The desolate prince was right when he described the state of Denmark as ‘rotten’.  The Compact OED gives us ‘rotting or decaying…. morally or politically corrupt.’  And there was a lot more to that decay and corruption than an ‘o’er hasty marriage’ and binge boozing behind the battlements. 

We can see signs of this rotting in governments generally in what we call the western world, but none more so than in the United States.

In her most enlightening book, Autocracy Inc, Anne Applebaum traces the similarities between the current regime in the U S, and those autocratic regimes like China or Russia, or ‘illiberal democracies’ like Turkey, Malaysia, India, the Philippines, or Hungary.

They share a brutally pragmatic approach to wealth.  Unlike the communist and fascist leaders of the past…the leaders of Autocracy Inc often maintain opulent residences and structure much of their collaboration as for-profit ventures.  Their bonds with one another, and with their friends in the democratic world, are cemented not through ideals, but deals – deals designed to take the edge off sanctions, to exchange surveillance technology, to help one another get rich…. Autocracy Inc offers its members not only money and security, but also something less tangible: impunity.

Does that not describe the Trump malaise in the U S?

After referring to ‘the fascist belief in the liberating power of violence’ and describing the feeling of success and calm after the fall of the Berlin Wall, Anne Applebaum says:

Everyone assumed that in a more open, interconnected world, democracy and liberal ideals would spread to the autocratic states.  Nobody imagined that autocracy and illiberalism would spread to the democratic world instead.

Later, the author refers to the remarks of a U S senator who said that ‘the same techniques of concealment used to facilitate offshore thugs and criminal activities also facilitate the political activities of domestic special interests.’

The book prompts discussion of the following – the relationship between political and financial dishonesty; the fundamental fallacy that underlies every aspect of the Trump administration; the limitations of the notion of kleptocracy; and the liability of the profiteers to account for their obtaining profits from their offices.

Trust and probity

People who hold office in government are in a position of trust owed to those who put them there.  They were not appointed or elected to look after themselves, but to serve the interests of others.  If they choose to break the rules about the limitations on their political powers, then they may just as easily break the rules about how they help themselves financially.  If they are dishonest politically, why not be dishonest financially?  If you are rotten about the rights of others, why not be rotten about their money?

There is nothing new in the notion that those in charge of the most austere political regimes are also likely to be the most corrupt financially.  Here from my schooldays is J B Bury, the bible on ancient Greece, on Sparta.

…..  the ‘communism’ which we observed in the life of the citizens was only superficial.  But it was specially provided by law that no Spartan should possess wealth in the form of gold or silver.  This law was at first eluded by the device of depositing money in foreign temples, and it ultimately became a dead letter; Spartans even gained throughout Greece an evil reputation for avarice.  By the fourth century, they had greatly degenerated, and those who wrote studies of the [Spartan] constitution contrasted Sparta as it should be and used to be with Sparta as it was.

The Spartans were not alone in having an evil reputation for avarice.  Greed was good generally – just look at Timon of Athens.  Bury remarks that Solon of Athens introduced reforms that ‘hit the rich hard,’ but that he was ‘too discreet to attempt to interfere seriously with the money market by artificial restrictions’. 

But it does seem that otherwise austere regimes cause its members to resort to graft as a way of life.  Does anyone believe that the rulers of Burma or Iran or Venezuela have clean hands?

Yet for centuries, Oxbridge clung to the myth that ancient Athens and Rome were civilized.  The wealth of each was built on slavery and the protection racket called empire.  Both slavery and empire disqualify the ancients from being called civilized. 

It was not until England shed its empire that it saw the ancient world for what it was.  Neither Athens nor Rome had ever dreamed that each of us is born with a dignity or worth merely because we are human – the sine qua non of civilization after the teaching of Jesus of Nazareth or Immanuel Kant.

