WASHINGTON ― The biggest potential conflict of interest for President-elect Donald Trump sits about half a mile away from the White House: The Trump International Hotel.
The Pennsylvania Avenue property occupies a federal building that the Trump Organization leases from the General Services Administration, one of the federal agencies that he will oversee come January.
Having a U.S. president operating a hotel that advertises his name in giant letters on a government-owned building flies in the face of the federal prohibition of government employees holding government contracts, not to mention long-standing norms for preventing conflicts of interest. In fact, the 60-year lease agreement between the GSA and the Trump Organization plainly states that “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.”
It appears that neither the Trump Organization nor the GSA has planned for this situation. Neither responded to The Huffington Post’s requests for comment.
Clear conflicts of interest already abound at the president-elect’s D.C. hotel. On Nov. 14, the Trump Organization refiled a lawsuit against the nation’s capital over its 2015 tax bill, arguing that it should be lowered. The company had previously filed suit over both its 2015 and 2016 tax bills in June, but that suit was thrown out of court in October because the tax assessment appeals for each year had to be filed separately.
City officials do not seem concerned that the lawsuit is now coming from the soon-to-be-president’s company. “We’ll handle this tax case like any other tax case,” said Rob Moruse, communications director for Washington D.C.’s attorney general, Karl Racine. “His new position does not change the legal equation.”
Next year, though, Trump will be in the position of appointing a new GSA director. The agency is required to enter into annual negotiations with the Trump Organization over the terms of its lease. The lease terms could include everything from the property assessment to tax issues like the historic preservation tax break the company has applied for.
At that point, Trump says he’ll set up as a “blind trust” and leave his three oldest children in charge of the company. The problem is, this setup is in no way a blind trust under any possible definition; Trump knows exactly what he owns and he knows who has invested in it. And while his children may be managing the business, he is still a beneficiary ― and they are also members of his presidential transition team.
Ethics and government contracting experts believe this setup creates an immediate and irreconcilable conflict of interest. “It’s not only unprecedented and improper, but it’s also horrible from an optics standpoint, in terms of conflicts of interest for the president of the United States to have a massive contract with an agency that reports directly to him,” said Steve Schooner, a procurement law professor at George Washington University Law School.
Schooner, a former government contracting official at the Department of Justice and the Office of Management and Budget, said it appears that neither the GSA nor the Trump Organization has a solution to this problem. He thinks that there is almost no way for the GSA to accommodate this arrangement and should just plan to cancel the lease on or before Trump’s inauguration.
“It’s not only unprecedented and improper, but it’s also horrible from an optics standpoint, in terms of conflicts of interest.”
Government contracts normally contain a clause specifying that the government retains the right to terminate the contract at its convenience; Trump’s is unique in that it does not. Still, the government has the right to terminate the lease for default despite the fact that it’s not stated explicitly in the contract.
Trump could always sue for breach of contract if this happens. Yet while the government would likely have to pay monetary damages to Trump, it would allow the agency to get out of a massive potential conflict of interest ― and certainly the glaring appearance of a conflict.
“In the end, it’s just a frigging lease,” Schooner said. “If GSA wants to terminate it tomorrow, the only thing Trump can do is sue and get money damages. That’s a price worth paying.”
Another way around the conflict would be for Trump to sell or gift his company to his children, said Richard Painter, a former top ethics official for President George W. Bush’s administration. But Trump hasn’t indicated that he has any interest in doing this, and may have to pay a hefty gift tax. Even if he did, the children’s role on the transition team ― which Painter described as “shocking” ― would still create an obvious appearance of a conflict of interest.
Trump isn’t likely to give up his new hotel in D.C. without a fight. He visited the hotel repeatedly during his presidential campaign, even hosting an absurd and controversial press conference there where he lied about his role in disseminating falsehoods about President Barack Obama’s birthplace.
The fears about conflicts of interest over this lease are well-founded. Aside from a tax lawsuit, the Trump Organization has already changed elements of its lease contract with GSA several times since it was first signed in 2012. The company had to change its financial backer after its original investor fell through. After the original architect ― a major supporter of historical preservation in Washington D.C. ― was removed, the Trump Organization subbed in a new architect. This brought on fights with the agency over design changes that officials said no longer preserved or showcased the building’s historical features, BuzzFeed reported earlier this year.
The Trump Organization could seek to renegotiate its contract any number of ways while its primary beneficiary sits just up the street in the White House. Then there are the enforcement questions: If the Trump Organization, for example, does not submit its annual financial documents on time, or if its financial documents need to be audited, GSA employees would face a direct confrontation with the president’s children, who will be running a corporation with his name on it.
“There’s an imbalance of power,” Schooner said. “In a 60-year, complicated contract, we’re going to ask a civil servant at GSA to negotiate annually with the president’s children. Mind-boggling.”