Trump Control of D.C. Hotel Is Threatened by Fine Print in Lease

EghtesadOnline: The lease on the ornate hotel that Donald Trump recently completed near the White House appears to bar participation by any elected official, posing an acute conflict-of-interest challenge just seven weeks before Inauguration Day.

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30 November 2016

The 60-year lease for the former post office pavilion, released under the Freedom of Information Act, was examined by two George Washington University procurement experts who published their findings this week in "Government Executive," a trade publication. They argued that the government should extricate itself from the deal, Bloomberg reported.

"The government should be pursuing an avenue to terminate the lease," said Scott Amey, general counsel to the Project on Government Oversight, a watchdog group, who didn’t contribute to the article.

Taken By Surprise

The deal’s provision appears to have surprised Trump’s presidential transition team, with spokesman Jason Miller telling reporters on a conference call Tuesday that the issue hadn’t been raised with him and that he would need to follow up with counsel.

The lease reads: "No member or delegate to Congress, or elected official of the Government of the United States or the Government of the District of Columbia, shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom."

Trump, a 70-year-old Republican television personality and real-estate developer, pays the government $3 million annually to rent the 1899 Romanesque Revival-style building as a 263-room hotel. At the Oct. 26 opening, he boasted that the hotel came in "under budget and ahead of schedule" -- qualities he said he would bring to the presidency.

Selling the lease before Trump becomes president would be "close to impossible," said Kevin Fullington, co-chairman of the government relations group at Herrick Feinstein LLP in New York. But Trump and his family could alter the terms of the operating agreement for Trump Old Post Office LLC to eliminate his ownership of the lease "in a day, if they wanted to," he added.

Children Split Ownership

Trump repeatedly said during the campaign he would hand control of his company to three of his children who are already executives. Ivanka, Donald Jr., and Eric currently own a bit more than 7 percent each of the hotel, according to Trump’s financial disclosure, and could split the ownership, Fullington said. Under such a plan, Trump, who has an almost 77-percent ownership, would own none.

The transfer would likely satisfy the contract’s prohibitions but might not solve a broader ethical concern. That’s what the authors of the article that identified the lease provision, Steven Schooner and Daniel Gordon, argued. They said the General Services Administration, the government division acting as Trump’s landlord, "will confront what any reasonable person would view as the appearance of a conflict of interest."

"Just imagine GSA pressing the Trump organization for more detailed revenue and expense information, or the President’s children negotiating annual rent adjustments with a career civil servant who reports to the GSA administrator appointed by their father, who serves at his pleasure," they added.

Governing Cleanly

Overall, Trump’s global business is widely seen as posing a severe threat to his ability to govern cleanly.

He has promised to do something about the issue but hasn’t made clear what, and the main law governing conflicts of interest doesn’t apply to the president. Vice President-elect Mike Pence, who is heading the transition, said early last week that "the president-elect and his family will create the proper separation from his business."

Democrats have been trying to apply pressure, while Republican Senator Lindsey Graham of South Carolina, a longtime Trump critic, told reporters Tuesday that the conflicts "will cloud his presidency if he doesn’t find a solution."

Currying Favor

The hotel, a new crown jewel in the Trump hospitality portfolio, has arisen repeatedly as a locus of conflict. Foreign leaders have said they would stay there while in Washington to curry favor with the president. Bahrain’s ambassador has announced a national day celebration there next month.

But the lease question is in a separate category because it seems to bar any government official from being a "beneficial owner," making it not only a moral and governing conflict but a distinctly legal one.

Newly named White House counsel Donald McGahn, a former Federal Election Commission chairman who was also chief lawyer to Trump’s campaign, will help the transition navigate conflicts, while Trump Organization General Counsel Alan Garten, who specializes in real estate and corporate law, is said to be taking on the task from the business side.

Fullington noted that the hotel lease language may actually be more flexible than it appears because it says "shall be admitted." That could be interpreted to mean not that Trump needs to walk away from the lease but that no elected official could be added as a new beneficial owner in the future.

"That’s not a slam-dunk argument, but it’s one that’s credible," he said.