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by Jake Pearson

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Last month, a Department of Government Efficiency aide at the nation’s consumer watchdog agency was told by ethics attorneys that he held stock in companies that employees are forbidden from owning — and was advised not to participate in any actions that could benefit him personally, according to a person familiar with the warning.

But days later, court records show, Gavin Kliger, a 25-year-old software engineer who has been detailed to the Consumer Financial Protection Bureau since early March, went ahead and participated in mass layoffs at the agency anyway, including the firings of the ethics lawyers who had warned him.

Experts said that Kliger’s actions, which ProPublica first reported on last week, constitute a conflict of interest that could violate federal criminal ethics laws. Such measures are designed to ensure that federal employees serve the public interest and don’t use their government power to enrich themselves. At the CFPB, which regulates companies that provide financial services, there are strict prohibitions on the investments that employees can maintain.

As ProPublica previously reported, Kliger owns as much as $365,000 worth of shares in Apple Inc., Tesla Inc. and two cryptocurrencies, according to his public financial report. Investments in those businesses are off limits to employees since the bureau can regulate them. A further review now shows that he’s invested in even more companies that are on the agency’s “Prohibited Holdings” list. Kliger also disclosed owning as much as $350,000 worth of stock in Google parent Alphabet Inc., Warren Buffett’s Berkshire Hathaway and the Chinese e-commerce company Alibaba.

That means, at a maximum, Kliger could own as much as $715,000 of investments in seven barred companies, the records show.

Experts said a defanged and downsized consumer watchdog is unlikely to aggressively regulate those and other companies, freeing them of compliance costs and the risk associated with examinations and enforcement actions. That in turn could boost their stock prices and benefit investors like Kliger.

Don Fox, a former general counsel of the independent federal agency that advises executive branch workers on their ethical obligations, said that “this looks like a pretty clear-cut violation” of the federal criminal conflict-of-interest statute.

Richard Briffault, a government ethics expert at Columbia Law School, said the fact that Kliger was warned not to take any actions that could benefit him personally showed that “he’s on notice that this is a problem, as opposed to doing this by accident, or unintentionally.”

But Briffault said there would likely be no recourse for Kliger’s actions given that the Department of Justice under President Donald Trump has “greatly deprioritized public integrity, ethics and public corruption as issues for them.” The New York Times reported last week that the section handling such cases is down to just a handful of lawyers.

From the outset, the Trump administration has been dogged by ethics controversies, from the president’s own foray into the cryptocurrency industry to Elon Musk’s dual roles as both the head of DOGE and a major federal contractor. Kliger’s case is “a nice illustration of how even on this micro level, they are violating the law, acting in ways that positively should cause people to not trust what they’re doing because there is no question that these corporations will benefit,” said Kathleen Clark, an expert on government ethics at Washington University in St. Louis.

Kliger hasn’t returned a phone call or email seeking comment. The CFPB didn’t respond to a request for comment.

The White House didn’t answer questions about the warning, whether Kliger had sought ethics waivers or if he was in the process of divesting. Instead, a spokesperson provided ProPublica the same statement it previously had, writing that Kliger “did not even manage” the layoffs, “making this entire narrative an outright lie.” A spokesperson said that Kliger had until May 8 to divest.

The April 10 ethics warning came amid a heated legal battle over the future of the CFPB.

The following day, an appeals court in Washington, D.C., allowed the agency’s acting director, Russell Vought, to implement mass firings after a lower court judge had stayed them. The court instructed Vought to conduct a “particularized assessment” of the bureau and to lay off only those employees who were deemed to be “unnecessary” to perform the agency’s statutorily required duties. In court filings, the government has said that review was done by the bureau’s chief legal officer, Mark Paoletta, and two other attorneys. In court papers, Paoletta has said the cuts are designed to achieve a “streamlined and right-sized Bureau.”

On April 13, Kliger was among a small team of DOGE and agency officials who received an email from Vought about the coming layoffs with the subject line “CFPB RIF Work” — government parlance for reduction in force, according to emails produced in court records. Vought’s email is redacted in the filing, but hours after he sent it, records show the bureau’s chief information officer wrote to Kliger and another DOGE aide regarding a “follow-up on Russ’s note below” and advised Kliger that he’d been granted access to agency computer systems that “should allow you to do what you need to do,” according to the email.

Layoff notices to more than 1,400 bureau employees went out on April 17.

In the preceding 36 hours, “Gavin was screaming at people he did not believe were working fast enough” to get the notices out and “calling them incompetent,” a federal employee on the layoff team using the pseudonym Alex Doe wrote in sworn declaration filed by lawyers for unionized employees trying to stop the administration from dismantling the bureau.

