[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
LANDLORD AND TENANT: THE TRUMP ADMINISTRATION'S OVERSIGHT OF THE TRUMP
INTERNATIONAL HOTEL LEASE
=======================================================================
(116-33)
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 25, 2019
__________
Printed for the use of the
Committee on Transportation and Infrastructure
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online at: https://www.govinfo.gov/committee/house-
transportation?path=/browsecommittee/chamber/house/committee/
transportation
__________
U.S. GOVERNMENT PUBLISHING OFFICE
41-130 PDF WASHINGTON : 2020
--------------------------------------------------------------------------------------
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
PETER A. DeFAZIO, Oregon, Chair
SAM GRAVES, Missouri ELEANOR HOLMES NORTON,
DON YOUNG, Alaska District of Columbia
ERIC A. ``RICK'' CRAWFORD, Arkansas EDDIE BERNICE JOHNSON, Texas
BOB GIBBS, Ohio ELIJAH E. CUMMINGS, Maryland
DANIEL WEBSTER, Florida RICK LARSEN, Washington
THOMAS MASSIE, Kentucky GRACE F. NAPOLITANO, California
MARK MEADOWS, North Carolina DANIEL LIPINSKI, Illinois
SCOTT PERRY, Pennsylvania STEVE COHEN, Tennessee
RODNEY DAVIS, Illinois ALBIO SIRES, New Jersey
ROB WOODALL, Georgia JOHN GARAMENDI, California
JOHN KATKO, New York HENRY C. ``HANK'' JOHNSON, Jr.,
BRIAN BABIN, Texas Georgia
GARRET GRAVES, Louisiana ANDRE CARSON, Indiana
DAVID ROUZER, North Carolina DINA TITUS, Nevada
MIKE BOST, Illinois SEAN PATRICK MALONEY, New York
RANDY K. WEBER, Sr., Texas JARED HUFFMAN, California
DOUG LaMALFA, California JULIA BROWNLEY, California
BRUCE WESTERMAN, Arkansas FREDERICA S. WILSON, Florida
LLOYD SMUCKER, Pennsylvania DONALD M. PAYNE, Jr., New Jersey
PAUL MITCHELL, Michigan ALAN S. LOWENTHAL, California
BRIAN J. MAST, Florida MARK DeSAULNIER, California
MIKE GALLAGHER, Wisconsin STACEY E. PLASKETT, Virgin Islands
GARY J. PALMER, Alabama STEPHEN F. LYNCH, Massachusetts
BRIAN K. FITZPATRICK, Pennsylvania SALUD O. CARBAJAL, California,
JENNIFFER GONZALEZ-COLON, Vice Chair
Puerto Rico ANTHONY G. BROWN, Maryland
TROY BALDERSON, Ohio ADRIANO ESPAILLAT, New York
ROSS SPANO, Florida TOM MALINOWSKI, New Jersey
PETE STAUBER, Minnesota GREG STANTON, Arizona
CAROL D. MILLER, West Virginia DEBBIE MUCARSEL-POWELL, Florida
GREG PENCE, Indiana LIZZIE FLETCHER, Texas
COLIN Z. ALLRED, Texas
SHARICE DAVIDS, Kansas
ABBY FINKENAUER, Iowa
JESUS G. ``CHUY'' GARCIA, Illinois
ANTONIO DELGADO, New York
CHRIS PAPPAS, New Hampshire
ANGIE CRAIG, Minnesota
HARLEY ROUDA, California
------ 7
Subcommittee on Economic Development, Public Buildings, and Emergency
Management
DINA TITUS, Nevada, Chair
MARK MEADOWS, North Carolina DEBBIE MUCARSEL-POWELL, Florida
GARY J. PALMER, Alabama SHARICE DAVIDS, Kansas
JENNIFFER GONZALEZ-COLON, ELEANOR HOLMES NORTON,
Puerto Rico District of Columbia
CAROL D. MILLER, West Virginia HENRY C. ``HANK'' JOHNSON, Jr.,
GREG PENCE, Indiana Georgia
SAM GRAVES, Missouri (Ex Officio) JOHN GARAMENDI, California
ANTHONY G. BROWN, Maryland
LIZZIE FLETCHER, Texas, Vice Chair
PETER A. DeFAZIO, Oregon (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ v
STATEMENTS OF MEMBERS OF THE COMMITTEE
Hon. Dina Titus, a Representative in Congress from the State of
Nevada, and Chairwoman, Subcommittee on Economic Development,
Public Buildings, and Emergency Management:
Opening statement............................................ 1
Prepared statement........................................... 3
Hon. Mark Meadows, a Representative in Congress from the State of
North Carolina, and Ranking Member, Subcommittee on Economic
Development, Public Buildings, and Emergency Management:
Opening statement............................................ 4
Prepared statement........................................... 6
Hon. Peter A. DeFazio, a Representative in Congress from the
State of Oregon, and Chair, Committee on Transportation and
Infrastructure:
Opening statement............................................ 7
Prepared statement........................................... 9
Hon. Sam Graves, a Representative in Congress from the State of
Missouri, and Ranking Member, Committee on Transportation and
Infrastructure:
Opening statement............................................ 10
Prepared statement........................................... 11
WITNESSES
Panel 1
Dan Mathews, Commissioner, Public Buildings Service, U.S. General
Services Administration:
Oral statement............................................... 12
Prepared statement........................................... 13
Hon. Carol Fortine Ochoa, Inspector General, U.S. General
Services Administration:
Oral statement............................................... 15
Prepared statement........................................... 17
Panel 2
Michael A. Foster, Legislative Attorney, Congressional Research
Service:
Oral statement............................................... 62
Prepared statement........................................... 64
Hans A. von Spakovsky, Senior Legal Fellow, Edwin Meese III
Center for Legal and Judicial Studies, The Heritage Foundation:
Oral statement............................................... 76
Prepared statement........................................... 78
Liz Hempowicz, Director of Public Policy, Project on Government
Oversight:
Oral statement............................................... 83
Prepared statement........................................... 84
Walter M. Shaub, Jr., Senior Advisor, Citizens for Responsibility
and Ethics in Washington, and Former Director, U.S. Office on
Government Ethics:
Oral statement............................................... 90
Prepared statement........................................... 92
SUBMISSIONS FOR THE RECORD
Submissions for the Record by Hon. Dina Titus:
GSA Public Buildings Service Memo of March 29, 2019, to
Inspector General.......................................... 107
GSA Office of Inspector General Memo of September 6, 2019, to
GSA Deputy Administrator................................... 109
United States of America v. 3,726 Rentable Square Feet of Office
Space, et al., 4:17-cv-02034-RBH (D.S.C. Florence Div.),
Submitted for the Record by Hon. Steve Cohen................... 111
Policy Excerpt, ``Trump--Donation of Profits from Foreign
Government Patronage,'' Trump Organization, Submitted for the
Record by Hon. John Garamendi.................................. 113
Submissions for the Record by Hon. Mark Meadows:
``Report of Material Provisions of the Old Post Office
Development Agreement,'' GSA, June 2013.................... 113
Photos....................................................... 116
Joint Statement of Professor Josh Blackman and Lecturer Seth
Barrett Tillman............................................ 117
``Business Transactions and President Trump's `Emoluents'
Problem,'' by Seth Barrett Tillman, Harvard Journal of Law
and Public Policy, Vol. 40, No. 3, 2017.................... 120
Brief of Amici Curiae Scholar Seth Barrett Tillman in
District of Columbia and State of Maryland v. Donald J.
Trump, in his individual capacity, No. 18-2488 (U.S. 4th
Cir.)...................................................... 121
APPENDIX
Questions from Hon. Peter A. DeFazio and Hon. Dina Titus to Dan
Mathews, Commissioner, Public Buildings Service, U.S. General
Services Administration........................................ 123
Questions from Hon. Mark Meadows to Dan Mathews, Commissioner,
Public Buildings Service, U.S. General Services Administration. 127
Questions from Hon. John Garamendi to Dan Mathews, Commissioner,
Public Buildings Service, U.S. General Services Administration. 128
Questions from Hon. Sharice Davids and Hon. Steve Cohen to Dan
Mathews, Commissioner, Public Buildings Service, U.S. General
Services Administration........................................ 128
Questions from Hon. Lizzie Fletcher to Dan Mathews, Commissioner,
Public Buildings Service, U.S. General Services Administration. 129
Questions from Hon. Mark Meadows to Hon. Carol Fortine Ochoa,
Inspector General, U.S. General Services Administration........ 130
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
September 20, 2019
SUMMARY OF SUBJECT MATTER
TO: LMembers, Subcommittee on Economic Development,
Public Buildings, and Emergency Management
FROM: LStaff, Subcommittee on Economic Development, Public
Buildings, and Emergency Management
RE: LSubcommittee Hearing Title: ``Landlord and
Tenant: The Trump Administration's Oversight of the Trump
International Hotel Lease''
_______________________________________________________________________
PURPOSE
The Subcommittee on Economic Development, Public Buildings,
and Emergency Management will meet on Wednesday, September 25,
2019, at 10:00 a.m. in 2167 Rayburn House Office Building, for
a hearing titled ``Landlord and Tenant: The Trump
Administration's Oversight of the Trump International Hotel
Lease.'' The purpose of the hearing is to examine the Old Post
Office Building lease. Witnesses include representatives from
the U.S. General Services Administration, the U.S. General
Services Administration Office of the Inspector General, the
Congressional Research Service, the Project on Government
Oversight, Citizens for Ethics and Responsibility in
Washington, and the Heritage Foundation.
BACKGROUND
FEDERAL OUTLEASING
The U.S. General Services Administration (GSA) is
authorized to lease vacant or underutilized federally-owned
space to private and non-federal entities.\1\ GSA can also use
its leasing authority to allow for retail or limited-scope
use.\2\ Depending on the facts and circumstances of the lease,
GSA can use the following authorities for this ``outleasing:''
the National Historic Preservation Act (NHPA),\3\ the Federal
Property and Administrative Services Act,\4\ the Cooperative
Use Act,\5\ and the Consolidated Appropriations Act, 2005.\6\
The National Historic Preservation Act (NHPA) authorizes GSA to
lease or exchange historic property provided that GSA can
ensure its preservation.\7\ GSA has used its authority under
the NHPA to outlease two underutilized federal buildings for
use as hotels--the Tariff Building and the Old Post Office
Building, both of which are located in downtown Washington,
D.C.\8\
---------------------------------------------------------------------------
\1\ 40 U.S.C. Sec. 581(d) (2017).
\2\ 40 USC 581(h) (2017).
\3\ 54 U.S.C. Sec. Sec. 306121, 306122 (2017).
\4\ 40 U.S.C. Sec. Sec. 543, 581(d) (2017).
\5\ 40 U.S.C. Sec. 581(h) (2017).
\6\ Pub. L. No. 108-447, Div. H, Title IV, Sec. 412 (2005).
\7\ 54 U.S.C. Sec. Sec. 306121, 306122 (2017).
\8\ ``Federal Real Property: GSA Outleasing and Restrictions on
Participation of Elected Officials,'' U.S. Government Accountability
Office (GAO), GAO-18-603R, July 25, 2018, accessed here: https://
www.gao.gov/assets/700/693396.pdfhttps://www.gao.gov/assets/700/
693396.pdf.
---------------------------------------------------------------------------
OLD POST OFFICE BUILDING HISTORY
The Old Post Office Building is a unique, historic building
located at 1100 Pennsylvania Avenue N.W., and owned by the GSA.
The building was completed in 1899 and served as the main post
office for the Nation's capital. It was placed on the Historic
Register in 1973. After the main post office closed, the Old
Post Office Building was used to house federal agency offices
and limited retail space. The building was underutilized for
decades. Attempts by GSA to introduce amenities failed and the
federal government lost money year after year. For example, in
2007, the building's rental receipts of $5.4 million were far
lower than the total expenses of the property of $11.9 million,
resulting in a loss of $6.1 million to the federal government.
The House Transportation and Infrastructure Committee held
multiple hearings related to the Old Post Office Building and
passed legislation to require GSA to find a private partner to
redevelop the site.\9\ Until 2016, the Old Post Office Building
was one of the oldest buildings in Washington, D.C. that had
yet to be rehabilitated and preserved.
---------------------------------------------------------------------------
\9\ Old Post Office Redevelopment Act of 2008, P.L. 110-359 (2008).
---------------------------------------------------------------------------
OLD POST OFFICE BUILDING REDEVELOPMENT
In 2008, Congress enacted H.R. 5001, the ``Old Post Office
Redevelopment Act of 2008,'' sponsored by Congresswoman Eleanor
Holmes Norton, which became P.L. 110-359 when signed into
law.\10\ The Act had bipartisan support and directed GSA to
move forward with the redevelopment of the Old Post Office
Building. In March 2011, GSA issued a Request for Proposals
(RFP) for the redevelopment of the Old Post Office using
authority under Section 111 of the NHPA. On February 7, 2012,
GSA announced the selection of the Trump Organization as the
preferred developer for the Old Post Office.\11\ The Trump
Organization's proposal called for redeveloping the Old Post
Office building into a luxury hotel.\12\
---------------------------------------------------------------------------
\10\ P.L. 110-359 (2008).
\11\ Press Release, ``GSA Selects the Trump Organization as
Preferred Developer for DC's Old Post Office,'' General Services
Administration, Feb. 7, 2012, accessed here: https://www.gsa.gov/about-
us/newsroom/news-releases/gsa-selects-the-trump-organization-as-
preferred-developer-for-dcs-old-post-office.
\12\ The Trump Organization won the competition and submitted the
original proposal. Trump Old Post Office LLC is the party to the lease
and was created after the Trump Organization won the competition.
---------------------------------------------------------------------------
OLD POST OFFICE LEASE AGREEMENT
Pursuant to the Old Post Office Redevelopment Act of 2008,
GSA reported to the Committee on the proposed redevelopment for
a 30-day congressional review period. The August 5, 2013, lease
agreement was signed by Donald J. Trump, for Trump Old Post
Office LLC (as tenant) with GSA (as landlord) for control over
and the redevelopment of the Old Post Office Building.\13\
Trump Old Post Office LLC is a subsidiary of the Trump
Organization.\14\ The Trump Organization invested $200 million
to redevelop the Old Post Office Building into the 271-room
Trump International Hotel.\15\ The lease agreement extends for
60 years to the year 2076 from the date of the hotel's grand
opening on October 26, 2016.\16\ The federal government is
entitled to a monthly rental payment as well as a percentage of
profits each year if annual profits exceed the cost of the
annual rental payments.\17\
---------------------------------------------------------------------------
\13\ Ground Leaser by & between the U.S. (as ``Landlord'') & Trump
Old Post Office LLC (as ``Tenant''), Lease No.: GS-LS-11-1307 (Aug. 5,
2013).
\14\ Trump Old Post Office LLC is a Delaware-based corporation at
the time of lease signing owned by Mr. Trump and his three adult
children Ivanka Trump, Donald J. Trump, Jr., and Eric Trump.
\15\ Press Release, ``GSA and Trump Organization Reach Deal on Old
Post Office Lease,'' General Services Administration, June 5, 2013,
accessed here: https://www.gsa.gov/about-us/newsroom/news-releases/gsa-
and-trump-organization-reach-deal-on-old-post-office-lease.
\16\ See ``Old Post Office Building,'' General Services
Administration, accessed here: https://www.gsa.gov/real-estate/gsa-
properties/visiting-public-buildings/old-post-office-building (last
reviewed Sept. 20, 2019).
\17\ Ground Leaser by & between the U.S. (as ``Landlord'') & Trump
Old Post Office LLC (as ``Tenant''), Lease No.: GS-LS-11-1307 (Aug. 5,
2013).
---------------------------------------------------------------------------
The lease agreement contains section 37.19 which 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,
provided, however, that this provision shall not be construed
as extended to any Person who may be a shareholder or other
beneficial owner of any publicly held corporation or other
entity, if this Lease is for the general benefit of such
corporation or other entity.\18\
---------------------------------------------------------------------------
\18\ Ground Leaser by & between the U.S. (as ``Landlord'') & Trump
Old Post Office LLC (as ``Tenant''), Lease No.: GS-LS-11-1307 (Aug. 5,
2013).
The federal government's outlease of the Tariff Building in
Washington, D.C., now the Hotel Monaco, includes an identical
provision.\19\
---------------------------------------------------------------------------
\19\ ``Federal Real Property: GSA Outleasing and Restrictions on
Participation of Elected Officials,'' U.S. Government Accountability
Office (GAO), GAO-18-603R, July 25, 2018, accessed here: https://
www.gao.gov/assets/700/693396.pdf.
---------------------------------------------------------------------------
TRUMP INTERNATIONAL HOTEL CONSTRUCTION
Under the lease agreement, the Trump Old Post Office LLC
gained access to the Old Post Office Building in May 2014 for
construction activities. The ceremonial groundbreaking for the
project took place on July 23, 2014.\20\ GSA performed
oversight of compliance with the lease and of construction
activities. The Trump International Hotel partially opened on
September 12, 2016,\21\ and officially opened on October 26,
2016.\22\
---------------------------------------------------------------------------
\20\ ``Transformation of Washington's Old Post Office Underway,''
General Services Administration, July 23, 2014, accessed here: https://
www.gsa.gov/blog/2014/07/23/transformation-of-washingtons-old-post-
office-underway.
\21\ Ian Simpson, ``Trump luxury hotel opens just blocks from the
White House,'' Reuters, Sept. 12, 2016, accessed here: https://
www.reuters.com/article/us-usa-trump-hotel/trump-luxury-hotel-opens-
just-blocks-from-the-white-house-idUSKCN11I25L.
\22\ See Trump International Hotel Certificate of Occupancy [on
file with Subcommittee].
---------------------------------------------------------------------------
ISSUES
TRUMP OLD POST OFFICE LLC BUSINESS STRUCTURE CHANGES
After President Donald J. Trump's presidential
inauguration, Trump Old Post Office LLC sent a letter to GSA
stating that President Trump transferred his interests in Trump
Old Post Office LLC to DJT Holdings Managing Member LLC, a
revocable trust.\23\ On March 20, 2017, Trump Old Post Office
LLC requested a certificate stating that Trump Old Post Office
LLC was in full compliance with Section 37.19 of the lease and
that the lease was valid.\24\ On March 23, 2017, GSA's
contracting officer for the lease issued an Estoppel
Certificate and accompanying letter stating that Trump Old Post
Office LLC was ``in full compliance with Section 37.19 and,
accordingly, the Lease is valid and in full force and effect.''
\25\
---------------------------------------------------------------------------
\23\ ``Evaluation of GSA's Management and Administration of the Old
Post Office Building Lease,'' Office of Inspector General (OIG),
General Services Administration (GSA), JE19-002, January 16, 2019,
accessed here: https://www.gsaig.gov/content/evaluation-gsas-
management-and-administration-old-post-office-building-lease.
\24\ Ibid.; see Letter from Kevin Terry to Trump Old Post Office
LLC (Mar. 23, 2017), accessed here: https://www.gsa.gov/cdnstatic/
Contracting_Officer_Letter_March_23_2017_
Redacted_Version.pdf.
\25\ Letter from Kevin Terry to Trump Old Post Office LLC (Mar. 23,
2017), at 1, accessed here: https://www.gsa.gov/cdnstatic/
Contracting_Officer_Letter_March_23_2017_Redacted_
Version.pdf.
---------------------------------------------------------------------------
GSA OIG JANUARY 2019 REPORT
In January 2019, the GSA OIG issued a report titled:
``Evaluation of GSA's Management and Administration of the Old
Post Office Building Lease.'' \26\ The OIG investigation
focused on GSA's decision-making process in determining whether
a breach of lease existed as a result of the election and
inauguration of President Trump. The OIG interviewed over two
dozen GSA personnel and reviewed GSA documents and emails
related to the lease.\27\
---------------------------------------------------------------------------
\26\ ``Evaluation of GSA's Management and Administration of the Old
Post Office Building Lease,'' Office of Inspector General (OIG),
General Services Administration (GSA), JE19-002, January 16, 2019,
accessed here: https://www.gsaig.gov/content/evaluation-gsas-
management-and-administration-old-post-office-building-lease.