For many, including me, The Republic of Plato is a blueprint for fascism.  But if we go to authentic fascists like those of Nazi Germany, we find real graft and corruption on a huge scale.  Put aside the dog-like loyalty of people like Hess and Rohm – Hitler, Goring and Himmler wallowed in mansions and riches, much of it the product of what the Romans called rapine.  Indeed, the conquering Roman armies lived off rapine – vae victis – in a manner that would only be surpassed by Attila the Hun, and Napoleon the Corsican.

It is not surprising that people cannot silo their dishonesty or greed.  That is why I take the view that we should be wary of dismissing as irrelevant the failures of those in public life that may be characterized as ‘private’.  If a person in a position of public trust cannot be trusted by those close to them, where does that leave the rest of us? 

That view may sound old fashioned.  That is not of itself a problem for most of us – if, for example, you also believe in having a trained independent civil service, or two political parties both capable of serving equally in government and opposition.  Each of those has gone clean out the window here in the last two generations.

So, that is the first point.  People in power who break the rules of government may be just as likely to break the rules about crime generally, and enrich themselves at your and my expense.

The present Trump regime stands for every part of that proposition.  Its own contribution is to be more brazen – shameless – than any of those who came before it – starting in the garden of Eden.

Government and business – and profit

The second point is the fallacy that underlies the whole Trump administration.  About forty years ago, some business people in Melbourne thought it would be simple to save struggling football clubs.  Just run them like their business.  They were dead wrong, and they sadly failed in their mission. 

Trump makes the same error.  He thinks he can run the U S like a business.  He is wrong. 

A trading corporation is formed and managed to return a profit on its business for its shareholders. 

That is not what the United States was formed for.  Its founders may have been grandiose, and hypocritical, but their stated object was not to make money.  Putting to one side the dreams of the Puritans, the aim of the founders was to deliver and ennoble the new Promised Land:

We the People of the United States in order to form a more perfect Union, establish Justice, ensure domestic Tranquillity, provide for the common Defence, and general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity ….

The congeries of slave owners who had their own self-evident truths were not after profit, but justice, tranquility, and general welfare. 

Those aspirations are pure moonshine for the New York property developer and his rough mates.  He is in it for profit and fame, and that contradiction undermines every part of his administration.  To adopt the phrase of Anne Applebaum, he puts deals way above ideals. 

Although he did not write one word of the book, Trump is obsessed with ‘the art of the deal,’ and his coming out the winner.  This is a different universe to that of Lincoln, Roosevelt, or Truman, whose one aspiration was to serve the people of the United States – ‘of the people, by the people, for the people.’  Trump does not believe in God, but if he did, he would surely know that God did not create him to serve the people.

It follows that this presidency stands on an obviously false premise.  But it gets worse.  The first object of government is to keep the peace – to ensure domestic tranquility and general welfare.  The laws of the union about guns make the first impossible, and the opposition to the Welfare State, that is pursued everywhere else in the West, make the second impossible.  The United States has not achieved its stated objectives.

Trump must be taken to have admitted that the United States has not ensured tranquility for Americans.  He says he should send the federal army into cities that have let crime run amok.  That would be unthinkable in Western Europe – or, say, Australia or Canada.

Because Trump is so egocentric, his political responses are often so personal.  During the Dark Age, the justice of the state was created to replace the vendetta.  Trump now uses – or abuses – the organs of the state to pursue his own personal and political vendettas, and to give succor to those whom he persuaded to try to overthrow the Constitution.  We therefore have a fearful combination of Alice in Wonderland and Nineteen Eighty Four.

There is something more about Trump’s infatuation with ‘deals’ – as when he told President Zelensky that he, Zelensky, did not hold the right cards.  To which the obvious response was – this is not a card game. 

But deals are games for Trump, and he is a very bad loser.  (Witness the Nobel Prize, a loss he suffered in full war-like mode.)  

People do not come back for repeat business with Trump.  Good business people know that the best ‘deals’ are contained in documents that are put on file and left there.  Ongoing arrangements turn on trust – and Trump’s whole career in business suggests he cannot be trusted. 

You can, if you wish, start with two admitted facts – he avoided national service, and he avoided paying tax.  In any other western nation, his history on those grounds alone would disqualify him from being elected to any significant public office.

