Ethics (or Lack Thereof) May Haunt Trump’s DC Hotel

Bear with me, please.  This is going to be a long one, and I apologize in advance.

One week after Election Day, the Washington Post published an article entitled “Trump leases his D.C. hotel from a government agency he’ll soon be in charge of”, by Steven L. Schooner and Daniel I. Gordon.

Mr. Schooner is a professor of government procurement law at George Washington University and is the co-director of that entity’s Government Procurement Law Program.  Mr. Gordon was President Obama’s first Federal Procurement Policy administrator.

A longer, more detailed article by the same authors was published last week (November 28) in Government Executive, an online business news daily for federal managers and executives (founded as a print trade magazine in 1969, it is published now in digital form at http://www.govexec.com).  The following day, Mr. Schooner was interviewed by Ari Shapiro on the broadcast of NPR’s All Things Considered.  The article in Government Executive was also picked up by and reproduced on The Atlantic‘s website as well as several others.

[By the way, although this matter has gotten attention the last couple of weeks due to the article(s) by Mr. Schooner and Mr. Gordon, Russ Choma wrote about this in August for Mother Jones, and described how the bid award was even protested by another developer.]

At issue, in Mr. Schooner’s opinion, is Trump’s Washington, D.C. hotel.  This is not a building and land lot on which the Trump Organization developed, built and opened a hotel.  Instead, it is the historic Old Post Office building.  Back in 2011, the federal government’s General Services Administration (GSA) issued RFP #10783 to receive bids from private companies to develop the sizeable (315,000 square foot) property for commercial use.

Now, note that this wasn’t a one-time property sale – it is a development opportunity.  The property itself is and will continue to be owned by the federal government, and the structure of the RFP was that the successful bidder would enter into an ongoing, multi-decades lease with the GSA.

Guess who the winning bidder was?  That’s right.  The GSA announced in early 2012 that the Trump Organization was the ‘preferred developer’ for the property, and in August, 2013, the GSA signed a 60 year (with an option for a second 40 years) lease agreement with Ivanka Trump on behalf of The Trump Old Post Office, LLC, a limited liability Delaware corporation controlled by the Trump Organization (for this article, let’s call them the “Trump Hotel”).  Under the terms of the agreement, the Trump Hotel will spend at least $200 million to redevelop the property into a high end hotel, and Donald Trump must personally guarantee $40 million of that amount (because critics pointed to his prior defaults and bankruptcies and to cover other “bad acts” such as a failure to pay taxes, commit fraud, commit other types of misconduct, etc.).  <—– [insert perfectly legitimate, almost required, snarky comment there]

The Trump Hotel will pay the GSA the lease amount of $250,000 each month, and that amount can be adjusted to the Consumer Price Index.  The Trump Hotel will also be responsible to pay all taxes.

That’s the background.  If you want to quickly review the foregoing before we move on, I won’t say anything.  This is a little complex.

Why is this a problem?  All decisions were made before Trump announced his presidential bid in June, 2015.

Well, because of the headline in the Washington Post’s November 15 article:  Trump leases his D.C. hotel from a government agency he’ll soon be in charge of“.

The GSA is an agency of the Executive Branch of the federal government.  Donald Trump is about to become the head of the Executive Branch of the federal government.  He can appoint the GSA Administrator.  He’s basically the lessor and the lessee.

What could possibly go wrong?  Well, let’s say the Trump Hotel defaults on its lease with the GSA – maybe they don’t make lease payments for four months or so.  Is the GSA going to sue their boss, the President of the United States?

Of course not.  As a people, Americans believe that one shouldn’t go into public service to personally benefit from that service.  That’s why there was trumped-up (yes, pun intended) outrage over the mythical “pay for play” scandals associated with the Clinton Foundation while Hillary Clinton was Secretary of State.  It’s why Mitt Romney agreed to divest himself from Bain Capital.  It’s why Bill Clinton agreed to shut down the Clinton Global Initiative.

Currently, America’s faith in its public institutions and governments is low to non-existent – I don’t think I need to say that even the appearance of anything less that fully ethical can be problematic and feeds this universal lack of faith in our government.