\27\ Id. at 4.
---------------------------------------------------------------------------
The OIG report made three findings:
GSA did not address issues related to the
Constitution's Emoluments \28\ clauses ``in connection with
management of the lease;'' \29\
---------------------------------------------------------------------------
\28\ See Appendix A for a Congressional Research Service (CRS)
report on the Constitutional Emoluments clauses.
\29\ ``Evaluation of GSA's Management and Administration of the Old
Post Office Building Lease,'' Office of Inspector General (OIG),
General Services Administration (GSA), JE19-002, January 16, 2019, at
1, accessed here: https://www.gsaig.gov/content/evaluation-gsas-
management-and-administration-old-post-office-building-lease.
---------------------------------------------------------------------------
``the decision to exclude the emoluments
decisions from GSA's consideration of the lease was improper
because GSA, like all government agencies, has an obligation to
uphold and enforce the Constitution; and because the lease,
itself, requires that consideration;'' \30\ and
``GSA's unwillingness to address the
constitutional issues affected its analysis of Section 37.19 of
the lease that led to GSA's conclusion that Tenant's business
structure satisfied the terms and conditions of the lease. As a
result, GSA foreclosed an early resolution of these issues,
including a possible solution satisfactory to all parties, and
the uncertainty over the lease remains unresolved.'' \31\
---------------------------------------------------------------------------
\30\ Ibid.
\31\ Ibid.
The OIG report made one recommendation to GSA: ``before
continuing to use the [Section 37.19] language, GSA determine
the purpose of the Interested Parties provision, conduct a
formal legal review by [GSA Office of General Counsel] OGC that
includes consideration of the Foreign and Presidential
Emoluments Clauses, and revise the language to avoid
ambiguity.'' \32\ The GSA in its formal response to the OIG
concurred with the recommendation.\33\ The IG's office has not
yet closed out this recommendation.
---------------------------------------------------------------------------
\32\ Id. at 24.
\33\ Id. at Appendix B.
---------------------------------------------------------------------------
WITNESS LIST
PANEL I:
Mr. Daniel Mathews, Public Buildings
Commissioner, U.S. General Services Administration
The Honorable Carol F. Ochoa, Inspector General,
U.S. General Services Administration
PANEL II:
Mr. Michael A. Foster, Legislative Attorney,
American Law Division, Congressional Research Service
Mr. Hans A. von Spakovsky, Senior Legal Fellow,
Edwin Meese III Center for Legal and Judicial Studies, The
Heritage Foundation
Ms. Liz Hempowicz, Director of Public Policy,
Project on Government Oversight (POGO)
Mr. Walter Shaub, Senior Advisor, Citizens for
Responsibility and Ethics in Washington (CREW), and Former
Director, U.S. Office of Government Ethics (OGE)
APPENDIX A
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Updated August 23, 2019.
The Emoluments Clauses of the U.S. Constitution
Recent litigation involving President Trump has raised a
number of legal issues concerning formerly obscure
constitutional provisions that prohibit the acceptance or
receipt of ``emoluments'' in certain circumstances. This In
Focus provides an overview of these constitutional provisions,
highlighting several unsettled legal areas concerning their
meaning and scope, and reviewing the status of ongoing
litigation against President Trump based on alleged violations
of the Emoluments Clauses.
THE CONSTITUTIONAL PROVISIONS
The Constitution mentions emoluments in three provisions,
each sometimes referred to as the ``Emoluments Clause'':
The Foreign Emoluments Clause (art. I, Sec. 9,
cl. 8): ``[N]o Person holding any Office of Profit or Trust
under [the United States], shall, without the Consent of the
Congress, accept of any present, Emolument, Office, or Title,
of any kind whatever, from any King, Prince, or foreign
State.''
The Domestic Emoluments Clause (a.k.a. the
Presidential Emoluments Clause) (art. II, Sec. 1, cl. 7):
``The President shall, at stated Times, receive for his
Services, a Compensation which shall neither be encreased nor
diminished during the Period for which he shall have been
elected, and he shall not receive within that Period any other
Emolument from the United States, or any of them.''
The Ineligibility Clause (art. I, Sec. 6, cl.
2): ``No Senator or Representative shall, during the Time for
which he was elected, be appointed to any civil Office under
the Authority of the United States, which shall have been
created, or the Emoluments whereof shall have been encreased
during such time; and no Person holding any Office under the
United States, shall be a Member of either House during his
Continuance in Office.''
PURPOSES OF THE EMOLUMENTS CLAUSES
Each of the Emoluments Clauses has a distinct, but related,
purpose. The purpose of the Foreign Emoluments Clause is to
prevent corruption and limit foreign influence on federal
officers. The Clause grew out of the Framers' experience with
the European custom of gift-giving to foreign diplomats, which
the Articles of Confederation prohibited. Following that
precedent, the Foreign Emoluments Clause prohibits federal
officers from accepting foreign emoluments without
congressional consent.
The purpose of the Domestic Emoluments Clause is to
preserve the President's independence. Under the Clause,
Congress may neither increase nor decrease the President's
compensation during his term, preventing the legislature from
using its control over the President's salary to exert
influence over him. To further preserve presidential
independence, the Clause prohibits a sitting President from
receiving emoluments from federal or state governments, except
for his fixed salary.
The purpose of the Ineligibility Clause is to preserve the
separation of powers and prevent executive influence on the
legislature (and vice versa). To that end, the Clause prohibits
federal officers from simultaneously serving as Members of
Congress. Moreover, a Member of Congress may not hold an office
if it was established during his tenure or if the emoluments of
that office were increased during his tenure.
OFFICERS SUBJECT TO THE EMOLUMENTS CLAUSES
In terms of the persons to whom they apply, the scope of
the Domestic Emoluments Clause and the Ineligibility Clause is
clear from the text of the Constitution: The Domestic
Emoluments Clause applies to the President, and the
Ineligibility Clause applies to Members of Congress.
The scope of the Foreign Emoluments Clause is less clear.
By its terms, the Clause applies to any person holding an
``Office of Profit or Trust under'' the United States. The
prevailing view of the Clause is that this language reaches
only federal, and not state, officeholders. According to the
Department of Justice's Office of Legal Counsel (OLC), which
has a developed body of opinions on the Foreign Emoluments
Clause, offices ``of profit'' include those that receive a
salary, while offices ``of trust'' are those that require
discretion, experience, and skill.
There is disagreement, however, over whether elected
federal officers, such as the President, are subject to the
Foreign Emoluments Clause. Some legal scholars have argued
that, as a matter of original public meaning, the Foreign
Emoluments Clause reaches only appointed officers (and not
elected officials). While there is some historical evidence in
support of this view, other evidence may point in the opposite
direction. Moreover, the OLC has generally presumed that the
Foreign Emoluments Clause applies to the President, and a
recent district court opinion came to the same conclusion.
THE MEANING OF THE TERM ``EMOLUMENT''
Black's Law Dictionary defines an ``emolument'' as an
``advantage, profit, or gain received as a result of one's
employment or one's holding of office.'' There is significant
debate as to precisely what constitutes an emolument within the
meaning of the Foreign and Domestic Emoluments Clauses,
particularly as to whether it includes private, arm's-length
market transactions. The only two courts to decide this issue
adopted a broad definition of ``Emolument'' as reaching any
benefit, gain, or advantage, including profits from private
market transactions not arising from an office or employ.
STANDING TO ENFORCE AN ALLEGED VIOLATION OF THE EMOLUMENTS CLAUSES
Whether the Emoluments Clauses may be enforced through
civil litigation is an open question. The doctrine of standing
presents a significant limitation on the ability of public
officials or private parties to seek judicial enforcement of
the Emoluments Clauses. Standing is a threshold constitutional
and prudential issue that concerns whether the person bringing
suit has a legal right to a judicial ruling on the issues he
has raised. Standing is grounded in Article III of the U.S.
Constitution, which limits the exercise of federal judicial
power to ``cases'' and ``controversies.''
To establish the standing requirements of Article III, a
plaintiff must identify a personal injury (referred to as an
``injury-in-fact'') that is actual or imminent, concrete, and
particularized. The injury must additionally be ``fairly
traceable'' to allegedly unlawful conduct of the defendant and
``likely to be redressed by the requested relief.''
Beyond these constitutional standing requirements, courts
have at times recognized a set of prudential principles that
are relevant to the standing inquiry. Because such limits are
not constitutionally mandated, Congress may modify them if it
does so expressly. In general, prudential principles require
that (1) a plaintiff assert her own legal rights and interests
(as opposed to those of a third party); (2) the plaintiff's
complaint fall within the ``zone of interests'' covered by the
legal provision at issue; and (3) the plaintiff may not assert
what amounts to a ``generalized grievance[]'' that is more
appropriately addressed by the representative branches of
government.
Different plaintiffs in ongoing Emoluments Clause cases
have relied on various theories to support standing, with mixed
results. Private parties, including business competitors and
government ethics watchdog groups, have asserted injuries in
the form of increased competition in their industries and
diversion of resources to combat the alleged constitutional
violations. States have alleged injury to proprietary interests
connected to ownership of competing businesses and harm to
their ``quasi-sovereign'' interests in the federal system,
among other things. Some Members of Congress have relied on the
alleged deprivation of their opportunity to vote on the
acceptance of emoluments under the Foreign Emoluments Clause.
SIGNIFICANT LITIGATION INVOLVING THE EMOLUMENTS CLAUSES
Until recently, there had been no substantial litigation
concerning the Emoluments Clauses. However, since 2016, a
number of private parties, state attorneys general, and Members
of Congress have filed lawsuits against President Trump
alleging that his retention of certain business and financial
interests during his presidency--and his failure to seek
congressional approval of interests relating to foreign
governments--violate the Foreign and Domestic Emoluments
Clauses. Three major federal lawsuits concerning the Emoluments
Clauses have been filed.
In Citizens for Responsibility and Ethics in Washington
(CREW) v. Trump, No. 17-CV-458 (S.D.N.Y.), a nonprofit
government ethics watchdog, along with various organizations
and individuals associated with the food services or
hospitality industries in New York and Washington, DC, alleges
violations of the Domestic and Foreign Emoluments Clauses
through President Trump's receipt of payments from the federal
government and various foreign government officials at
different Trump Organization properties. For example,
plaintiffs allege that the Trump International Hotel's
continuing lease with the General Services Administration
violates the Domestic Emoluments Clause, and that payments for
services made to the Trump International Hotel by agents of
foreign governments violate the Foreign Emoluments Clause.
President Trump moved to dismiss the suit, asserting that the
plaintiffs lack standing and that the term ``emoluments'' does
not extend to arm's-length commercial transactions. The
district court dismissed the case for lack of standing on
December 21, 2017. The plaintiffs' appeal on the standing
issues is currently pending before the Second Circuit.
In District of Columbia v. Trump, No. 17-1596 (D. Md.), the
District of Columbia and the State of Maryland sued President
Trump, alleging violations of the Foreign and Domestic
Emoluments Clauses similar to those in the CREW lawsuit.
President Trump moved to dismiss based on standing and a
failure to state a claim. On March 28, 2018, the district court
ruled that the plaintiffs had standing, limited to injuries in
the District of Columbia, based on alleged injuries related to
the Trump International Hotel. On July 25, 2018, the court
denied President Trump's motion to dismiss, holding that
plaintiffs had stated a claim because the President was subject
to the Foreign Emoluments Clause and the term ``emolument''
reached any ``profit, gain, or advantage, of more than de
minimis value, received by [the President], directly or
indirectly, from foreign, the federal, or domestic
governments.'' These rulings were appealed to the Fourth
Circuit, which issued a decision on July 10, 2019, reversing
the district court on the standing issue. The Fourth Circuit
panel concluded that the plaintiffs lacked standing to pursue
their claims and remanded the case with instructions to
dismiss. However, the plaintiffs may still petition for
rehearing by the full Fourth Circuit or seek review from the
Supreme Court.
Finally, in Blumenthal, et al. v. Trump, No. 17-1154
(D.D.C.), 201 Members of Congress have alleged violations of
the Foreign Emoluments Clause through the President's receipt
of foreign-government payments at Trump properties, foreign
licensing fees, and regulatory benefits, among other things.
President Trump moved to dismiss on the grounds that the
plaintiffs lack standing and that he has not received any
prohibited ``emoluments.'' On September 28, 2018, the district
court ruled that the plaintiffs have standing, reasoning that
these Members of Congress suffered an injury-in-fact through
the deprivation of a voting opportunity under the Foreign
Emoluments Clause. On April 30, 2019, the district court held
that the plaintiffs had stated a claim against the President,
adopting a broad definition of the term ``Emolument'' as
reaching any gain, profit, or advantage. After the district
court denied the President's request for an immediate appeal,
the President petitioned the D.C. Circuit, requesting that it
stay the district court's proceedings and review its rulings.
On July 19, 2019, the D.C. Circuit denied the petition but
suggested that the district court had abused its discretion by
not permitting an immediate appeal. On August 21, 2019, the
district court certified an immediate appeal and stayed the
case pending appeal to the D.C. Circuit.
Kevin J. Hickey, [email protected], 7-2070
Michael A. Foster, [email protected], 7-7202
LANDLORD AND TENANT: THE TRUMP ADMINISTRATION'S OVERSIGHT OF THE TRUMP
INTERNATIONAL HOTEL LEASE
----------
WEDNESDAY, SEPTEMBER 25, 2019
House of Representatives,
Subcommittee on Economic Development, Public
Buildings, and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 10:04 a.m., in
room 2167, Rayburn House Office Building, Hon. Dina Titus
(Chairwoman of the subcommittee) presiding.
Ms. Titus. The subcommittee will come to order.
I ask unanimous consent that the chair be authorized to
declare a recess at any point.
I also ask unanimous consent that members of the full
committee be permitted to sit in the subcommittee.
Without objection, so ordered.
We will now proceed with opening statements.
I wish you all a good morning, and welcome to the fourth
hearing of the Economic Development, Public Buildings, and
Emergency Management Subcommittee.
One of the purposes of this committee is to protect
taxpayer dollars by ensuring that they are spent effectively,
efficiently, and with transparency. That brings us to today's
hearing, which is entitled, ``Landlord and Tenant: The Trump
Administration's Oversight of the Trump International Hotel
Lease.''
You can tell from the title that today we are going to be
investigating a fairly unprecedented situation. The Federal
Government owns the building that houses President Trump's DC
hotel. Since President Trump has declined to divest from his
businesses, he is essentially acting as both the landlord and
the tenant.
Before I was elected to Congress, I spent over three
decades teaching college students about American Government and
politics. In those classrooms, we had serious discussions about
the role of the legislature holding the executive branch
accountable to the highest legal and ethical standards, and
that is exactly what we hope to do today.
So, first, let's start with some facts.
One, all Federal workers and federally elected officials
take an oath to uphold the U.S. Constitution. And, of course,
that includes the President, all members of the administration,
and all of us in Congress.
Second, the Constitution contains two clauses that are
pertinent to our topic today. One prevents an elected official
from receiving, and I quote, ``any present or emolument from
any king, prince, or foreign state without the consent of
Congress.'' To date, Congress has given this President no such
consent.
A second and related clause prevents the President from
accepting any Federal or State taxpayer dollars or emoluments
beyond his Presidential salary. Now, a lot of people may not be
familiar with the term ``emolument,'' but the Founding Fathers
thought of it broadly as any payment or benefit. They included
it in the Constitution to prevent U.S. Government officials
from accepting bribes from foreign governments or from parts of
our own Government that might be trying to curry favor. I hope
we can all at least agree that that is a practice that the
public and the Members of this Congress don't abide.
Third, the Government lease for Trump's DC hotel explicitly
states that the tenant may not use the premises to violate
Federal law, quoting again, ``for any purpose or in any way.''
And that, of course, includes the Constitution.
Moreover, section 37.19 of the lease states that no elected
official of the Government of the United States shall be
admitted to any share or part of this lease or to any benefit
that may arise therefrom. Yet the President continues to have a
personal stake in the hotel. When people stay at Trump's DC
hotel, he directly benefits.
Yet, despite all the legal and ethical issues that arise
from this unprecedented situation, the agency that oversees the
lease, the General Services Administration, has not done a
thing about it. In fact, the agency's independent inspector
general, who is here with us today, conducted an exhaustive
report that found that the GSA recognized that the President's
business interest in the Old Post Office lease raised issues
under the Constitution's Emoluments Clause that might cause a
breach of lease.
Despite this observation, the inspector general found that
the GSA decided not to address those obvious issues. The
inspector general called that ``improper.'' Well, I think that
is kind of the least of it.
When you take an oath to uphold a Constitution, you are
bound by that oath, yet GSA officials have turned a blind eye
to these legal and ethical issues. When called on it, the GSA
failed to implement basic recommendations made by the inspector
general.
GSA was instructed to conduct a formal legal review that
includes consideration of the Constitution's Emoluments Clauses
and the terms of the lease. As far as I know, GSA hasn't even
pretended to conduct that review.
GSA was also instructed to revise the language of their
leases to make it even clearer that the Constitution is
relevant. They haven't done so in any way that satisfies the
inspector general, and they have haven't done so in any way
that satisfies this committee.
Finally, in addition to the legal issues, GSA has refused
to turn over documents to this subcommittee, which has the
jurisdiction over GSA and that we have a legitimate purpose to
examine. In 2008, Congress directed GSA to lease out the Old
Post Office Building in order to make a profit, yet GSA,
relying on the opinion not of their attorneys but of Trump's
business lawyers, refused to turn over any basic financial
documents that could help us determine if they are upholding
the terms of the lease.
How can we know that taxpayers' investments are being
protected if we can't examine the financial records of the
hotel? And how can we assure that national policy is not being
swayed by those spending money at the hotel that benefits
people at the highest levels of our Government?
GSA is also preventing us from looking at legal memos that
were drafted when Government officials who were supposed to
enforce the terms of this lease decided to look the other way.
It is shameful, and yet it is what we have come to expect from
an executive branch that continues to stonewall Congress and
rejects transparency at every turn.
Few could have ever imagined the situation like we are in
today, but the Founding Fathers were wise enough to put the
Emoluments Clause right in the Constitution, and we should be
wise enough to enforce it.
In our first panel today, we will hear from the agency that
oversees the DC Trump International Hotel lease and from the
inspector general, who found that the GSA did not fulfill its
obligations under the Constitution. In the second panel, we
will hear from legal scholars who can shed more light on some
of these pertinent issues.
I want to thank the witnesses for being here today. I look
forward to hearing your testimony and your answering our
questions.
[Ms. Titus' prepared statement follows:]
Prepared Statement of Hon. Dina Titus, a Representative in Congress
from the State of Nevada, and Chairwoman, Subcommittee on Economic
Development, Public Buildings, and Emergency Management
Good morning and welcome to the fourth hearing of the Economic
Development, Public Buildings, and Emergency Management Subcommittee.
This morning's hearing is entitled, ``Landlord and Tenant: The Trump
Administration's Oversight of the Trump International Hotel Lease.''
You can tell from the title that today we are investigating an
unprecedented situation. The federal government owns the building that
houses President Trump's D.C. hotel. Since President Trump has declined
to divest from his business, he is essentially both the landlord and
the tenant.
Before I was elected to Congress, I spent over three decades
teaching college students about American government and politics. In
those classrooms, we had serious discussions about the role of the
legislature in holding the executive branch accountable to the highest
legal and ethical standards. That's exactly what we hope to do today.
So let's start with some facts. First, all federal workers and
federally elected officials take an oath to uphold the U.S.
Constitution. Of course, that includes the President, the
Administration, and all Members of Congress.