Among those laid off were the agency’s ethics officer and their “entire team” of lawyers, according to court records.

Those are the very employees who’d twice notified Kliger that he was required to identify any investments in companies on the bureau’s Prohibited Holdings list. The warning last month explicitly instructed him not to participate in any bureau activity that could benefit the businesses whose stocks he owned, said the person familiar with the notice, who spoke on condition of anonymity because of its sensitivity.

Last week, the appeals court reversed course and temporarily stopped the firings at the CFPB amid a flurry of legal challenges. Agency officials then notified the more than 1,400 fired employees who’d been told they were being let go that the pink slips were being rescinded.

The court battle over the CFPB’s future is ongoing, though, with oral arguments before appellate judges in Washington, D.C., scheduled for later this month.

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In May 2015, President Barack Obama gave a big speech about dropping trade barriers with other nations. He delivered it on a sunny day at Nike’s world headquarters in Oregon.

“Sometimes when we talk about trade, we think of Nike,” Obama said, before making his pitch for a trade deal with Asian countries that he described as the “highest-standard, most progressive trade deal in history.”

President Donald Trump canceled that deal, known as the Trans-Pacific Partnership, less than two years later.

Now, as Trump erects more trade barriers in his second administration, Nike once again is center stage in conversations about globalization, a familiar place for a company that has its roots importing Japanese track shoes and briefly made sneakers in the United States.

Last month, Trump announced sweeping tariffs that would slam imports from the countries where most Nike sneakers and apparel get made. A close look at Nike’s massive supply chain offers a case study in the possible ripple effects of the escalating global trade war and shows how vulnerable factory workers could get squeezed.

Some degree of taxation on imports has long been a feature of international garment trade, and Nike has decades of experience navigating these tariffs. The company has not spoken about how it will handle the current round under Trump, but it’s among 76 companies that signed a letter to the president last week warning about dire consequences for footwear companies unless there is tariff relief.

In response to questions about how tariffs might impact factory workers, Nike said in a statement it is “committed to ethical and responsible manufacturing.”

“We build long-term relationships with our contract manufacturing suppliers because we know having trust and mutual respect supports our ability to create product more responsibly, accelerate innovation and better serve consumers,” the statement said.

Where does Nike make sneakers and clothing?

Nike doesn’t own or operate the overseas factories that make its products. Instead, it works with 532 contract manufacturers that employ nearly 1.2 million workers, according to an online Nike map.

No country is more important to Nike’s manufacturing than Vietnam, where the brand works with 131 factories that employ nearly 460,000 workers. Half of Nike’s sneakers were made in Vietnam last year, according to the company’s annual report.

Nike’s second-largest production base is Indonesia, where its 45 contract factories employ more than 280,000 workers.

The company has been moving production out of China over the last decade. It works with 120 Chinese contract factories that employ more than 100,000 workers — down from more than 350,000 workers in 2012. Some of the footwear and apparel that Nike makes in China is sold to Chinese consumers and therefore not subject to tariffs.

Are tariffs affecting Nike?

Yes. On April 2, Trump announced “reciprocal” tariffs that included 46% on Vietnam, 32% on Indonesia and 34% on China. The next trading day, Nike’s shares fell 14%, wiping out $14 billion in shareholder value.

A week later, the president paused most of the tariffs for 90 days, but a 145% tariff on imports from China and a 10% surcharge on most imports from other countries remain in place.

Tom Nikic, a veteran industry analyst at Needham & Co., calculated that the tariffs, if fully implemented, would nearly wipe out Nike’s profits if the company made no changes to its current pricing or production.

“By my math, their earnings would decline by approximately 95%,” he said in an email.

Will Nike squeeze factories for better deals?

“Almost certainly,” said Jason Judd, executive director of the Global Labor Institute at Cornell University. “The default for a brand or retailer faced with a tariff or some other shock is to press suppliers for discounts.”

“The COVID shock is a good example,” Judd added. “We know from talking to suppliers that the COVID shock meant canceled orders and renegotiations over price.”

The Worker Rights Consortium, a labor monitoring group, estimated brands canceled $40 billion in orders during the pandemic.

When Trump announced tariffs during his first administration, Nike’s top executives said they’d find savings in their supply chain.

“We have a lot of levers we can work with, from sourcing to other levers,” Andy Campion, then Nike’s chief financial officer, said in 2019.

How will tariffs affect Nike’s factory workers?

