In 2019, three House committees subpoenaed business and tax records related to President Trump and the Trump Organization.  The Committee on Oversight and Reform issued a subpoena to Mazars USA LLP, President Trump’s accounting firm.  The Financial Services Committee and the Intelligence Committee subpoenaed records from Deutsche Bank and Capital One, which have had extensive financial dealings with President Trump and his businesses.

The Committee on Oversight and Reform oversees government operations, including the Executive Office of the President and the government ethics laws that require officials and political candidates file financial disclosure reports. The Financial Services Committee oversees the country’s banking laws, including anti-money-laundering laws. The Intelligence Committee has jurisdiction over the American intelligence community and can investigate persons who may pose a threat to national security.

In 2019, the House also passed Resolution 507 to clarify that the committees were empowered to obtain records related to the President, his business entities and organizations.

Mazars, Deutsche Bank and Capital One have indicated that they will comply with the subpoenas if the courts declare them valid.

Purposes of the subpoenas

The Oversight Committee heard testimony from former Trump lawyer Michael Cohen that President Trump and Mazars would routinely falsify his assets to get loans and avoid taxes.  The Office of Government Ethics also found President Trump omitted payments to Cohen in a 2018 disclosure report. The Committee chairman stated the Mazars subpoena was needed to determine whether President Trump engaged in illegal conduct, had undisclosed conflicts of interest, or was violating the Constitution’s Emoluments Clauses.

The Financial Services Committee’s investigation focused on whether illicit money, including from Russian oligarchs, has flowed into the United States through shell companies and into American investments such as luxury high-end real estate.  Deutsche Bank and Capital One have had significant dealings with the Trump Organization and have been fined by regulators for not complying with federal anti-money-laundering programs.  Deutsche Bank has reportedly extended President Trump and his businesses more than $2 billion in loans despite a high risk of default. Capital One provided funding for the Trump International Hotel in Washington, D.C.

The Intelligence Committee’s investigation concerns Russian and other foreign efforts to influence American elections. The Committee is trying to determine if foreign actors have financial leverage over President Trump or his businesses, if the President or his family are at risk of foreign exploitation or manipulation, and whether the Russian government coordinated with the Trump campaign or administration.

Trump objects to the subpoenas

President Trump sued to stop Mazars, Deutsche Bank and Capital One Bank from complying with the subpoenas.  President Trump claims the committees have exceeded their constitutional powers to investigate because the subpoenas do not have valid legislative purposes. Rather, they were issued in an effort to collect Trump’s personal information for political advantage. Trump argues the investigations are improper because Congress is searching for inaccuracies and legal violations in financial statements he filed as a private citizen.  Such an investigation is a law enforcement role reserved to the executive and judicial branches. It is meant to expose information for the mere sake of exposure. As such, the records cannot lead to legislation and therefore have no legitimate legislative purpose.

Rulings below

Trump’s arguments failed in the courts below. Both the federal district court in Washington and the Court of Appeals for the District of Columbia ruled against President Trump. Trump now appeals to the Supreme Court to determine whether the subpoenas are a valid exercise of the House committees’ power.

The Supreme Court will address several key issues to determine whether the third parties must comply with the subpoenas issued by House committees.

How broad are the committees’ investigatory powers?

American colonists and the Founders saw their legislatures and Congress as having the same sweeping powers of investigation as the British Parliament.  In 1791, Justice James Wilson said, “The house of representatives . . . form [sic] the grand inquest of the state. They will diligently inquire into grievances, arising both from men and things.”

Until the late 19th century, the courts did not interfere with or curtail the investigatory powers of Congress.  In 1880, the Supreme Court decided Kilbourn v. Thompson, where a witness challenged a congressional subpoena concerning failedinvestments made by the Navy Secretary. The Court found that Congress had limited powers to compel witnesses, did not have a general power to inquire into a person’s private affairs as courts did, and that the matter was already before a federal court.  The Court also held the investigation could not result in valid legislation.  Although other cases have clarified and limited the reach of Kilbourn, the holding became the basis for most of the Supreme Court’s limitations on congressional investigations.

