Washington, D.C. Attorney General Karl A. Racine sued two of President Donald Trump’s businesses and his nonprofit inaugural committee on Wednesday morning over a series of “unconscionable” $1 million bookings at the president’s hotel in early 2017.
According to the 18-page complaint, Trump’s businesses overcharged the president’s inaugural committee and the inaugural committee itself broke the law by agreeing to pay above-market rates for the use of a hotel ballroom and for misusing nonprofit funds.
The filing notes:
The Trump Entities, for-profit companies that conduct business with an aim toward maximizing revenue, were aware at their highest levels of the [inaugural committee’s] nonprofit status. Nonetheless they entered into this private inurement transaction with the [inaugural committee], charging the nonprofit rates not only above market for the use of event space, but also well above the Trump Hotel’s own pricing guidelines.
“The Trump Entities even insisted the [inaugural committee] pay these exorbitant rates in full when the Hotel could not provide the full event space on at least one day,” the filing continues. “In doing so, the Trump Entities contributed to waste and unconscionably benefited from nonprofit funds required to be used for the public good.”
Racine also expressly alleges the nonprofit presidential inaugural committee knew it was acting in violation of D.C. nonprofit law.
“By entering into the event space contract with the Trump Entities via the Trump Hotel, the [inaugural committee] engaged in an illegal, ultra vires act that was contrary to its nonprofit purpose and abused the authority conferred upon it by law by knowingly contracting and rendering payment for services designed to enrich private entities,” the filing alleges. “As such, the PIC diverted nonprofit funds from their intended purpose to the private benefit of the Trump Entities and its owners.”
In late 2016, the Trump Hotel quoted a $3.6 million dollar price tag for the inaugural committee’s use of facilities, food and drink for eight days. At first, the nonprofit’s employees “repeatedly” pushed back when presented with the exorbitant amount.
Rick Gates, who served as deputy chair, even personally reached out to Ivanka Trump for a discount and to relay those concerns.
In a prescient email, Gates wrote, in relevant part:
First, the cost itself seems quite high compared to other property. Second, I am a bit worried about the optics of [the inaugural committee] paying Trump Hotel a high fee and the media making a big story out of it. Let me know if you have any thoughts and if we can discuss the best path forward.
Two days later, an executive at the Trump Hotel reached out to Gates and negotiated the price down from $450,000-per-day to $175,000-per-day—a relatively steep drop but still 35 times more than typical event space pricing by the hotel’s own metrics. The lawsuit notes that a comparable rental for the exact same event space—during the same week—cost only $5,000. There was also a $200,000 surcharge for food and drink tacked on to the inaugural committee’s pricing offer.
According to Racine’s office, one of the inaugural committee’s key event planners, Stephanie Winston Wolkoff, who had previously raised concerns about the price and location with Donald Trump himself, “again expressed her serious concerns with the pricing to both Gates and Ivanka Trump.”
Ultimately, however, Wolkoff’s concerns were ignored. Gates continued to negotiate with the Trump Hotel and eventually signed a contract—later agreeing to also put on a glitzy private party for Trump’s children using the nonprofit’s funds. When news of this separate event made its way down the pipeline, however, the inaugural committee’s employees balked and rebelled, demanding the soiree for the presidential progeny be canceled. But then the kids themselves stepped in.
Again the lawsuit:
Members of the Trump family were aware of and involved in the negotiation of this unconscionable contract. In addition to previous conversations with President-elect Donald Trump and Ivanka Trump, on December 30, 2016, the [inaugural committee] Deputy Director for Special Events emailed other [inaugural committee] employees a status update that “Rick [Gates] is determining the master buyout cost with the family and Trump Hotel team directly. We have asked to have eyes on the contract once the details are agreed upon, but we have not received an ETA.”
Gates then allegedly determined to work in secret—while communicating with the Trump Hotel and Ivanka to make sure the children of privilege were well-feted via nonprofit funds.
“This private event would end up costing the [inaugural committee] more than $300,000,” the lawsuit notes. “As evidence that Gates knew it was inappropriate for the [inaugural committee] to hold this event, he hid the fact it was still occurring from key [inaugural committee] event planning staff who believed the event was canceled.”
Racine’s office slammed the various Trump-affiliated entities as an “unfair and unjustified” abuse of ”nonprofit funds to enrich the Trump family.”
”Although the Inaugural Committee was aware that it was paying far above market rates, it never considered less expensive alternatives, and even paid for space on days when it did not hold events,” a press release says. “The Committee also improperly used non-profit funds to throw a private party for the Trump family costing several hundred thousand dollars.”
The attorney general’s office noted that they are seeking the creation of a constructive trust that will claw back the money spent at the Trump Hotel “and to direct those funds to suitable nonprofit purposes.”
“District law requires nonprofits to use their funds for their stated public purpose, not to benefit private individuals or companies,” Racine said in a statement. “In this case, we are seeking to recover the nonprofit funds that were improperly funneled directly to the Trump family business.”
Read the full filing below:
[image via Alex Wroblewski/Getty Images]