WASHINGTON, D.C. – Attorney General Karl A. Racine today announced a lawsuit against the 58th Presidential Inaugural Committee and two entities that own or control the Trump International Hotel in Washington, D.C. for abusing nonprofit funds to enrich the Trump family. In its lawsuit, the Office of the Attorney General (OAG) alleges that the Inaugural Committee, a nonprofit corporation, coordinated with the Trump family to grossly overpay for event space in the Trump International Hotel. 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. The Committee also improperly used non-profit funds to throw a private party for the Trump family costing several hundred thousand dollars. OAG’s lawsuit seeks to recover the amount improperly paid to 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,” said AG Racine. “In this case, we are seeking to recover the nonprofit funds that were improperly funneled directly to the Trump family business.”
The 58th Presidential Inaugural Committee (PIC) is a tax-exempt organization registered to do business in the District of Columbia. The PIC served as the primary vehicle for planning and organizing activities around the 2017 Presidential Inauguration of Donald J. Trump. The PIC’s bylaws prohibit it from using its funds for unreasonable expenses or to benefit private interests. The Trump Organization LLC is a New York-based corporation founded and run by the Trump family, with major real estate interests that include the Trump Hotel in the District. President Trump and his family are the primary beneficiaries of the Trump Organization’s profits.
OAG’s investigation found that Rick Gates, a Trump associate tapped to serve as Deputy Chairman of the PIC, personally managed discussions with the Trump Hotel about using event space, including the ballroom and meeting rooms, for allegedly official Inaugural events. As part of its investigation, OAG discovered that one of the PIC’s key event planners, Stephanie Winston Wolkoff, raised concerns about the Trump Hotel’s event pricing with President-elect Trump, Gates, and Ivanka Trump. This included issuing a written warning to Gates and Ivanka Trump that the Hotel’s final price proposal was at least twice the market rate. Despite this warning, Gates allowed the PIC to enter into a contract with the Trump Hotel for four days of event space at a total cost of $1.03 million, an amount far above even the Hotel’s own internal pricing guidelines.
OAG also found that the Trump Hotel went against industry practice and its own policy in refusing to offer the PIC discounted event space, even though the PIC arranged to book a sizable portion of the hotel’s available guest rooms. Further, on one of the days the PIC reserved event space, the Hotel double-booked its largest ballroom with a different organization—the Presidential Inaugural Prayer Breakfast. Although both organizations are nonprofits, the Prayer Breakfast paid only $5,000 for use of the ballroom, while the PIC still paid the day’s full event space rate of $175,000. Gates, with Ivanka Trump’s knowledge, also allowed the PIC’s nonprofit funds to pay for a private after-hours party for the Trump family at their Hotel, even after PIC staff initially canceled this event over concerns of improper use of funds. Gates allowed the event to move forward after Trump Hotel staff complained that canceling it would hurt the Hotel’s bottom line.
The Office of the Attorney General has the authority to oversee nonprofit business activities taking place in the District of Columbia. In its complaint, OAG alleges that the PIC and the relevant Trump entities violated District law by:
- Abusing nonprofit funds to enrich the Trump family: The PIC grossly misused its nonprofit funds to make an unfair and unjustified payment of $1.03 million to the Trump Hotel, even after senior Committee staff and members of the Trump family were warned that the charges were unreasonable. In fact, the Trump Hotel ended up charging rental rates that were well in excess of its own pricing guidelines. The PIC’s payment flowed directly to the Trump family, flouting the PIC’s bylaws prohibiting the use of its funds for private enrichment.
- Failing to seek out fair market value for event space and services rendered: The PIC contracted with several other event spaces and hotels in the District for various Inaugural purposes. Some of these contracts offered use of event space at a discounted rate, or at no charge after a catering minimum. However, the PIC did not seriously consider using these spaces to host the events planned for the Trump Hotel, nor did it seek competing offers.
- Using nonprofit funds to throw a private party for President Trump’s family: The PIC paid at least $300,000 to use event space in the Trump Hotel for a private reception for the President’s children—Donald, Jr., Ivanka, and Eric—on the evening of January 20, 2017. Rick Gates explained in an email to Ivanka Trump, “There will be an after party at the OPO [Trump Hotel] following the inaugural balls on Friday. DJT is not expected to attend but was more for you, Don and Eric.” Event staff within the PIC recognized this would not be a proper use of PIC funds and had tried to cancel this event, but Gates and the Trump family went forward with the event anyway.
A copy of the complaint is available at: https://oag.dc.gov/sites/default/files/2020-01/Trump-PIC-Complaint.pdf
A copy of the supplemental investigation documents is available at: http://bit.ly/Trump-PIC-Complaint-Supporting-Documents
OAG is asking the court to impose a constructive trust over the amount improperly paid to the Trump Hotel. The court can then direct this money to suitable nonprofit entities dedicated to promoting civic engagement.
OAG’s Nonprofit Enforcement Work
This lawsuit is OAG’s latest effort to ensure that nonprofits operating in the District spend their money for purposes that benefit the public, and to hold these organizations accountable when they break District law. Under AG Racine’s leadership, OAG has invested resources and hired more attorneys to expand this nonprofit enforcement capacity. Already, OAG has litigated and resolved actions against several District charter schools, and the president of a nonprofit that owned an affordable housing building, for mismanagement of nonprofit funds. The office has also taken action against Howard Theatre Restoration, Inc., for failing to properly obtain financial audits. Several additional investigations remain open.
If you suspect that a nonprofit doing business in the District of Columbia is violating District law, please contact the Office the Attorney General at (202) 727-3400.