from the take-umbridge dept
Trump’s quest to stress-test every line in the Constitution continues apace, with his declaration that the government now owns 10% of Intel looking like nothing but a great, big, gigantic taking.
Of course, it is also terrible policy. While there are sometimes compelling arguments that companies should be in public hands, like for utilities, where there is inadequate competition otherwise, or perhaps companies about to fail, where equity in exchange for a publicly-funded bailout might make sense. But none of those arguments apply to a private company that, wobbly though it may have been recently (as are so many), nevertheless remains capable of participating in a competitive environment. Instead, in this case all the reasons not to have the state control the means of production apply, and none of the reasons why an exception should ever be made come anywhere near to it.
Here it is simply Trump openly helping himself to a share of a going concern.
Because he thinks he can, for this company and many others.
But he can’t. Because (among potentially lots of other reasons) it’s a taking.
The Fifth Amendment of the Constitution closes with the prohibition, “nor shall private property be taken for public use, without just compensation.” And yet, if Trump were to succeed with this arrangement vis a vis Intel, that foreclosed scenario is exactly what would be happening.
First, there has been no actual compensation. Details are slowly emerging (and note, if this arrangement were truly above board then everyone would have been very clear on what was happening and why from the outset, so this sketchiness just adds to why it’s unconstitutional, if for no other reason than it obviates any notion of fairness) but it appears that Trump wants to convert $11.1 billion in grants and pledges that Intel was eligible for (and possibly already paid, or at least due), into the “payment” for an equity stake in the company.
About $7.8 billion had been been pledged to Intel under the incentives program, but only $2.2 billion had been funded so far. Another $3.2 billion of the government investment is coming through the funds from another program called “Secure Enclave.”
But this purpose is not what Congress authorized the grant payments for, which means that Trump would effectively be impounding that money and using it for a purpose other than what Congress had earmarked it for, even if nominally still involving the same recipient. For example, Congress, with the CHIPS Act (the apparent source for at least some of these grants), wanted to support American companies so they could continue to effectively compete in the world as private enterprises. Not buy them.
The deal also got the government for the stock at a discount, turning that money to which Intel was entitled to into equity in greater proportion than the closing stock price would have equated to.
The U.S. government is getting the stake through the conversion of $11.1 billion in previously issued funds and pledges. All told, the government is getting 433.3 million shares of non-voting stock priced at $20.47 apiece — a discount from Friday’s closing price at $24.80. That spread means the U.S. government already has a gain of $1.9 billion, on paper.
Even if Trump had the authority to snatch back any money from the government Intel was due by converting it into payment for the equity, he wouldn’t have the authority to demand the discount. All the equity he obtained above what the share price would have equaled he got for free, or, to put it in Constitutional terms, without compensation.
But even to the extent that some form of compensation could be construed from the arrangement, nothing about it qualifies as “just compensation” because there’s nothing just (or compensating) about forcing someone to do a deal that gives up something they had of value at the point of a gun, either literally or proverbially. Here Trump has been very busy very loudly and publicly loading up the metaphoric gun with groundless pressure against the CEO and the company if they did not do this deal. And everyone knows how his pressure is far from an idle threats given how he has already come after other people and their businesses when he’s set his sights on them.
That the CEO or the company board might have somehow “agreed” to the deal, or even proposed its terms in the face of that pressure, does not make what is happening here any less wrongful. If making someone an offer they effectively can’t refuse could count as appropriate compensation then the Sopranos would have been a show about a Fortune 500 CEO, not a wanted criminal. You can’t do legitimate deals by extorting people. Whatever results is not a deal, and certainly not fair. Which means there cannot be “just compensation.” And without “just compensation” it means that the equity Trump has helped himself to is just an unconstitutional taking.
Perversely, however, the one reason why it might not be a taking is that the likelihood that this equity position will be for “public use” benefiting the public treasury seems small. Trump’s idol Putin is infamous for redirecting shares of previously public industry to cronies, allowing them to become unfathomably rich and powerful oligarchs by co-opting public resources and the benefits of earlier public investments, and there is no reason to believe, based on everything Trump has said and done to date, that Trump won’t try to emulate those kakistocratic tendencies. Nevertheless, because he is ostensibly using public power to further this scheme, it is likely still a taking, because at least for a brief moment there is at least the pretense that the entire enterprise is for the public benefit. It is that presumption that gives him the ostensible power to even attempt it.
But, as Trump regularly demonstrates, not every exercise of lawful power is itself lawful. And this move to seize a portion of a private company is no exception. It is just as much a taking as any case that has ever been litigated, if not more so, given the sheer brazenness and scale. And arguably not the first even this term. For instance, there was the US Steel deal, where Trump obtained a “golden share” as a condition for the merger. And there was his extraction of promises by law firms for free legal work they otherwise had no obligation to provide as a means of avoiding his threats. There were, of course, other constitutional infirmities with the latter deals, aside from the potential takings issue, but those infirmities reflect the modus operandi of his takings based on unconstitutional threats against his targets, until they submit to his demands.
With the US Steel “deal” the quid pro quo of the “golden share” exchange was a little more subtle, where that offer was a means of turning a government “no” to a “yes, but only if…” But there is still something irredeemably corrupt about this sort of bargain, where a company has to barter part of itself to the government for a policy result. The takings clause protects not just those that the government might take from but the public that also has an interest in making sure that the government strikes whatever deals it does fairly.
Which is one reason why it shouldn’t matter for takings purposes if the deal at least appears to produce some value for some, because they may not be all the people who are supposed to be protected from this form of government abuse. But the other reason is because none of these “deals” that Trump is doing is fair, and that some may have somewhat benefited cannot make them fair. Such is the nature of duress, because even if a seemingly good deal results it may still not be as good a deal as the taken party should have been able to benefit from had there been no duress. Duress precludes deals from ever truly being fair, which we can see here, with Intel, where a government ownership interest has resulted after an abuse of government power. The result is inherently tainted, because it is a deal done as an attempt to avoid an even greater cost instead of a result that is truly fair for the company. As this deal obviously isn’t, because it is hard to imagine that anyone could think a deal exchanging money the company was already entitled to for equity would be anywhere near as fair as a deal as being able to keep the promised money without having to surrender anything at all.
Filed Under: 5th amendment, donald trump, industrial policy, nationalization, ownership, socialism, takings
Companies: intel