Factory workers will likely feel the impact directly.

Dara O’Rourke, an associate professor at the University of California, Berkeley, who’s studied wages in Nike factories, said the tariffs could become a “huge hammer.”

“It is likely that you will see this kind of pressure from managers to say to workers, ‘For a period of time, we’re going to have to work harder and longer,’” he said. “Hold the line or you’re going to lose your job.”

That could mean workers are asked to make more sneakers and T-shirts every shift and work longer hours, according to Thulsi Narayanasamy, director of international advocacy for the Worker Rights Consortium.

It is likely that you will see this kind of pressure from managers to say to workers, ‘For a period of time, we’re going to have to work harder and longer.’

—Dara O’Rourke, associate professor at the University of California, Berkeley

“When suppliers are squeezed and workers have unreasonable production targets, they don’t drink water, don’t take food breaks,” she said in an email. She added that in these circumstances, the organization consistently hears about “women having urinary tract infections, struggling with repetitive strain injuries, kidney stones, and having back problems due to rapid, repetitive movements for more than 12 hours a day.”

Narayanasamy said brands like Nike have a choice: “Push costs that they could reasonably absorb onto their suppliers, replete with the knowledge that doing so will immediately harm millions of factory workers, or not.”

In its statement, Nike said it sets clear labor expectations for supplier factories in its Code of Conduct and Code Leadership Standards.

Foreign garment workers could also face furloughs or work without pay, said Cornell’s Judd. That happened across the industry during the pandemic.

In 2021, the Worker Rights Consortium identified 31 garment factories — three of which did work for Nike — that the consortium said didn’t pay $39.8 million in severance benefits owed to 37,637 workers who lost jobs during the pandemic.

Nike previously has disputed that it owed wages to workers at the three factories named in the labor group’s report. In its statement, Nike also said factories are responsible for severance benefits.

“Manufacturing suppliers hold the financial obligation to pay worker severance, social security and other separation benefits to impacted employees in accordance with local law and Nike’s Code of Conduct,” the company said. “And in the event of any closure or divest, Nike works closely with the supplier to conduct a responsible exit.”

Will tariffs force Nike to move manufacturing back to the U.S.?

“To think this will bring jobs back to the U.S. is poorly thought out, would be the nicest thing I could say,” said Berkeley’s O’Rourke.

Footwear and apparel manufacturing remains labor-intensive. Sneakers require gluing and stitching. T-shirts require sewing. Efforts to automate shoe production have mostly flopped.

That’s part of the reason Nike makes most of its products in countries with low wages. ProPublica reported this month on a former Nike factory in Cambodia where most employees made the minimum wage — about $1 per hour.

Ngin Nearadei, center, worked for three years in a Cambodian garment factory that produced baby clothes for Nike and other brands. She told ProPublica she couldn’t have afforded to buy the clothes she helped make. (Sarahbeth Maney/ProPublica)

Nike also uses huge factories that are filled with equipment that’s difficult to transfer to a new location. They’re often located near materials companies that make the rubbers, nylons and polyesters needed to make sneakers.

“The full production system is not easily movable,” O’Rourke said.

Instead of moving the work back to the U.S., industry watchers expect apparel companies will continue to manufacture products in countries with low wages, but manufacturing will shift to those subject to less onerous tariffs.

That could further harm workers in Vietnam, Indonesia, China and other countries with relatively high proposed tariff rates and a lot of Nike manufacturing jobs. In Indonesia, for example, one labor union expects as many as 50,000 workers could lose their jobs if the full Trump tariffs go into effect.

As the number of people looking for work increases, wages in those countries will decrease.

“The line at the gate to find work gets longer,” Judd said. “And that means employers of any kind can start paying new workers less because unemployment has jumped.”

What could tariffs mean for Nike’s prices?

Estimates vary and depend on how much of the cost Nike passes to consumers.

If the 46% tariff on Vietnam goes into effect, the price of a $155 sneaker made in Vietnam would increase to $220, according to the Footwear Distributors and Retailers of America, a trade group that counts Nike as a member.

The example, which isn’t specific to Nike, assumes the importing company passes nearly all of the tariff cost to customers. No athletic footwear brand has given specifics, although Adidas CEO Bjørn Gulden last week said “higher tariffs will eventually cause price increases.”

But Nike’s been in a slump and has been discounting many of its sneakers to boost sales.

It’s possible that Nike will absorb more of the tariff cost to avoid raising prices too steeply.

“It will likely be hard for Nike to raise prices,” the investment bank UBS recently wrote in a research note.

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