D.C. Attorney General Karl A. Racine sued President Trump’s inaugural committee and business Wednesday, alleging that the committee violated its nonprofit status by spending more than $1 million to book a ballroom at Trump’s D.C. hotel that its staff knew was overpriced and that it barely used.
The committee was formed to organize the events around the inauguration, but Racine alleges it instead “abandoned this purpose and violated District law when it wasted approximately $1 million of charitable funds in overpayment for the use of event space at the Trump hotel.”
“These charges were unreasonable and improperly served to enrich” Trump’s business, the complaint reads. He alleges that Trump and his daughter Ivanka Trump were probably aware of the charges, based on documents Racine subpoenaed from the committee and the Trump Organization.
D.C. law requires that nonprofit organizations not operate for the purpose of generating profits for private individuals. In the civil suit, Racine (D) asked for an order from D.C. Superior Court directing that the money be returned and given to charities promoting civic engagement.
In an email, a spokesman for the Presidential Inaugural Committee said: “The facts will show that the PIC operated in compliance with the law and this suit is without merit. . . . Despite the PIC’s cooperation with his office’s investigation, the DC AG did not coordinate with the PIC’s legal counsel to interview a single former PIC employee or staff member nor discussed with counsel any particular concerns about the PIC’s full compliance with the law. In fact, the PIC has received no outreach from the DC AG since last summer.”
In response to previous inquiries about spending by the committee, its chairman, Thomas J. Barrack Jr., issued a statement saying that the inauguration and the more than 20 related events “were executed in elegance and seamless excellence without incident or interruption, befitting the legacy and tradition that has preceded us.”
The Trump Organization issued a statement Wednesday calling the lawsuit “an attempt to regulate what discounts it believes the hotel should have provided” and “a clear PR stunt.”
“The rates charged by the hotel were completely in line with what anyone else would have been charged for an unprecedented event of this enormous magnitude and were reflective of the fact that hotel had just recently opened, possessed superior facilities and was centrally located on Pennsylvania Avenue,” the company said.
The company also released an email from Ivanka Trump to Trump hotel executives saying that the company should charge a “fair market rate.”
Racine’s lawsuit specifically targets a $1 million deal made between the committee and the Trump Organization for the ballroom during four days around the inaugural, which he alleges was a knowing waste of the nonprofit’s resources to benefit the Trumps. Racine has litigated against other nonprofit groups in the past, including charter schools and the organization managing the Howard Theatre.
Documents submitted with the 18-page complaint show discussions between Trump’s company and his inaugural committee, ending in a deal that Racine argues is such a waste of the committee’s funds that it violates the law and the organization’s mission “to further the common good and welfare” of American citizens “by supporting the activities surrounding the 2017 Presidential inauguration.”
Hotel management emailed the committee in November 2016 saying an eight-day package of meeting rooms, food and drinks would cost $3.6 million — an enormous number even by the standards of luxury hotels during the inauguration.
Rick Gates, a lobbyist and the committee’s deputy chairman, then emailed Ivanka Trump to say that cost “seems quite high compared to other properties” and said he worried it would generate negative publicity. Ivanka Trump, then an executive at her father’s business, responded to say she had directed the hotel’s general manager to speak with Gates directly. (Gates was later sentenced to 45 days in jail plus three years probation for conspiracy and lying to the FBI as part of special counsel Robert S. Mueller III’s probe into Russian interference in the 2016 election.)
After hotel management agreed to charge $175,000 per day for meeting space and to charge separately for food and beverage, Stephanie Winston Wolkoff, a friend of first lady Melania Trump who had previously produced the Met gala and New York’s Fashion Week, expressed alarm, writing that other properties had been offered to the committee at little or no cost. She warned that one of the committee’s two planned events at the hotel was for the Trump family and that “when this is audited it will become public knowledge.”
Wolkoff said the meeting space should cost a maximum of $85,000 per day. Even that was pricey compared with offers from other hotels. The committee separately received free meeting space from the Fairmont hotel near Georgetown after booking a large block of rooms and agreeing to spend at least $46,000 on food and drinks, according to the documents.
The committee also received two meeting rooms at no cost from the W Hotel near the White House after booking a block of guest rooms and agreeing to spend at least $75,000 on food and drinks.
There is disagreement about how many guest rooms the committee booked at the Trump hotel, a figure that hotels often use to determine whether to offer discounted meeting space. Racine’s staff said they determined the committee booked up to 80 percent of the rooms the week of the inaugural. Trump Organization attorney Alan Garten said that the committee paid for 5 or 6 percent of the hotel’s rooms at most. “Not only was there never any room block but in the end the PIC was only responsible for a nominal number of rooms,” he said. Neither side provided evidence to support their claims.
The lawsuit is the second brought by Racine over Trump’s business practices. In the other, Racine and Maryland Attorney General Brian Frosh (D) allege that Trump violates the Constitution’s foreign “emoluments” clause by doing business with foreign governments.
The Trump inaugural committee raised a record-shattering $107 million, more than double the largest haul for any other incoming president. Trump broke with the practice of most recent inaugural committees and placed no limits on corporate or individual donors, leading more than 45 individuals and companies to donate at least $1 million each.
In the three years since, negative revelations about the committee’s work have emerged. Federal prosecutors in New York are pursuing a criminal investigation related to donations and spending by the committee and have issued their own subpoenas.
Wolkoff was criticized also after the committee directed $26 million to her 12-person firm, though all but $1.62 million of that was reportedly routed to subcontractors.
Although Trump and his children weren’t managers of the committee, they have since run into trouble for misuse of charitable funds when a judge ordered Trump to pay $2 million in damages for using funds from his foundation for his own benefit. Trump agreed to close the organization.
The documents appear to show that Wolkoff planned to raise the issue of the hotel prices with the president-elect. On Dec. 16, 2016, according to her task list, Wolkoff had a meeting scheduled with Trump at which the “cost of ALL EVENTS at Trump Hotel” was on the agenda.
The cost of the ballroom was raised at least two other times by committee officials, according to the documents.
The hotel had earlier booked another group, the Presidential Inaugural Prayer Breakfast, for the morning of the inauguration — meaning the ballroom was double-booked. Correspondence between the committee and hotel management appears to show that committee staff expected a $70,000 discount since the room was unavailable for half that day, but ended up paying full freight anyhow. (The prayer breakfast was booked before Trump’s victory for $5,000.)
Gates later discussed with hotel management the possibility of canceling a Friday night event he originally thought would host 1,250 people.
He wrote to Ivanka Trump to say: “There will be an after party at the [Trump hotel] following the inaugural balls on Friday. DJT is not expected to attend but was more for you, Don and Eric,” referring to the president and his adult sons. Racine cites this as misuse of charitable funds to benefit the Trump family.
The cost for the ballroom at the Trump hotel never came down. Trump’s company is now trying to sell its lease to the hotel. Initial bids are due Thursday for the property.