The Supreme Court requires that a congressional investigation have a “legitimate legislative purpose,” often meaning information that will lead to legislation.  In the 1950s, Quinn v. U.S. and Watkins v. U.S. held that Congress may not exercise “law enforcement” powers.  In addition, Watkins held there is no congressional power to “expose for the sake of exposure,” where the predominant result can only be an invasion of the private rights of individuals.

Should courts try to determine whether the committees’ reasons are pretextual?

President Trump argues that Congress’ motives are not legislative, but political.  He wants the Supreme Court to look behind the House committees’ stated reasons for the subpoenas to determine that the committees issued the subpoenas just “for the sake of exposure.”

However, legal precedent requires courts be highly deferential to Congress’ judgement. Generally, courts should presume Congress is acting within its legitimate constitutional powers and responsibilities. Courts must also presume that the congressional committees will responsibly exercise their powers by giving due regard for the rights of witnesses.

Given that each of the committees in this case had facially valid legislative purposes for the subpoenas, it is highly unlikely the Court will give weight to President Trump’s contention that Congress’ true motive was political. The courts, however, can consider evidence such a member statements or hearing questions to decide whether Congress exceeded its authority.

Are the House committees improperly engaged in “law enforcement”?

President Trump argues that the House committees do not have the power to issue the subpoenas because they are actually trying to purse law enforcement activities against the president.

Under our separation of powers, it is the state or federal executive branches that perform law enforcement activities. Under the Constitution, the only “law enforcement” activity tasked to Congress falls under its power of impeachment.  Through impeachment, Congress may investigate wrongdoing by government officials. The investigation requires a majority of the House and conviction requires a two-thirds vote of the Senate. A conviction results in punishment: removal from office and restrictions on holding future offices.

President Trump argues the committees are now improperly exercising law enforcement powers because they are investigating potential legal violations and wish to expose alleged wrongdoing. The individual House committees do not have impeachment power alone, so they cannot investigate Trump with the goal of trying to punish him.

Watkins v. U.S., decided during the McCarthy “red scare,” found a subcommittee’s inquiry into a person’s politics and affiliations did not serve a “public purpose,” but was meant to bring the witness public scorn.  The Court held (1) there is no congressional power to expose for the sake of exposure, and (2) Congress is not empowered to expose where the predominant result would be an invasion of an individual’s private rights.

This ruling appears at odds with the notion that courts should not be trying to determine a pretext for a congressional investigation.  In fact, exposure of wrongdoing is one of the greatest tools at Congress’ disposal.  In the words of Justice Louis Brandeis, “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

The House committees point out, in contrast to Trump’s argument, that they cannot be pursuing law enforcement activities against the president because Congress cannot pursue charges against an individual without the executive. If Congress finds evidence of a crime during its investigations, Congress’ ethics committees may refer the cases to federal or state executive authorities. Only through the executive authorities may the government bring cases for possible law violations discovered during investigations.

Amicus argument: The information does not really belong to the President

Professor James Wheaton and I filed amicus briefs in Mazars and Vance supporting the House committees. We argue that President Trump cannot object to Mazars, Deutsche Bank and Capital One turning over the financial information because Trump is legally separate from the entities requested to provide information.

The subpoenas request information held by more than 500 business entities connected to the Trump Organization. President Trump argues that because he has not divested his economic interests in the business entities, or put them into a blind trust, they remain so closely tied to him that the subpoenas must be invalid. President Trump further argues that producing these records would distract him from his official duties.

The amicus brief argues the President is not being asked to produce any records, so compliance with the subpoenas should not take up any of the president’s time. Further, President Trump does not need to consult with any of the entities because he publicly resigned from positions of authority before becoming president. Therefore, the entities are legally separate from the President, and the subpoenaed documents do not belong to him, contrary to Trump’s arguments. For additional information on this argument, see Professor Wheaton’s report on Trump v. Vance.