Second, the Constitution contains two clauses pertinent to our
topic today: One prevents an elected official from receiving ``any
present [or Emolument] . . . from any King, Prince, or foreign state''
. . . ``without the Consent of Congress.'' To date, Congress has given
this President no such consent. A second and related clause that
prevents the President from accepting any federal or state taxpayer
dollars or emoluments beyond his presidential salary.
A lot of people may not be familiar with the term ``emolument,''
but the Founders thought of it broadly as any payment or benefit. They
included it in the Constitution to prevent U.S. government officials
from accepting bribes from foreign governments or from parts of our own
government that could try to curry favor. I hope we can all at least
agree that's a practice the American people will not abide.
Third, the government lease for Trump's D.C. hotel explicitly
states that the tenant may not use the premises to violate federal law
``for any purpose or in any way.'' That of course includes the
Constitution. Moreover, Section 37.19 of the lease states that ``No . .
. elected official of the Government of the United States . . . shall
be admitted to any share or part of this lease, or to any benefit that
may arise therefrom.'' Yet, the President continues to have a personal
stake in this hotel.
When people stay at Trump's D.C. hotel, he directly benefits, yet
despite all the legal and ethical issues that arise from this
unprecedented arrangement, the agency that oversees the lease--the
General Services Administration--has not done a thing about it. In
fact, the agency's independent Inspector General who is here with us
today conducted an exhaustive report that found that the GSA
``recognized that the President's business interest in the Old Post
Office lease raised issues under the Constitution's Emoluments Clause
that might cause a breach of lease.''
Despite this observation, the Inspector General found that GSA
decided not to address those obvious issues. The Inspector General
called that ``improper''--and I think that description is, if anything,
too kind.
When you take an oath to uphold the Constitution, you are bound by
that oath. Yet, GSA officials have turned a blind eye to these legal
and ethical issues. When called on it, the GSA failed to implement
basic recommendations made by the Inspector General. GSA was instructed
to conduct a formal legal review that includes consideration of the
Constitution's Emoluments Clauses and the terms of the lease. As far as
I know, GSA hasn't even pretended to do that. GSA was also instructed
to revise the language of their leases to make it even clearer that the
Constitution is relevant. They haven't done so in a way that satisfies
the Inspector General and they certainly haven't done so in a way that
satisfies this subcommittee.
Finally, in addition to the legal issues, GSA has refused to turn
over documents to this subcommittee, which has jurisdiction over GSA,
that we have a legitimate purpose to examine. In 2008, Congress
directed GSA to lease out the Old Post Office building in order to make
a profit. Yet, GSA, relying on the opinion of Trump's business lawyers,
refuses to turn over basic financial documents that would help us
determine if the tenant is upholding the terms of the lease.
How can we know that taxpayer investments are being protected if we
can't examine the financial records of the hotel? And how can we ensure
national policy is not being swayed by those spending money at a hotel
that benefits people at the highest levels of our government? They're
also preventing us from looking at the legal memos that were drafted
while the government officials who were supposed to enforce the terms
of this lease decided to look the other way. It's shameful, and yet
it's what we've come to expect from an executive branch that stonewalls
Congress and rejects transparency at every turn. Few could have ever
imagined a situation like the one we have today, but the Founding
Fathers were wise enough to put the Emoluments Clauses right in the
Constitution. We should be wise enough to enforce them.
In our first panel, we will hear from the agency that oversees the
D.C. Trump hotel lease and from the Inspector General who found that
the GSA ``did not fulfill'' its obligations under the Constitution. In
the second panel, we will hear from legal scholars who can shed more
light on these serious issues.
I want to thank the witnesses for being here today. I look forward
to hearing your testimony. I now recognize the Ranking Member, Mr.
Meadows, for an opening statement.
Ms. Titus. And I now recognize the ranking member, Mr.
Meadows, for an opening statement.
Mr. Meadows. Thank you, Chairwoman Titus.
Once again, here we are in the drama of ``everything
related to President Trump is bad.'' You know, instead of
focusing on critical issues like disaster recovery, our
crumbling infrastructure, we are here today trying to answer a
constitutional question that is currently before the courts
and, I would offer, that no one on this dais is even able to
answer.
We are looking at a constitutional question, but, no, this
is all about the President and his business. And we have other
business before this subcommittee that is critical to the
American taxpayer. We have 79 bills that have been referred to
this subcommittee, and we have only acted on 9 of them. We
could be in a hearing today examining some of those proposals.
And it is National Preparedness Month. Here we are--the
original plan for this hearing today was to focus on recovery
areas, some that affect my very State. But, instead, we are
here focusing on an issue because of the perception of
wrongdoing.
Now, based on our markup last week, the remarks by Members
at the markup, I am sure that there are Members on both sides
of the aisle that would view it as a critical responsibility of
this committee to address disaster relief. Right now, more than
half the States and Territories are still impacted by 73 open
major disasters and emergency declarations.
Additionally, GSA spends over $5 billion a year on leased
space. The Federal Buildings Fund struggles to pay for the
basic maintenance of those buildings. And yet here we are
today, calling the GSA Buildings Commissioner here, not to talk
about those important things, but, rather, to opine on a
decision that has already been made, a conclusion that has
already been made by my colleagues opposite.
Let us be very clear: We are here today because of a lease
that was endorsed by, advocated by Democrats, signed off on by
Democrats, negotiated and executed under President Barack
Obama, and a lease where nearly all the decisions were made
before and after the election, were made by the Obama
administration. And yet somehow it is the President's fault.
And this one decision, made after the President was sworn
in, was done by a career public servant. So, even with that, if
you focus just on that, we have a long-term career public
servant with leadership that is appointed by GSA making
decisions. And here we are today; the inspector general still
found that there was no undue influence in that decision.
Now, I am just at a loss for words, almost, when you look
at this, because GSA has produced documents at the request of
Members. Over 10,000 pages, nearly 3,800 documents that have
been produced to the OPO, and more is expected. Yet our
colleagues would argue that the GSA is not responding to their
requests.
So let me be clear on this as well. I am a strong supporter
of transparency and oversight and access to information. But
when those demands start taking on an outside, beyond the
mission, core mission of what is happening, we have the
responsibility to make sure that those requests are not only
reasonable and legitimate but they are not just a fishing
expedition.
You know, Republican Members, myself included, sent a
letter in February requesting documents on which the OIG based
the analysis and conclusion in her report. That was actually
requests not as a fishing expedition but because of the unusual
nature of the OIG's report.
The report itself has been cited as authority in pending
legal cases, yet contains assertions without citation. And at
least one incident is factually incorrect. The factual
assertion has been disputed by legal experts. You know, it
contains its own legal analysis on unsettled constitutional
questions currently before the courts.
Now, the chairwoman, she has talked about those
constitutionally protected areas and our rights of oversight as
a legislative body. Indeed it is. This question is one that has
to be resolved by the courts, not by the legislative body. If
we want to change the law and make sure that we can change it,
let's go ahead and introduce something. But to date, nothing
has been introduced. No markups on that.
Given this issue and the facts, using the legal
proceedings, it is critical for us to verify every bit of the
OIG's report and its accuracy. And to understand the basis of
that report, we have requested the casefile documents, similar
to the request the committee made last year for the OIG's
report on the FBI headquarters. However, so far on that, we
have only received 177 documents. Those are largely publicly
available legal research documents, like law review articles
that they used for the constitutional analysis. To me, that is
unresponsive.
I hope we can get back to the real work. I hope that we can
make sure that, once again, this committee operates in a
bipartisan fashion. Today's hearing is certainly not that.
[Mr. Meadows' prepared statement follows:]
Prepared Statement of Hon. Mark Meadows, a Representative in Congress
from the State of North Carolina, and Ranking Member, Subcommittee on
Economic Development, Public Buildings, and Emergency Management
Thank you, Chairwoman Titus.
Once again, instead of focusing on critical issues like disaster
recovery and our crumbling infrastructure, we are here today focusing
on answering a constitutional question that's currently before the
courts.
We have other business before this subcommittee that is critical to
the American taxpayer. We have 79 bills referred to this subcommittee
and have only acted on about nine of them--we could have had a hearing
today examining some of those proposals.
And, it is National Preparedness Month. The original plan for
today's hearing was to focus on recovery efforts, but instead we are
focusing on this issue because of a perception of wrongdoing by the
President.
Based on our markup last week and the remarks by Members at that
markup, I am sure there are Members on both sides who would have viewed
a disaster hearing as critical. Right now, more than half the States
and territories are still impacted by 73 open major disasters and
emergency declarations.
Additionally, GSA spends over $5 billion a year on leased space.
The Federal Buildings Fund struggles to pay for basic building
maintenance, yet we call the GSA Public Buildings Commissioner here not
to talk about that, but rather a decision made prior to his appointment
or documents they are already producing.
Let's be very clear--we are here today because of a lease, endorsed
by and advocated for by Democrats, signed off on by Democrats, and
negotiated and executed under President Obama. A lease where nearly all
of the decisions before and after the election were made under the
Obama Administration.
And the one decision made after the President was sworn in was done
by a career public servant, long before the current political
leadership at GSA was appointed. Even the GSA Inspector General found
there was no undue influence in that decision.
Since that time, GSA has produced documents at the request of
Members--over 10,000 pages and nearly 3,800 documents have been
produced related to the OPO and more is expected. Yet, our colleagues
argue that GSA is not responding to their requests.
Let me be clear on this as well--I am a strong supporter of
transparency, oversight, and access to information. But, when we are
making demands of agencies, taking federal employees away from their
core mission to comply with these requests, we have some responsibility
to ensure the requests are reasonable--not for political purposes and
not a fishing expedition.
Republican members, myself included, sent a letter in February
requesting the documents on which the OIG based her analyses and
conclusions in her report. We requested this not as a fishing
expedition, but because of the unusual nature of the OIG report.
The report itself has been cited as authority in pending legal
cases, yet contains assertions without citations and, in at least one
instance, a factual assertion has been disputed by a legal expert.
And, it contains its own legal analysis on an unsettled
constitutional question currently pending in the courts.
Given these issues and the fact that it has been used in legal
proceedings, it is critical for us to verify its accuracy.
To understand the basis for the OIG's report, we requested the case
file documents--similar to a request the Committee made last year for
the OIG's report on the FBI Headquarters. However, so far we have only
received 177 documents and those are largely publicly available legal
research documents like law review articles they used for their
constitutional analysis. To me that is unresponsive.
I hope we can get back to real work on what usually are bipartisan
issues in this Committee. We have made headway in disaster reforms,
reforming how we manage federal properties, and exploring ways to
improve our economic development programs.
We could have focused today on a topic that would help inform our
actions on those important issues and help our constituents who sent us
here to work together on real solutions--not play games on their dime.
Mr. Meadows. And, with that, I yield back.
Ms. Titus. I thank the ranking member.
And I now recognize the chairman of the T&I Committee, who
has spent some time working on this issue and is quite familiar
with the documents that have been released and some of the
players and all of the issues. I recognize the chairman, Mr.
DeFazio.
Mr. DeFazio. It is nearly 3 years since I first questioned
GSA regarding the lease. It is pretty simple: No Member or
Delegate to Congress or elected official of the Government of
the United States or 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.
Now, the ranking member just went on at some length about
why we are here. We are here because President Trump, ignoring
all precedent, decided not to divest himself of his business
interests and, in particular, of the hotel, the Trump Hotel,
and, in particular, a hotel which has a lease that says no
elected official shall benefit. And the President was elected.
I mean, he didn't get a majority of the vote, but he was
elected. So to say that this committee should not be pursuing
this with GSA, in that instance, is bizarre.
Secondly, this building was leased because it was losing
money. And the idea was, it is going to make money and we will
get a share--now, you have to question the way GSA does this
stuff; they do a lot of things that are incompetent--a share of
the profits, as opposed to a share of the gross, because you
can always hide and come up with, ``Oh, we are hardly
profitable.'' We don't even know today. The only statements we
have were, either intentionally or unintentionally, put online
[indicating a document].
Now, they would say--this is back in 2016. Now, they would
say that this is proprietary. If you read through it, these
are, like, simple, one-line disclosures. There is nothing
proprietary in this document. But now GSA says: Congress is not
entitled to those; those were released mistakenly.
Well, how do we know what the income is? How do we know how
GSA is calculating the profits? Apparently, that is at the
discretion of the contracting officer. I think that is the
career official that he referred to.
This career official opined in November of 2016 that it was
absurd that anybody would question this lease or the Emoluments
Clause. This was a contracting officer. And I asked a series of
questions of a former official from this agency: Is this how
contracting officers work?
And then he went on in the email--this was to Ivanka
Trump--to say: I want to get together with you and drink some
coffee and tell you about my great trip to New York.
Now, this is a public servant who is looking out after the
public interest. He is still the contracting officer. He has
discretion in how they calculate the profits. And we don't know
whether we are getting a damn penny out of this thing or not.
Here are the statements they give to us [indicating
documents]. That is it. It is a cover page. A cover page. That
is what Congress is entitled to.
Well, what is the income? We don't know. What is the
profit? We don't know. What is the Government getting? We don't
know.
And the gentleman doesn't want to know whether the
taxpayers are getting ripped off or not? That is just
extraordinary to me. Extraordinary.
Now, I----
Mr. Meadows. Will the gentleman yield? Will the gentleman
yield?
Mr. DeFazio. No, I will not yield.
Mr. Meadows. Well, you asked a question----
Mr. DeFazio. I will not yield. The gentleman--I will not
yield. Please be quiet. You went over time. I don't want to go
too much over time. We have a lot to----
Mr. Meadows. Well, the chairman went over time too.
Mr. DeFazio. I haven't gone over yet. But you are going to
make me.
So--and then I asked for the legal opinions. We can't see
them. We can't have them.
OK. So we can't see the legal opinions that have been
questioned by the IG, but the gentleman knows that they are
fine, the legal opinions, whatever they are----
Mr. Meadows. Well, the gentleman knows that we get $3
million a year from the lease. The gentleman does know that.
Mr. DeFazio. We don't know on a monthly basis what the
income of the hotel is and how they are calculating this and
what percent we are getting. So we could be----
Mr. Meadows. But the gentleman knows we are getting more
money under this lease than the previous lease.
Mr. DeFazio. The gentleman is out of order.
Thank you, Madam Chair.
So now----
Mr. Meadows. You are not the chairman. You are not the
chairman.
Ms. Titus. Will the ranking member please stop
interrupting?
Mr. DeFazio. Are you going to be quiet now?
Thank you.
So here is the legal opinion that we have recently received
from GSA [indicating document]. It didn't come from the
counsel. We have never seen a document out of the General
Counsel's Office. There is a General Counsel's Office. And it
is a document from Michael Best & Friedrich LLP, attorneys at
law. And this is the only legal opinion we have, and that
happens to be the Trump Hotel's attorneys.
This whole thing is so out of line, in terms of GSA's
oversight of the public interest, of the lease of this hotel,
from day one. Day one. And that is why we are here today.
And we are here principally because this President failed
to divest himself of conflicts of interest and put himself and
exposed himself, not only in violation of the lease but also to
the Emoluments Clause of the Constitution of the United States,
both foreign and domestic. That is why we are here today.
[Mr. DeFazio's prepared statement follows:]
Prepared Statement of Hon. Peter A. DeFazio, a Representative in
Congress from the State of Oregon, and Chair, Committee on
Transportation and Infrastructure
I have been pursuing issues related to the leasing of the federally
owned Old Post Office building to the Trump International Hotel for
years. Since October 2016, I have written seven letters to the General
Services Administration (GSA) seeking records and asking questions
about this lease and the agency's legal justification for not
terminating this lease in order to comply with the terms of the lease
and the U.S. Constitution's Emoluments Clauses.
Those clauses protect the country against efforts to corrupt the
President. They also bar the President of the United States from
profiting from any ``King, Prince, or foreign State'' without
congressional consent or from being financially compensated from state
governments or the federal government, with the exception of receiving
his or her salary.
Because the President has refused to divest his interest in the
Trump Old Post Office LLC, GSA needs to take action to prevent the U.S.
Constitution from being violated.
As Ranking Member of this committee, GSA ignored my requests for
information about the Old Post Office lease for years. They only began
complying with my records requests once I became Chairman. And as
Chairman of the Transportation and Infrastructure Committee, the first
oversight letter I wrote with Ms. Titus on January 22, 2019, was to GSA
requesting records on the Old Post Office Building lease.
Since then, we have received more than 3,000 documents amounting to
more than 10,000 pages from GSA. However, eight months later GSA is
still refusing to provide certain categories of documents to the
committee including legal memos and opinions regarding this lease and
monthly financial statements from the Trump International Hotel.
This is unacceptable. It is also deeply troubling to me that GSA on
one hand has said they respect the committee's oversight authority and
on the other hand they have relied on the Trump Old Post Office LLC's
attorney--let me repeat that GSA has relied on the Trump Old Post
Office LLC's attorney--to question the committee's legislative
authority in seeking to obtain these records.
I would like to remind GSA that they are a federal agency and not
an arm of the Trump Organization and that they have a fundamental
obligation to provide the committee with the records it needs to
conduct appropriate oversight of the leases the GSA manages, programs
they create and policies they enact. And last time I checked, GSA has
its own Office of General Counsel.
Congress' oversight authority is broad and this Committee's
oversight of GSA leasing arrangements is clear. Our legislative
jurisdiction over GSA and public buildings, including the Old Post
Office Building, which is currently being leased to the Trump
International Hotel, is well established. Our ability to conduct robust
oversight ensuring the public is aware of how federal agencies are
being managed and how their contracts with private entities are being
enforced is paramount.
This oversight should not be a partisan issue. Previous Republican
and Democratic Ranking Members and Chairs of the Transportation and
Infrastructure Committee and its subcommittees have routinely
investigated GSA's management of its leases.
Suggestions that the committee does not have oversight authority to
look into the Old Post Office lease to the Trump International Hotel or
that somehow business records of a company leasing a federally owned
government building are sacrosanct and should not be reviewed as part
of Congress' long-standing and legitimate investigative process is
frankly ridiculous and appears to be a well-orchestrated distraction
from the core issues surrounding GSA's apparent disregard of the
Emoluments Clauses expressly laid out in the U.S. Constitution.
This hearing is focused on the Old Post Office Building lease and
the GSA's failure to properly account for the Emoluments provisions in
the U.S. Constitution, as a result of President Trump's refusal to
divest from his financial stake in the Trump International Hotel.
Unfortunately, this is only part of a pattern of government employees
under this administration brazenly violating these provisions.
In the past few days it has been reported that a senior aide to the
President of Ukraine met a State Department employee for breakfast at
the Trump International Hotel in an alleged effort to seek help
connecting with President Trump's lawyer, Rudolph Guiliani. Regardless
of whether the foreign or federal U.S. official paid for this
encounter, if they were there on government business it would implicate
the Emoluments Clauses to the Constitution.
It has also been reported that Trump administration officials spent
taxpayer funds to stay at Trump's golf club in Ireland and U.S. Air
Force crews have used federal funds to stay at Trump's resort in
Scotland. In addition, the Attorney General of the United States has
apparently booked his private holiday party at the Trump International
Hotel and the press has reported on patronage of the Trump Hotel in
D.C. by foreign governments as well as at least one state government.
Although not all of these acts may violate the law or the U.S.
Constitution they all raise serious ethical concerns.
President Trump could have simply divested from his investments
when he took office. He did not. He has not. It seems he will not. And
GSA must now deal with the consequences and stop shirking its
constitutional obligations.
Our Founding Fathers knew well the risk of unscrupulous
individuals, both foreign and domestic, attempting to corrupt our
presidents. And they knew this would have detrimental and wide-ranging
negative consequences on our democracy and the public's perception of
our government and its institutions.