So, there is something unsettling, is there not, about the following proposition?  ‘Jack and Jill went into politics – and then Jack and Jill got filthy rich.’

Kleptocracy

That leaves the kleptocracies discussed at length in Autocracy Inc.  Trump puts Mammon before God every time.  (His ego has no room for God.)  And he is making millions for himself and his family from the public offices he holds.  (I could be typing this under a framed cartoon of Trump as Superman.  He sold the cartoons.  The proceeds did not go to charity.  The very idea would be absurd.) 

Words like kleptomania come from the Greek kleptos meaning ‘theft.’  Wikipedia says:

Kleptocracy is different from plutocracy (rule by the richest) and oligarchy (rule by a small elite). In a kleptocracy, corrupt politicians enrich themselves secretly outside the rule of law, through kickbacks, bribes, and special favours from lobbyists and corporations, or they simply direct state funds to themselves and their associates.

That is not Trump.  His schtick is not theft.  That is a crime.  But Trump’s profiteering certainly looks unlawful and dishonest.

Under our Westminster system, ministers of the Crown, the members of the executive government, hold positions of trust.  As the great English legal historian, Maitland, said in another context, ‘for every exercise of the royal power, some minister is answerable’.  Civil servants are servants of the Crown and the people, and being in the same position as employees, they owe obligations under the general law of loyalty and good faith to those whose interests they serve.

It is not the Westminster model, but the rule of law that regulates the way that our governments ministers discharge their obligations under the law, at least to the same extent that we regulate the way that directors of public companies are obliged to act – in the interests of shareholders, and not themselves. 

That is very much the way of the common law in the view we take of the proper role of all those in government.  It is not to the constitution that we ordinarily look in order to control those who direct government, in much the same way that we seek to control those who direct business.  Parliament looks after its own, but otherwise these are matters for our general law – the common law and the statutes of our parliaments.  The rationale is the same.  These people are where they are for us, and not for themselves.

Unjust enrichment or unconscionable profit?

The ministers are, therefore, subject to legal duties owed to those who put their trust in them.  As such, the Ministers must put the interests of the public before their own; they must act toward the public with the utmost good faith (uberrima fidei); they must avoid any external obligation that conflicts with their duties to the public; and they must account to the public for any financial benefit they derive from breaching any such obligations.

There is a kicker for grifters in that last remedial proposition.  We are not constrained to talk about cases where the fault of the agent has led to loss of the principal.  If the principal happens to score a win, the agent may get the windfall.  The liability to account under our laws does not turn on dishonesty. 

The duties I refer to are customarily called ‘fiduciary’.  That is a very slippery word.  It is not understood by most lawyers, let alone those who are appointed as Ministers of the Crown.  It is a standing invitation to circular reasoning – he has to account, because he is a fiduciary; because he is a fiduciary, he has to account. 

But the obligations owed by public officers (or public servants) to the Crown (the Commonwealth) are described as ‘fiduciary’.  And the law is clear that the ordinary relationship of a contract of employment entails that the employee is subject to fiduciary duties to the employer.  It follows that those serving the Commonwealth, including Ministers of the Crown, owe these duties to the people of Australia.  They are accountable to the people of the Commonwealth for any failure to observe those duties and are liable to account to those people for any profit they derive from doing so.

Now, there may I suppose be nuanced arguments about the extent of these duties for public officers, but it would be difficult for ministers to say that they did not have to act in good faith, or that they could make and keep a profit arising from their position without seeking some form of authority – or without disclosing it.  Such a denial would of itself lead to loss of office.

This part of the law, generally called equity, turns on conscience, rather than fault, and it provides a remedy for conduct it regards as unconscionable.  And it does so in terms that would shock those shysters who are wont to clip the ticket, and with much greater thrust than our regulators can summon up.

Here are extracts from two texts of undoubted authority on equity.  The first is the standard text of Maitland.

