Why Hasn’t the Government Gone After Trump for His $180 Million Breach of Contract?
Shortly after 9:20 p.m. on a foggy evening three days before Donald Trump’s inauguration, a soft-spoken man with a sandy goatee and clear plastic glasses set himself on fire outside 1100 Pennsylvania Avenue, the century-old Romanesque Revival that was once Washington, D.C.’s first post office and is now home to the Trump International Hotel.
His clothes were still smoldering in the middle of the street as the man, who wouldn’t give his name, told reporters he’d lit himself aflame to protest “the fact that we’ve elected somebody who is completely incapable of respecting the Constitution of the United States.”
But not even an attempted self-immolation in front of one of its properties was enough to spur a reaction from the mid-level bureaucrats at the General Services Administration. The agency, which oversees management of some 8,300 federal buildings, including the Old Post Office, has known for months it would be at the center of the first big fight over President Trump’s conflicts of interest and violation of the Constitution – and it has quietly, assiduously avoided doing anything about it.
The hotel has emerged as the most emblematic of Trump’s knotted, worldwide web of business conflicts. Though Trump announced last week that he was handing over management of the Trump International Hotel to his son, Don Jr., the president still owns the business. The hotel actively caters to foreign diplomats – and the Constitution explicitly prohibits presidents from accepting money from foreign governments. It’s an impeachable offense.
But the primary issue for the GSA is that Trump is presently in violation of his lease, which specifically forbids any government employee from being a lessee. The cut-and-dry language of the contract Trump signed in 2013, when he beat out nine other companies’ bids to refurbish the Old Post Office building, states that “[n]o … 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’s even worse that he’s the president: That means Trump gets to appoint the person in charge of the agency with which he or his kids will renegotiate the D.C. hotel’s lease each year.
The GSA had reason to believe Trump could end up in violation of the lease as far back as June 2015, when he announced his candidacy for president – a full 17 months before Election Day. As recently as six weeks before the election, it seems no one at the GSA expected this would pose much of a problem; the issue went entirely unmentioned when the agency’s inspector general delivered a report to Congress at the end of September.
Once it became clear Trump had won the presidency – that he would, therefore, soon be in violation of a $180 million contract with the federal government – nothing changed. As the weeks slipped by after the election, it became increasingly clear that neither outgoing Obama appointee Denise Turner Roth, nor the man subsequently installed in her place – a career civil servant from the GSA’s Denver office named Tim Horne – were going to confront the Trump Organization over the president’s imminent breach of contract.
It’s not just independent observers who believe Trump is in violation of the lease – the agency’s own expert told Congress as much. In December, Democrats on the House Oversight and Government Reform Committee asked the GSA to send a representative to go over the finer details of the lease. The agency dispatched its deputy commissioner of public building service, Michael Gelber, who confirmed the agency’s interpretation of the contract – that Trump would be in violation of the lease on day one of his administration – only to have his congressional testimony immediately undercut by the GSA’s own public affairs officer, who released a written statement claiming the agency hadn’t taken a position on the issue yet.
A series of similarly dissembling GSA statements followed in the weeks leading up to the inauguration. Together, they appear to indicate that both Trump and the Trump Organization had taken almost no proactive steps to comply with its Old Post Office lease, and that the GSA had taken no steps to compel it to.
There was a brief indication, just before Trump’s swearing in, that the GSA was going to take some kind of action. On Inauguration Day, the GSA was set to release a statement regarding the Trump hotel lease. Three-and-a-half weeks later, it’s still unclear what the agency was going to say, because that statement was quietly quashed.
Roth, the Obama appointee who held the top job at the GSA – the person who probably should have sent a letter officially notifying Trump he would soon be in breach long before it got to this point – was relieved of her duties shortly after the inauguration. The man who replaced her was in the job for less than eight hours before he was replaced by a third candidate, Horne. (Rolling Stone‘s efforts to reach both Roth and her short-lived successor, Norman Dong, for comment were unsuccessful.)
What’s most maddening to ethics watchdogs about the GSA ignoring Trump’s breach is that the case really couldn’t be more straightforward for the agency to pursue. “It’s the only conflict of interest where the government holds all the cards,” says Steven Schooner, a George Washington University government procurement law professor who’s spent his career poring over government contracts like the one Trump signed with the GSA. Schooner has been following the Old Post Office building project since its inception.
In Schooner’s view, there are a few problems with Trump’s insistence on maintaining the lease. On top of the lease specifically forbidding government employees – to ward off accusations of favoritism, Schooner says – there’s the more specific concern that foreign governments could try to gain favor with Trump by patronizing the hotel. Trump hasn’t taken any steps to address this fear; in fact, the property has a director of diplomatic relations dedicated to cultivating that business.