Yet, in this instance regarding President Trump's financial stake
in the Trump International Hotel, it seems clear that GSA has failed in
its obligation to comply with the Constitution. Ignoring this problem
won't make it disappear. But investigating it can help determine how
GSA went so wrong, and how they can take corrective actions so that
these mistakes and missteps are not repeated into the future.
Mr. DeFazio. Right on time.
Ms. Titus. Thank you.
The Chair now recognizes the ranking member of the T&I
Committee, Mr. Graves, for an opening statement.
Mr. Graves of Missouri. Thank you, Madam Chair, Ranking
Member Meadows.
We used to hear over and over and over again when
Republicans were in the majority, why aren't we doing
infrastructure? Why aren't we doing infrastructure? Where is an
infrastructure bill? And that question is still valid today.
And yet here we are, in a politically motivated hearing,
talking about the Old Post Office.
In light of the disasters this year, I think we should be
focusing on making sure our committee's disaster reform efforts
are working. Instead, here we are, again in a politically
motivated hearing. We need to make sure our communities have
the tools to prepare and recover from the next disaster.
We saw just last week parts of Texas being hammered by
Tropical Storm Imelda. My home district in Missouri is still
recovering from historic flooding, with devastated homes and
farms and people that still haven't been able to get back into
their houses. We have many communities that have a long way to
go when it comes to recovering from the last two hurricane
seasons.
And, instead, today's hearing is going to be nothing more
than a political spectacle and a chance for the President's
opponents to try to undermine him and continue to do their
search for anything to further their case on impeachment. And
that is what this is about.
Instead of working on disaster preparedness or any other of
the countless number of infrastructure items that are clearly
more important than this, like fixing roads and bridges, we are
instead going to be listening to politically motivated
criticisms of the President.
I know we have worked together in a bipartisan manner on
this committee, and I believe we can still do that if we put
politics aside. But, instead, this is a political distraction.
It takes us away from the important work that this committee
should be doing.
[Mr. Graves of Missouri's prepared statement follows:]
Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on
Transportation and Infrastructure
Thank you, Chair Titus and Ranking Member Meadows.
First, I want to note that we still don't have an infrastructure
bill--something our Nation desperately needs. And as Ranking Member
Meadows noted, September is National Preparedness Month. Yet here we
are in a politically motivated hearing talking about the Old Post
Office.
In light of all the disasters this year we should be focusing today
on making sure our Committee's disaster reform efforts are working as
intended and that our communities have the tools to prepare for and
recover from the next disaster.
We just saw last week parts of Texas being flooded from Tropical
Storm Imelda. My home district in Missouri is still recovering from
historic flooding that devastated homes and farms. And many communities
have a long way to go to recover from the last two hurricane seasons.
Instead, today's hearing is going to be nothing more than a
political spectacle--a chance for the President's opponents to try to
undermine him and to continue their search for anything to further
their case for impeachment.
Instead of working on disaster preparedness, or any of the other
countless infrastructure items that are clearly more important than
this, like fixing roads and bridges, we will instead listen to
politically motivated criticisms of the President.
I know that we have worked together in a bipartisan manner on this
Committee, and I believe we can continue to do so if we put politics
aside. But instead, this partisan distraction takes us away from our
important work on infrastructure.
Mr. Graves of Missouri. And, with that, I yield back.
Ms. Titus. Thank you, Mr. Graves.
At this time, we would like to welcome our witnesses. On
the first panel, we have Mr. Daniel Mathews, the Public
Buildings Commissioner for the U.S. GSA, and we have the
Honorable Carol Ochoa.
Thank you for being here. We look forward to your
testimony.
Without objection, our witnesses' full statements will be
included in the record.
Since your written testimony has been made part of the
record, the subcommittee requests that you limit your oral
testimony to 5 minutes as well.
At this point, we will begin with Mr. Mathews.
TESTIMONY OF DAN MATHEWS, COMMISSIONER, PUBLIC BUILDINGS
SERVICE, U.S. GENERAL SERVICES ADMINISTRATION; AND HON. CAROL
FORTINE OCHOA, INSPECTOR GENERAL, U.S. GENERAL SERVICES
ADMINISTRATION
Mr. Mathews. Good morning, Chairwoman Titus, Ranking Member
Meadows, and members of the subcommittee. My name is Dan
Mathews, and I was sworn in as Commissioner of the Public
Buildings Service in August of 2017. Before that, I served as a
majority and minority staff director of this subcommittee for
almost 15 years.
Let me begin by thanking you for authorizing our
prospectuses and for your help in securing Senate authorization
as well, particularly for the Lloyd George U.S. Courthouse in
Las Vegas.
I also would like to briefly discuss how PBS is attacking
some of the most difficult challenges in Federal real estate
which this committee and the GAO identified over the last
decade. These problems include an over-reliance on costly
leases, the need to renovate our aging inventory, and to reform
the courthouse construction program.
Since September 2017, GSA has cut 3.5 million square feet
from its expiring lease portfolio; negotiated rental rates 11
percent below market, as compared to the historic average of 3
to 5 percent below market; and avoided $1.9 billion in future
lease costs.
By investing our scarce capital in GSA-owned facilities,
such as the Suitland Federal Center in Maryland, GSA is
reducing our reliance on leasing and improving the quality and
utilization of our most important facilities.
And, finally, GSA is partnering with the judiciary to
construct over $1 billion in courthouses on-budget and on-
schedule.
Over the last 2 years, GSA has made significant progress in
addressing the bipartisan priorities of this committee, and I
look forward to working with you on these issues in the future.
Moving on to today's topic, I would like to share some
context I believe is important.
One of the longstanding bipartisan priorities of this
committee was to address the serious disrepair and occupancy
problems at the Old Post Office. This effort resulted in the
bipartisan enactment of the Old Post Office Building
Redevelopment Act, which directed GSA to redevelop the Old Post
Office while maintaining Federal ownership and historic
integrity of the facility.
Pursuant to the act, GSA conducted a full and open
competition and, in 2013, signed a 60-year lease with the Trump
Old Post Office LLC. The company pays rent, and the lease
provides for the potential of revenue-sharing with the GSA and
the American taxpayer.
This joint effort created a substantial financial benefit
for the Government and taxpayers. Prior to the redevelopment of
the Old Post Office, GSA operated the facility at a significant
annual loss, including $6.5 million in 2007 alone. Today, as a
direct result of the act, instead of a multimillion-dollar
operating loss, GSA now receives approximately $3 million in
annual rent for a historic property that has been fully
renovated with private funds.
While the inspector general's review of the Old Post Office
outlease did not seek to determine whether the President's
interest in the hotel violates either the Emoluments Clauses or
section 37.19 of the lease, both of these issues continue to
generate questions for Members of Congress.
With respect to the Emoluments Clauses, it would be
inappropriate for GSA to weigh in on that issue while it is the
subject of active litigations. The first of several lawsuits
alleging violations of the Emoluments Clauses was filed on
January 23, 2017. Accordingly, the meaning and application of
the Emoluments Clauses has been the subject of active
litigation for the entirety of the administration.
Beginning in June of 2017, the Department of Justice has
taken the position in those cases that the President's interest
in the Trump International Hotel does not violate the
Constitution. The committee can rest assured that, if and when
these issues are conclusively resolved as a matter of law, GSA
would faithfully adhere to those legal determinations.
With respect to section 37.19 of the lease, GSA followed
its standard process for determining compliance with the terms
and conditions of a lease. The career contracting officer, who
has the legal authority and responsibility for making contract
decisions, worked in consultation with the career attorneys
from GSA's Office of General Counsel to make this decision. As
a result of that process, in a March 2017 determination by the
career contracting officer, GSA found the tenant in compliance
with section 37.19 of the lease.
As the committee is aware, following the contracting
officer's determination, GSA's inspector general conducted a
16-month investigation into the management and administration
of the Old Post Office Building lease.
Given the title of this hearing, I believe one key aspect
of the review is absolutely vital to reiterate: The inspector
general found no instances of undue influence or interference
on the career civil servants charged with administering this
lease.
Furthermore, as noted in our response to the review, GSA
agreed with the report's single recommendation, as the agency
understood it, and will take action consistent with that
recommendation prior to continuing to use the language in
future outleases.
Lastly, GSA has worked diligently to respond to
congressional oversight requests concerning this project,
including requests from this committee. As part of this effort,
GSA has provided more than 3,000 documents and 10,000 pages of
materials in response to this committee's requests, in addition
to numerous briefings on this topic.
In conclusion, again, let me thank you for authorizing our
prospectuses in a timely matter. We very much appreciate that.
Thank you.
[Mr. Mathews' prepared statement follows:]
Prepared Statement of Dan Mathews, Commissioner, Public Buildings
Service, U.S. General Services Administration
Good morning Chairwoman Titus, Ranking Member Meadows, and Members
of the Subcommittee. My name is Dan Mathews, and I am the Commissioner
of the Public Buildings Service (PBS) at the U.S. General Services
Administration (GSA). The purpose of my testimony today is to help
explain the GSA history of the Old Post Office redevelopment project
and detail how the agency has responded to the recommendation of the
GSA Office of Inspector General (OIG) following its evaluation of the
outlease.
Since this is my first time testifying before the Subcommittee--and
many of my former Capitol Hill colleagues--I would also like to take
the opportunity to discuss how PBS is building on its success to more
efficiently and effectively support customer agencies achieve their
mission, while saving taxpayer money.
Today, PBS is advancing this work through three strategic
initiatives: lease cost avoidance, real estate footprint optimization,
and our internal productivity initiative.
Old Post Office Redevelopment Act
As many of you know, prior to joining GSA in August of 2017, I
served as the Staff Director for both the majority and minority staff
of this Subcommittee for almost 15 years. During my tenure, one of the
issues that received strong bipartisan support was how to address the
serious disrepair and occupancy problems at the Old Post Office
building. This effort resulted in the bipartisan passage and enactment
of the Old Post Office Building Redevelopment Act of 2008 (the Act).
This legislation directed GSA to redevelop the property on Pennsylvania
Avenue in between the White House and Capitol, while maintaining
Federal ownership and the historic integrity of the facility.
Pursuant to the Act, GSA conducted a full and open competition,
which resulted in the selection of the Trump Organization as the
preferred private sector entity to redevelop the Old Post Office. In
2013, GSA signed a lease with the Trump Old Post Office, LLC. In
accordance with the lease, the LLC pays rent for 60 years to use the
Old Post Office facility as a hotel. Additionally, the lease provides
for the potential of revenue sharing with GSA and the American
taxpayer. Finally, the lease ensures the historic preservation and
integrity of the building, as well as public access to the clock tower
and observation deck.
The Act and subsequent repositioning of the Old Post Office created
a substantial financial benefit for the government and taxpayers. Prior
to the outlease and redevelopment of the property, GSA operated the
facility at a significant annual loss. As this Committee noted in its
Committee Report on the Act, in 2007, GSA collected $5.4 million in
rent payments from tenants, while spending $11.9 million to operate and
maintain the property. On top of this $6 million annual loss, it was
estimated that it would take an investment of approximately $200
million to renovate the building to address maintenance backlogs and
turn the facility into a modern office building. Understanding the
challenges associated with such an investment, Congress directed GSA to
follow through on its proposed plan to redevelop the building through a
publicprivate partnership. Today, as a direct result of the Act,
instead of a multi-million dollar annual operating loss, GSA now
receives a monthly rent payment $267,653 and the historic property has
been fully renovated with private funds and is maintained to a high
standard.
Old Post Office Lease Administration
While the Inspector General's review of the Old Post Office
outlease ``did not seek to determine whether the President's interest
in the hotel violates either the Emoluments Clauses or Section 37.19 of
the lease,'' both of these issues continue to generate questions from
Members of Congress. With respect to the Emoluments Clauses, it would
be inappropriate for GSA to weigh in on that issue while it is the
subject of active litigations. The first lawsuit alleging violations of
the Emoluments Clauses was filed in the Southern District of New York
on January 23, 2017--the first full business day following the
President's inauguration. Additional suits have been filed since that
time. Accordingly, the meaning and application of the Emoluments
Clauses has been the subject of active litigation for the entirety of
this Administration. The Department of Justice has taken the position
in those cases that the President's interest in the Trump International
Hotel does not violate the Constitution. The Committee can rest assured
that if and when these issues are conclusively resolved as a matter of
law, GSA would faithfully adhere to those legal determinations.
With respect to Section 37.19 of the lease, GSA followed a fairly
typical process for determining compliance with the terms and
conditions of a lease. The career contracting officer, who has the
legal authority and responsibility for making contract decisions,
worked in consultation with career attorneys from GSA's Office of
General Counsel to make this decision. As a result of that process, in
a March 2017 determination by the career contracting officer, GSA found
the tenant in compliance with Section 37.19 of the lease.
As the Committee is aware, following the Contracting Officer's
determination, GSA's OIG conducted a very detailed and thorough 16-
month investigation into the management and administration of the Old
Post Office building lease. Given the title of this hearing, I believe
one key aspect of the review is absolutely vital to reiterate: the OIG
found no instances of undue influence or interference on the career
civil servants charged with administering the lease.
Furthermore, as noted in our response to the review, GSA agreed
with the report's single recommendation as the agency understood it and
will take action consistent with that recommendation prior to
continuing to use the language of Section 37.19 of the Old Post Office
building lease in the future.
Lastly, GSA has also worked diligently to respond to Congressional
oversight requests concerning this project, including requests from
this Committee. As part of this effort, GSA has provided more than
3,000 documents and 10,000 pages of material in response to this
Committee's requests, in addition to numerous briefings on this topic.
PBS Strategic Initiatives
I would like to focus on PBS's strategic initiatives I mentioned at
the beginning of my testimony. GSA's leased portfolio consists of more
than 8,000 leases equating to more than 187 million rentable square
feet of space. Leasing represents more than half of PBS's total
expenditures and 66 percent of those leases are due to expire during
the next five years. That's more than 100 million square feet of leased
set to expire. The lifetime contract value of these leases is about $60
billion dollars. Over the next few years, GSA's goal is to trim
billions from that figure by negotiating longer firm terms with lessors
in order to secure lower rental rates, concessions, and other
discounts.
GSA is also prioritizing the improved optimization of our owned
inventory of more than 1,600 federal buildings. By investing in our
owned portfolio, building conditions and utilization rates will
improve. One example of this strategy at work is GSA's FY20 funding
request to restack the Suitland Federal Center campus in Suitland,
Maryland. This effort will allow Federal agencies to move out of
expensive, leased space in the District of Columbia into a modern GSA-
owned building, saving the taxpayer potentially $244 million over the
next 10 years.
Finally, GSA is leveraging its human capital, technology, and
business processes to improve agency productivity and efficiency. By
ensuring we have the right people in the right places, with the right
technology and resources, we will be strategically positioned to
achieve our goals with regard to lease cost avoidance and real estate
footprint optimization.
In closing, GSA is committed to carrying out its mission of
delivering the best value in real estate for the Federal government and
the American taxpayer.
I thank the Subcommittee for the opportunity to testify today and
look forward to answering your questions.
Ms. Titus. Thank you, Mr. Mathews. And we appreciate you
getting your testimony to us ahead of time, which was late last
night, despite the deadline being earlier.
Ms. Ochoa?
Ms. Ochoa. Good morning, Chairwoman Titus, Ranking Member
Meadows, and members of the subcommittee. Thank you for the
opportunity to testify here today regarding the Office of
Inspector General's evaluation of GSA's management and
administration of the Old Post Office.
As you know, GSA administers and manages the ground lease
for the Old Post Office Building on Pennsylvania Avenue in
Washington, DC. The Trump Old Post Office LLC, is the tenant on
the lease.
On July 28, 2017, my office initiated an evaluation of
GSA's management and administration of the lease based on
numerous complaints from Members of Congress and the public. We
focused our evaluation on GSA's decisionmaking process for
determining whether the President's business interest in the
lease caused the tenant to be in breach of the lease upon the
President's inauguration.
We did not seek to determine whether the President's
interest in the hotel violates either the Emoluments Clauses of
the U.S. Constitution or the ``interested parties'' provision
in section 37.19 of the lease or whether any violation caused a
breach of the terms and conditions of the lease. Rather, we
sought to determine whether there were any improprieties in
GSA's decisionmaking process regarding those issues.
Our evaluation found that GSA, through its Office of
General Counsel and its Public Buildings Service, recognized
that the President's interest in the lease raised issues under
the Constitution's Emoluments Clauses that might cause a breach
of the lease but decided not to address those issues.
We found that GSA attorneys made the decision not to
address these issues by mid-December 2016 after having been put
on notice in the summer of 2016 of the President's status as a
nominee of a major political party for the Presidency. The
attorneys did so without preparing a decision memorandum to
document the rationale for the position they were taking. They
did so without conducting any research of the two Emoluments
Clauses. They did so without checking for any opinions about
them from the Department of Justice Office of Legal Counsel or
contacting or seeking guidance from that office.
Our report found that GSA was correct in recognizing that
there was a potential issue regarding the Old Post Office lease
raising constitutional issues. We addressed GSA's reasons for
ignoring the constitutional issues and the effect this had on
its analysis of section 37.19 of the lease.
GSA's lawyers gave us various reasons for their decisions
to ignore the Emoluments Clauses. They told us, for example,
that constitutional issues rarely arise in GSA's work, that the
Emoluments Clauses are not within GSA's purview, and that GSA's
role is only to opine on specific provisions of the lease.
For reasons that we set out in the report, we rejected
these explanations. We rejected them largely because the
decision not to include the emoluments issues from GSA's
consideration of the lease was improper because GSA, like all
Government agencies, has an obligation to uphold and enforce
the Constitution and because the lease itself requires that
consideration.
In addition, we found that GSA's unwillingness to address
the constitutional issues affected its analysis of section
37.19 of the lease. That led to GSA's conclusion the tenant's
business structure satisfied the terms and conditions of the
lease, and, as a result, GSA foreclosed an early resolution of
the issues, including a possible solution that would have been
satisfactory to all parties. And the uncertainty over the lease
remains unresolved.
At the conclusion of our report, we recommended that,
before continuing to use the language, GSA determine the
purpose of the ``interested parties'' provision, conduct a
formal legal review by its Office of General Counsel that
includes consideration of the foreign and Presidential
Emoluments Clauses, and revise the language to avoid ambiguity.
I very much appreciate the interest of the committee in the
work of our office, and I am happy to answer any questions you
might have.
[Ms. Ochoa's prepared statement follows:]
Prepared Statement of Hon. Carol Fortine Ochoa, Inspector General, U.S.
General Services Administration
Chairman Titus, Ranking Member Meadows, and Members of the
Subcommittee: Thank you for the opportunity to testify here today
regarding the Office of Inspector General's (OIG) Evaluation of the
General Services Administration's (GSA) Management and Administration
of the Old Post Office Lease.
Introduction
The General Services Administration (GSA) administers and manages
the ground lease for the Old Post Office Building (OPO) on Pennsylvania
Avenue in Washington, D.C. The Trump Old Post Office LLC is the Tenant
on the lease.
On July 28, 2017, the GSA Office of Inspector General (OIG)
initiated an evaluation of GSA's management and administration of the
agency's ground lease of the OPO, based on numerous complaints from
Members of Congress and the public. The complaints generally raised two
issues regarding the lease: (1) does the Foreign Emoluments Clause or
the Presidential Emoluments Clause of the U.S. Constitution bar
President Donald J. Trump's business interest in the Trump Old Post
Office LLC and (2) does the President's business interest in Tenant
violate Section 37.19 of the lease, a provision addressing
participation by elected officials.
We focused our evaluation on GSA's decision-making process for
determining whether the President's business interest in the OPO lease
caused Tenant to be in breach of the lease upon the President's
inauguration. We did not seek to determine whether the President's
interest in the hotel violates either the Emoluments Clauses or Section
37.19 of the lease, or whether any violation caused a breach of the
terms and conditions of the lease. Rather, we sought to determine
whether there were any improprieties in GSA's decision-making process
regarding these issues. We issued our report on January 16, 2019.
