At least three of Donald Trump's Cabinet officials are receiving multimillion-dollar payouts — so-called "golden parachutes" — from the companies they are leaving to join the federal government.
Exxon Mobil will pay Rex Tillerson, its former CEO, a compensation package worth $180 million after he becomes secretary of state. Elaine Chao will receive between $1 million and $5 million from the bank Wells Fargo on her way to oversee Trump's transportation department. Goldman Sachs will award Gary Cohn, incoming chair of the National Economic Council, close to $285 million.
Democrats have said these "golden parachutes" are a form of corruption — payments from corporations seeking to win favor with new government regulators. Progressives in the Senate, like Wisconsin's Tammy Baldwin, criticized President Barack Obama on the same grounds when he also nominated bank executives who were taking payments from their former employers.
The banks offering the parachutes, and the officials receiving them, call those charges wildly misleading. They say the payments are necessary to separate new government officials from their existing company holdings (like stocks), rather than amounting to any kind of special gift.
Independent experts in campaign finance disagree. "The point here is obviously for the business to try to befriend the regulator so he or she goes soft on them," says Craig Holman, legal counsel at the money-in-politics advocacy firm Public Citizen. "This really ought to outrage everybody."
In blasting Tillerson, some media outlets have taken to implying that Exxon is showering the incoming secretary of state with additional cash simply because he's joining the government. "Rex Tillerson will make another $180 million if confirmed as Trump's secretary of state," wrote Mic's Jack Buehrer.
The reality is more complicated: Tillerson is receiving the $180 million primarily because he's accumulated more than 2 million restricted shares of stock and restricted stock units in years leading the company.
Obviously, nobody would argue that it'd be more ethical for Tillerson to keep his Exxon stock options while secretary of state — where he could potentially use the office to increase their value.
The controversy instead comes in when we consider how Exxon and Tillerson agreed to separate his financial holdings. Exxon's company policy bans its employees from immediately cashing out on their stocks. To get around that problem, the plan is for Exxon to have Tillerson receive $180 million from an independent trust — one that will pay him over the next 10 years. That arrangement was brokered by the nonpartisan Office of Government Ethics, which signed off on the deal.
Some experts, like ethics lawyer Stan Brand, have argued that Exxon's independent trust is in line with company policy. Brand told Bloomberg that since Tillerson's won't be able to immediately receive all the funds in the independent trust, the stocks were not being allocated to Tillerson on an "accelerated schedule" in defiance of company policy. Therefore, Brand said, the fund doesn't amount to any kind of special gift.
But critics say Exxon still appears to be going out of its way to help Tillerson with a special exemption. Alan Johnson, a compensation consultant in New York, told Bloomberg that Exxon was deviating from its normal practice "of not delivering stock early" because the independent trust allows Tillerson to immediately separate from Exxon.
That makes it look like Exxon is making a special exception to give Tillerson access to $180 million, right before he helms a government agency that could deliver huge financial rewards to Exxon. Exxon drills for oil and gas on six separate continents, and government agencies under the control of Tillerson's state department — like the Bureau of Energy Resources — are directly involved in managing the natural resources of foreign countries, according to Bloomberg. (That state department agency, for instance, helps the South American country of Guyana manage its resources — and Exxon owns nearly half of a 1.4 billion barrel oil field in the country.)
Chao and Cohn pose a different problem in the eyes of ethics advocates. That's because, unlike Tillerson, they both have provisions in their contracts that specifically require their companies to reward them with millions if they join the government, according to Holman, of Public Citizen. They would not receive these payouts if they left their companies either to retire or to join a competitor.
We only know this kind of arrangement exists on Wall Street because of President Obama's Cabinet. During Jack Lew's Senate confirmation hearing for Treasury secretary in 2013, he revealed that he received $1 million in payments from Citibank in order to join the Obama administration.
"The point here is clearly to buy favor with the regulator," Holman says. "If you can give the new person in the administration $1 million on their way out, the idea is that they'll then represent your point of view in the government."
The idea of a "golden parachute" as a retirement or bonus package for a leaving employee is nothing new. But the revelation about Lew and Citigroup hinted at something much more suspicious — that big financial firms weren't just generously compensating outgoing employees, but that they were explicitly rewarding them for joining the government.
That shocked experts, since it suggested that these government officials were taking huge sums of money not because of their work as private regulators but because they had become government officials. "Only in the Wonderland of Wall Street logic could one argue that this looks like anything other than a bribe," Sheila Bair, then the chair of the Federal Deposit Insurance Corporation, said in a statement at the time.
At first, the Wall Street banks maintained that Lew's arrangement was an exception. "They were saying it's a one-shot deal and that nobody really did it," Holman says. "And then we found out it was fairly common."
A company filing from Morgan Stanley revealed its executives are eligible for a bonus if they work for "a governmental department or agency, self-regulatory agency, or other public service employer." Stanley Fischer, now vice chair of the Federal Reserve, had a similar clause in his Citigroup contract, according to a report by Public Citizen.
Antonio Weiss, a counselor to Lew, admitted that Weiss received $21 million from the bank Lazard for entering the government, according to a report by David Dayen in the New Republic. The public never saw the actual text of his contract, Dayen reported.
Holman says Chao and Cohn's financial disclosure forms reveal that the practice is continuing into the Trump administration — at least for those two nominees, and possibly others.
Tillerson's $180 million, Chao's $5 million, Cohn's $285 million — these are just the Trump Cabinet business conflicts we know about.
It's certainly possible that there are others. The reason for the mystery is that Trump's nominees have refused to release documentation we'd need to know if there are more of these kinds of payments going on.
This has been the core of some Senate Democrats' response to news of the "golden parachutes" being deployed on behalf of Trump's Cabinet. In a letter released on January 14, seven Democratic senators requested Trump's incoming nominees disclose what money they'd be receiving that they wouldn't be getting if they were going to another private sector job or retiring.
"We ask that any compensation provided to a nominee — that would be otherwise forfeited — be explicitly described in financial disclosure documents submitted to the Senate," they wrote.
On Tuesday, Wisconsin's Baldwin reintroduced legislation that would also make the kind of agreement between Cohn and Goldman Sachs illegal — it would ban employers from paying bonuses to employers when they join the government. (The legislation is likely headed nowhere.)
"When Wall Street insiders and corporate executives move through the revolving door from the private sector to public service, they should not be rewarded with golden parachutes simply for joining the Trump Administration," Baldwin said in a statement to Vox.
Correction: Due to an editing error, a previous version of this story incorrectly stated that Jack Lew received $21 million from the Lazard financial firm. In fact, Antonio Weiss received $21 million from the Lazard firm.