….wherever a person clothed with fiduciary character gains some personal advantage by availing himself of his situation as a trustee, he becomes a trustee of the advantage so gained…the rule includes persons who are not trustees properly so called, but all those who stand in what is called a fiduciary position …it is a general principle of equity that if an agent acquire any pecuniary advantage to himself from third parties by means of his fiduciary character, he is accountable to his employer as a trustee for the profit he has made.  

The second is the great American text of Story.

But by far the most comprehensive class of cases of undue concealment arises from some peculiar relation, or fiduciary character, between the parties …the relation of client and attorney and principal and agent.  In these and the like cases, the law, in order to prevent undue advantage from the unlimited confidence, affection, or sense of duty, which the relation naturally creates, requires the utmost degree of good faith (uberrima fides) in all transactions between the parties.  If there is any misrepresentation, or any concealment of a material fact, or any justsuspicion of artifice or undue influence, courts of equity will interpose and pronounce the transaction void ….

In short, it may be laid down as a general rule, that a trustee is bound not to do anything which can place him in a position inconsistent with the interests of the trust, or which has a tendency to interfere with his duty in discharging it.  And this doctrine applies, not only to trustees strictly so called, but to other persons standing in like situation.  … Besides, agents are not only responsible for a due account of all the property of their principals, but also for all profits which they have clandestinely obtained by any improper use of that property.

Story originated in the U S.  These citations come from an English edition.  But I am not qualified to say what may be the American law relevant to the millions upon millions Trump and his family are milking from the people as a result of his use, or abuse, of public office. 

Nor do I know whether abuse of, or misfeasance in, public office gives rise to a cause of action there, or whether our law of unjust enrichment may apply.  (That law derives from the decision of Lord Mansfield given before the United States was born, in Moses vMacferlan, and which was founded simply on the ‘ties of natural justice’ and ‘the equity of the plaintiff’s case’.)

It may help to mention two English cases where people have had to account for profit they made out of a relationship where they had to act in good faith.  Only one case involved dishonesty. 

In Reading v Attorney- General, an English sergeant during the war made a large amount of money by using his position and uniform to assist smugglers.  The court held that the assets of which the sergeant had control, or the facilities which he enjoyed, or the position which he occupied, were the real cause of his obtaining the money, and he was therefore accountable for it to his employer – at common law.  It mattered not that the employer had not lost any profit, nor suffered any damage.  (Sadly, our texts on equity are reluctant to discuss this decision at common law – given at the highest level.)

Previously, the same court (the House of Lords) in Regal Hastings Ltd v Gulliver had ruled that where the directors of a public company had, as if by accident, derived a profit from a corporate restructure, they were liable to account to the company for that profit.  It arose while they were discharging a fiduciary obligation, and that liability did not depend on any finding of fraud or bad faith.  ‘The profiteer, however honest and well intentioned, cannot escape the risk of being called to account.’ That is not comfortable reading for company directors.  Or servants of government.

So, our law makes not only the greedy pause before feathering their nest.  For present purposes, we need not stay to see what particular legal rubric – what we call common law or equity – that the court applied, since all have moved on since.

Under our laws therefore, Trump and his family would be liable to be sued for millions.  I do not know what is the position in the U S. 

It is easy to hear the response of Trump.  ‘I have not even been furtive; I am the most brazen hero of the Golden Age since Achilles.  In any event, I can do what I like since I am the President of the United Sates.’  Neither could be a defence, and either should inflame the remedy.

The assertion that the President is above the law represents an argument that was lost in England in 1215.  The President would strike at the very basis of the rule of law in the United Sates if he asserted that he could derive profit from breaching the trust imposed on him by virtue of his office, and that the law denied any remedy to the people.  Such a proposition may or may not hold in China, Iran or Russia, but not in the United States.

There is a medieval background beside Magna Carta.  The Statute of Westminster 1275 provided that ‘No Sheriff nor other’s King officer shall take any reward to do his office, but shall be paid out of that which they take of the King.’  Later, Lord Mansfield said that a ‘public officer’ held ‘an office of trust and confidence concerning the public.’  The general law – common law or equity – had for long provided that someone misusing an official position for personal gain was liable to the relevant authority under a writ of account.  This was not a matter of what we call ‘constitutional law.’  It is the law that applies to the boy selling pies at the footy.