Our evaluation found that GSA, through its Office of General
Counsel (OGC) and Public Buildings Service, 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 the decision to exclude the
emoluments issues from GSA's consideration of the lease was improper
because GSA, like all government agencies, has an obligation to uphold
and enforce the Constitution; and because the lease, itself, requires
that consideration. In addition, we found that GSA's unwillingness to
address the constitutional issues affected its analysis of Section
37.19 of the lease that led to GSA's conclusion that Tenant's business
structure satisfied the terms and conditions of the lease. As a result,
GSA foreclosed an early resolution of these issues, including a
possible solution satisfactory to all parties; and the uncertainty over
the lease remains unresolved.
Based on these findings, we recommended 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.
Below is a more detailed discussion of the findings in our report.
Background
The Old Post Office building, located on Pennsylvania Avenue in
Washington, D.C., was erected in the 1890s. In 2008, Congress directed
GSA to redevelop the property, which had become costly to maintain. GSA
selected Trump Old Post Office LLC as the developer in 2012, and
executed a lease of the building with that entity as Tenant in 2013.
The Trump International Hotel officially opened there in October 2016.
The next month, Donald J. Trump was elected President of the United
States. At that time, President-elect Trump held a majority interest in
Tenant.
Shortly after the November 2016 election, lawyers in GSA's OGC
began discussing the issues the President-elect's business interest in
Tenant raised under the Constitution's Emoluments Clauses and Section
37.19 of the lease.
The relevant provisions are as follows:
U.S. Constitution, Article I, Section 9, Clause 8--The
Foreign Emoluments Clause: [N]o Person holding any Office of Profit or
Trust under [the United States], shall, without the Consent of the
Congress, accept of any present, Emolument, Office, or Title, of any
kind whatever, from any King, Prince, or foreign State.
U.S. Constitution, Article II, Section 1, Clause 7--The
Presidential Emoluments Clause: The President shall, at stated Times,
receive for his Services, a Compensation, which shall neither be
encreased nor diminished during the Period for which he shall have been
elected, and he shall not receive within that Period any other
Emolument from the United States, or any of them.
Ground Lease, Old Post Office Building, Section 37.19:
Interested Parties: 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; provided,
however, that this provision shall not be construed as extending to any
Person who may be a shareholder or other beneficial owner of any
publicly held corporation or other entity, if this Lease is for the
general benefit of such corporation or other entity.
As described in further detail below, in December 2016, the OGC
lawyers decided not to consider whether the President's business
interest in the OPO lease might result in his receipt of emoluments
under the Constitution's Emoluments Clauses. In March 2017, after
receiving guidance from the lawyers, the GSA contracting officer
responsible for the OPO lease decided that Tenant was in full
compliance with Section 37.19 of the lease.
Facts
Emoluments
GSA's legal work on the Emoluments Clauses and Interested Parties
provision fell to a small group of OGC supervisory attorneys named in
our report. Senior attorneys told us that they walled the Contracting
Officer off to avoid any political influence over him and preserve his
independence.
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, the attorneys responsible for providing guidance on
the OPO lease told us that they did not discuss this possibility until
November 2016.
The attorneys recalled participating in a few internal discussions
about the emoluments issues after the election. In the end, they all
agreed that there was a possible violation of the Constitution's
Emoluments Clauses. Nonetheless, they decided to ignore the emoluments
issues, for various reasons discussed below. As one senior attorney
told us, OGC decided to ``punt.''
The OGC attorneys made the decision not to address the emoluments
issues by mid-December 2016. The attorneys told us they did so without
preparing a formal decision memorandum to document the rationale for
the position they were taking, conducting any research of the two
Emoluments Clauses, checking for any opinions about them from the
Department of Justice Office of Legal Counsel (OLC), or contacting or
seeking guidance from OLC.
Section 37.19
The language of Section 37.19 originated in an 1808 statute that
provided that every federal government contract or agreement must
include a prohibition that: ``no member of Congress shall be admitted
to any share or part of such contract or agreement, or to any benefit
to arise thereupon.''
The version of the Interested Parties provision used in the OPO
lease was taken from GSA's 1999 outlease of the historic Tariff
Building in Washington, D.C., for the Hotel Monaco. The revised clause
used in the Monaco Hotel lease stated in full:
No member or delegate to Congress, or elected official of the
Government 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; provided, however, that this
provision shall not be construed as extending to any Person who
may be a shareholder or other beneficial owner of any publicly
held corporation or other entity, if this Lease is for the
general benefit of such corporation or other entity.
According to the GSA attorney on that project, the Interested
Parties provision was intended to minimize an elected official's
interference with the commercial operation of the government landlord.
GSA made no changes to the Monaco Hotel lease Interested Parties
provision when pasting it into OPO lease Section 37.19. By the time GSA
executed the OPO lease in 2012, Congress had revised the 1808 language
used in Section 37.19 `` . . . to conform to the understood policy,
intent, and purpose of Congress to make it clear that the prohibition
prohibited entry into a contract or benefiting from the contract.''
The GSA team members assigned to the OPO redevelopment project
recalled little discussion of, or familiarity with, Section 37.19 at
the time the lease was signed. GSA did not consider the provision a
material term of the OPO lease, and it was not discussed during lease
negotiations. There also was no discussion on the OGC OPO team about
Section 37.19's impact if Mr. Trump became President.
GSA Review of 37.19
As with the emoluments issue, GSA attorneys first began seriously
discussing the meaning of Section 37.19 and whether President Trump's
business interest in the OPO lease constituted a breach shortly after
the election, following the publication of the first of several
articles about Section 37.19 in November 2016. The Contracting Officer
told us that he immediately formed an opinion, based on his ``plain
reading'' of Section 37.19, that there was no breach of Section 37.19;
however, he waited to formalize his opinion because he was willing to
consider other points of view.
President Trump was sworn into office on January 20, 2017. After
the inauguration, Tenant's counsel notified the Contracting Officer
that the President had transferred his interest in the Old Post Office
to a revocable trust and relinquished his management over that interest
for the period of his presidency; however, he still retained his
financial interest in the property.
OGC lawyers, the Contracting Officer, and the Project Manager met
with Tenant representatives and counsel on January 31, 2017, to discuss
Tenant's new organizational structure. The Contracting Officer told us
that during the meeting, he strongly encouraged the President's
divesture from Tenant. The Contracting Officer said he wanted to get
the OPO out of controversy, but felt he did not have a solid position
to force divestiture.
On February 10, 2017, the Contracting Officer solicited Tenant's
position and analysis on whether Tenant was in ``full and complete
compliance'' with the Lease, specifically Section 37.19. Counsel for
Tenant responded February 17, 2017, concluding that, among other
points, (1) Section 37.19 does not apply when an elected official is
``admitted to'' a lease before their election and (2) Tenant is an
``other entity'' under Section 37.19's exception for owners who have a
beneficial interest in a ``publicly held corporation or other entity.''
After receiving Tenant's response, the Contracting Officer requested a
legal opinion from OGC.
OGC provided a memorandum to the Contracting Officer dated March 3,
2017, and further guidance in a memorandum dated March 20, 2017. GSA
has asserted attorney-client and deliberative process privileges with
respect to the contents of both memoranda.
Contracting Officer's Decision
The Contracting Officer sent an Estoppel Certificate and decision
memorandum to Tenant dated March 23, 2017, stating that the Tenant was
``in full compliance with Section 37.19 and, accordingly the Lease is
valid and in full force and effect.'' The Contracting Officer told us
he considered the four corners of the lease and the plain meaning of
its language, Tenant's interpretation of the lease language, and the
OGC opinions. He also stated that no one inside or outside GSA
pressured him to render any specific decision about Section 37.19.
Analysis
We evaluated whether GSA should have addressed the issue raised
under the Foreign and Presidential Emoluments Clauses as part of its
administration of the lease. To do so, we first considered whether, as
GSA acknowledged, the Emoluments Clauses might apply to the benefits a
government officer or employee receives from private business
activities.
We surveyed sources that show the contemporaneous use and meaning
of the term ``emolument'' during the Founding Era. We reviewed the
Supreme Court opinions that might show general usages over long periods
of time. Finally, we reviewed evidence of the first President's
business activities that might be relevant to our inquiry. We found
evidence that the term ``emolument'' as used historically and today
includes the gain from private business activities, confirming GSA's
assumption that the Old Post Office lease raises at least potential
constitutional issues.
We also addressed GSA's reasons for ignoring the constitutional
issues, and the effect this had on its analysis of Section 37.19 of the
lease. OGC lawyers told us they ignored the emoluments issues and that
constitutional issues rarely arise within GSA's work. They also stated
that the Foreign Emoluments Clause is not in GSA's purview, and not for
GSA ``to evaluate.'' OGC lawyers also justified their inaction by
stating that Section 37.19 is a specific lease provision but the
Foreign Emoluments Clause raised larger issues. We rejected these
explanations. The notion that GSA can disregard selected parts of the
Constitution fundamentally ignores Article VI of the Constitution.
Clause 2 in Article VI establishes the whole Constitution as ``the
supreme Law of the Land'' and, therefore, it governs every agency.
Moreover, the lease, by its very terms, contemplates that laws will be
considered even if they are not specifically included in the text.
The agency also disregarded existing precedent and instruction that
provided important guidance for understanding the contours of the
constitutional provisions GSA confronted. Significantly, we found that
OGC had already addressed the threshold question that the lease
presents: Does the Foreign Emoluments Clause restrict the income or
other benefits that an officer or employee receives from their private
business activities with foreign states?
At least as early as 2013, OGC recognized that a Foreign Emoluments
Clause issue could arise when a GSA employee sought a waiver to
participate in an outside real estate company in the Washington D.C.
area. When the issue arose, the employee's supervisor, with the
assistance of an OGC ethics advisor, issued a decision memorandum that
partially granted the waiver but cautioned that the Foreign Emoluments
Clause prohibited the employee from doing any business with any foreign
country, such as any transaction regarding an embassy.
OGC also disregarded the opinions of the Department of Justice's
OLC on the Foreign Emoluments Clause and the Presidential Emoluments
Clause. OGC attorneys understood that OLC provides guidance on
constitutional issues and were aware of applicable past OLC opinions.
In fact, the office was aware of specific OLC opinions that interpreted
the Presidential Emoluments Clause and the Foreign Emoluments Clause in
circumstances that involved President Reagan and President Obama. Those
and other OLC emoluments opinions provide guidance GSA attorneys could
have used but ignored.
Finally, OGC also could have sought guidance from OLC directly, but
did not. We found that OGC is familiar with seeking guidance from OLC,
and had requested advice from OLC previously. OGC confronted a similar
problem 20 years ago when OGC sought guidance on a complex business
structure between six entities, in which two Members of Congress held
beneficial interests through blind or excepted trusts, and a real
estate investment trust that held government leases. The proposal
raised a question whether the interests of the Members under the
proposed transaction violated the criminal statutes, based on the 1808
Act that prohibited Members from entering in or holding federal
government contracts. OGC sought guidance from OLC because of the
statutory bar to Members of Congress contracting with the government.
Within two months, OLC issued two opinions that rejected several
alternatives suggested by the entities at issue, but also identified
for GSA's General Counsel one alternate arrangement suggested by the
entities that satisfied the law. OGC charted a different course here.
We recognize that under its OLC Best Practices, OLC addresses
constitutional issues in the context of specific facts and
circumstances, which changed in January 2017 as Tenant's business
structure changed. However, much as OGC and the Members of Congress
discovered in 1998, if asked, OLC might have worked with OGC in order
to determine whether Tenant's current business structure or some other
structure in OLC's view would satisfy the Constitution's restrictions,
and those of Section 37.19. Instead, GSA chose to leave any Foreign
Emoluments Clause and Presidential Emoluments Clause issues unresolved
without seeking the type of OLC assistance that OGC sought previously.
Emoluments and Section 37.19
The primary clause of Section 37.19 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 . . . .
The first issue that arises is whether Section 37.19 bars an
official from receiving a benefit if the official entered into the
lease as a private person, before becoming a public official. This
issue turns largely on what the term ``admitted to'' means.
Section 37.19 also creates an exception to the prohibition in a
proviso clause that states:
. . . provided, however, that this provision shall not be
construed as extending to any Person who may be a shareholder
or other beneficial owner of any publicly held corporation or
other entity, if this Lease is for the general benefit of such
corporation or other entity. Here the issue primarily turns on
whether ``publicly held'' modifies both ``corporation'' and
``other entity.''
As previously noted, GSA has asserted privileges over the OGC's
opinions on Section 37.19. This assertion limits discussion of OGC's
views of the legal issues this provision presents, and its guidance to
the Contracting Officer.
When OGC attorneys considered how Section 37.19 should be
interpreted, they employed the standard tools attorneys use for
interpreting language in contracts but they did not, however, analyze
the Constitution's Foreign and Presidential Emoluments Clauses as they
affected Section 37.19. This was a serious shortcoming that left a
constitutional cloud over the lease.
Under the rule of constitutional avoidance, ``where an otherwise
acceptable construction . . . would raise serious constitutional
problems . . . ,'' language should be interpreted to avoid the
constitutional issues ``unless such construction is plainly contrary to
the intent of Congress.'' This prudential rule has special relevance to
a contract or lease where constitutional restraints may limit the
agency's own statutory authority, and by extension, that of its
contracting officer. We found that at least some of the OGC OPO
attorneys knew about the constitutional avoidance rule from researching
OLC opinions, starting in December 2016, for an understanding of the
Seven Member Rule. However, we found that OGC did not consider in
connection with the OPO lease whether GSA has an obligation to
interpret its lease provisions to avoid constitutional questions.
OGC should have recognized from OLC's authoritative Executive
Branch precedents, as well as OGC's own experience with the Foreign
Emoluments Clause, that the OPO lease presented serious constitutional
questions. In this circumstance, the constitutional avoidance rule
requires an inquiry to determine whether there are other plausible
interpretations of Section 37.19 that do not present constitutional
problems, as discussed above. Such an inquiry might have led, as we
discussed earlier, to discussions with OLC. Much like the discussions
that yielded the solution OLC found for OGC in 1998, when Members of
Congress sought to participate in a business structure that included
government leases, those discussions might have led OLC to identifying
business structure options for GSA and Tenant that satisfied Section
37.19 without raising potential constitutional issues. However, OGC
refused to consider any constitutional implications and failed to
conduct this inquiry. As a consequence, the GSA contracting officer
provided Tenant with an Estoppel Certificate that leaves a
constitutional cloud over the lease.
Conclusion
We found that GSA, through its Office of General Counsel and Public
Building Service, 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 the Department of Justice's Office of
Legal Counsel 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.
GSA 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 outleases of historic properties.
Recommendation
At the conclusion of our report, we recommended 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.
In its response to our report, GSA agreed with our recommendation.
The agency provided a written response to our evaluation report and we
included that document as an appendix to our report's final version.
Subsequently, our office has been in ongoing dialogue with GSA
management about its plan to implement the recommendation.
In my next semiannual report to Congress, which is scheduled to be
delivered to you at the end of October, I will inform the Committee
about the status of the recommendation and whether our office agrees
with the final GSA management decision regarding its implementation.
Mr. Meadows. Madam Chairman, I have a unanimous consent
request.
Ms. Titus. The gentleman is recognized.
Mr. Meadows. I thank the gentlewoman.
In light of the testimony indicating that there was a $6
million annual loss that Mr. Mathews had, I would ask it be
entered into the record both a briefing and a part of the lease
that would indicate a base rent of $3 million, which would be
income to the U.S. Government, not an expense.
I ask these documents be entered into the record.
Ms. Titus. Without objection.
[The information is on pages 113-115.]
Mr. Meadows. Thank you.
Ms. Titus. Thank you.
Thank you both for your testimony.
We will now move on to Member questions. Each Member will
be recognized for 5 minutes. And I will start by recognizing
myself.
Mr. Mathews, before you accepted your current job in the
summer of 2017, did anyone affiliated with the Trump
administration, Trump transition team, Trump campaign, or Trump
Organization ask you for your opinion on whether the Trump
Organization was in violation of the lease for the Old Post
Office?
Mr. Mathews. I had no communication with anyone from the
Trump companies while I was being considered for this position,
no.
Ms. Titus. Have you ever had any communication with any
current or former GSA employees about how the White House or
President Trump would respond if he were forced to divest from
his business interests?
Mr. Mathews. Well, I worked for this subcommittee as the
majority staff director, and we certainly received briefings
from GSA on this very question.
Ms. Titus. Thank you.
Ms. Ochoa, in January of this year, your office issued the
report that has been described and outlined the failures of the
GSA to address the issues with the lease, including those that
pertain to the Emoluments Clause. Is that correct?
Ms. Ochoa. Yes.
Ms. Titus. And on March 29 of 2019, GSA delivered a
corrective action plan to you in response to the
recommendations of how they should remedy the issues with the
hotel lease. Is that correct?
Ms. Ochoa. Yes.
Ms. Titus. And did you find that GSA's plan to remedy the
situation was sufficient?
Ms. Ochoa. We have not agreed with the agency's corrective
action plan to date.
Ms. Titus. And, in your judgment, did GSA adequately
clarify the section of the Old Post Office lease that prohibits
elected officials from being a party or beneficiary of a
Federal lease?
Ms. Ochoa. It is my understanding that GSA has not
undertaken the analysis we requested or made----
Ms. Titus. Did GSA bother to do the legal review of the
Emoluments Clauses that they failed to do when Donald Trump
took office and that you recommended?
Ms. Ochoa. I have no information that they have done that.
Ms. Titus. So GSA went back and is it correct they
submitted another plan to you on August 26 of 2019? Is that
correct?
Ms. Ochoa. I think that is the right date.
Ms. Titus. And did your office find that their plan to
remedy the situation on that day was significantly different
from the one that they had submitted back in March?
Ms. Ochoa. No, it is not.
Ms. Titus. I have the two documents here. The first is the
GSA's corrective action plan dated March 29, and the second is
the inspector general's communication with the GSA on September
6, 2019. I would ask for unanimous consent that they be entered
into the record.
Without objection, so ordered.
[The information is on pages 107-111.]
Ms. Titus. Section 37.19 of the lease states that no Member
or Delegate to Congress or elected official to the Government
of the U.S. shall be admitted to any share or part of this
lease or to any benefit that may arise therefrom.
Ms. Ochoa, your agency said that the GSA needed to clarify
this language. Is it true that GSA attempted to clarify this
language by claiming that it should only apply to Members of
Congress and not the President of the United States?
Ms. Ochoa. The corrective action plan proposes to drop the
language from section 37.19 that prohibits both State and local
elected officials and the President and Vice President from
benefiting from the lease.
Ms. Titus. So their way of dealing with the problem of the
President coming under the Emoluments Clause was to drop the
President from the lease and just say that in the future this
would apply only to Members of Congress but not the President
and the Vice President. Is that correct?
Ms. Ochoa. Or State and local elected officials.
Ms. Titus. For both clauses then. Yeah.
Ms. Ochoa. That is my understanding of the corrective
action plan as to section 37.19.
Ms. Titus. I found that astounding.
And on top of that, is it correct that, to date, GSA has
still, in your judgment, failed to uphold its constitutional
obligation about conducting the legal review of the Emoluments
Clauses?
Ms. Ochoa. Yes, I am not aware of their effort to look into
the Emoluments Clause in connection with how it affects
interpretation of section 37.19.
Ms. Titus. Mr. Mathews, I am sure we are in agreement that
the President of the United States is an elected official of
the Government. Given that the agency's independent IG has just
said that you failed to uphold your duties under the U.S.
Constitution, can you commit that the GSA will conduct a legal
review of the Emoluments Clauses as they pertain to the Trump
DC Hotel?