The political question doctrine

An issue that could resolve the case on a technicality is the “political question” doctrine. The Supreme Court has asked the parties and the Solicitor General to brief whether the political question affects this case.  The political question doctrine allows the Court to avoid deciding a case on its merits because the lawsuit is a political conflict that should be resolved by the “political branches”: Congress and the President. If the Supreme Court uses this doctrine and does not decide the case on the merits, Mazars, Deutsche Bank and Capital One may see the subpoenas as legally valid and release the financial records to Congress.

Correction: An earlier version of this report said the argument is on Monday. It has been corrected to Tuesday.

DECISION ANALYSIS:

July 10, 2020

Term Ends Without Anticipated Fireworks Regarding Trump’s Financial Records

On July 9, 2020, the Supreme Court ruled in two cases regarding whether third parties must comply with subpoenas to hand over President Trump’s tax information. Trump v. Mazars involved subpoenas by three House committees to Trump’s accounting firm and two banks which have had extensive financial dealings with President Trump and his businesses.

The Supreme Court ruling in Mazars left court-watchers disappointed. Instead of the fireworks people anticipated, the Court ruled the case should go back to the lower courts and reconsider the case under a new four-part test analyzing separation of powers concerns.

As a result of the ruling, the case will certainly drag on and perhaps end up back in front of the Court next session.

Background

In 2019, three House committees subpoenaed business and tax records related to President Trump and the Trump Organization. The three committees seeking Trump’s records are investigating various issues from ethics to national security and declared the records requested necessary to their investigations.

President Trump sued to stop Mazars, Deutsche Bank and Capital One Bank from complying with the subpoenas. Mazars, Deutsche Bank and Capital One indicated that they will comply with the subpoenas if the courts declare them valid.

Issue in the Case

The Court was asked to determine whether the Congress has the authority to subpoena the President’s personal records, even those in the custody of a third person. Congressional committees generally have a very broad ability to demand information so long as it has a “legitimate legislative purpose,” often interpreted to mean the information will lead to legislation.  In the 1950s, Quinn v. US and Watkins v. US held that Congress may not exercise “law enforcement” powers. In addition, Watkins held there is no congressional power to “expose for the sake of exposure,” where the predominant result can only be an invasion of the private rights of individuals.

Here, Congress was not demanding the records of just any individual, but the President. President Trump argued that, as President, he had sweeping immunity from this type of subpoena. In the alternative, he argued that the reasons given for the subpoenas were pretextual and that Congress just wanted the information for political advantage. Congress, however, claimed that they could demand nearly any information they desired.

The Supreme Court Decision

The Court held that Congressional subpoenas for information from the President involve special separation of powers concerns that were not fully considered by the lower courts. With this decision, the Court provided the district and circuit courts a new non-exclusive four-part test to guide them in these specific situations. As a result of the ruling, the case will head back to the lower courts, which will each consider the subpoenas under the new test.

A new (non-exhaustive) test

The Court’s new test has at least four parts for the lower courts to apply in this case.

First, courts should examine Congress’ legislative purpose for gathering the subpoenaed information and then “carefully assess” whether that purpose warrants involving the President and his personal papers. If Congress could reasonably obtain the information it seeks elsewhere, it would fail to satisfy this part. Further, the Court expressly stated that due to the “President’s unique constitutional position,” Congress may not use the President or his information as a “case study” for general legislation. Here the Court distinguishes Congress from the court system (such as the proceedings in Vance): while the integrity of the court system demands all of the facts, Congress is not “hampered” when it does not have all of the relevant evidence.

Second, the lower courts should insist that the Congressional subpoena be “no broader than reasonably necessary to support Congress’s legislative objective. This prong will prevent “unnecessary intrusion into the operation of the Office of the President.”

Third, the courts should consider “the nature of the evidence offered by Congress to establish that a subpoena advances a valid legislative purpose.” The Court suggests that a subpoena based on detailed and substantial evidence of a legitimate need is more likely to be enforced. “Vague” evidence or “loosely worded” purposes is more likely to fail. Congress will, therefore, have to specifically explain in detail why the President’s information is needed.

Fourth, courts should assess whether the Congressional subpoena will unduly burden the President’s time and attention. While Vance held that litigation does not burden the President’s time, it held that Congressional subpoenas are different. Unlike courts, Congress may have an incentive to use subpoenas on the President to gain a political or institutional advantage.

