Sometime in the next few days, Gov.-elect Bruce Rauner is expected to release details about the blind trust he promised to create to avoid conflicts of interest from his extensive financial holdings.
Presumably, Rauner will want to have the blind trust in place before he is sworn in Monday and starts taking official actions.
Blind trusts sound like a good idea for politicians, and they definitely can be, but much depends on how they are set up.
The idea is to reassure the public that officeholders, having given up control of their money, will not improperly benefit from insider trading or crooked investments.
The trouble is that not all blind trusts are created equally, and at the very least, the public officials know what investments they put into the trust.
It was Rauner’s private equity colleague Mitt Romney who called blind trusts “an age-old ruse” in 1994 in reference to Ted Kennedy’s, then established his own by the time he ran for president in 2012.
The concern here is that Rauner’s blind trust not be allowed to become a vehicle to place more blinders on the public about what conflicts he may have — or to provide reassurances that are not borne out by the facts.
Unlike the federal government and some states, Illinois has no law governing creation of blind trusts by its public officials.
That means Rauner will be setting up his own rules as he goes along.
If he’s going to be the kind of governor he promised on the campaign trail, that should mean adopting the highest ethical standards with a blind trust that is as transparent as possible to the public and as independent as possible of him.
In short, Rauner needs to make full disclosure of the assets he is putting into the trust, then give up control of his money by turning those assets over to a trustee with whom he has strictly limited communication.
That’s obviously a tall order for any self-made wealthy individual such as Rauner, which is one of the reasons blind trusts are fairly rare in politics.
Let me interject that I don’t believe Rauner got himself elected governor for purposes of making money.
But I also believe Rauner isn’t real keen on letting everybody know where he’s got his money invested, which obviously is the key to understanding his potential conflicts.
We definitely don’t deserve any more half-measures such as his decision during the campaign to release only the front two pages of his income tax returns without any of the accompanying schedules or attachments.
At the time, Rauner emphasized he had exceeded any legal requirement, which was true because there is no legal requirement in Illinois for public officials or candidates to disclose their taxes, although most of the serious ones voluntarily do so.
Rauner shouldn’t be allowed to follow the same course with the blind trust and say that he’s exceeded the legal requirement if he falls short of the ethical bar.
Legal experts who deal with politicians’ blind trusts tell me the key is making sure they are really blind, such that the public official can’t give specific instructions to the person managing his money. You know, something like: “Invest in this company. It’s about to get a big state contract.”
Again, I’m not saying Rauner would do that, but Illinois governors have done stranger things.
Rauner’s most obvious and serious potential conflicts involve his holdings in GTCR, the private-equity company he ran before entering the governor’s race, and the firm’s work investing state pension funds. I honestly don’t know what he can do to alleviate that conflict.
Many of Rauner’s investments are complex and probably can’t be undone by any trustee, which means he will keep them for many years.
That’s why Robert Walker, a former chief counsel to both the U.S. Senate and House ethics committees and now a lawyer at Wiley Rein LLP, says blind trusts are of limited value in the short term.
After all, Rauner will know exactly what he put in the trust, and what actions might benefit those investments.
“It’s a good gesture initially if there are strict provisions applied and followed. It’s not a panacea for potential conflicts of interest,” Walker said.
Kenneth Gross, an ethics lawyer at Skadden Arps who has advised many politicians on how best to avoid conflicts, doesn’t normally like blind trusts but says in Rauner’s case it’s the “right thing to do, because of the complexity of his holdings.”
“If nothing else, it makes political sense,” Gross said.
By the time Rauner runs for president, it might make even more sense.