Mr. Mathews. First, I would like to just respond to our
corrective action plan. So, with respect to the ``interested
parties'' provision, GSA agreed to no longer use the language
contained in section 37.19 in future outleases--not in the
current lease--in future outleases. So I just wanted to
correct----
Ms. Titus. So in future leases only Congress is prohibited,
but not the President and Vice President, in case there are
future leases. We got that.
Mr. Mathews. Correct.
Ms. Titus. Now, will you conduct that study of the legal
implications or legal review of the Emoluments Clause?
Mr. Mathews. So, on that question, what we propose to do in
future outleases is to remove the ambiguity from that
``interested parties'' clause by striking it and referencing
the statutory basis for that clause so there is a direct
reference to that statutory reference. That is what we are
prepared to do----
Ms. Titus. That statutory reference does not supersede the
Constitution. So it seems to me that the IG's investigation
revealed that you all just completely ignored the serious legal
and ethical questions here. And your response to their
recommendations was not to follow the recommendations but to
strike the President and Vice President and say, oh, that just
applies to Congress.
Thank you, and my time is up.
Mr. Meadows--oh. Mrs. Miller will be recognized.
Mrs. Miller. Thank you, Chairwoman Titus.
And thank you, Ranking Member Meadows.
I spend most of my time on the Oversight Committee in
hearings designed by my colleagues across the aisle with only
one goal: to impugn and impeach our President. And now, instead
of being productive in this committee, we are subjected to
another display of political theater and listening to what the
left thinks about what the President is doing with the hotel
that he is not involved with.
Here I am in a Committee on Transportation and
Infrastructure subcommittee meeting--it is one of the most
bipartisan committees in Congress--and we are doing it again.
This is disappointing. I find it disturbing and a waste of the
American people's time and dollars.
I came to Congress to work on the issues that matter.
Infrastructure is the future of America and the future of our
States and my home State of West Virginia. When this hearing
was first noticed, it was supposed to be a disaster recovery
hearing--again, an issue that is very important to my home
State and many of the other States that are suffering. It is an
issue that I want to work on.
It is sad that the political environment is so toxic that
it is preventing us from doing what we came here to do, which
was to work together on the things that matter.
Mr. Mathews, isn't it true that before the lease that we
were losing $6 million per year on the Old Post Office and that
now the taxpayer is actually receiving income?
Mr. Mathews. Yes, that is correct. We have essentially a
$10 million swing in the operating revenues of that facility.
It has been a tremendously successful project, a bipartisan
project, from a real estate perspective and a financial
perspective from the taxpayer.
And we also have a building that had approximately $200
million in unfunded capital repair requirements. It has been
fully renovated. All the mechanical, electrical, plumbing, you
name it, it is all brandnew. The building is being maintained
to a high standard.
It is a very successful real estate project for the
taxpayer.
Mrs. Miller. On what date did the GSA announce the
selection of the Trump Organization as the preferred developer
for the Old Post Office Building?
Mr. Mathews. The lease was executed on August 5, 2013.
Mrs. Miller. And when was it signed?
Mr. Mathews. That is when it was signed, ma'am.
Mrs. Miller. OK.
Mr. Mathews. August 5, 2013.
Mrs. Miller. And on what date did the President alert the
GSA that he intended to alter the business structure to assign
his interest to another party in order to comply with the
lease?
Mr. Mathews. I believe that took place--I would have to
check to get that exact date. I am afraid it is not on my
timeline. But I believe it was either early 2017 or late 2016.
Mrs. Miller. I would like to know when it is finalized. Was
that before or after his official inauguration?
Mr. Mathews. And that was January 23. So I would have to
get that specific date, but it was right around that time.
Mrs. Miller. OK.
At what date was it determined, following the review of the
lease, that the tenant was in full compliance and it went in
effect?
Mr. Mathews. That was March 23, 2017.
Mrs. Miller. Thank you.
I yield back my time.
Ms. Titus. The gentlelady yields back.
I would like to make a clarification. I don't know where
this is coming from, that the hearing was noticed for disaster
relief. This hearing has been noticed for this topic all along.
And so that is something that needs to be cleared up.
Mr. Meadows. Madam Chairman, I think what it was was when
we had the subcommittee looking at proposed hearings, you
noticed it one way, but when we were doing the hold date, it
was hold for disaster relief. I think that is where the
ambiguity is.
Ms. Titus. I think that is scheduled for later next week.
We will be looking at FEMA again.
Mr. Meadows. I have a unanimous consent request----
Ms. Titus. OK.
Mr. Meadows [continuing]. Madam Chairman.
I would ask unanimous consent that these three photos be
entered into the record that show the Delegate from DC, the
mayor of DC, along with President Trump, at the ground-
breaking, along with the celebration at the ribbon-cutting with
the Delegate from DC, trying to demonstrate how everyone seemed
to be happy about this until the President was elected.
Ms. Titus. Without objection, we will enter these into the
record.
[The information is on pages 116-117.]
Ms. Titus [examining photos]. Ms. Norton, you are looking
good here.
And I would point out, this is prior to the President being
elected, which changes----
Mr. Meadows. Well, I would point out, one of the photos,
for the record, is after----
Mr. DeFazio. Can we return to the topic at hand?
Mr. Meadows. Well, to my knowledge, just a point of
clarification, to make clear on the unanimous consent request,
is that one of the pictures is actually after the opening of
the Trump Hotel.
Mr. DeFazio. Who cares?
Ms. Norton. Would the gentleman yield?
Mr. DeFazio. Could I please ask----
Ms. Titus. Could we have a little order in here, please?
Could we please have a little order?
This is----
Mr. DeFazio. No objection.
Ms. Titus. All right. There was no objection to entering
these into the record. We just want to be clear that this is at
the lease signing, which is prior to Mr. Trump being
inaugurated as President. All right. Prior to him being
President.
We will now recognize Mr. DeFazio for 5 minutes.
Mr. DeFazio. Thank you, Madam Chair.
You keep referring to the income, which is actually
mandated by the lease, and all you are talking about is the
mandated rent payment. And there is a provision of the proposed
lease, percentage rent difference, where--and I would again
question GSA's judgment in how they calculate this--but that we
are supposed to receive an additional amount of money if the
property is profitable.
And according to the only released monthly statements that
were leaked or intentionally put out by a public-spirited
employee at GSA, it began to be profitable in February 2017.
So, Mr. Mathews, last year--all you are quoting to us is
the rent payment. What was the additional amount paid to the
GSA under the terms of the lease out of the profits of the
Trump Hotel?
Mr. Mathews. Thank you for the question.
Mr. DeFazio. It is a simple question. Just give me the
number.
Mr. Mathews. So I actually need to correct something. The
profit-sharing is not based on profits; it is based on gross
revenues.
Mr. DeFazio. OK.
Mr. Mathews. And those gross revenues are reported----
Mr. DeFazio. OK. So what was the amount? I am asking you a
simple question. We do not have that number. You have not
provided us that number. What additional payments were made to
the Government last year under this lease beyond the mandated
rent? How much?
Mr. Mathews. We received--and the way it's structured is it
is based on gross revenues with a minimum payment of
approximately $3 million and a maximum payment--it is a
percentage of the gross revenues.
Mr. DeFazio. Three percent more, up to 3 percent.
Mr. Mathews. It escalates----
Mr. DeFazio. OK. All right. So how much did we receive last
year over and above the mandated rent?
Mr. Mathews. As I testified, we received the approximately
$3 million base rent.
Mr. DeFazio. OK. So all we got was the base rent. So you
are saying this hotel is losing money?
Mr. Mathews. I am not saying that.
Mr. DeFazio. No one is staying there? There are no gross
revenues? There is no sharing? It is not beyond the lease?
OK. So you are telling us that. Do you believe it is
legitimate for this committee--you worked for this committee
for a long time.
Mr. Mathews. Yes, I did.
Mr. DeFazio. Do you believe we have oversight
responsibility?
Mr. Mathews. Yes, I do.
Mr. DeFazio. Good. Now, then why can't we get anything
except redacted monthly statements [indicating document]? How
do we know--and you can't give me a number--that we are getting
the additional payments that are required under the lease if
you won't give us any financials? Will you give us the
financial statements?
Mr. Mathews. So----
Mr. DeFazio. Will you give us, yes or no?
Mr. Mathews. So our goal----
Mr. DeFazio. Yes or no?
Mr. Mathews. Our goal is to----
Mr. DeFazio. Yes or no?
Mr. Mathews. Our goal is to----
Mr. DeFazio. Yes or no?
OK. You are not going to answer that question.
OK. You were asked earlier about--so you are not going to
provide those. How about doing an audit? You do do audits of
leases. Is that correct, yes or no?
Mr. Mathews. We receive an annual audited financial
statement----
Mr. DeFazio. Who audits it?
Mr. Mathews. It is a third party, and we receive an
annual----
Mr. DeFazio. OK. Did you choose the third party?
Mr. Mathews. Excuse me?
Mr. DeFazio. Who chose the third party?
Mr. Mathews. The tenant provides----
Mr. DeFazio. Sure. OK.
Mr. Mathews [continuing]. The audited financial statement.
Mr. DeFazio. OK. So you don't feel you have any
responsibility to check into that, or the contracting officer
doesn't?
Mr. Mathews. That actually----
Mr. DeFazio. To the IG, would you conduct an audit of this
hotel to see whether or not the income, which is required, over
and above the base rent is being properly paid to the taxpayers
of the United States of America?
Ms. Ochoa. Actually, GSA has specific authority under the
lease to conduct such an audit.
Mr. DeFazio. Well, he just said they won't do it.
Ms. Ochoa. The focus of that audit would be on determining
whether the Government is getting the appropriate rent
payments.
Mr. DeFazio. Yes.
Ms. Ochoa. We would have to think about that. We certainly
have oversight authority over the payment issue. We would have
to think carefully about the resources that it would take to do
such an audit and any constraints on our ability to get the
records independently of GSA. We would have to think about
whether it made sense for GSA to ask us to do that audit or to
have an outside auditor with expertise----
Mr. DeFazio. But GSA has the authority. GSA has done this
for other leases, I would assume.
Have you? Have you ever audited a lease, GSA ever audited a
lease? Or do we let all of our tenants just send us their own
financials and send us their own legal, you know, after they
have hired an accountant?
Mr. Mathews. I don't know offhand if we have audited other
leases, but we do----
Mr. DeFazio. OK.
Mr. Mathews [continuing]. Receive certified financial
statements.
Mr. DeFazio. Right. OK. So, since you receive them, how
much additional money beyond the base rent did we get last
year, did the taxpayers of the United States of America get
last year, under the terms of this lease? What was that number?
Mr. Mathews. We just received the base rent.
Mr. DeFazio. OK. So somehow you have calculated that, you
know, within this whole purview, that there is no one staying
there, there is no revenues over and above?
Mr. Mathews. Well, again, we receive certified annual
financial statements that tell us what the gross revenue is,
and we know that we are receiving the proper amount of rent.
Mr. DeFazio. OK.
I thank the gentlelady.
Ms. Titus. I will now recognize Mr. Pence.
Mr. Pence. Thank you, Chairwoman Titus, Ranking Member
Meadows, and the witnesses before us today.
Ranking Member Meadows, I know you want to save taxpayers
billions of dollars in the public building space, like it seems
like we have saved $9 million a year here at the Trump Hotel,
and I would sincerely like to thank you for your leadership on
this issue.
I would like to take this opportunity to discuss real
issues that impact Hoosiers and all Americans, like
transforming how we approach Federal real estate and saving
taxpayer dollars, instead of putting on a partisan show.
You see, billions of taxpayer dollars can be saved if we
continue to, one, consolidate and reduce our space footprint;
two, negotiate good lease deals; three, sell or redevelop
properties that are underutilized and high-value; and, four,
put people in more efficient buildings.
Commissioner Mathews, when we met back in April, I told you
that I had two priorities: public-private partnerships and
updating OMB score rules to bring our approach to Federal real
estate to the 21st century.
If we are serious about transforming how we approach
Federal real estate, it is critical for us to do things
differently and put more options on the table, like P3s. Today,
Mr. Meadows and I introduce a Public-Private Partnerships for
Prosperity Act of 2019, legislation to provide GSA with
flexibility to pilot the use of public-private partnerships.
Hopefully, we get back to doing the work for the people we
represent instead of grandstanding and self-promoting.
I yield back.
Ms. Titus. Thank you, Mr. Pence.
We will now recognize Ms. Davids.
Ms. Davids. Thank you, Chairwoman.
Mr. Mathews, in light of the inspector general's finding
that as a result of GSA's failure to address the constitutional
issues raised by the lease in question, has GSA taken any steps
to address the emoluments and other constitutional issues at
all?
Mr. Mathews. So a couple of points on that.
One, so we agreed with the single recommendation of the
report, as we understood it. And we are applying a new--to
future outleases, we have agreed to remove the ``interested
parties'' provision and replace it with a reference to the
underlying statute that governs that provision to remove any
ambiguity----
Ms. Davids. Sir, that is not the question I asked. I didn't
ask what you were doing moving forward on other leases. I asked
about the lease in question.
Mr. Mathews. So the lease in question. There are a number
of lawsuits that are pending that are specifically designed to
address this question of, is there or is there not an
emoluments violation?
In that forum, the Department of Justice speaks for the
executive branch of Government. And the Department of Justice
has argued before the courts there is no emoluments violation,
there is no violation of the Constitution. And it would not be
appropriate for GSA to opine on that matter, given that the
courts are addressing that issue and the Department of Justice
has----
Ms. Davids. OK. Thank you. That is enough on that one.
So, in response to a question that was just asked, you said
you were uncertain whether you have conducted any audits on
leases that the GSA has entered into. Is that true? You don't
know whether you have----
Mr. Mathews. So----
Ms. Davids. So you are currently running the GSA. Is that
right?
Mr. Mathews. I am the Public Buildings Commissioner; that
is correct.
Ms. Davids. OK. And you don't know if your agency conducts
audits on leases?
Mr. Mathews. We have thousands of leases. We conduct a
variety of contractual lease administration activities every
day. If----
Ms. Davids. And you are unsure if an audit----
Mr. Mathews. If they involve third-party----
Ms. Davids [continuing]. Is one of those activities?
Mr. Mathews [continuing]. Audits, I couldn't tell you, but
we enforce contract actions every day----
Ms. Davids. Sir, I would like you, after this concludes, to
submit for the record whether or not the GSA conducts audits on
any leases that it enters into.
Mr. Mathews. We would be happy to----
Ms. Davids. Thank you.
Mr. Mathews [continuing]. Get back to you on that.
Ms. Davids. What percentage of the activities that you are
responsible for right now for the American people, what
percentage of those activities is managing leases?
Mr. Mathews. So we have about $10.5 billion flowing through
the Federal Buildings Fund, over 8,000 leases, approximately
$5.6 billion in annual rent expenditures for private-sector
leases. It is the majority of our portfolio. It is one of our
top priorities.
Ms. Davids. That is a lot of money to not know whether or
not you audit the activities.
Are you concerned about the fact that you may or may not be
auditing $10-plus-billion annual funds that go to the Federal
Government?
Mr. Mathews. We have program management reviews on a
regular basis. We have contracting reviews on a regular basis.
We have a whole office within GSA; it is outside of PBS, but it
is called the senior procurement executive. We do contract
reviews of different business lines on a regular basis. This
year alone, we have probably gone through six or seven regions
of internal contract reviews of our leasing programs. So there
is tremendous oversight over this.
The question was about a very specific type of audit. And I
don't know if we do that same type of audit across all of our
leases. I don't know if those lease terms, frankly, allowing,
authorizing that type of a specific audit is even present. This
is an outlease. Outleases are a very few minority of our lease
portfolio. Most of our leases, we are the lessee and we are
leasing a facility from a lessor. In this case, it is reversed.
Ms. Davids. How often do you have a profit-sharing
provision in a lease that you enter into as the GSA?
Mr. Mathews. Again, our outleases are relatively----
Ms. Davids. Can you please--because it sounds like that
will take you a long time to get to. Can you please find out
how many and then report that to the committee? And then also
find out how often you conduct audits on outleases specifically
and report that to the committee as well?
From the answers that you have given so far, in addition to
the lease that we are currently reviewing, I have major
concerns about the oversight that you have over any of the
leases that the GSA has entered into, because it sounds as if
you are not exactly sure what kind of review you are doing. And
that is very problematic for the person who is ultimately
responsible for the properties that the Federal Government has.
I yield back.
Ms. Titus. Thank you.
The lady yields back, and we will now recognize Mr. Palmer.
Mr. Palmer. Madam Chairman, I have a point of inquiry
before I begin my questions, if I may? And it is a serious--I
am asking for information.
In Chairman DeFazio's opening statement, I just need to
clarify, did he say that he had a conversation with a former
GSA employee who gave him a different perspective on the lease
arrangement?
Mr. DeFazio. No, I said my staff did.
Mr. Palmer. Your staff did. Did that individual provide--
Madam Chairman, did that individual provide documentation
either in printed or electronic format, or was the content of
the conversation recorded?
Mr. DeFazio. May I respond to the gentleman?
The former staff who has jurisdiction over this issue met
with a person from GSA, and that person said there were
substantial issues to be resolved.
That conversation was characterized and sent to GSA in a
letter of inquiry in November. And GSA said that is not the
conversation, and they denied the whole thing. So that is the
end of that. And that gentleman has been transferred to New
York, and he won't talk to anybody.
Mr. Palmer. OK. But it was a former----
Mr. DeFazio. He has been transferred----
Mr. Palmer [continuing]. A former staff----
Mr. DeFazio. He has been transferred to New York, the GSA
employee.
Mr. Palmer. Madam Chairman, my inquiry is, was that a
former member of this committee's staff that had that
conversation? And if it was documented in any form, then it
should have been provided to the entire committee, the staffer
identified and the individual identified. That would be my
point of inquiry.
Mr. DeFazio. I have no idea what he is talking about.
Ms. Titus. We will just take a minute to take that under
consideration.
Mr. Palmer. Thank you, Madam Chairman.
[Discussion off the record.]
Ms. Titus. I have been advised that it was an informal
meeting to a former staffer. I am sure those kind of meetings
take place all the time. We can talk about that further
offline.
Mr. Palmer. I thank you, Madam Chairman.
Ms. Titus. Thank you.
Mr. Palmer. It would be my opinion that that information
should have been provided to the entire committee, but I really
appreciate your response to the inquiry.
Ms. Titus. OK. Thank you.
Mr. Meadows. Yeah. Point of order.
Ms. Titus. Mr. Meadows?
Mr. Meadows. If indeed it is entered into the record, it
has to have something that is documented. You can't have a
referral to a testimony that is not something of record,
according to the committee rules.
Ms. Titus. This was not a testimony. It was not referred to
as a testimony. It was referred to as an informal conversation
with a former staff person.
Mr. Meadows. So a point of inquiry, then. Was it subject to
your investigation?
So you are saying this is not part of your normal
investigation; this was just a casual conversation.
Ms. Titus. This was back in 2016.
So we will move on with the questions from Mr. Palmer.
Mr. Meadows. You mean under the previous Congress?
Ms. Titus. Yes.
Mr. Meadows. So, then, it is not relevant to this hearing.
Ms. Titus. Well, it is as relevant as the pictures from the
ribbon-cutting are.
So I think we will now move on with Mr. Palmer's questions.
Mr. Palmer. Thank you, Madam Chairman.
IG Ochoa--is that correct?
Ms. Ochoa. ``Ochoa.''
Mr. Palmer. ``Ochoa.'' Thank you. In your written
testimony, you make a point in your conclusion that appears to
say that the procedures that the GSA followed in these
outleases of historic properties is consistent with the other
outleases.
I will read it to you. It says, ``GSA 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 outleases of historic properties.''
So it appears to me that they are basically doing what they
always do. It is almost like a cut-and-paste and a lease
arrangement that occurred, apparently, in 2013? Is that
accurate?
Ms. Ochoa. Are you asking me about the origin of that
language?
