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Evaluation of GSA's Management and Administration of the Old Post Office Building Lease
Source: General Services Administration - Inspector Genera
Emoluments
The selection in July 2016 of Tenant’s primary owner, Donald J. Trump, as a major political party candidate for President raised the possibility for GSA that its lease of the OPO might generate questions under the Foreign Emoluments Clause and the Presidential Emoluments Clause. However, one attorney said OGC did not discuss this possibility until shortly before the November election, when news articles appeared that questioned whether Trump’s election would trigger Emoluments Clause and other conflicts of interest issues.
According to one senior attorney, the emoluments issues did not become a hot button issue until after the election. One attorney specifically recalled that emoluments did not become an issue for OGC until an article regarding the issue appeared in Government Executive on November 28, 2016 The attorneys recalled participating in a few internal discussions about the emoluments issues after the election. Most attorneys on the OPO project were aware that there was a Foreign Emoluments Clause and a Presidential Emoluments Clause. 25 One attorney stated his view at the time was that the purpose of the Presidential Emoluments Clause was to prevent a President from receiving additional compensation beyond his salary for performing his job as an elected official and that the clause did not apply to income from pre-existing business arrangements. Another attorney thought that there were good arguments to be made on both sides of the issues presented by the two Emoluments Clauses. In the end, they all agreed early on that there was a possible violation of the Constitution’s Emoluments Clauses.
Nonetheless, the attorneys decided to ignore the emoluments issues. They told us that the agency generally does not deal with constitutional issues (other than issues involving land condemnation or GSA officials), and consequently, the Constitution’s emoluments issues were not in GSA’s purview. In their view, OGC is only responsible for rendering an opinion on an explicit provision of the OPO lease, such as Section 37.19. Emoluments raised larger issues regarding the President’s business interests. One attorney told us that they decided not to “spin their wheels” on something that was not before them and, if necessary, they could address the issue another day.
The selection in July 2016 of Tenant’s primary owner, Donald J. Trump, as a major political party candidate for President raised the possibility for GSA that its lease of the OPO might generate questions under the Foreign Emoluments Clause and the Presidential Emoluments Clause. However, one attorney said OGC did not discuss this possibility until shortly before the November election, when news articles appeared that questioned whether Trump’s election would trigger Emoluments Clause and other conflicts of interest issues.
According to one senior attorney, the emoluments issues did not become a hot button issue until after the election. One attorney specifically recalled that emoluments did not become an issue for OGC until an article regarding the issue appeared in Government Executive on November 28, 2016 The attorneys recalled participating in a few internal discussions about the emoluments issues after the election. Most attorneys on the OPO project were aware that there was a Foreign Emoluments Clause and a Presidential Emoluments Clause. 25 One attorney stated his view at the time was that the purpose of the Presidential Emoluments Clause was to prevent a President from receiving additional compensation beyond his salary for performing his job as an elected official and that the clause did not apply to income from pre-existing business arrangements. Another attorney thought that there were good arguments to be made on both sides of the issues presented by the two Emoluments Clauses. In the end, they all agreed early on that there was a possible violation of the Constitution’s Emoluments Clauses.
Nonetheless, the attorneys decided to ignore the emoluments issues. They told us that the agency generally does not deal with constitutional issues (other than issues involving land condemnation or GSA officials), and consequently, the Constitution’s emoluments issues were not in GSA’s purview. In their view, OGC is only responsible for rendering an opinion on an explicit provision of the OPO lease, such as Section 37.19. Emoluments raised larger issues regarding the President’s business interests. One attorney told us that they decided not to “spin their wheels” on something that was not before them and, if necessary, they could address the issue another day.
Conclusion and Recommendation
GSA administers and manages the ground lease for the Old Post Office Building that the Trump Old Post Office LLC (Tenant) redeveloped into a hotel. Following the 2016 election, it was necessary for GSA to consider whether President-elect Trump’s business interests in Tenant might cause a breach of the lease under Section 37.19, Interested Parties provision, upon his becoming President.
GSA’s analysis should have considered whether the Foreign Emoluments Clause or the Presidential Emoluments Clause of the U.S. Constitution barred the President’s business interest in Tenant. We found that GSA, through its OGC and PBS, recognized that the President’s business interest in the OPO lease raised issues under the Constitution’s Emoluments Clauses that might cause a breach of the lease, but decided not to address those issues in connection with the management of the lease. We also found that OGC improperly ignored these Emoluments Clauses, even though the lease itself requires compliance with the laws of the United States, including the Constitution. In addition, we found that GSA’s unwillingness to address the constitutional issues affected its analysis of Section 37.19 and
the decision to grant Tenant an Estoppel Certificate.
GSA’s decision-making process related to Tenant’s possible breach of the lease included serious shortcomings. GSA had an obligation to uphold and enforce the Constitution. However, GSA opted not to seek any guidance from OLC and did not address the constitutional issues related to the management of the lease. As a result, GSA foreclosed an opportunity for an early resolution to these issues, including a possible solution satisfactory to all parties; and the constitutional issues surrounding the President’s business interests in the lease remain unresolved.
In interviews with the OIG, OGC has acknowledged that if a constitutional violation were later found, they would have to revisit the issue of potential breach of the OPO lease’s Interested Parties provision; however, the fact remains that GSA continues to use the language of the provision in other leases. We recommend that before continuing to use the language, GSA determine the purpose of the Interested Parties provision, conduct a formal legal review by OGC that includes consideration of the Foreign and Presidential Emoluments Clauses, and
revise the language to avoid ambiguity.
GSA administers and manages the ground lease for the Old Post Office Building that the Trump Old Post Office LLC (Tenant) redeveloped into a hotel. Following the 2016 election, it was necessary for GSA to consider whether President-elect Trump’s business interests in Tenant might cause a breach of the lease under Section 37.19, Interested Parties provision, upon his becoming President.
GSA’s analysis should have considered whether the Foreign Emoluments Clause or the Presidential Emoluments Clause of the U.S. Constitution barred the President’s business interest in Tenant. We found that GSA, through its OGC and PBS, recognized that the President’s business interest in the OPO lease raised issues under the Constitution’s Emoluments Clauses that might cause a breach of the lease, but decided not to address those issues in connection with the management of the lease. We also found that OGC improperly ignored these Emoluments Clauses, even though the lease itself requires compliance with the laws of the United States, including the Constitution. In addition, we found that GSA’s unwillingness to address the constitutional issues affected its analysis of Section 37.19 and
the decision to grant Tenant an Estoppel Certificate.
GSA’s decision-making process related to Tenant’s possible breach of the lease included serious shortcomings. GSA had an obligation to uphold and enforce the Constitution. However, GSA opted not to seek any guidance from OLC and did not address the constitutional issues related to the management of the lease. As a result, GSA foreclosed an opportunity for an early resolution to these issues, including a possible solution satisfactory to all parties; and the constitutional issues surrounding the President’s business interests in the lease remain unresolved.
In interviews with the OIG, OGC has acknowledged that if a constitutional violation were later found, they would have to revisit the issue of potential breach of the OPO lease’s Interested Parties provision; however, the fact remains that GSA continues to use the language of the provision in other leases. We recommend that before continuing to use the language, GSA determine the purpose of the Interested Parties provision, conduct a formal legal review by OGC that includes consideration of the Foreign and Presidential Emoluments Clauses, and
revise the language to avoid ambiguity.
Read more: https://www.gsaig.gov/sites/default/files/ipa-reports/JE19-002%20OIG%20EVALUATION%20REPORT-GSA%27s%20Management%20%26%20Administration%20of%20OPO%20Building%20Lease_January%2016%202019_Redacted.pdf
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