An overview of Biden’s cabinet members’ handling of financial conflicts of interest issues

Cabinet secretaries represent many of the most important members of a president’s administration. To ethically lead the government, these critical government officials should be free of conflicts of interest arising from their personal financial interests. This report examines how President Biden’s cabinet secretaries have handled potential conflicts of interest arising from those interests.

Overall, by streamlining their financial portfolios, limiting their private investments, restricting their outside positions, and deactivating their private consulting businesses, President Biden’s cabinet members have taken significant steps to avoid conflict of interest concerns, although there are some exceptions. These measures should reduce cabinet members’ exposure to conflicts of interests, and are important steps towards restoring public trust in the integrity of our government’s decision making processes. In addition, President Biden’s cabinet secretaries promptly addressed most potential conflict of interest issues, leading to the successful confirmation of all 15 of them in the first 61 days of the new administration.

Like all appointees requiring Senate confirmation, cabinet members are required to file public financial disclosure reports in connection with their nominations. Public financial disclosure reports are an essential part of the nomination process helping the Office of Government Ethics (OGE) and agency ethics officials identify and resolve potential conflicts of interests. Combined with their ethics agreements, which outline remedial actions they have agreed to undertake, cabinet members’ public financial disclosure reports reveal the administration’s approach for handling potential conflicts of interest.

CREW examined these records in preparing this report, focusing in particular on the cabinet secretaries’ individual stock holdings, private investments, and outside positions. Those interests can give rise to conflicts under the primary federal conflict of interest statute, 18 U.S.C. § 208, unless they are the subject of an individual waiver or an OGE regulatory exemption applies.

Those reports show that most Biden cabinet members agreed to divest individual stock holdings in publicly traded companies and privately-held businesses. While two cabinet secretaries – Energy Secretary Jennifer Granholm and Agriculture Secretary Tom Vilsack – were permitted to retain a limited amount of stock investments in publicly-traded companies, these investments likely do not constitute conflicts of interest under OGE regulations because they appear to be de minimis in value. In addition, a number of cabinet members were permitted to retain their individual real estate rental properties, as well as private consulting businesses, provided they ceased active business operations. Most cabinet secretaries also agreed to resign from their outside positions, although a few were permitted to keep their family trustee positions, and one was permitted to retain her professor emeritus position.

By divesting and stepping back from financial interests and outside positions, President Biden’s cabinet members should be able to avoid the types of conflicts of interest concerns that plagued several Trump cabinet members, including former Commerce Secretary Wilbur Ross, former Education Secretary Betsy DeVos, former Transportation Secretary Elaine Chao, and former Treasury Secretary Steven Mnuchin. In addition, President Biden’s cabinet members’ divestiture and recusal commitments are generally more straightforward than those of former President Trump’s cabinet, which should help keep them in compliance with their ethics agreements.

Identifying and promptly addressing potential conflict of interest concerns helped make it possible for all of President Biden’s cabinet secretaries to be successfully confirmed in his first 61 days of office. While nominations can be delayed to give candidates additional time to remedy disclosure issues or sticky financial conflicts of interest concerns, none of President Biden’s were plagued by these kinds of issues. By comparison, President Trump’s cabinet took more than 90 days to be seated in part due to conflict of interest problems, in particular with his Agriculture Secretary nominee, Sonny Perdue, who had agribusiness conflicts of interests tied up in family trusts.

The financial disclosure and ethics review process for cabinet nominees

Successful management of the financial disclosure review process is not an easy task to navigate during the presidential transition due to obvious time constraints. OGE’s legal and regulatory framework requires a nominee’s public financial disclosure report to be filed not later than five days after their nomination is transmitted to the Senate. Agency ethics officials must review it for conflicts of interest and completeness within three working days of receipt. Nominees address their resolution of conflicts of interest in ethics agreements outlining remedial actions they have agreed to undertake, including divestiture of conflicting assets, resignation from outside positions, and recusal requirements relating to 18 U.S.C. § 208 and 5 C.F.R. § 2635.502, the OGE regulation governing specific party matters and other circumstances that give rise to the appearance of a lack of impartiality when they involve former employers, former clients, and other covered relationships. Nominees’ ethics agreements also include a provision acknowledging their obligation to comply with additional requirements in the Ethics Pledge that all of the president’s political appointees must sign. OGE then reviews the report, along with the ethics agreement, and if it is satisfied that no unresolved conflicts of interest exist, the OGE Director signs and submits the report with a letter to the appropriate Senate committee, expressing OGE’s opinion on whether the nominee has complied with all applicable conflict laws and regulations.

