Azerbaijan: Will The Construction Of This "Trump Hotel" Topple Despicable Donald?
The Problems With Trump's D.C. Hotel Are Not Going Away
As the prospect of a Trump Presidency became real last year, a number of leading experts on ethics and corruption called on the U.S. General Services Administration, which oversees federal contracts, to cancel the Trump Organization’s lease to operate the Trump International Hotel in Washington, D.C., which is located in a building owned by the federal government. The President, they said, shouldn’t make money from a federal contract. Last week, the G.S.A. issued its ruling on the matter. In a hundred-and-sixty-six-page letter addressed to Donald Trump, Jr., a G.S.A. contracting officer named Kevin M. Terry declared that President Trump was “in full compliance” with the contract, and that anybody who disagreed was reaching “simplistic ‘black and white’ conclusions.”
This was strangely combative language for a bureaucratic document. To support his own conclusion, Terry cited a Politico article from December that quotes some lawyers saying that there is a legal argument supporting Trump keeping the contract. Such an argument comes down to one word: “admitted.” The G.S.A. contract with Trump includes standard language that “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.” For Terry, since Trump was a private citizen on the day he signed the deal with the G.S.A., he was not an elected official when he was admitted to the lease. In the Politico article, several lawyers agreed that this technical reading could allow the Trump Organization to sue the G.S.A. if it cancelled the contract. However, the article was hardly a ringing endorsement of Terry’s approach to the problem. These lawyers didn’t believe that Presidents have a fundamental legal right to benefit from contracts issued by the G.S.A. They just thought the contract was sloppily written.
Terry also failed to mention that the G.S.A. abides by a large body of rules known as Federal Acquisition Regulations, or far, which contains clear languageinsisting that “Government business shall be conducted in a manner above reproach . . . Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships.” Jessica Tillipman, of George Washington University Law School, told Mother Jones that “it’s crazy” to think that the D.C. hotel deal isn’t a conflict of interest. The President oversees the G.S.A. The G.S.A. oversees one of the President’s newest high-profile commercial projects.
It’s possible that Terry felt he had no choice regarding the Trump hotel. The contract was already awarded, and removing it would risk a lawsuit from a famously litigious counterparty. However, the aggressive, baiting tone of his letter is hard not to read as the work of a government official currying favor with the man in charge of that government.
Much of the letter is dedicated to celebrating the Trump Organization’s recent restructuring of the ownership of the D.C. hotel. The restructuring was done explicitly to give the G.S.A. cover to allow the Trump Organization to maintain the lease. Pages seventy-two and seventy-three of Terry’s letter feature graphic representations of the pre-election ownership structure and the post-election transformation. Both charts are absurdly complicated mazes of holding companies that own other limited-liability companies. But both contain the same simple truth: Donald Trump will ultimately receive profits from the hotel. Terry makes much of the fact that “President Trump is not an officer, director, manager, employee, or other official in any of the entities listed above,” meaning the operating companies. This may be, once again, technically true, though Terry notably did not include the word “owner” when listing the many things Trump is not. President Trump owns the Donald J. Trump Revocable Trust, into which he placed his holdings after Election Day. He owns the company that employs his children, and he has the power to revoke that revocable trust at any time and reinstate himself, unilaterally, as officer, director, and manager of the Trump Organization.
In 2012, the Department of Justice published a comprehensive guide to the Foreign Corrupt Practices Act, the law that bans American citizens and companies from participating in bribery and corruption in other nations. The guide explains that corrupt officials often create formal legal structures designed to suggest that payments do not flow to them. Therefore, the guide cautions companies not just to consider “the formal relationship between the parent and subsidiary” but also “the practical realities of how the parent and subsidiary actually interact.” In other words, if something like Trump’s D.C. hotel arrangement—a sitting President owning a business that is, nominally, managed by his sons—were in another country, American firms would have to be careful about working with that firm. The D.O.J. has a simple word for such an arrangement: corruption. (The Trump Organization itself has partnered with similarly arranged businesses in Azerbaijan and other countries.)
In the case of Trump’s D.C. hotel, the practical realities of how the parent—both corporate and familiar—interacts with the subsidiary are clear: President Trump will meet with his sons regularly to discuss the financial successes and failures of the company that he still fully owns and for which he retains all ultimate control. Trump’s two older sons, Eric and Donald, Jr., now run the Trump Organization, but Eric Trump recently told Forbes that he expects to keep his father updated on the state of the family business. The American people are being asked to take Trump and his sons at their word when they promise only to discuss profits and losses—and not any specific business deals. But if, say, the Trump Hotel is particularly successful, are we to believe that the boys won’t explain to their dad why it did so well? And if corporate entities and foreign nations continue to book events at the hotel to help it on its way, are we to believe that the dad won’t look favorably on whoever helped deliver him profits?
In the letter, Terry praised the Trump Organization for deciding that, so long as Trump is President, none of the proceeds of the D.C. hotel will go to his personal trust, nor “to any other entity in which President Trump has a direct, indirect or beneficial interest.” But does this mean that he’ll receive the money as soon as he’s out of office? If so, what’s the difference? And, in the meantime, what happens to that money? Who controls it? The answers to these questions may well undercut the very argument Terry has used to justify the decision to allow the Trump Organization to hold on to its lease.