Mr. Palmer. No, ma'am, I am asking you if this is
consistent with what, as you point out, and it appears that you
think is problematic, GSA has kind of a standard operating
procedure for these outleases of historic properties.
Ms. Ochoa. The point of the sentence that you are reading
to me was that GSA has told us that if there is a
constitutional violation found, it would have to go back and
revisit whether there was a breach----
Mr. Palmer. But the point I am making----
Ms. Ochoa [continuing]. Of the Post Office lease. They
still have the same language in two existing leases.
Mr. Palmer. It is consistent with the other leases. It is
the same language in these other outleases of historic
properties.
Ms. Ochoa. Yeah, it is substantially similar. The only
difference is which State and local officials it applies to.
Mr. Palmer. That is my point. This is a standard lease.
Madam Chairman, I yield the balance of my time to the
ranking member, Mr. Meadows.
Mr. Meadows. I thank the gentleman from Alabama.
Mr. Mathews, let me come to you. Is the Trump Organization
in breach of their contract?
Mr. Mathews. No. In March 2017, the contracting officer
found them in compliance.
Mr. Meadows. All right. And so, with regards to the lease
payments, are they in breach of their lease agreement up until
today? Are they paying the accurate amount of lease payments as
agreed upon in the lease that we all have?
Mr. Mathews. Correct. They are current on their rent.
Mr. Meadows. In your long history with this committee and
with GSA and dealing with public buildings, would it be foolish
for them to underpay on their lease because that would, in
essence, terminate the lease after all of the improvements they
have made?
Mr. Mathews. It certainly wouldn't be wise.
Mr. Meadows. OK. Well, let me put it this way: If you had
invested millions of dollars to upgrade the Old Post Office,
would you make sure that you are making your monthly payments
in accordance to the lease so that you do not default on a
lease?
Mr. Mathews. One would think it would be important to
remain in compliance with the lease, absolutely.
Mr. Meadows. All right.
So, fundamentally, the question that we have before us
today is not whether the Trump Organization is making the
payments that have been negotiated under the previous
administration, as I said in my opening statements. It is not
that they are--so this all boils down to an emoluments question
and whether the President of the United States should get some
kind of benefit tangentially from the operating of a hotel that
he leased prior to him becoming President. Is that correct?
Mr. Mathews. Yes, it is. We know we receive--we have a
certified, annual, audited financial statement. We know that
the right amount is being paid. And you are right; at the end
of the day, this comes down to that core question, which is
pending before the courts. And GSA is not in a position to
opine on that answer. The Department of Justice has already.
Mr. Meadows. Does GSA have a number of buildings in the
Washington, DC, area that they are actually paying money,
taxpayer money, out on an annual basis to maintain those
buildings that is a net cost to the taxpayer?
Mr. Mathews. There are some, and most of them are historic
buildings.
Mr. Meadows. Are there more than a dozen of those?
Mr. Mathews. I don't know about in the National Capital
region, but----
Mr. Meadows. It is a softball question.
Mr. Mathews [continuing]. Certainly nationally, absolutely.
Mr. Meadows. OK. All right.
And so, in doing this, what you took was a nonperforming
asset, where we lost, according to your testimony, $6 million a
year--is that correct?
Mr. Mathews. Yes.
Mr. Meadows. And you are now making it a net plus at $3
million a year to the Federal Treasury. Is that correct?
Mr. Mathews. That is correct. It has been a very successful
financial real estate transaction for the taxpayer.
Mr. Meadows. I yield back.
Ms. Titus. Thank you.
The Chair now recognizes Ms. Norton.
Ms. Norton. Well, hooray for us. We don't even know if we
are getting the share of the profits that the Government is
entitled to.
The Old Post Office Building Redevelopment Act was my bill.
This building is located not only in my district, in the
Nation's Capital. It was an embarrassment to anyone who came.
It is catty-corner from the White House. It was a dump. The
first floor was used for street vendors, essentially.
And so we finally were able to get those taxes--and, by the
way, that bill, they do pay property taxes to the District and
DC hotel tax. You bet your life I was quite pleased to cut the
ribbon on this dump and make it into a real asset for the
Federal Government. It was underperforming. And, in plain
sight, the Government was losing millions of dollars every day.
Let me ask you, Commissioner Mathews, you said that the GSA
now receives a monthly rent payment. And here I am quoting the
amount you indicated--$267,653 a month. I appreciate that
figure. As with any testimony, could you tell us how the
Congress can verify your answer? Obviously, we don't take at
face value figures like that without having some way to verify
them and, therefore, give credit to such an answer.
Mr. Mathews. Well, so we receive the rent, we receive
payments; those go into the U.S. Treasury. We certainly could
provide you the financial transaction records that show that
those deposits were made. I am sure that is possible.
Ms. Norton. Mr. Mathews, what GSA continues to provide
Congress with are monthly and annual financial statements. I
made this same request 2 years ago, but we have still not
received the monthly financial statements.
I am asking you now at this hearing, will you commit to
providing this committee with these financial documents so we
can verify that the Old Post Office is a performing asset, as
you have indicated today?
Mr. Mathews. So, with respect to the financial documents
request, I would say our goal is to accommodate the committee's
oversight request to the greatest extent possible while
ensuring compliance with our contractual obligations to the
tenant. And our staffs, I know, are discussing these issues,
and we are trying to accommodate that request so we can provide
information while also respecting our contractual obligations
under the lease.
Ms. Norton. You will engage with the committee on this
question of providing the documents I have just asked for?
Mr. Mathews. Our staffs are. Correct.
Ms. Norton. What?
Mr. Mathews. Our staffs are. Correct. Yes.
Ms. Norton. As we speak. All right.
Thank you very much, Madam Chair.
Ms. Titus. The gentlelady yields back.
Mr. LaMalfa is recognized.
Mr. LaMalfa. Well, thank you, Madam Chair, for letting me
sit on the committee today and ask a couple questions.
As we get into the fall season here, you know, the pumpkins
are ripening and people are just going crazy for pumpkin spice
coffee and early birds are putting the witches and ghosts out
in their yards, so we are going to chase a few more witches and
ghosts, I guess, right?
Because I am in disbelief that we are here, at a time with
the fires in the West that we have had and the hurricanes and
the flooding in the South, the infrastructure we should be
working on, boosting up our levees and water infrastructure and
everything around this country, that we are dealing with a
hotel here once again that has been established as making money
after it was losing money for years.
And it is getting down to, do we have to ask our
accountants, is it, in fact, making money? I mean, that is
pretty simple stuff. Do we want to see the, you know--Mr.
Mathews, has the President signed the checks himself? I mean, I
have a hat with his signature on it. You can compare signatures
to make sure that it is actually happening. Do you need that
information?
Mr. Mathews. I know the lease is with the Trump Old Post
Office LLC, not with the President himself.
Mr. LaMalfa. OK. Well, that is about what we are down to
here.
Now, if we wanted to actually talk about what this
committee works on, you know, the Subcommittee on Economic
Development, Public Buildings, and Emergency Management, I had
hoped we would do more emergency management, with what we have
going on, but we do have a situation of a public building in
California.
There is a request for a new Federal building, one for the
Citizenship and Immigration Services Center which processes
immigration applications. Kind of a big deal right now, right?
Their existing building has an extremely high-risk seismic
classification and other health issues in the building which
have impacted Federal workers and has caused delays in
processing immigration applications. Again, kind of a big topic
these days.
So this committee hasn't acted on that. You know, it has
done some other business here, but a very high-priority issue
is our border and the people that--you know, we hear a lot of
dramatics about how they are doing along the border.
With the committee not having addressed this, can you talk
about the importance of expediting this and the committee doing
this work?
Mr. Mathews. I guess I would say a couple things.
Seismic interests are obviously very important. We have an
older inventory, so oftentimes our buildings are not to current
seismic codes. And so we are in the process of upgrading a
number of buildings across the country in high-risk seismic
areas, some in northern California, some in Oregon, some in
Seattle, Washington, as well, and then in the New Madrid Fault
area.
And one of our biggest challenges is our Federal Buildings
Fund. We receive about $10.5 billion in rent from our tenant
agencies every year, but we only receive appropriation out of
that fund, about $9 billion to $9.5 billion a year. So every
year we are being shorted about $1 billion, $1\1/2\ billion of
funds that can only be spent on public building purposes under
title 40.
But the money is sitting there, and we are not able to
access it. And properties like you are describing, we are
really challenged to repair them, get them in good working
order, and to make them safe. And we have thousands of
employees sitting in Federal buildings that need----
Mr. LaMalfa. Exactly.
Mr. Mathews [continuing]. Real significant improvements,
and if we had full access to the funds in the Federal Buildings
Fund, we would be able to do that.
It is absolutely critical to approve prospectuses in a
timely manner. And, again, that is why I thanked the chairwoman
for her help, particularly with a prospectus we had for a
building in her district. We have a courthouse; it is about 20
years old, and the fire and life safety system--we proposed
that project. And for a good year and a half, that prospectus
was sort of blocked up in the Senate. And thank you for your
help. We were able to get it loose, and we are now----
Mr. LaMalfa. Well, it would be nice----
Mr. Mathews [continuing]. Replacing the fire alarm system.
Mr. LaMalfa. It would be nice, Mr. Mathews, if we could get
that prospectus going here. Because we have a backlog at the
border; we have, obviously, many seismic issues in my home
State of California and nearby in Oregon as well and in the
West. So would you say this is a priority this committee should
take up?
Mr. Mathews. Yes. We would very much appreciate that. The--
--
Mr. LaMalfa. OK. Thank you. I should end it there. I would
like to yield the rest of my time to Mr. Meadows. So thank you
for that answer, Mr. Mathews.
Mr. Meadows. I thank the gentleman from California.
Ms. Ochoa, let me come to you. After your report was
released, I think Seth Tillman, a lecturer for the Maynooth
University Department of Law, wrote you, detailing a factual
error in your constitutional analysis of the Emoluments Clause.
Are you aware of that?
Ms. Ochoa. I am aware that Professor Tillman wrote, asking
that we adopt his particular argument.
Mr. Meadows. But pointing out that he felt like you had a
factual error.
Ms. Ochoa. He expressed a different view.
Mr. Meadows. Well, did he say you were correct?
Ms. Ochoa. He expressed a different view----
Mr. Meadows. It is an easy--well, you have counsel behind
you, if you want to turn around and ask them. I mean, did he
agree with your analysis?
Ms. Ochoa. No, he did not.
Mr. Meadows. OK.
So I would ask unanimous consent that we enter into the
record the statement from Professor Josh Blackman and Lecturer
Seth Tillman detailing the exchange with Ms. Ochoa's office.
Ms. Titus. Without objection.
[The information is on pages 117-120.]
Mr. Meadows. Thank you. I yield back.
Ms. Titus. We will now recognize Mr. Garamendi.
Mr. Garamendi. Thank you, Madam Chair.
The question has been raised on why we are here----
[Audio malfunction in hearing room.]
Mr. Meadows. It wasn't me, John.
Mr. Garamendi. No, it certainly wasn't Mr. Meadows. Thank
you.
The question has been raised as to why we are here today
dealing with this issue. All of us have taken the oath of
office, and it basically says, ``I do solemnly swear that I
will support and defend the Constitution of the United States
against all enemies, foreign and domestic, and I will bear true
faith and allegiance to the same.''
We are really here about the Constitution of the United
States. We know that Article I, Section 9, Clause 8, is the
Foreign Emoluments Clause, which is very much a question before
this committee at this moment, and Article II, Section 1,
Clause 7, the Presidential Emoluments Clause, is also before
the committee at this moment.
I think we would all agree that that is the issue at hand,
and the reason we are here is to carry out our solemn oath of
office.
And both of you before us also took the same oath of
office.
So let us proceed, then, with some questions in an
understanding of why we are here.
Mr. Mathews, you stated just a moment ago that the tenant
is in full compliance with the lease.
My question goes to Ms. Ochoa.
On page 23, paragraph 5, lines 6 through 9 of your report,
you say, according to it, can--my question to you is, can the
GSA state definitively that the Trump Organization, LLC, is not
in breach of the Old Post Office lease terms without--without--
an evaluation of these constitutional questions?
In other words, can you tell us definitively that they are
not in breach until such time as the constitutional Emoluments
Clause issues are dealt with?
Let me put that in the positive. Are they in breach of
their lease because of the Emoluments Clause and the lease
language itself?
Ms. Ochoa. It is hard to have a full discussion of that
issue without being able to discuss GSA's legal opinions.
Certain portions of our report have been redacted based on
claims of privilege.
What I can say and what we said in the report is that,
without employing the doctrine of constitutional avoidance, in
their interpretation of section 37.19, they foreclosed a way of
taking the emoluments issues off the table.
Mr. Garamendi. They pushed aside the fundamental
constitutional issue of emoluments and simply said, that is not
relevant. Is that correct?
Ms. Ochoa. They said they were not going to decide the
issues. I don't think they said they were not relevant. They
recognized it was an issue; it was an issue relevant to the
lease. But they decided that they were not going to attempt to
resolve the issue.
Mr. Garamendi. On page 8 of your report, you say that he--I
suspect you mean the President here--still retains his
financial interest in the property. Is that your view? Is that
correct, that he does maintain a financial interest in the
property?
Ms. Ochoa. I believe that is a fact.
Mr. Garamendi. OK.
Mr. Mathews, does the President maintain a financial
interest in the property?
Mr. Mathews. I believe that is correct, yes.
Mr. Garamendi. So your answer is, yes, he does maintain a
financial interest in the property.
Mr. Mathews. I am not familiar with all the details of the
financial structures of the company, but I believe that is
correct.
Mr. Garamendi. You believe that is correct.
Mr. Mathews. I do, yes.
Mr. Garamendi. Thank you.
Now, are you aware of any payments made to the hotel from
foreign governments?
For both of you, Mr. Mathews first.
Mr. Mathews. So GSA, we are not involved in the daily
management of the hotel. That is why we did an outlease.
Mr. Garamendi. So you are unaware of any payments from any
foreign governments?
Mr. Mathews. I have certainly seen press reports.
Mr. Garamendi. But you have not asked for or received
specific information on that issue, even though it would be a
question of the emoluments and the lease itself?
Mr. Mathews. Well, with respect to the question of
emoluments, that question is pending before the courts, and----
Mr. Garamendi. We understand that, but my question to you
is, have you attempted to collect any information on payments
from foreign governments, even though the lease itself raises
that issue?
Mr. Mathews. We don't receive that level of information----
Mr. Garamendi. So the answer is that you have not.
Mr. Mathews [continuing]. In the financial documents.
Mr. Garamendi. Ms. Ochoa, do you have any information about
payments from foreign governments?
Ms. Titus. The gentleman's time has expired.
Ms. Ochoa. Would you like me to answer the question?
Ms. Titus. You may answer the question.
Ms. Ochoa. We don't have direct access to the books and
records of the hotel.
Mr. Garamendi. Thank you.
Thank you, and I yield back.
Ms. Titus. Thank you.
Just for clarification--Mr. LaMalfa will be glad to hear
this, I think, if you all can tell him. He was talking about a
request for funding for a new building in Laguna Niguel. GSA
sent us that prospectus 3 weeks ago, and minority and majority
staff are already meeting with GSA on that subject. So we would
like to share that information with him.
Now, Mr. Weber is recognized.
Mr. Weber. Thank you, ma'am.
It is appalling to me, too, that we are kind of here,
because Congressional District 14 in Texas is a gulf coast
district, and we have had Hurricane Harvey 2 years ago that we
are still trying to recover from and now Tropical Storm Imelda.
And those are the things we should be focused on, in my
opinion, but we are here.
Mr. Mathews, you were sworn in in August 2017. You stated
that the lease was signed August the 5th, 2013.
Mr. Mathews. Correct.
Mr. Weber. Do you know when those negotiations for that
lease began?
Mr. Mathews. I believe they began in 2012.
Mr. Weber. 2012. OK. So it was well before Donald Trump's
announcement, June 16 of 2015, that he was going to run for
President?
Mr. Mathews. Yes, absolutely.
Mr. Weber. OK.
Are you aware of the lawsuits that have been filed against
Trump over this hotel, the three lawsuits we call the CREW
suits, for example?
Mr. Mathews. Yes, that is correct.
Mr. Weber. And how about you, Ms. Ochoa? Are you aware of
those.
Ms. Ochoa. I am, yes.
Mr. Weber. Are you aware that at least two members of this
committee are associated with those lawsuits?
Ms. Ochoa. Am I personally aware?
Mr. Weber. Yes, ma'am.
Ms. Ochoa. I haven't reviewed the----
Mr. Weber. How about you, Mr. Mathews? Did you know that?
Mr. Mathews. Yes.
Mr. Weber. OK. You did know that.
Once the GSA contracting office made the decision about the
Emoluments Clause and decided to move on, was that sufficient
for the two of you?
Mr. Mathews, we will go with you first.
Mr. Mathews. Well, obviously, that decision was made, you
know, by the inspector general's own report and testimony, in
December of 2016.
Mr. Weber. Right.
Mr. Mathews. And subsequent----
Mr. Weber. So was it sufficient for you? Did you say, OK,
we will move on, we will do the American people's work?
Mr. Mathews. Well, I didn't arrive until 2017, so that ship
had pretty much sailed.
Mr. Weber. But when you got there, it was sufficient.
Was it sufficient for you, Ms. Ochoa?
Ms. Ochoa. No, for the reasons stated in the report.
Mr. Weber. No, I gotcha. OK.
Well, we would love for this committee to be able to do the
same thing, move on, do the American people's work as well.
I am going to yield back to the ranking member the rest of
my time.
Mr. Meadows. I thank the gentleman from Texas.
Ms. Ochoa, I am going to come back and follow up on my good
friend from California, Mr. Garamendi's question. Because he
was talking about a memo that I guess is privileged from
December of 2016. Is that correct?
Ms. Ochoa. No, there is not a memo from December of 2016.
It is----
Mr. Meadows. All right. So the privileged memo that you
were talking about, what privileged memo were you talking about
there?
Ms. Ochoa. I am talking about the legal opinions that GSA's
lawyers wrote in connection with advising the contracting
officer about his interpretation----
Mr. Meadows. And when did those legal opinions get written?
When were they written?
Ms. Ochoa. Those were in March of 2017.
Mr. Meadows. And they were written by whom?
Ms. Ochoa. They were written by GSA lawyers who were part
of the team advising the contracting----
Mr. Meadows. And that team--and it was--at that particular
point, had that legal team, were they part of the Trump
administration? Were they political appointees, I guess is what
I am getting at, or were they people who had actually worked at
GSA during the procurement process?
Ms. Ochoa. It was the same team of lawyers spanning both
administrations. These were career attorneys, yes.
Mr. Meadows. I am sorry, I didn't hear you. Could you
repeat that?
Ms. Ochoa. The same team of lawyers looked at the issues
spanning both administrations. They began looking----
Mr. Meadows. Yeah, but I think according to your testimony,
it says, the Office of General Counsel, OGC, made the decision
not to address the emoluments issue by mid-December of 2016. Do
you stand by that?
Ms. Ochoa. I do, yes.
Mr. Meadows. OK. Was President Trump in charge of that
decision at that particular point? Had he been inaugurated at
that point?
Ms. Ochoa. No.
Mr. Meadows. All right. So any nefarious purpose of the
emoluments issue being addressed, how would that have anything
to do with the current President if the decision was made in
December of 2016 during the last months of the Obama
administration?
Ms. Ochoa. Our report didn't ascribe, or describe, any
nefarious----
Mr. Meadows. No, but I guess what I am saying is there
seems to be an implication that this administration was the one
that actually said that there is not an emoluments issue. And I
guess you and I both know what the real story is, and those
decisions were made under the previous administration. Isn't
that correct, according to your testimony?
Ms. Ochoa. Congressman Meadows, I would love to be able to
talk with you about the legal opinions. I cannot because the--
--
Mr. Meadows. Well, did they happen in December--do you
stand by your testimony that they happened in the mid part of
December of 2016?