In order to meet OGE’s formal requirements and deadlines, most work on a prospective nominee’s public financial disclosure report, as a practical matter, is completed by the White House, OGE, agency ethics officials, and the prospective nominee before a nomination is announced or formally submitted. While there is often back and forth between the prospective nominee and ethics officials to address outstanding disclosure and conflicts of interest issues, once OGE pre-clears a report, with input from agency ethics officials, the White House can move forward with the formal nomination process confident that OGE is prepared to certify that nominee’s report having determined there are no insurmountable financial disclosure or conflicts of interest issues left to resolve. 

Prior to a newly-elected president’s inauguration, the financial disclosure process is triggered by the presidential transition office, which arranges for the prospective nominee to fill out their public financial disclosure form (OGE 278e). During a presidential transition, the Senate may schedule confirmation hearings for some candidates before their nominations have been formally submitted. For example, confirmation hearings for four of President Biden’s cabinet nominees were held on January 19, 2021, prior to his inauguration and formal nominations being submitted on January 20, 2021. Under these circumstances, their public financial disclosure reports are expected to be certified by OGE and forwarded to the Senate in advance of the inauguration and formal nomination.

President Biden’s cabinet secretary nominees were quickly confirmed

On January 20, 2021, shortly after being sworn in, President Biden submitted his nominations for Secretaries of State (Antony Blinken), Treasury (Janet Yellen), Defense (Lloyd Austin), Agriculture (Tom Vilsack), Commerce (Gina Raimondo), Education (Miguel Cardona), Energy (Jennifer Granholm), Health and Human Services (Xavier Becerra), Homeland Security (Alejandro Mayorkas), Housing and Urban Development (Marcia Fudge), Interior (Debra Haaland), Labor (Marty Walsh), Transportation (Pete Buttigieg), and Veterans Affairs (Denis McDonough), as well as the Attorney General (Merrick Garland). In part due to the Biden presidential transition’s successful management of the financial disclosure review and vetting process, Biden’s cabinet secretaries were all confirmed by March 22, 2021, 61 days after his taking office. This helped allow the Biden administration to begin working quickly.

By contrast, President Trump’s cabinet secretaries were not fully in place until April 27, 2017, or 97 days after President Trump took office. Although most of his cabinet secretary nominations were submitted on January 20, President Trump’s nomination of Mr. Perdue to be Agriculture Secretary was not sent to the Senate until March 9, and he was confirmed on April 24, 2017. Since there were no strong objections voiced based on his background and experience, the delay likely involved his agribusiness trust holdings. The extended period apparently gave Secretary Perdue time to plan for a restructuring of his family trusts, which held the agribusinesses. Upon confirmation, Secretary Perdue agreed to revoke his existing family trusts and create new ones in which neither he nor his spouse would hold a beneficial interest.

Rather than being withdrawn due to financial disclosure or conflict concerns, President Trump’s first candidate for Labor Secretary, Andrew Puzder, had his nomination withdrawn amid tax issues and allegations of abuse involving an ex-wife. The withdrawal resulted in a delay of President Trump’s Labor Secretary nomination and confirmation. Alexander Acosta was nominated for the position on March 7, 2017, and confirmed on April 27, 2021, more than 90 days into the administration. 

President Biden also suffered some confirmation setbacks. For example, his nominee for the Director of the Office of Management and Budget, Neera Tanden, encountered serious opposition from Senator Joe Manchin (D-WV), who viewed some of her social media comments as being unduly partisan. While the OMB Director position is given cabinet-level status, it is not the head of an executive department like the 15 cabinet secretary positions identified above, which are the focus of this report.

