in-chief.

For what it’s worth.
Dr. ESP