“We now have empirical information – we have facts – that show that foreign governments, lobbying firms and special-interest groups plan to spend money lavishly in Trump’s hotels, paying premium prices, because the president cares about it, he appreciates their patronage and they believe it will curry favor with the president of the United States,” Schooner says. And that puts President Trump in direct violation of the emoluments clause of the U.S. Constitution.
Trump’s tax lawyer has argued that paying for a hotel room constitutes an acceptable value-for-value transaction, rather than a gift. Schooner doesn’t buy it. “Have you had a hotel reservation that you forgot to cancel? You know what happens. You pay for it anyway,” he says. “If I wanted to give $100,000 to a member of Congress, I have to report that; that’s going to be a public document. If I want to give $100,000 to the Trumps, I call [Trump’s hotel] up, I schedule an event, I give them a non-refundable deposit and then I don’t hold the event.”
“As long as people are staying in that hotel to curry favor with the president, we’ve got a problem,” Schooner says. The idea that Trump would donate the hotel’s profits to the Treasury – another idea his tax lawyer has floated – doesn’t change that calculus. “Imagine a month where there’s very, very low occupancy in the hotel. And the government of Kuwait comes in and holds a big fancy reception in there. There’s not profit that month. But the Trump family lost less money that month. That’s a benefit – that’s emolument,” he says.
Schooner also addresses the problem with Trump selecting the new GSA head – the person who would not only notify Trump about breaking of his contract, but who would also have power over whichever unlucky agency employee is tasked with the annual lease renegotiation. “His or her boss has been appointed by the president and serves at the president’s pleasure, and you’re opposite the table from the president’s children. Are you gonna be negotiating to get the very, very best deal for the taxpayers? Or to please the Trump family and your boss?” Schooner says. “That’s an impossible position to put a government employee in.”
On top of all those concerns, there’s also a more simple one: the fact that the GSA’s decision to ignore the hotel lease violation creates a precedent. “Everybody looks to GSA for policy guidance and leadership. This is not leadership. It’s not a model of behavior. It’s exactly the kind of stuff that we don’t want to happen,” Schooner says. “We don’t want government agencies to buy scandals. We want our public spending to be scandal-free, to be transparent, to be credible, to be accountable, to be something where we can look at the results and be proud of them.
“This is atrocious,” he says.
If the GSA believes Trump is in violation of his lease – as its own deputy commissioner testified to members of Congress in December – the next step would be to notify the president and the Trump Organization of that breach. If he or the company disputes the agency’s finding, the dispute would go before a three-judge panel at the Civilian Board of Contract Appeals, which would almost certainly find in the government’s favor. (“They’re very predictable,” Schooner says.)
What’s still unclear, at this point, is if anyone at the agency has the backbone to enforce its own contract.
The reaction from the GSA’s press office following the deputy commissioner’s appearance before Congress doesn’t bode well. “The deputy commissioner of GSA goes over there and says what every reasonable, experienced person thinks: He’s gonna be in breach on the day of the inauguration,” Schooner says. “And then later that afternoon, GSA’s flack throws them under the bus,” issuing a statement undermining his testimony with a statement saying the GSA did “not have a position” about the lease, and taking one before he assumed office would be “premature.”
The news that broke last week about Trump stepping down as president of the hotel doesn’t make a significant difference, Schooner says. “The fundamental principle is ownership, not management,” he says. As long as Trump still owns the hotel, it doesn’t matter whether he’s president of it – he’s still benefitting. And he’s personally named in the lease. “Donald J. Trump isn’t an entity – it’s him. They do create freestanding LLCs for each project, but [in this lease,] the tenant is him.”
The GSA told WAMU last week that it is “reviewing and evaluating this information to assess its compliance.” And a GSA spokesperson told Rolling Stone this week that there could be news relating to the lease as early as this Friday. But Democrats who have been pressing the agency on the issue are pessimistic. Members of the House Committee on Oversight and Government Reform – the same committee Gelber testified before – issued a letter a few weeks ago requesting more information from the GSA about the lease. But with minority representation on the committee, they lack the power to subpoena any agency officials or documents. Only the committee’s chairman, Jason Chaffetz, can do that.
For his part, Chaffetz seems to have a different set of priorities altogether. The day after Trump announced he would not be divesting from his businesses, Chaffetz threatened to subpoena not the president, nor any of his family members or business associates – but rather the director of the federal Office of Government Ethics for saying Trump’s plan to hand over his business to his children was ethically insufficient.
How Trump’s agenda is at odds with what Americans want. Watch here.