The old writ of account at common law, which was later effectively taken over by courts of equity, goes back to at least the twelfth century.  It involved two phases.  First, the issue was whether the defendant was accountable.  Secondly, a judgment for the return of capital and any profits from its use.  As was common with the development of substantive law from procedure, the writ came first, and the doctrine followed later – reluctantly.  Still, a leading text book is entitled ‘The Duty to Account’.

There is nothing therefore extraordinary, at least for Australian lawyers, about public officers at the highest level being subject to the general law of the land.  To adapt the language of A V Dicey, no one is above the law, but all of us, whatever our rank or condition, are subject to the ordinary law of the land, and amenable to the jurisdiction of the ordinary tribunals.  ‘The principles of private law have with us been by the action of the courts and parliament so extended as to determine the position of the Crown and its servants; thus, the constitution is the result of the ordinary law of the land.’

The second proposition does not apply in the United States.  The first did not apply in France.  I would be surprised if that were so in the United States.  (A footnote in Dicey, published in 1885, refers to the ‘servitude of the French.’)

The Prime Minister of Australia and the janitor at Parliament House are subject to the same laws about how they go about serving the people of Australia.  If the barons got it right at Runnymede in 1215, this issue is not one of governance, much less the constitution, but one of domestic housekeeping.  The law in Australia is clear that employees are liable to account to their employers and this applies to employees of government.  It would be odd if the Prime Minister had less exposure to the law than the janitor.  Is the state of the revenue less important than the state of the loo?

Put differently, the question is not whether Ministers of the Crown are accountable to the Commonwealth and the people for any profit obtained in the carrying out of their trust, but on what legal ground could it be submitted that they are not?  A standard work of authority is blunt: ‘Wherever A owes a duty to B, B is entitled to recover from A every benefit obtained by A by virtue of his fiduciary position, without B’s knowledge and consent.’

If the legal position is not the same in the United States, it might be time they came clean about it.

Now, the proper plaintiff in any action against the President would, I suppose, be the nation – the United States.  Trump could prevent that – but only while he is in office. 

There are ways around this where a company refuses to sue its directors – one is a ‘derivative shareholder action’ – but I do not know what the position may be in the United States.  Eventually, however, Trump and his family could be held to account.

Which brings me back to the disconsolate prince of Denmark.  He fell to ground like the providential sparrow.  He felt cursed that it was left to him to put things right in Denmark.  The problem for America is that no one is putting their hand up to do so there.

And it would be a shame if they were seen to go back nine hundred years on the bequest of the nation from which they seceded.

Notes

Maitland on ministers of the Crown: The Constitutional History of England, C U P, 1963, 203.

Equity: Maitland, Lectures in Equity, Cambridge, 1910, 82-83.

Equity: Story, Commentaries on Equity Jurisprudence, First English Edition, Stevens and Haynes, 1884, pars 218, 232, and 462.

Moses vMacferlan (1760) 2 Bur 1005.

Reading v Attorney- General [1951] AC 507.

Regal Hastings Ltd V Gulliver [1967] 2 AC 134n, 144.

Statute of Westminster, 1275, 3 Edward I, Ch 26: Paul Finn, Fiduciary Obligations, 2016, 358, fn 15. (Wikipedia offers a different version.)

Lord Mansfield: R v Bembridge (1783) 22 State Trials I, 155-156.

The writ of account: J A Watson, The Duty to Account, Federation Press, 2006, pars 2, 61, and 169.  The writ said the defendant must ‘duly and without delay render to the plaintiff an account’ for the time during which he held the plaintiff’s money: Pollock andMaitland, The History of English Law, 2^nd Ed, Vol II, 221.  The authors there say that in the thirteenth century, statutes ‘sanctioned a procedure against accountants which was in that age a procedure of exceptional rigour.’

Dicey, The Law and the Constitution, Macmillan & Co, 1885, 177 (and footnote), 216.