GSA’s Trump Hotel lease is under scrutiny again

There are fresh calls for the federal government to scrutinize its lease with the Trump Organization for its Washington, D.C. hotel following the claims this week about the unreliability of the business’s financial statements.

Mazars, the accounting firm former President Trump and his company have used for years, said in a Feb. 9 letter, that it was cutting ties with Trump, saying it could no longer vouch for the accuracy of his financial statements. The letter was filed on Monday by New York State Attorney General Letitia James as part of her ongoing civil investigation. This is the latest in the series of perils for the Trump Organization and comes as it is working to sell its government lease for its downtown D.C. hotel, which has had its own slew of controversy. 

“In light of these new revelations, including further evidence that the former president submitted at least one financial statement with possible material misrepresentations to [the General Services Administration], we request that you consider terminating the Old Post Office Building lease to former President Trump and the Trump Organization under the authority provided in Article 27 of the lease,” wrote Reps. Carolyn Maloney, D-N.Y., chair of the House Oversight and Reform Committee, and Gerry Connolly, D-Va., chair of the committee’s Government Operations panel, in a letter to GSA on Thursday. This is the first time this formal request is coming through the committee. 

This will “end, once-and-for-all, the grave damage this inappropriate lease has done to presidential ethics and integrity in government contracting,” said the lawmakers who have been investigating and scrutinizing this lease for years. 

Maloney and Connolly said that GSA notified their committee earlier this month that as of Feb. 1, the 45-day period for GSA to review the proposed sale (first reported in November) of the hotel lease and decide if it wants to greenlight it. 

The sale “may appear to address some of those conflicts, commentators have raised concerns that the $375 million sale price is at least $100 million above market value,” they wrote. “This sales price would provide a profit of approximately $100 million for the Trump Organization, even accounting for the Trump Organization’s prior investments into the property.”

Rep. Peter DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee, who has also been investigating this situation, said the lease for the hotel “continues to raise serious questions about GSA’s auto leasing program.” He noted that he introduced legislation previously that would require GSA to conduct audits for outleases of this size. 

“The public disclosure of the Mazars letter should be causing GSA a high degree of anxiety (and, frankly, embarrassment),” Steven Schooner, professor of procurement law at The George Washington University Law School who previously served as associate administrator for procurement law and legislation in the Office of Federal Procurement Policy, which is within the Office of Management and Budget, told Government Executive. “Not only is it almost a certainty that GSA awarded Trump Organization the hotel lease based upon incorrect and potentially fraudulent representations of its financial condition, but GSA's ongoing relationship with the Trump Organization depended upon annually audited financial reporting.” 

Schooner, along with others, raised concerns about Trump in 2016 about questioning if he could “in effect, be both landlord and tenant,” then called for GSA to cease doing business with the Trump Organization in 2020, 2021 and now. “It's inexplicable and, frankly, indefensible at this point that GSA (or some other agency) has yet to suspend, debar, or propose Trump Organization for debarment,” he said. The suspension and debarment process aims to protect the government from waste, fraud and abuse from procurement and nonprocurement programs that pose a risk. 

Suspensions and proposals for debarment are an “everyday occurrence” in the government as in fiscal 2019, which is the most recently available data, 722 firms or individuals were suspended, 1,437 were proposed for debarment, and 1,199 were debarred, Schooner noted. 

“GSA is committed to ensuring a thorough and appropriate review process for the proposed transfer of the lease of the Old Post Office building,” Christina Wilkes, GSA press secretary told Government Executive on Friday. “GSA has taken, and will continue to take, steps to ensure that the tenant is in compliance with the terms and conditions of the lease.” 

GSA’s Suspension and Debarment Official, who is a career federal employee, makes the decisions about suspension and debarment decisions through an established and independent process to ensure fairness for taxpayers and the government, a GSA official said on background. The agency doesn’t comment on any potential or ongoing suspension or debarment cases. 

Trump said in a statement on Feb. 15, “we have a great company with fantastic assets that are unique, extremely valuable and, in many cases, far more valuable than what was listed in our Financial Statements.” He said that Mazar’s decision was “clearly a result of the [New York attorney general and district attorney’s] vicious intimidation tactics used—also on other members of the Trump Organization.” In the statement Trump listed off claims about his wealth, which The New York Times pointed out on Wednesday don’t add up.

Government Executive asked Mazars for comment on Trump’s statement, and if given what it said about the state of the Trump Organization's finances, should GSA terminate the contract for the D.C. hotel.

“Due to our industry’s professional obligations Mazars cannot discuss any clients -- current or former, the status of our relationships, or the nature of our services in a public forum without client consent or as required by law,” an unnamed company spokesperson said on Friday. “We remain committed to fulfilling all of our professional and legal obligations.” 

The Washington Post reported earlier this month that James subpoenaed GSA for information on how the agency chose the Trump Organization to lease out the Old Post Office Building for the hotel, as part of the civil investigation, according to two people familiar with the situation who spoke on the condition of anonymity. She is also forging a criminal investigation with Manhattan District Attorney Alvin Bragg, a Democrat.