Prepared Remarks: Trump Inaugural Committee Lawsuit

Delivered by Attorney General Karl A. Racine
Trump Inaugural Committee Lawsuit Press Call
 

Good morning on what I am sure is a very slow news day. I do appreciate the press for gathering.

Today, my office is filing a lawsuit against the 58th Presidential Inaugural Committee, the Trump Organization, and the Trump International Hotel, for blatantly and unlawfully abusing nonprofit funds to enrich the Trump family.

We are bringing this suit under my office’s authority to enforce and bring actions against nonprofits that violate the law.

Nonprofits are unique corporate entities that function as public trusts.

This unique status as public trusts means they derive benefits, including the benefit of not paying taxes.

Nonprofits are, however, legally required to ensure that their funds are used for their stated public purpose—not for enriching private interest.

This prohibition on what is referred to as “private inurement” is a key and official governing principle of almost every not-for-profit organization.

That includes the Presidential Inaugural Committee—which means the Committee has a legal responsibility to avoid unreasonable, wasteful expenses.

In 2018, news reporting raised questions around the Inaugural Committee’s expenses over the 2017 Presidential Inauguration of Donald J. Trump, including regarding the Committee’s activities at the Trump International Hotel in Washington, D.C.

An independent investigation by my office has revealed that the Inaugural Committee made exorbitant and unlawful payments to the Trump Hotel to rent event space for Inaugural activities.

This came as a result of coordination between Inaugural Committee Deputy Chairman Rick Gates, Trump International Hotel management, and members of the Trump family.

In today’s lawsuit, we allege several examples of how the Inaugural Committee abused its nonprofit funds.

The Inaugural Committee staffers, including Mr. Gates, and members of the Trump family all knew the cost to rent event space at the Hotel was grossly above market value.

The Inaugural Committee paid for four days of event space use. But our investigation reveals that they only used the space on two days.

And to top it off, one of those events amounted to a private party for the Trump children.

On November 25, 2016, Mr. Gates opened discussions with Trump Hotel staff about use of the venue’s event space, including the ballroom and meeting rooms, for allegedly official Inaugural events.

The Hotel initially quoted Mr. Gates a daily rate of $450,000 for complete access to event space over eight days—an amount well in excess of even the Hotel’s own pricing guidelines at the time.

Within minutes of receiving the quote, Ramsey Ratcliffe, Jonathan Reed, and Lindsay Reynolds—Inaugural Committee staff with experience in managing events—raised alarms about the price over email.

Mr. Gates then contacted Ivanka Trump, the president’s daughter, writing that he was “…a bit worried about the optics of PIC [Presidential Inaugural Committee] paying Trump Hotel a high fee and the media making a big story out of it.”

The hotel’s General Manager, Mickael Damelincourt, offered a new quote after meeting with Mr. Gates at the Trump Hotel: four days of event space at what would eventually cost $1.03 million.

This was still far above the Hotel’s pricing guidelines, and far above market value.

Our investigation found that Stephanie Winston Wolkoff—one of the Inaugural Committee’s key event planners—noted unease with the offer during an in-person meeting with President-elect Trump and Ivanka Trump.

Ms. Wolkoff also sent a follow-up email to both Ivanka Trump and Mr. Gates to “express [her] concern.”

In this email, she warned that the Hotel’s proposal was at least twice the market rate, and noted, “In my opinion the max rental fee should be $85,000 per day.”

The Inaugural Committee accepted the contract anyway.

Our investigation also confirmed that the Committee could have hosted these events at other venues for free or reduced costs.

But these alternatives were never given serious consideration.

Beyond this wasteful spending of public funds, our investigation identified several other problematic aspects to the Inaugural Committee’s business with the Trump Hotel.

It is both hotel industry practice and the Trump Hotel’s own policy to grant guests booking large blocks of rooms free use of event space. That’s free use of event space.

However, the Trump Hotel did not provide any discounts on event space, even though the Inaugural Committee agreed to book a sizable portion of the hotel’s available guest rooms.

Further, the Inaugural Committee paid the Trump Hotel $350,000 for event space access over two days that the Committee held no official Inaugural events.

In fact, during one of the days when the Inaugural Committee actually held events, the Trump Hotel double-booked its largest ballroom with a different nonprofit organization, which planned the Presidential Inaugural Prayer Breakfast.

Although both organizations are nonprofits, the Prayer Breakfast group paid only $5,000 for use of the ballroom, while the Inaugural Committee still paid that day’s full event space rate of $175,000.

The contrast, again: $5,000 versus $175,000.

Finally, Mr. Gates, with Ivanka Trump’s knowledge, also used the nonprofit’s funds to pay for a private after-hours party for the Trump family and roughly 1,200 guests at the Hotel—ignoring the Inaugural Committee staff’s concern that it amounted to improper spending.

With this lawsuit, we are asking the court to recover the money that the Inaugural Committee improperly paid the Trump entities, and through a constructive trust, restore it to a proper, public-serving purpose.

This is OAG’s latest effort to ensure that nonprofits operating in the District spend their money for purposes that benefit their public trust.

Our office has several open nonprofit investigations, and is investing resources and hiring more attorneys to further strengthen the office’s nonprofit enforcement capacity.

Nonprofits in the District are on notice that we are looking over their shoulder for compliance with District law, and we will not hesitate to take action if they violate our statutes.

With that, I’ve concluded my opening remarks.

Thank you.