March 06, 2017

Top Democrats Request IG Investigation of GSA Handling of Trump’s D.C. Hotel Lease

For Immediate Release:  March 7, 2017

Contact:

Jen Gilbreath (DeFazio), 202-225-4472

 

 

Top Democrats Request IG Investigation of GSA Handling of Trump’s D.C. Hotel Lease

GSA ignored requests for documents related to the apparent breach of the lease

Washington, D.C. -- Today, House Committee on Transportation and Infrastructure Ranking Member Peter DeFazio (D-OR) and Ranking Member of the Subcommittee on Economic Development, Public Buildings, and Emergency Management Hank Johnson (D-GA) sent a letter to the Inspector General of the U.S. General Services Administration (GSA) Carol Ochoa requesting an immediate investigation into the management and administration of the Old Post Office lease agreement with the Trump Organization. The Trump International Hotel opened in the Old Post Office building in October 2016.

“Given GSA’s repeated refusal to respond to our requests to provide documents and substantive answers on this matter, we are increasingly concerned that the agency is not properly carrying out its mission. We request that you review the management and administration of the OPO lease agreement since President Trump’s election, including identifying any breach of the lease agreement or associated conflicts of interest, and describing the actions that the Administrator must take to eliminate any breach of the lease, potential conflict of interest, or appearance of conflict of interest,” the Members wrote.  

Since Election Day, Democrats on the Committee on Transportation and Infrastructure have sent a total of three letters to GSA requesting critical information regarding the apparent breach of the lease given that President Trump is now both the landlord and the tenant of the Old Post Office lease agreement. The Agency has either ignored or sent nonresponsive replies to each letter. The Committee on Transportation and Infrastructure has jurisdiction over the GSA Public Building Service, which controls the Old Post Office building.

DeFazio and Johnson also voiced concern that President Trump will soon appoint the Administrator of the General Services Administration, who will have the power to change the lease without Congressional notification or oversight.

The letter explains, “The GSA Administrator is fully empowered to change the financial terms of the lease including the base rent, the percentage of profits paid to the Federal Government, and the rate of return allowed in the event of a sale. Moreover, the Administrator can make significant changes to the terms of the lease without any Congressional oversight or public scrutiny. To date, GSA has already executed five amendments to the lease since 2013. Because President Trump failed to transfer or eliminate his controlling interest in the property prior to his inauguration, he is now able to negotiate new and favorable financial terms with the Administrator he appoints. Left unchecked, this arrangement is fraught with the possibility that President Trump and his children will enrich themselves at taxpayers’ expense.”

 

The full letter is below.

 

March 7, 2017

 

 

The Honorable Carol F. Ochoa

Inspector General

U.S. General Services Administration

1800 F Street, NW

Room 5340

Washington, DC 20405

                                                           

Dear Inspector General Ochoa:

 

We write to express our serious concerns regarding how the General Services Administration (GSA) is addressing the management and administration of the Old Post Office (OPO) lease agreement with the Trump Old Post Office LLC in light of the election and inauguration of Mr. Donald J. Trump as President of the United States.

 

President Trump and his family personally benefit from the lease agreement. For the past three months, we have asked GSA to resolve President Donald Trump’s apparent breach of the OPO lease agreement and the significant conflicts of interest associated with the agreement given President Trump’s election. GSA has not addressed these breach and conflict-of-interest issues and has been unwilling to respond substantively to our requests for information regarding the lease agreement. Given GSA’s unwillingness to provide answers to basic questions, we are increasingly concerned that the agency is not properly carrying out its mission.

 

We strongly urge you to investigate and report on GSA’s management and administration of the OPO lease agreement since President Trump’s election, including identifying any breach of the lease agreement or associated conflicts of interest, and describing the actions that the Administrator must take to eliminate any breach of the lease, conflict of interest, or appearance of a conflict of interest.

 

On January 20, 2017, President Trump assumed the unprecedented position as both landlord and tenant of the OPO lease agreement for the Trump International Hotel in Washington, DC. Under the lease agreement, President Trump and three of his adult children, Ivanka Trump, Donald Trump Jr., and Eric Trump, control the management and maintenance of the property and hold a significant financial interest in the Trump International Hotel in Washington, DC. For the first time in U.S. history, a sitting President operates and profits from a private business in a taxpayer-owned Federal building.

 

President Trump will soon appoint the Administrator of General Services, who serves at the pleasure of the President. The Administrator is responsible for administering and managing a lease where the President is the lessee and is its primary financial beneficiary. Further complicating this matter is that President Trump named his three adult children, Ivanka Trump, Donald Trump Jr., and Eric Trump to the Presidential Transition Team Executive Committee and they had the opportunity to engage in the process for selecting the Acting Administrator of General Services as well as a permanent Administrator. Within hours of the inauguration, the President replaced the initial Acting Administrator of GSA with a new Acting Administrator.  

