Two Senate Democrats say Rex Tillerson's plan to eliminate conflicts of interest stemming from his ties to Exxon Mobil before becoming President-elect Trump's secretary of state should be illegal, despite Tillerson's efforts to sever ties with the energy giant.
Sens. Elizabeth Warren of Massachusetts and Tammy Baldwin of Wisconsin called Tillerson's plan to divest himself of about $180 million in deferred Exxon shares a "golden parachute" Wednesday night. Under legislation proposed by Baldwin meant to reform the "revolving door" between industry and the government, the plan would be illegal, the senators noted.
The criticism shows the difficulty that candidates as wealthy as Tillerson face in reducing the conflicts of interest they might face in office. The former Exxon Mobil CEO has assets worth up to half a billion dollars, his disclosures indicate.
Much of that wealth is tied up in shares of Exxon that have not vested, making it particularly difficult for Tillerson and Exxon to cut ties with each other before he takes up duties that will inevitably bear on Exxon's fortunes.
For shares that Tillerson already has in his portfolio, the best practice prescription is simple: He should liquidate those shares and put the proceeds in a blind trust.
But divesting of shares that haven't vested yet is a trickier proposition. On Tuesday night, Exxon Mobil published its plan for doing so.
If Tillerson is confirmed, the company said, it would cancel the award of the more than 2 million shares owed him over 10 years and instead contribute the value of those shares to an independent trust that would be managed according to ethics guidelines and pay Tillerson according to the schedule that would have applied to his shares.
The company also would subtract $3 million from the value of the shares, to fulfill ethics guidelines and cancel the health and other benefits he would have been owed. Altogether, that would amount to a $7 million hit to Tillerson.
Yet Warren and Baldwin were not impressed.
In a joint statement, they called the arrangement an "egregious payout deal" that would fly in the face of Trump's promise to "drain the swamp."
The problem? The payout would be contingent on Tillerson gaining a top government post, making it an illegal plan under the terms of Baldwin's proposed Financial Services Conflict of Interest Act.
In the past, liberals have raised concerns about a related issue, contracts that award employees bonuses for accepting government roles that oversee the firm's industry. Anger over a $20 million bonus that one Obama nominee for the Treasury would have received helped liberal Democrats scuttle the nomination in early 2015.
Tillerson's case is different, however. The compensation he would receive would not be a bonus, but rather deferred compensation he already earned. Nevertheless, the payout to the independent trust would run afoul of Baldwin's bill.
Caleb Burns, a partner at the law firm Wiley Rein who works on government ethics and election law, said that there would not be a better way for Exxon to distance itself from Tillerson than its existing plan, short of not paying him the compensation he is owed. Under existing law, the plan is legal and would be legal even if the payments were specifically tied to Tillerson being named secretary of state, rather than being part of his compensation whether or not he got it. In that case, Tillerson would have to recuse himself from business that affected Exxon.
As for the objections voiced by Warren and Baldwin, Burns said that they sound "like more of the same that we've heard from other opponents of this administration, which is clamoring about ethics issues that don't really exist as a matter of law."