Most (but not all) Biden cabinet secretaries agreed to fully divest their publicly-traded and privately-held companies and resign from their outside positions

Individual stock holdings in publicly-traded companies

To avoid implicating the conflict of interest statute, 18 U.S.C. § 208, which bars federal employees from participating in particular matters that would directly and predictably affect their financial interests, most cabinet members in the Biden administration agreed to divest individual stock holdings in publicly-traded companies. Energy Secretary Granholm, however, retained stock holdings in seven publicly-traded companies, and Agriculture Secretary Vilsack retained stock holdings in a single publicly-traded company. As explained below, these holdings appear to fall within the de minimis thresholds that qualify for exemptions under OGE regulations, but their values will require monitoring to ensure they stay within those thresholds should the need arise for Secretary Granholm or Secretary Vilsack to participate in particular matters that would affect their financial interests.

Divesting from publicly-traded companies can be critical to avoiding conflicts of interest for cabinet members. While most potential conflicts stem from matters within their agency’s jurisdiction, cabinet members may also be asked to engage with the president and senior White House aides on matters that fall outside their agency’s normal purview, including unexpected events such as those arising from economic crises and public health and national security emergencies. In addition, a president may at times adopt a “whole of government” approach on key issues that broadens individual cabinet members’ responsibility beyond the purview of their agency’s primary jurisdiction. For example, under an Executive Order issued during his first week in office, President Biden engaged 21 federal agencies to carry out tasks to address climate change.

Based on these concerns and to avoid possible exposure to insider trading charges (e.g., if they were to engage in securities transactions after coming into possession of material nonpublic information), President Biden’s cabinet members agreed to streamline their financial portfolios as part of the nomination process by divesting their publicly-traded stock holdings. For example, Treasury Secretary Yellen agreed to divest her holdings in 13 publicly-traded companies, Secretary of State Blinken agreed to divest his holdings in 15 companies, Attorney General Garland agreed to divest his holdings in six publicly-traded companies, and Defense Secretary Austin agreed to divest his holdings in the four publicly-traded companies on which he had served as a board member. Several other cabinet members, including Health and Human Services Secretary Becerra, Homeland Security Secretary Mayorkas, Education Secretary Cardona, Labor Secretary Walsh, Commerce Secretary Raimondo, Housing and Urban Development Secretary Fudge, Interior Secretary Haaland, and Veterans Affairs Secretary McDonough, had no reported holdings in publicly-traded companies, and therefore no related divestitures. The term publicly-traded companies for these purposes does not include investments in diversified mutual funds, which are subject to an OGE regulatory exemption.

Similar to the other cabinet secretaries, Energy Secretary Granholm agreed to divest her holdings in 13 publicly-traded companies in the energy, financial services, healthcare, real estate and information technology sectors. Based on a comparison of her OGE 278e financial disclosure and the holdings she agreed to divest from in her ethics agreement, it appears she was permitted to retain other investments in publicly-traded companies, including several in the same or related sectors from which she divested. For example, Secretary Granholm appears to have been permitted to retain holdings in Invesco Ltd. (financial services), Gilead (drug manufacturing), Cedar Fair LP (entertainment), Vivint Smart Home Inc. (security protection software application technology), Redfin (real estate), Teledoc Health (healthcare), and Uber (software application technology).

While retaining these holdings could mean that Secretary Granholm needs to recuse from participating in certain particular matters that would affect them to avoid a conflict of interest, some or all of them may be covered by OGE exemptions for de minimis financial interests. One exemption permits participation in particular matters involving specific parties that would affect an employee’s financial interests in publicly-traded securities if the market value of the disqualifying interest does not exceed $15,000. Another exemption permits participation in particular matters of general applicability – that is, matters that don’t involve a specific company but affect a discrete class such as a particular industry or sector – if the value of the disqualifying financial interest in publicly-traded securities does not exceed $50,000.

Because OGE requires assets to be reported based on broad categorical values and some of Secretary Granholm’s retained stock holdings are held in both her and her spouse’s brokerage accounts, it can be difficult to discern whether the total reported values exceed the de minimis thresholds in the OGE regulatory exemptions. For example, Granholm reports her holdings in Invesco in two separate accounts – one having a value of between $1,001 and $15,000 and other having a categorical value of between $15,001 and $50,000. Should a matter arise that would affect Invesco’s financial interests as part of the financial services sector, Secretary Granholm may be able to rely on OGE’s regulatory exemption to participate in particular matters of general applicability, provided the combined value of her holdings in Invesco remains below $50,000. However, Secretary Granholm would have to recuse from matter involving Invesco as a party or party representative since the value of her Invesco stock exceeds the $15,000 threshold for de minimis financial interests involving specific party matters.

