Does the Trump Organization’s Indictment Mean Anything for the Company’s GSA Lease?
Experts said the indictment prompts speculation about possible suspension or debarment from federal business, but were unsure if GSA would act.
JULY 12, 2021
The recent indictment of the Trump Organization by New York prosecutors did not mention the company’s government lease for its Washington, D.C. hotel, but according to observers, the indictment raises additionalquestions and concerns about the lease, after years of scrutiny.
The 15-count indictment against the Trump Organization and its chief financial officer is for tax related crimes dating back 15 years; both the company and CFO pleaded not guilty. There could be more indictments as New York Attorney General Letitia James said, “this investigation will continue and we will follow the facts and the law wherever they may lead,” in a statement on July 1. The Trump Organization holds a lease with the General Services Administration for its downtown D.C. hotel located in the Old Post Office Building, but that is not mentioned in the indictment.
“GSA is committed to responsibly administering all of its leases and ensuring these contracts are fully enforced,” a GSA spokesperson told Government Executive,when asked if the indictment will have any impact on the lease. “We will continue to abide by our obligations under the lease and insist that our lessee continue to do the same.”
The company obtained the lease before Trump became president, after which the agreement was subject to years of investigation by lawmakers about potential conflicts of interest since Trump failed to fully divest from his business interests. GSA, under the Trump administration, was also accused of lax oversight by lawmakers and came under fire from its inspector general for its management of the lease. The situation came under renewed scrutiny in the wake of the House's impeachment of Trump for inciting the attack on the U.S. Capitol in January.
Steve Schooner, the Nash & Cibinic Professor of Government Procurement Law at The George Washington University’s Law School, told Government Executive, “I do not expect the indictment to affect/impact the lease,” casting doubts on GSA’s oversight of the agreement. “Could it? Of course,” but “I'm not getting my hopes up,” he said.
Schooner also pointed out “one key issue that the indictment raises is whether the Trump Organization should (finally, belatedly) be suspended (or proposed for debarment).” Suspensions are temporary exclusions from doing business with the government when an investigation is ongoing and debarments are exclusions for a set period of time after an investigation or legal proceedings against a contractor. This can be for either procurement or nonprocurement (such as grants and cooperative agreements) situations.
The relevant section of the Code of Federal Regulations “specifies that indictment (alone) constitutes adequate evidence for suspension for, among other things, making false statements, tax evasion, violating [federal] criminal tax laws, lack of business integrity or business honesty,” Schooner said in a recent tweet.
“The recent indictment against the Trump Organization certainly could impact future federal business, but it is unlikely to impact its Washington hotel lease,” said Scott Amey, general counsel at the nonprofit Project On Government Oversight. However, he agreed there is a “strong” case to either suspend or debar the company.
Schooner and Amey, along with Kathleen Clark, a law professor at the Washington University in St. Louis and an expert on government ethics, wrote in Government Executive in January 2020 that the Trump Organization should be banned from doing business with the federal government due to the first impeachment investigation as well as various lawsuits that raised issues about the company.
Virginia Canter, chief ethics counsel for the group Citizens for Responsibility and Ethics in Washington, said determining if the indictment will impact the lease is “not an easy question.” However, it “really raises questions about whether or not the Trump Organization has what is referred to as ‘present responsibility’ to perform its obligations under the Old Post Office lease.”
In reference to the counts of falsifying business records, “If they’re doing it at the top level, maybe they’re doing it at another level as well?” she asked. Also, Canter said she would like to know what GSA is doing to “ensure that the government’s interest, the public’s interests, taxpayers' interests are being protected in terms of the administration of this lease.”
Eric Montalvo, a founding partner at the Federal Practice Group, said, “I would not expect the federal government to be jumping in immediately to act, but they certainly would have an interest in making sure that none of the activities that are being alleged somehow impact the GSA contracting activities.”
While “there is a possibility that the government will seek a suspension or debarment” based on this information “the key is whether the Trump Organization is ‘presently responsible,’ ” a term that isn’t defined in the Federal Acquisition Regulation, he said, “and is really a determination made by a suspension and debarment official.” Montalvo stated it is much more difficult to debar a company as opposed to an individual.
Also, there should also be a consideration of the specific entity of the Trump Organization that was awarded the lease, he added.
The Trump Old Post Office LLC, a subsidiary of the Trump Organization, is the tenant.
GSA did not respond to a follow up question about suspension and debarment. The Trump Organization did not respond for comment.
In June, the Trump Organization put the hotel lease up for sale for the second time, after the pandemic thwarted the previous attempt. This came “on the heels of Manhattan’s district attorney convening a grand jury expected to decide whether to indict the former president, other executives at his company or the business itself,” The Washington Post reported.
Canter said the indictment “just adds to their woes and it's a serious woe,” as the company has struggled to bring revenue and business into the hotel. Ahead of the indictment, former federal prosecutors said an indictment would have a devastating impact on all of the Trump organization’s businesses, Forbes reported.
In May, New York Attorney General James joined Manhattan District Attorney Cyrus Vance Jr.’s years-long criminal investigation into the Trump organization. James’s office was previously doing a civil inquiry, which is continuing. The Wall Street Journal reported in May that Vance’s investigation has looked at other Trump properties, such as the D.C. hotel, and then The Washington Post reported on July 4 that Vance’s office subpoenaed GSA for documents in February, but it was unclear exactly which records.
Separately, a group of House Democrats is in the middle of an ongoing court case with GSA over documents related to the lease, a bid that a federal appeals court revived in December.