The Court was clear that this is not an exhaustive list since a subpoena for a sitting President’s personal papers is so rare; “one case every two centuries,” did not offer enough experience to determine other factors.

How does the decision relate to the political question doctrine?

Shortly before oral arguments, the Court asked the parties and the Solicitor General to brief how the political question doctrine affected this case. The political question doctrine allows a court to avoid deciding a case on its merits because the lawsuit is a political conflict that should be resolved by the “political branches”: Congress and the President.

The Court’s decision spends a considerable amount of time discussing the fact that the “political branches,” Congress and the President, are constantly engaged in a game of political and institutional tug of war. Congress has requested information from the President before, and sometimes the President has complied—typically when politics demands such a response. The Court clearly would like to avoid becoming involved in political arguments between these branches.

Although the Court paid tribute to the political question doctrine, it decided nevertheless to wade into this particular dispute. The proffered four-part test is an apparent effort to thread a very small needle and is designed to exclude subpoenas that are politically motivated or to gain an institutional advantage.

While the decision appears to be a loss for Congress in the context of Trump, it actually gives Congress a clear path to get a President’s personal records so long as it has a good, provable reason. For the first time in our Constitutional law, Congress has the express permission of the Court to get the President’s personal records if need be.

Whether courts can apply this test and still “remain above the political fray” is a huge unresolved question.

Squaring the Balancing Test with the Speech and Debate Clause

President Trump argued that Congress’ motives are political, rather than legislative. Courts are generally highly deferential to Congress’ judgement and presume Congress is acting within its legitimate constitutional powers and responsibilities. In part, this is due to the Constitution’s Speech or Debate Clause, which states:

The Senators and Representatives shall receive a Compensation for their Services, to be ascertained by Law, and paid out of the Treasury of the United States. They shall in all Cases, except Treason, Felony and Breach of the Peace, be privileged from Arrest during their Attendance at the Session of their respective Houses, and in going to and returning from the same; and for any Speech or Debate in either House, they shall not be questioned in any other Place. 

US. CONST. Art. I §6 clause 1 (emphasis added).

The “any other Place” is often interpreted as “in court.” The first and third prongs of the Court’s new test both ask courts reviewing Congressional subpoenas to look at the purposes for the information, and to assess whether the reasons for an evidence underlying the demand is specific and “substantial.” This will necessarily force judges to decide whether Congress’ subpoena is “legitimate” or “political.” How this is compatible with the Speech or Debate Clause is unclear. Also, it is difficult to tell where a Congressional investigation will lead or what action will come of the information. To obtain a subpoena for Presidential documents, the Congressional committee will have to state exactly what it intends to do with the information.

How will the committees fare under the new test?

The first prong in the Court’s new test is a clear signal to the lower courts that the House Financial Services Committee’s subpoena should not be enforced, given that the Committee’s stated purpose for demanding the records was as a case study of potential financial impropriety.

On the other hand, the Intelligence Committee and the Oversight Committee may have strong arguments as to why they need the demanded records. The Intelligence Committee may have specific information and testimony that President Trump has either received money from, or is in debt to, foreign interests who may seek to take advantage of his position. The Oversight Committee has documents and testimony provided by former Trump lawyer Michael Cohen that the President may have falsified financial documents required of all federal officers. In both situations, the Congressional committees should be able to make compelling arguments that the information sought will lead to either specific legislation or other Congressional action.

Dissent: Thomas and Alito

In dissent, Justices Thomas and Alito argued impeachment is the vehicle that Congress should have used to get President Trump’s personal financial records. They said the Constitution clearly makes the impeachment process a Congressional check on the President’s improper actions. They also found no precedent from the founding generation where Congress subpoenaed a president’s personal papers. Therefore, according to the Thomas and Alito, the committees should not be able to get the requested information from a sitting President without going through the impeachment process.

In providing the new four-part test, the Court indicates that it rejects this argument. However it does define a more demanding standard for Congress when the fact-finding regards the President.