And to protect this, boilerplate language in government contracts usually requires that the person or entity signing a contract with the government can’t be a government official who benefits from the contract.  Otherwise, who’s to say that the official didn’t influence the award of a contract to make money himself or herself?  That’s what we call corruption.

…… which brings us to Mr. Schooner’s and Mr. Gordon’s point.  There is language in the lease between the GSA and the Trump Hotel that states No … elected official of the Government of the United States … shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom …”

Regardless of whether you support a recount effort, think the Electoral College should be abolished, or even voted for and love Donald Trump, I think we can agree that he is shortly going to take office as an elected official of the U.S. government.  I think we can agree that he will also have a share or part of the Trump Hotel-GSA lease.  And unless the Trump Organization plans to run the Trump Hotel into the ground (which, by the way, materially breaches the lease), I think we can agree that Donald Trump will benefit from the lease.

Am I right?  Or should I say, are Mr. Schooner and Mr. Gordon right?  They believe that, because of the language in the lease, Donald Trump and the Trump Hotel will be in breach of the GSA lease the minute Donald Trump takes the oath of office.

On the other hand, Isaac Arnsdorf argued in Politico yesterday that there’s no clear recourse available to anyone who objects to this dilemma, and that emphasizes this twisted conundrum:   The party to the lease on behalf of the U.S. government who has the right to enforce its terms is …. the GSA that will shortly report directly to Donald Trump’s branch of government.  He also described the position of the Trump Hotel’s attorneys as pointing out that the language in the lease means that no elected official could be “admitted” to the lease or benefit from it after it was signed in August, 2013.  And Donald Trump was not an elected official at the time the lease was signed.

This is specious reasoning.  The intent of this language is not to protect somebody like … oh, let’s say Bernie Sanders being added to the lease at a later date.  It’s to protect both the citizenry and an elected official from an official’s being in a position to choose between their public obligations and their commercial interests, or from serving “two masters”.  I assume that the language was written by the GSA, although it would be interesting to see if the word “admitted” was negotiated into the lease by the Trump Organization negotiators.  If it wasn’t and it’s the GSA’s language, it doesn’t appear to be bulletproof.  In fairness, though, would anyone have contemplated that someone would split combed over hairs relative to the words “admitted to”?

I’m not a party to this lease, though, and I can’t bring any action against either Trump or the GSA.  Neither can you.  BUT WE CAN CALL AND EMAIL the Administrator of the General Services Administration, Denise Turner Roth.  We can tell her that there are clear and unarguable conflicts with the GSA/Trump Old Post Office lease.  She can be reached at (202) 501-0800 and her email address is denise.roth@gsa.gov.

And for a little levity, we can also close this post with the Office of Government Ethics.

The Office of Government Ethics (www.oge.gov) can’t take any action regarding the GSA lease either – they’re not an enforcement agency.  They can’t take enforcement or any other corrective action.  They write ethics policies for the Executive Branch and promulgate them, provide training, and the like.  It is headed by a Director who serves a five year term.  The current director, Walter Shaub, Jr., was appointed by President Obama and will hold this position until January 8, 2018 – just under a year after Trump is inaugurated.

The Office of Government Ethics very much sees all the ethical conflicts that Trump brings to the presidency.  How do we know this?  Because of Twitter, of all things.

Last week, Donald Trump issued a series of tweets that attempted to address the business conflicts that are increasingly being questioned.  Note that he says (a) he is not mandated to take any action to avoid conflicts, and (b) he actually doesn’t say he is divesting himself from any businesses, only that he is removing himself from operations:

“I will be holding a major news conference in New York City with my children on December 15 to discuss the fact that I will be leaving my great business in total in order to fully focus on running the country in order to MAKE AMERICA GREAT AGAIN!  While I am not mandated to do this under the law, I feel it is visually important, as President, to in no way have a conflict of interest with my various businesses.  Hence, legal documents are being crafted which take me completely out of business operations.  The Presidency is a far more important task!”  [emphasis added]

Apparently, the Office of Government Ethics didn’t want to miss the opportunity to really impress upon Trump that they were watching …. and that they didn’t miss the loopholes in how he worded his tweets.  They basically trolled him with 9 tweets, all of which deliberately infer that his big announcement means he will divest himself from the Trump Organization – which would be the right thing to do, but is not what he will do.  Ah, but it was still enjoyable to watch!

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