President-elect Donald Trump laid waste to his Republican opponents in the primaries, has wasted no time filling his cabinet and successfully used his Twitter pulpit to disseminate his message bypassing traditional media. Yes, he's continually pilloried by the left, but—all things considered—Trump has had a relatively easy time so far—even taking time out of this week to meet with the inimitable and mercurial Kanye West at Trump Tower.
He's been a winner politically, but his hotel business is taking it on the chin of late.
We've written about how Trump could be setting himself for violating the so-called "emoluments clause" of the Constitution, which prohibits federal officials from doing business with or accepting gifts from foreign governments without congressional approval.
Still, unlike Congressional members, who are subject to strict rules regarding conflicts of interest, particularly those that could benefit them financially, the president and vice president are exempt.
For instance, President Lyndon Johnson once famously used his influence to secure a radio station license for his wife, Lady Bird Johnson.
As Lady Bird Johnson's New York Times obituary pointed out: "At one time, the Johnson interests included KTBC Television, which was sold to Times Mirror in 1973; Austin cable interests, which were sold to Time Warner Cable, and Karnack Cable System, cable interests outside Austin, which were sold to Tele-Communications Inc."
Trouble in Brazil
And while Donald Trump's political fortune has fared well, his hotel empire is hitting some hardship.
The latest is in South America. There, in Rio de Janeiro, it's been reported that Trump’s name has been removed from a beachfront hotel—though, at the time of this posting, the Trump Rio de Janeiro website was still online—after, as Reuters pointed out, "a Brazilian prosecutor opened a criminal investigation into investments made by two state pension funds" into the hotel. Note: Trump does and did not ever own the hotel, but was the developer and manager of record.
This claim, however, does not jive with a Trump Hotels statement regarding the hotel, which stated: “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 Hotels brand. As a result, we have made the decision to remove our brand name from the project.”
They did not comment on the criminal probe.
The hotel was due to be finished in time for this year’s Olympic Games, and while the hotel did officially open, some parts of it are still under construction. The waterfront property was developed through a licensing deal with Brazilian partner LSH Barra.
As The Washington Post writes: "Two small Brazilian public-sector pension funds invested a total of $40 million in the fund that controls LSH Barra. 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."
To be clear, none of the allegations place any wrongdoing on either the Trump Organization or Trump Hotels. Still, the exposure is not good and, above all, Trump Hotels will now lose out on a potentially lucrative licensing arrangement in Brazil.
In the U.S., things aren't especially great either for Trump Hotels. In November, we charted the trouble concerning Trump and the new Trump International Hotel Washington, D.C. The U.S. General Services Administration leased the Old Post Office Pavilion to a consortium led by The Trump Organization, and Trump spent roughly $200 million renovating the building into a luxury hotel. While Trump doesn’t officially own the building, only the lease, branding it with his name, Steven Schooner, a law professor at the George Washington School of Law, said in studying the contract for the hotel he found a clause prohibiting elected officials from taking any part in the lease of the property.
Clause 37.19 of the contract states: “No member or delegate to Congress, or elected official of the Government of the United States or the Government of the District of Columbia, shall be admitted to any share or part of this Lease or to any benefit that may arise therefrom.”
A Politico story posted today notes that four Democratic members of Congress "say the General Services Administration has concluded that President-elect Donald Trump will be in violation of the lease for his luxury Washington D.C. hotel when he is sworn in on Inauguration Day, unless he divests all financial interest in the project."
I'm generally skeptical of MoveOn petitions, but I did sign this one regarding GSA's lease deal for Trump Hotel DC https://t.co/GlNLPFRxyX— Eric Goldman (@ericgoldman) December 1, 2016
Still, we aren't clear on how Trump's businesses will be run moving forward. The President-elect was poised this week to hold a press conference and announce plans to relinquish operation of his businesses to his children. However, that press conference has now now been scrapped until January. The early word, as Politico writes, is that Trump is planning to cede management control to his sons Donald Jr. and Eric, but retain ownership in the company.
Eric Danizger, the former CEO of Wyndham Hotel Group and Hampshire Hotels is the current CEO of Trump Hotels, and was reportedly hired to expand the Trump hotel brand internationally, especially. In September, Danizger announced a new boutique brand by Trump Hotels called Scion that is noticeably absent the Trump name.
Bad for Business
Trump has been a master of media, burnishing his name through his ubiquitous Twitter posts and shows like "The Apprentice." But his hotels are drawing ire from the likes of professional athletes.
Without citing a specific reason, but calling it "personal preference," Cleveland Cavaliers superstar LeBron James opted to not stay at the team's appointed hotel, Trump SoHo, in New York, while the team was in town to play the New York Knicks.
NBA teams, it turns out, are not through sticking it to Trump. The L.A. Lakers, in town this week to play the Brooklyn Nets, have reportedly changed plans to also stay at the Trump SoHo—though the reason given was security concerns amid possible protests happening outside the hotel.
According to NBA league sources, and as reported by ESPN, a total of three NBA teams have stopped staying at Trump-branded hotels in New York and Chicago. "Sources told ESPN.com that the Milwaukee Bucks, Memphis Grizzlies and Dallas Mavericks have moved away from Trump hotels in New York City and Chicago. Sources add that another Eastern Conference team contracted to stay at the Trump SoHo in New York this season has likewise already decided to switch to a different property in Manhattan when its current contract expires at season's end and that the Trump association is among the factors for the switch. Seven other teams told ESPN.com that they are still currently scheduled to stay at Trump-branded properties this season."