Agriculture Secretary Vilsack also appears to have been permitted to retain holdings in a publicly-traded company, U.S. Bancorp, whose value is reported to be worth between $15,001 and $50,000. Because the value of his U.S. Bancorp stock exceeds $15,000, Secretary Vilsack will need to recuse from specific party matters involving the company, and he will need to monitor the value of his holdings if he intends to rely on the regulatory exemption applicable to particular matters of general applicability.

Privately-held business interests

As with stock holdings in publicly-traded companies, privately-held business interests are subject to conflict of interest laws and regulations. Here, too, many but not all of President Biden’s cabinet members divested their privately-held business interests.

Secretary Austin, for example, agreed to divest his privately-held Pine Island Capital Partners LLC and related investments prior to assuming his position. Secretary Mayorkas’s former law firm, WilmerHale, agreed to refund his capital account prior to him assuming the duties of his office, along with his partnership share for services rendered in 2020 and a fixed payment for services rendered in 2021, with a lump sum payout of the firm’s defined benefit plan to occur within two months of separation. Some divestitures were subject to an extended payout schedule beyond the three-month period usually required for completing divestitures. Secretary Blinken, for instance, agreed to divest his financial interest in strategic consulting firm WestExec Advisors, LLC by arranging to sell back his equity interest to other owners to be paid over a two-year period. Secretary Granholm was given 180 days to completely divest her vested stock options in Proterra, Inc., an electric vehicle technology company whose board of directors she served on, though she actually completed the divestiture within 90 days of her appointment.

A limited number of Biden administration cabinet members were permitted to retain their interests in privately-held businesses but with arrangements or restrictions designed to avoid conflicts of interests. The most complicated arrangement involves Agriculture Secretary Vilsack, who owns farmland and receives benefits from the Department of Agriculture’s Farm Service Agency Conservation Reserve Program. Rather than sell the farmland, Secretary Vilsack was permitted to lease out the farmland on a fixed-cash basis and to address financial conflicts of interest through a waiver issued under 18 U.S.C. § 208(b)(1), as well as a recusal policy that covers his farm, the tenant managing it, and the lease. These type of waivers can be granted, in consultation with OGE, when the disqualifying financial interest is deemed not so substantial as to be deemed likely to affect the integrity of the employee’s services to the government. Secretary Vilsack’s fixed-cash lease, waiver, and recusal are consistent with how he managed similar conflicts of interest involving conservation benefits when he previously served as Agriculture Secretary during the Obama administration.

In Secretary Raimondo’s case, she was permitted to retain her spouse’s employment-related holdings in PathAI, an AI-powered pathology company. However, she will need to adhere to a strict recusal policy to avoid a financial conflict of interest under 18 U.S.C. § 208.

Other cabinet members also were allowed to retain a handful of discrete privately-held holdings. Secretaries Garland, Granholm, Fudge, and Becerra were permitted to retain their individual residential rental properties, while Secretaries Austin, McDonough, Granholm, and Buttigieg were permitted to retain their solely-owned consulting or S-Corporation businesses provided they ceased active business operations. Secretaries McDonough and Austin agreed to cease engaging in business operations and remain dormant during their service, other than maintenance-type activities. Secretary Granholm limited activity in her and her spouse’s S-Corporation consulting firm to managing their brokerage accounts and profit-sharing defined contribution plans. And Secretary Buttigieg restricted his “pass-through” S-Corporation’s business activities to receiving intellectual property payments from book advances, royalties, and some podcast profits.

The Biden cabinet members’ handling of their financial holdings contrasts with controversial privately-held investments retained by several of President Trump’s cabinet members. Commerce Secretary Ross was the subject of a 155-page report by the Commerce Department’s Inspector General, who examined allegations of conflicts of interest stemming from controversial transoceanic shipping investments he initially retained and then attempted to divest through a short sale, and his failure to timely divest certain other stock holdings in accordance with his ethics agreement. Throughout her tenure in office, Education Secretary DeVos retained her $5 million to $25 million financial interest in a brain development company that claims to have worked with 10,000 children and adults to overcome problems with attention deficit disorder (ADHD), autism, sleeplessness, and stress. Transportation Secretary Chao was investigated by her department’s Inspector General after running afoul of her divestiture requirements involving Vulcan Materials, a highway construction materials company, while OGE refused to certify Treasury Secretary Steven Mnuchin’s financial disclosure report for failing to adhere to ethics rules in divesting from film production company StormChaser Partners.