 

Regardless of the application of any criminal statute, this situation adds to the irreconcilable conflicts of interest of the lease agreement with the Trump Old Post Office LLC. Several lease terms require the Administrator to exercise judgement in both the execution of the lease and the use of remedies to cure any violations of the lease agreement. Because the President controls the Administrator exercising judgement on these terms, and because his daughter and son-in-law wield historically outsized power in his administration, the potential conflicts of interest are exacerbated.

 

The lease agreement explicitly prohibits any elected official of the U.S. Government from serving as a lessee or from obtaining any benefit that may arise from the lease. Section 37.19 of the lease states:

 

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;[1]

 

Mr. Trump became “an elected official of the Government of the United States” when he became President on January 20, 2017. Moreover, he is the primary beneficiary of the lease. Although it appears President Trump may have recently transferred his ownership interest to a revocable trust, the “purpose of the trust is to hold assets for the exclusive benefit of Donald J. Trump” and he may revoke the trust at any time.[2] As a result, he continues to derive a financial benefit from the lease, thereby violating its specific terms.

 

In addition, the subjective terms of this approximately 200-page lease agreement are numerous and significant and include determining the standard to which the hotel is maintained, how much is spent on maintenance and repair of this historic building, the businesses that are allowed to operate in the hotel, and remedies for any dispute that arises from the management of the Trump International Hotel, Washington, DC. 

 

The GSA Administrator is fully empowered to change the financial terms of the lease including the base rent, the percentage of profits paid to the Federal Government, and the rate of return allowed in the event of a sale. Moreover, the Administrator can make significant changes to the terms of the lease without any Congressional oversight or public scrutiny. To date, GSA has already executed five amendments to the lease since 2013.

 

Because President Trump failed to transfer or eliminate his controlling interest in the property prior to his inauguration, he is now able to negotiate new and favorable financial terms with the Administrator he appoints. Left unchecked, this arrangement is fraught with the possibility that President Trump and his children will enrich themselves at taxpayers’ expense. This is simply untenable.

 

Given the conflict-of-interest issues raised by President Trump’s election, we have repeatedly asked GSA about the management and administration of this lease. On each occasion, GSA’s response has been wholly inadequate. 

 

On December 14, 2016, we requested that GSA provide a list of unleased space within the hotel, unredacted lease documents, monthly reports submitted to the agency, and any legal memoranda regarding potential conflicts of interest. GSA provided no response.

 

On January 23, 2017, we requested information regarding the steps that GSA has taken or plans to take to address President Trump’s apparent breach of the lease agreement; monthly reports submitted to the agency; the steps that GSA has taken or plans to take to address liens against the Trump International Hotel; and any correspondence related to the aforementioned items. GSA provided no substantive response.

 

Given GSA’s repeated refusal to respond to our requests to provide documents and substantive answers on this matter, we are increasingly concerned that the agency is not properly carrying out its mission. We request that you review the management and administration of the OPO lease agreement since President Trump’s election, including identifying any breach of the lease agreement or associated conflicts of interest, and describing the actions that the Administrator must take to eliminate any breach of the lease, potential conflict of interest, or appearance of conflict of interest. In this review, we ask that you specifically assess the following:

 

  1. Has GSA fully and appropriately evaluated the apparent violation of section 37.19 of the lease agreement? Is GSA’s conclusion consistent with Federal contracting rules prohibiting conflicts of interest?

 

  1. Has GSA calculated the cost to terminate the lease agreement with the Trump Old Post Office LLC? If so, how much is that cost?

 

  1. What remedies is GSA seeking to cure the breach of this lease term? Has the Administrator considered terminating the lease and transferring it to a different hotelier as a remedy to eliminate any conflict of interest or appearance of a conflict of interest? If not, why not?

 

  1. To date, GSA has executed five amendments to the original lease agreement. Did GSA receive fair value in exchange for making those changes to the lease agreement? Does GSA have procedures in place to ensure it always receives fair value in exchange for lease amendments?
  2. Has GSA taken any action to shield the contracting officer and the Old Post Office Building project management team from undue influence?

 

  1. How will GSA create a transparent process for administering and managing the lease?

 

Thank you for your attention to this matter. 

 

 

Sincerely,

 

 

 

 

PETER DeFAZIO                                         HANK JOHNSON                

Ranking Member                                             Ranking Member

Subcommittee on Economic Development, Public Buildings, and Emergency Management

 

 

 

cc:        Mr. Timothy Horne

Acting Administrator, U.S. General Services Administration

 

 

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[1] General Services Administration, Ground Lease, By and Between The United States of America (as “Landlord”) and Trump Old Post Office, LLC (as “Tenant”) (GS-LS-11-1307) (Aug. 5, 2013) (online at www.gsa.gov/portal/content/305477) (emphasis added).

[2] Letter from Stephen J. O’Brien, Law Offices of Mallios & O’Brien, to Members of the District of Columbia Alcoholic Beverage Control Board (January 27, 2017).