RIO DE JANEIRO — Trump Hotels said Tuesday it is removing its brand name from a luxury hotel it manages in Rio de Janeiro and will no longer be responsible for its operation. The move came after prosecutors opened a criminal investigation into investments in the property.
The decision takes effect Thursday, just days after President-elect Donald Trump tweeted that his sons would run his businesses while he was in the White House and vowed they would launch “no new deals” during his time in office. The president-elect has faced criticism that his company’s overseas investments could present conflicts of interest.
The 170-room Trump Hotel Rio de Janeiro, a modern, triangular structure with the Trump name on top, is owned by a Brazilian developer whose former chief executive is Paulo Figueiredo Filho, grandson of the last president under Brazil’s 1964-1985 military dictatorship. The hotel had partially opened in June, just weeks before the Summer Olympics, in the upscale Barra de Tijuca neighborhood where the Olympic Park and Athletes’ Village were located.
In pulling out of the project, the Trump firm cited delays in the construction of the hotel and differences with the developers in “vision.”
Brazilian federal prosecutors said in a document issued in October that they were investigating questionable investments by pension funds in the hotel, which is owned by the Brazilian company LSH Barra. It has been managed by the Trump Organization, which has no financial investment in the project.
Trump representatives have said that the criminal investigation didn’t target the U.S. politician or his firm.
LSH Barra did not immediately respond to a request for comment on the Trump company’s decision to remove its name from the project. Figueiredo Filho left his executive position at the development company in March, though he retains a financial stake, according to the company. The development company says the hotel is worth at least $75 million.
In his early 30s, Figueiredo Filho is an outspoken young conservative and property developer. His Facebook profile features a photograph of him with the president-elect.
Two small Brazilian public-sector pension funds invested a total of $40 million in the fund that controls LSH Barra, according to the document issued by prosecutors in October.
The prosecutors said that the “reckless” investments by the two pension funds — Serpros, for employees of a government IT agency, and Igeprev, for employees of Tocantins state in Brazil’s vast interior — entailed a high risk that raised suspicion. In addition, Igeprev bought debentures in the fund that controls LSH Barra, increasing its exposure, the document said. The investigation is part of Operation Greenfield, a wider investigation into pension fund investments in Brazil.
“It is necessary to verify if the favoritism shown by the pension funds towards LSH Barra Empreendimentos Imobiliários SA and The Trump Organization was due to illicit payments and bribes,” Anselmo Lopes, a prosecutor, wrote in the document.
LSH Barra has denied any wrongdoing.
Last year a Brazilian court froze $36 million of assets belonging to former Igeprev executives and companies that had managed and administered some of its funds. In September, Brazil’s government pensions watchdog suspended the management of Serpros.
The Trump hotel was supposed to be fully operational in time for the Summer Olympics. But even today, only 60 percent of the rooms at the beachside hotel are ready. The rest, along with a convention center, are due to be completed next year, the company has said.
Christine Lin, a spokeswoman for Trump Hotels, said in an emailed statement that the company sought to provide guests “with unparalleled service and world-class experiences. Unfortunately, the developers of the Rio de Janeiro hotel are significantly behind on the completion of the property, and their vision for the hotel no longer aligns with the Trump brand. As a result, we have made the decision to remove our brand name from the project.”
Trump Hotels will also no longer manage the project, Lin said. She did not respond to questions about the Brazilian investigation and said the decision takes effect on Thursday.
When media reports about the investigation first surfaced in November, the Trump Organization sought to distance itself from the hotel’s owners and the pension funds.
“We have no relationship or involvement with these pension funds,” Alan Garten, executive vice president and general counsel at the Trump Organization told the Reuters news agency. “We have an arm’s length agreement with the developer where we were hired to provide a service.”