Outside positions

Because outside positions as an officer, director, trustee, general partner or employee can also give rise to imputed conflicts of interest under 18 U.S.C. § 208, most of President Biden’s cabinet secretaries agreed to resign from their outside positions. A few, however, were permitted to keep certain trustee positions, including Secretaries Yellen, Raimondo, and Mayorkas. Since these positions are associated with their family trusts, Secretaries Yellen, Raimondo, and Mayorkas should be able to reasonably monitor their investments to ensure they do not give rise to new or unexpected conflicts of interest. In addition, Secretary Yellen was also allowed to retain her professor emeritus position at the University of California, but agreed not to provide any services to the university for the duration of her government appointment, which will allow her to avoid possible conflicts of interest stemming from restrictions on teaching for compensation and outside earned income.

Other potential conflicts from matters involving personal and business relationships

Conflicts of interest also can arise from matters involving personal and business relationships, including those with a former employer, former clients, and a spouse’s employer. These conflicts of interest, however, do not usually present the same degree of difficulty to resolve as those arising from the criminal conflict of interest statute. These recusal requirements under the OGE regulation that governs them, 5 C.F.R. § 2635.502, apply to specific party matters involving a former employer or former client from which a cabinet secretary can ordinarily recuse for the required one year, and also cover conflicts of interest that arise from a spouse’s employment. For example, Secretaries Yellen, McDonough, Vilsack, Granholm, Becerra, and Cardona all agreed to recuse themselves from specific party matters involving their spouse’s employers.

The waiver standard for 5 C.F.R. § 2635.502(d) also is less burdensome to meet than for waivers issued under 18 U.S.C. § 208(b)(1). Disqualification under 5 C.F.R. § 2635.502 can be waived by an agency ethics official by issuing an “authorization to participate” based upon a determination that the government’s interest in the employee’s participation outweighs the concern that a reasonable person may question the integrity of the agency’s programs and operations. For example, Granholm, Becerra and Buttigieg received authorizations with respect to former clients or employers, which covered media outlets, the University of California and the state of California.

In some cases, employees are issued authorizations to address circumstances that are not expressly covered by the regulations, but which would “raise a question” regarding the employee’s impartiality. For example, Secretary Yellen was authorized by Treasury Department ethics officials to participate in particular matters focused on the interests of the financial services sector. This authorization was granted “out of an abundance of caution” to address questions about her impartiality for having accepted millions of dollars in honoraria for speeches from banks and asset and management firms prior to joining the administration. Her authorization is limited, however, and does not permit her to participate in particular matters involving the sources of honoraria as parties or party representatives.

In addition to recusal requirements under 5 C.F.R. § 2635.502, the Biden Ethics Pledge imposes a two-year cooling-off period on specific party matters involving former employers and former clients, as well as broader recusal and hiring requirements for former lobbyists and former foreign agents. The Biden Ethics Pledge restrictions can be waived when it is in the public interest due to exigent circumstances, such as national security, the economy, public health, or the environment, or when a literal application of the restriction is inconsistent with the purposes of the restriction. As with 5 C.F.R. § 2635.502, issues involving covered relationships with former employers and former clients addressed by Biden Ethics Pledge’s two year cooling-off period are usually less problematic to address than financial conflicts of interest, which can be more difficult to disentangle and waive. To date, no Ethics Pledge waivers have been issued to Biden’s cabinet members and none of them were impacted by the Ethics Pledge restrictions applicable to former lobbyists or foreign agents.

Conclusion

By streamlining their financial portfolios, limiting their private investments, and restricting their outside positions, President Biden’s cabinet secretaries have taken significant steps to avoid conflict of interest concerns. These measures will help make their divestiture and recusal commitments easier to track for compliance purposes and reduce cabinet members’ exposure to conflicts of interests under 18 U.S.C. §208. As a result, Biden’s cabinet members have taken important steps towards restoring public trust in the integrity of our government’s decision making processes.