Trump May Have Breached His D.C. Hotel Lease by Getting Elected

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Trump’s new hotel. Photo: Anadolu Agency/Getty Images

Toward the end of the presidential campaign, when it was “obvious” Donald Trump was going to lose, there was a lot of talk about how the public-relations drubbing he had taken during the campaign would damage the Trump brand. One apparent early victim was the Trump International Hotel, which opened in September. In 2013, Trump had signed a 60-year, $180 million lease with the federal government to take over the Old Post Office Pavilion, a beautiful, historic building which sits on prime Pennsylvania Avenue real estate. Rival bidders complained that the numbers Trump floated to win the contract were pie in the sky, that he couldn’t possibly deliver on the promises he was making regarding the property’s development. And indeed, just a month before the election, the hotel was struggling mightily to rent rooms at its normal rates, which were hundreds of dollars higher per night than equivalent hotels in the city.

Then, instead of losing the election, Trump won it. And it quickly became clear his victory would be a boon to the fledgling hotel, at least in the short term. In a widely circulated article highlighting the many conflicts of interest to come during the Trump presidency, the Washington Post quoted foreign diplomats who openly said that of course they would stay at a hotel owned by the president as an easy means of currying favor — and they expected their counterparts in other countries to do the same.

It sounded like a happy ending for Trump and his family members — they get to run both D.C. and its hottest new luxury hotel. But if an article published in Government Executive is any indication, Trump may have already breached the property’s contract simply by getting himself elected president. In the piece, headlined “GSA’s Trump Hotel Lease Debacle,” Steven L. Schooner and Daniel I. Gordon, both experts in federal procurement, or how the government buys and sells and leases stuff (Gordon was Obama’s administrator for federal procurement policy) — lay out why Trump’s leasing of the space “presents unprecedented and intolerable conflicts of interest” now that he is president-elect. Trump “will be violating the lease’s terms when he becomes an elected official on Inauguration Day,” they argue — and the only realistic solution is for the government to get out of the contract before then. (Some credit is due to Mother Jones for highlighting this issue way back in August.)

The issues stem from Trump’s imminent role as someone who gets to appoint the heads of all sorts of different government agencies. One of those agencies is the General Services Administration, a bureaucracy that normal people get to mostly ignore. The GSA “helps federal agencies build and acquire office space, products and other workspace services, and oversees the preservation of historic federal properties. Its policies covering travel, property and management practices promote efficient government operations.” It also leased Trump the Old Post Office Pavilion.

This is obviously problematic. Whereas fully grasping Trump’s other “entanglements” is complicated and may, in some cases, require close reading of the Emoluments Clause of the U.S. Constitution, Schooner and Gordon write that “understanding and addressing the problems raised by the Trump Organization’s 60-year, $180 million lease is far simpler.” That’s because the contract between Trump and the government contains the following explicit language: “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[.]”

There are good reasons for this language, given how many obvious issues could arise as a result of someone in the government both leasing and overseeing the lease of the building. These issues are only compounded by some of the particulars of the Trump agreement:

The Old Post Office Pavilion lease is between GSA—whose administrator President Trump will appoint—and Mr. Trump’s family-owned company. Specifically, the lessor is Trump Old Post Office LLC, which, of course, is part of the Trump Organization, a privately owned conglomerate, of which President-elect Trump is chairman, president, and majority stakeholder. The situation is a casebook example of both the appearance of a significant conflict of interest and an intolerable intermingling of an elected official’s governmental duties and his family’s personal financial interests.

[…]

The Old Post Office lease is a particularly complicated and, for GSA, rather unusual, 60-year agreement that requires significant annual disclosure of detailed financial information. These extensive disclosures are followed by negotiations over escalation of the rent and any other payments that the Trump Organization must pay to the government. 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. Any reasonable person would worry about the undue pressures and the inherent risk of favoritism that the government might show to such a well-connected contractor …

That’s why it doesn’t matter whether Trump is able to pass off the hotel to his kids or anyone else in his family (as Bloomberg reported in September, the hotel is a major showcase for — and test of — Ivanka’s brand, with the Ivanka Suite going for $1,050 a night). As long as the building is in the Trump family orbit, “[t]he GSA employees handling the Trump lease will be caught between their duty to protect the interests of the building’s landlord—that is, the government, the public, and the taxpayers—and their duty of loyalty to the GSA administrator, who will be appointed by, and serve at the pleasure of then-President Trump.”

According to Schooner and Gordon, there’s just no way out except a cutting of the cord. In normal circumstances, the contractor in question — Trump — would understand the need to do so and would work with the GSA to come to a mutually satisfactory resolution. Given everything Trump has said about his lack of concern with his conflicts of interests, that’s unlikely. Therefore, “[t]he government should immediately end the hotel lease relationship, before Trump becomes president,” Schooner and Gordon write.

Thanks to federal law, the government usually has fairly broad latitude to back out of a contract as long as it compensates the contractor appropriately. Unfortunately, the lease with the Trump organization includes language expressly prohibiting this. But since, in Schooner and Gordon’s view, Trump has already breached the contract, they write that the GSA should quickly take whatever action it can, including a lawsuit, to get out of the contract before Trump is in a position to effectively give orders to his own landlord.

Schooner and Gordon anticipate Trump will respond as he always does — by suing or countersuing. But even if the government ends up having to pay some sort of judgment to the Trump organization — the authors don’t expect the award would be all that significant — they still view this as a no-brainer. Ponying up a bit of cash to Trump, they write, “would be a price worth paying to preserve the integrity of our government and its contracting system. The faster GSA ends its business relationship with the Trump Organization, the better.”

Trump May Have Breached His D.C. Hotel Lease by Winning