The Trump campaign’s most recent financial disclosures show that the self-proclaimed business mogul has a sketchy habit of steering political funds towards his own companies. Through the end of May, the Associated Press noted, Trump's campaign spent approximately $6 million on Trump products and services: nearly 10 percent of all campaign spending.
But the intertwining interests of the Trump campaign and his businesses raise some disconcerting ethical and legal questions as the race for the White House continues. This financial morass is alienating Republican donors and lawmakers who already have their doubts about the presumptive GOP presidential nominee—and raises questions about just how far Trump could theoretically go if he wanted to profit from his campaign.
“Presidential campaigns generally try to separate themselves from their businesses. What he is doing is unprecedented,” said Larry Noble, general counsel of the Campaign Legal Center. “Using all of your companies to provide services to your campaign—whether it’s illegal or not, that’s questionable… if he’s doing this to enrich himself, it is illegal.”
And there are other potential legal hazards: If a Trump-owned business provides a product at above-market cost, it would enrich Trump, which is illegal; but if that business provides a product at below-market cost, it would be an illegal in-kind corporate donation to the Trump campaign.
Between June 2015 and the end of that year, Trump’s campaign spent $2.2 million on Trump-owned businesses, including on Tag Air Inc., an airline where Trump is the CEO.
Most recently, in May, Trump’s campaign paid more than $400,000 to Mar-a-Lago, his Florida club. He spent money on water with the Trump brand. He snatched up a bunch of Trump wine too.
“If he’s overpaying for that, he’s helping subsidize the company. If he’s underpaying for that, the company is subsidizing him,” Noble said. “That’s why most campaigns stay away from doing this.”
The use of campaign funds to funnel money back to his own operations may also give Republican donors pause. Trump’s campaign started June with just $1.3 million in cash, compared to $42.5 million for presumptive Democratic nominee Hillary Clinton.
“Clearly money matters in politics at some point. I don’t think he needs to outspend Hillary Clinton, but he needs to be competitive,” said Sen. Lindsey Graham, a Republican who has declined to support Trump, in the U.S. Capitol Tuesday.
“Hillary’s got many times what he’s got on hand. That shows his personal fortune better go into the campaign,” added Sen. Mark Kirk, another Republican who has said he cannot support his party’s presumptive presidential nominee. Trump has said he will not be self-funding his general election campaign.
Yet, his party’s biggest dollar donors have already been rather passive: now, with news that Trump’s campaign is spending considerable amounts of money on Trump’s businesses, they have even more reason to be.
“It’s certainly not the sort of thing a Republican donor would be impressed by… It would be improper to take people’s money and use it to profit the candidate,” said Richard Skinner, the Money-In-Politics policy analyst at the Sunlight Foundation, a transparency group. “It’s worth investigating.”
Government watchdogs suggested that there were a number of legal ways that Trump could profit on his campaign going forward, and some others that stepped into legal gray areas—all of which they are on the lookout for.
If Trump were to loan his campaign more money going forward, he can charge the campaign an exorbitantly high interest rate on the loans. The Federal Election Commission allows “a commercially reasonable rate,” but that can be open to interpretation.
“The majority of interest-bearing personal campaign loans we found were in the 5 to 6 percent range, but there were also a decent amount in the 8 to 10 percent range,” said Jordan Libowitz, a spokesman at Citizens for Responsibility and Ethics in Washington.
The most notorious case of this is when Rep. Grace Napolitano, a Democrat from California, lent her own campaign $150,000 at a whopping 18 percent interest rate. She later reduced the rate, but also collected more than $221,000 in interest, paid from her campaign account, between 1998 and 2009.
The real money, suggested Skinner, was if Trump got involved in advertising. It’s an enormous market: it’s estimated that federal campaigns will spent $4.4 billion on television ads in 2016.
“Say he hired, as consultants, a firm that was controlled by him, so that the profits for making and booking ads would go into one of his businesses. That would net him a whole lot more money,” he told The Daily Beast. There is no evidence that Trump currently owns such a company.
Trump’s campaign is also employing a number of individuals who also have roles in the Trump Organization, the umbrella group for the likely GOP nominee’s businesses. This could profit Trump if these employees are being paid with political funds while spending time working on the business side.
If he overpays for these employees with campaign funds, he’s helping subsidize the company; if he pays them below-market rates, the company is subsidizing his campaign. This legal mess is the reason campaigns steer clear of personal businesses.
Trump could also use public financing to fund his general election campaign, something that hasn’t been done since McCain accepted it in the 2008 presidential campaign. Taxpayers would be on the hook for up to $96 million in Trump campaign spending—removing the need for Trump to spend time fundraising for his White House run.
He has previously left the door open to the idea, he now appears to be leaning against.
Taking $96 million in public financing would mean that his campaign would be closely audited by the Federal Election Commission and limit his ability to loan his campaign money to just $50,000—something he’s unlikely to do.
“Because of the $96 million cap, going that route is almost a concession of defeat—Hillary will certainly raise and spend $500 million plus,” said Charlie Spies, a Republican lawyer who supported Jeb Bush earlier in the election cycle. “It would also be humiliating for someone who claims to be worth $10 billion and able to self fund, to settle for such a low amount.”
Ultimately, whether the campaign decides to involve itself in get-rich-quick schemes in the future, even the campaign spending Trump has engaged in up until now has been questionable.
“There are rules about the use of campaign funds for businesses and the use of business funds for campaigns, and this involves all those rules,” Noble said. “It raises the question of whether the campaign really exists to benefit the Trump brand and Trump businesses. And when he’s making decisions, whether he is more concerned about his brands or his campaign.”