Ms. Ochoa. They made the decision to ignore the issue in
December of 2016.
Mr. Meadows. All right. And do you think that President-
elect Trump was putting pressure on them to make that decision
at that point?
Ms. Ochoa. I have made no such----
Mr. Meadows. Do you have any evidence that would suggest
that?
Ms. Ochoa. If we had found any such evidence, we would have
reported it.
Mr. Meadows. I thought so.
I yield back.
Ms. Titus. Mr. Johnson is now recognized.
Mr. Johnson of Georgia. Thank you.
Mr. Mathews, prior to becoming Public Buildings
Commissioner at GSA, you worked for several Republican
congressmen out of California, and then you went to work for
the House Rules Committee on the Republican side. And,
thereafter, you came to the Transportation and Infrastructure
Committee, where you ended up as staff director of the
Transportation and Infrastructure Committee's Subcommittee on
Economic Development, Public Buildings, and Emergency
Management. And after that, you then went to the administration
as Commissioner of Public Buildings. Is that correct?
Mr. Mathews. Yes, that is correct.
Mr. Johnson of Georgia. And you are what we call a
political appointee. Isn't that correct?
Mr. Mathews. Yes, I am.
Mr. Johnson of Georgia. And you have had absolutely no
experience in running a large organization. Isn't that correct?
Mr. Mathews. No, that is not correct.
Mr. Johnson of Georgia. What large organization have you
managed?
Mr. Mathews. I was the assistant deputy commissioner of the
Texas Department of Health, and I----
Mr. Johnson of Georgia. Assistant deputy director----
Mr. Mathews [continuing]. Deputy commissioner of the Texas
Department of Health. And----
Mr. Johnson of Georgia. OK.
Mr. Mathews [continuing]. Under our responsibility were
several thousand people and a couple billion dollars.
Mr. Johnson of Georgia. Well, I don't want your range of
responsibilities, but I will say, welcome back to the----
Mr. Mathews. Thank you.
Mr. Johnson of Georgia [continuing]. Subcommittee, that you
now are Public Buildings Commissioner, answering to your prior
subcommittee as a political appointee.
Now, let me ask you this question, sir. On March 20, 2017,
the Trump Post Office LLC requested an estoppel certificate
stating that the company was in full compliance with section
37.19 of its lease agreement. And GSA, your organization, the
public buildings department, issued the letter. Isn't that
correct?
Mr. Mathews. Yes. I worked for this committee at the time,
but, yes, that is right.
Mr. Johnson of Georgia. Well, but you--so my point is that,
in issuing that estoppel letter, it was done 3 days after it
was requested. The estoppel letter was issued 3 days after the
Trump team requested it, correct?
Mr. Mathews. I don't know how many days went by, but we can
find out for you.
Mr. Johnson of Georgia. You don't know how many days? Well,
you wouldn't disagree, then. It was 3 days.
And what kind of assessment would take place prior to
granting an estoppel certificate by your department?
Mr. Mathews. Well----
Mr. Johnson of Georgia. What would normally happen?
Mr. Mathews. So there is----
Mr. Johnson of Georgia. And how long does it normally take?
That is the question I want to ask.
Mr. Mathews. So there is a structure in place for making
contract administration----
Mr. Johnson of Georgia. Does it take longer than 3 days?
Mr. Mathews. Again, I don't know if it took 3 days or how
long that was under consideration.
Mr. Johnson of Georgia. Let me ask you this question. How
many employees in your public buildings department?
Mr. Mathews. A little under 6,000.
Mr. Johnson of Georgia. 6,000 employees. And how many
public buildings?
Mr. Mathews. Well, when you include our lease portfolio, we
have well over 10,000 facilities.
Mr. Johnson of Georgia. And so you have not had a chance,
with all that responsibility, to review what actually happened
on this Trump Post Office lease? Is that correct? Even though
you were the staff attorney for this subcommittee?
Mr. Mathews. I am not an attorney, but I was the staff
director of the subcommittee.
Mr. Johnson of Georgia. In fact, you have a degree in
Government and philosophy.
Mr. Mathews. From Georgetown University, that is right.
Mr. Johnson of Georgia. So now you are managing this big
organization here. Have you received any phone calls from
Donald Trump, Jr., Donald Trump, Eric Trump, or anybody
concerned with the Trump Organization during your tenure as
Public Buildings Commissioner?
Mr. Mathews. No.
Mr. Johnson of Georgia. You have not?
Mr. Mathews. No.
Mr. Johnson of Georgia. Are you certain about that?
Mr. Mathews. Yes, I am.
Mr. Johnson of Georgia. Why was it that GSA did not embark
upon a study to determine whether the Post Office lease to the
Trump Organization was compliant insofar as the Emoluments
Clause of the Constitution is concerned?
Mr. Mathews. Well, again, that decision was made in
December of 2016 by the previous administration----
Mr. Johnson of Georgia. And you could have had it reviewed,
yourself, could you not, to determine constitutionality? Isn't
that your responsibility as Public Buildings Commissioner?
Mr. Mathews. Well, I would say that conditions have changed
since 2016. There have been a number of lawsuits filed, and
this very question which you are asking is pending before the
courts. And in that forum, the Department of Justice, who
speaks for the executive branch, in that forum, has argued
there is no violation of the Constitution. And so it wouldn't
be appropriate----
Mr. Johnson of Georgia. But your department never undertook
such a review. Is that your testimony today?
Mr. Mathews. I am sorry, is that for me or----
Mr. Johnson of Georgia. No, that is for you. You should
know. You are the director of--you are the Commissioner.
Ms. Titus. The gentleman's time has expired. Can you answer
that ``yes'' or ``no''?
Mr. Mathews. No, and it wouldn't be appropriate for us to
do that.
Ms. Titus. OK. Thank you.
We will now recognize Mr. Perry.
Mr. Perry. Thank you, Madam Chair.
Inspector General Ochoa, according to the report, the OIG
began the evaluation of GSA's management and administration of
GSA's ground lease of the Old Post Office Building in July of
2017 in response to numerous complaints from Members of
Congress and the public at large about the management of the
lease.
The complaints generally raised two issues regarding the
lease: One, does the Foreign Emoluments Clause or the
Presidential Emoluments Clause of the U.S. Constitution bar
President Trump's business interest in the Trump Old Post
Office LLC (Tenant)? And, number two, does the President's
business interest in Tenant violate section 37.19 of the lease?
The next paragraph of the report explains that the OIG did
not seek to determine the accuracy of either complaint; rather,
sought to determine whether there were any improprieties in
GSA's decisionmaking process regarding these issues.
My question at this time is, why was the evaluation aimed
at the decisionmaking process regarding the complaints rather
than addressing the complaints themselves? In other words, did
something preclude you or GSA from evaluating the emoluments
question itself?
Ms. Ochoa. In the first instance, the responsibility for
evaluating those issues was with GSA management. They had made
their decision by the time we opened our review, and that is
why we scoped our review to look at whether there was anything
improper in the way they went about making those decisions.
Mr. Perry. And the second case?
Ms. Ochoa. In both cases.
Mr. Perry. You said in the first case it was management's--
--
Ms. Ochoa. In the first instance of addressing those
issues, that was GSA management's responsibility. Our oversight
extended to how GSA fulfilled its responsibilities.
Mr. Perry. Why didn't you just address the questions
themselves? Do you know why? I mean, you are the OIG, so you
would know why they made that decision to look at the process
as opposed to the questions themselves.
Ms. Ochoa. Yes. Yes, I do know why. It was a matter of
exercising judgment as to the scope of the review. It wasn't
necessary for us to resolve the merits of the issues in order
to determine whether GSA was correct in recognizing there was a
constitutional issue and whether their reasons for avoiding it
were valid.
Mr. Perry. So it wasn't necessary to answer the question of
the complaints by Members of Congress or the--that is what you
are saying right now. You----
Ms. Ochoa. No, I am----
Mr. Perry [continuing]. Answered the administration of it
but not the questions themselves, and you made that judgment.
Ms. Ochoa. I made the judgment that the review was
appropriately scoped to address the concerns of the complaints.
Mr. Perry. And the concerns of the complaints were
regarding the Emoluments Clauses themselves, not the process by
which you would evaluate them, and you decided not to do that.
Ms. Ochoa. It is one and the same. It is, how did GSA come
to its conclusion.
Mr. Perry. Well, no, because we don't get the answer,
right? I mean, the answer is that it is settled constitutional
law, but obviously it is not settled constitutional law.
Let me ask you this. When did you start your role as the IG
for the agency?
Ms. Ochoa. In July of 2015.
Mr. Perry. 2015.
Ms. Ochoa. Yeah.
Mr. Perry. So you have been there for a little while. You
are not a puppet of the administration. You are doing the job
that you think that you are supposed to do regardless of who is
the President or not and what interest they may have.
Mr. Mathews, regarding other similar leases that might be
close to the Old Post Office, do you receive monthly statements
from other leases in accordance to what has been asked of you
in this hearing?
Mr. Mathews. Yes.
Mr. Perry. And you receive them from the Trump Hotel as
well.
Mr. Mathews. We do.
Mr. Perry. And do you receive a breakdown of how much the
profit or loss is based on the lease on a weekly, monthly,
whatever basis?
Mr. Mathews. So we receive a monthly financial statement
and an annual audited financial statement.
Mr. Perry. And it is the same for all of them?
Mr. Mathews. I believe it is for all of them, yes. I can
confirm that for you, but I believe that is the case.
Mr. Perry. Generally speaking, right?
Mr. Mathews. Yes.
Mr. Perry. There might be an outlier, but it is the same
for all of them, and it is the same for the Trump Hotel/the Old
Post Office? No difference, right?
Mr. Mathews. That is correct.
Mr. Perry. So what you are being asked today, even though,
according to my good friend from California, the reason for
this--the focus of this hearing is on the Emoluments Clause,
but we keep on being concerned about how much money we are
getting. You are reporting the same as you do for the Trump
Hotel as everyone else, and what you are being asked here today
is to provide something wholly separate, unique, and different
than every other lease that you manage.
Mr. Mathews. That is correct.
Mr. Perry. And how many leases do you manage?
Mr. Mathews. Over 8,000.
Mr. Perry. Thank you, Madam Chair. I yield my time.
Ms. Titus. We want to clarify that there are only six of
these outleases. So when you talk about the thousands of leases
you have, those would not be the same type as the type you have
with the Trump Hotel. Is that correct?
Mr. Mathews. Outleases are----
Ms. Titus. Yes, thank you.
All right. We will now recognize Mr. Brown.
Mr. Brown. Thank you, Madam Chair.
I want to thank my colleagues on the committee for their
attention and diligence on this issue. And I realize that a
number of the questions, lines of inquiry that I had have
already been covered.
So let me just start by saying, I am really troubled. I
mean, I am, like, disturbingly frustrated to know that a
Federal Government agency, the GSA, its officers, its
attorneys, its supervisors, do not fulfill their responsibility
to consider, uphold, and enforce all of the laws of this
country, whether it is rules, Executive orders, statutes, and,
yes, the Constitution. And to learn from the IG's report that
that responsibility was shirked, it is disturbing, to say the
least.
I don't think that any public servant, Members of Congress,
the President, are above the law, but I don't think that that
sentiment is shared at 1600 Pennsylvania Avenue. The bottom
line is that, if the President had fully divested from his
company, this hearing would not be necessary.
Instead, we have to discern whether the President is
putting his business and personal interests above our Nation's.
We have to question why foreign leaders, lobbyists, and even
the Attorney General is choosing to spend tens of thousands of
dollars at the Trump International Hotel and whether the
President is trying to enrich himself in direct violation of
the Constitution.
Commissioner Mathews, I want to direct this question to
you. According to the Office of Inspector General's January
2019 report and contrary to both your written and oral
testimony here today, GSA failed to appropriately consider the
Emoluments Clauses--``clauses,'' both--to the U.S. Constitution
in regard to the Old Post Office lease, as well as section
37.19 of the lease.
Mr. Commissioner, has anyone in the GSA Office of General
Counsel provided you or any of your colleagues any guidance on
the emoluments issue since the January 2019 report was issued?
Mr. Mathews. The answer is ``no,'' but this emoluments
question is pending before the courts, and that is----
Mr. Brown. Yeah, I understand that, but--so, in
anticipation, you have not made any inquiry of your general
counsel on this issue?
Mr. Mathews. It wouldn't be appropriate for GSA to opine
on----
Mr. Brown. I was just asking ``yes'' or ``no.'' I am just
asking if you or any of your colleagues have made inquiry of
your general counsel on the emoluments issue since the IG's
report in January of this year. It is a ``yes'' or ``no.'' It
sounds like the answer is, no, you have not. Is that correct?
Mr. Mathews. That is correct.
Mr. Brown. The committee has been requesting records
relating to the Trump Hotel financial statements to the GSA.
And I know a number of Members have asked about it.
Has the GSA Office of General Counsel provided you with
guidance on how to track expenditures at the Trump
International Hotel or any other similarly situated hotel
relating to rental or lease fees derived from foreign, Federal,
or State governments?
Mr. Mathews. Well, under the lease, the tenant is obligated
to provide monthly and annual audited financial statements----
Mr. Brown. And do they report revenues by revenue source,
whether it is a foreign, Federal, or State government? Yes or
no?
Mr. Mathews. The financial documents, again, we are working
with----
Mr. Brown. Well, I am just asking a question. I mean, it
really is a ``yes'' or ``no.'' I mean, I appreciate your desire
to provide a lengthy explanation, but is there a process where
the revenues are reported by source, specifically Federal,
State, or foreign governments?
Mr. Mathews. We don't receive that sort of breakdown.
Mr. Brown. So if the courts were to rule that there is a
potential Emoluments Clause problem, are you saying that you
don't have the systems in place to identify whether a foreign
government paid for rent or lease or for services at the hotel?
Mr. Mathews. I am not going to speculate on what the courts
may or may not do----
Mr. Brown. So you are just going to wait until the court
actions show----
Mr. Mathews [continuing]. Or what the implications of that
may or may not be for GSA.
Mr. Brown. Have you asked your general counsel about
guidance on this issue?
Mr. Mathews. I am not going to speculate on what the courts
are going to do.
Mr. Brown. No, I am just asking you, have you asked your
general counsel about the issue of whether or not you should or
shouldn't track the sources of revenues or fees that are paid
at the Trump Hotel?
Mr. Mathews. The tenant complies with the lease, and the
lease has provisions----
Mr. Brown. So have you asked your general counsel?
Mr. Mathews. I am not going to discuss the----
Mr. Brown. Oh, so you are not going to answer that question
``yes'' or ``no''?
Mr. Mathews. No.
Mr. Brown. Let me just be clear. Are you going to answer
``yes'' or ``no'' to the question I just previously asked?
Mr. Mathews. Look, the--well, I am trying to answer your
question----
Mr. Brown. OK. Then let me restate the question. Let me be
a little simpler in the question.
Mr. Mathews [continuing]. Financial statements.
Mr. Brown. Let me be a little simpler. I am reclaiming my
time. I am reclaiming my time.
Ms. Titus. The gentleman's time has expired.
Mr. Brown. OK. Boy, 5 minutes flies.
Ms. Titus. I now recognize Mr. Westerman.
Mr. Westerman. Thank you, Madam Chair.
Thank you to the witnesses for being here today.
Madam Chair, I was excited to see that we were going to be
talking about the billions of dollars of Federal assets that
are sitting out there unused, but, unfortunately, that is not
really what this discussion is about. You know, I thought this
horse had been ridden hard and put up wet, but apparently it
died in the stable, and somebody wants to bring it out and beat
on a dead horse a little bit more.
But there are serious issues this committee should be
addressing. Just in my hometown of Hot Springs, Arkansas, we
have a 200,000-square-foot hospital. It was the original Army
and Navy hospital used from the 1800s up through World War II.
It is a historic building. It currently needs a tenant. We have
a national park there, where we have leased out historic
bathhouses to private businesses.
We need to be doing more of that to take care of these old
historic buildings, instead of having hearings to beat up on
one of these buildings that actually is a success story, how we
have reused Federal assets. And it is just a rhetorical
question, but when are we going to start focusing on the real
issues?
And I would like to yield the remainder of my time to
Ranking Member Meadows.
Mr. Meadows. I thank the gentleman from Arkansas.
Ms. Ochoa, I am going to come back to you. So when you were
preparing your review of this lease and drafting the report,
did you reach out to outside legal counsel?
Ms. Ochoa. No.
Mr. Meadows. All right. So all your legal experts were from
within the IG's office. Is that correct?
Ms. Ochoa. The team that did the review was inside the----
Mr. Meadows. And the drafting.
Ms. Ochoa. Yes.
Mr. Meadows. So they are on your IG staff. Is that correct?
Ms. Ochoa. Yes.
Mr. Meadows. All right. So who on your staff is a
constitutional expert?
Ms. Ochoa. Actually, the three senior members of the team
have over 70 years of combined experience handling
constitutional litigation at the Department of Justice.
Mr. Meadows. All right. So, with the Department of Justice,
obviously you were very critical with the GSA. You were very
critical of the GSA in not consulting--I mean, with GSA of not
consulting DOJ. Is that correct?
Ms. Ochoa. Yes, and not reaching out to try to find a
solution to the issue that was presented.
Mr. Meadows. All right. So when you were drafting the
report, did you take into account the DOJ's position on this
issue?
Ms. Ochoa. We looked at GSA's decisionmaking at the time
that the decision was made, and we looked at what was available
to them in that context.
Mr. Meadows. So did you take into account their position,
their published position, as it relates to this particular
question?
Ms. Ochoa. The position that the Department developed in
litigation doesn't affect the conclusions in our report.
Mr. Meadows. Well, but, by the IG's statute, you are bound
to look at all of those legal experts. And you are saying that
the three people that you relied on were from DOJ, but did you
rely on any current DOJ opinion in drafting it?
Ms. Ochoa. Look, we were aware of the DOJ litigating
position. We were not----
Mr. Meadows. So you just disagreed with it.
Ms. Ochoa. No. We didn't weigh in on the merits of the
question that the DOJ litigating position is addressing. That
is the merits of whether there is a violation of the
constitutional Emoluments Clauses here.
All we engaged in was really an issue-spotting exercise.
Because before we were about to criticize career attorneys for
failing to address an issue, we wanted to make darn sure they
were right when they realized that it was a potential
constitutional issue. That is what our report was about.
Mr. Meadows. And so you used the key word there,
``potential.'' Is that correct? So you are not making a
definitive statement. You are not suggesting that the Supreme
Court is going to come down on your side or GSA's side. You are
not making an opinion there. You are just saying it could be a
potential issue.
Ms. Ochoa. That is right. We are not trying to weigh in one
way or the other. We don't know how the lawsuits will----
Mr. Meadows. So, when you did your report, did you look at
and analyze the potential legal and financial exposure to the
taxpayer that the contracting officer may have had in making
this decision? Was that part of your analysis?
Ms. Ochoa. Excuse me, could you repeat that?
Mr. Meadows. Well, the contracting officer obviously made a
decision based on unsettled constitutional law. Did you look at
the potential financial implications that might arise from that
particular decision?
Ms. Ochoa. We looked at the reasons that the contracting
officer gave us and the lawyers gave us, and the financial
situation didn't come into play at all----
Mr. Meadows. All right.
Ms. Ochoa [continuing]. What they told us.
Mr. Meadows. So can you--I see my time has expired.
Ms. Titus. I will now recognize Mrs. Fletcher.
Mrs. Fletcher. Thank you, Chairwoman Titus. And thanks to
you and Ranking Member Meadows for holding this hearing today
and to the witnesses for taking time to testify.
I want to clarify a few of the things that we have just
heard and make clear that, in response to one of the questions
about the volume of leases that are similar to the one that we
are talking about, that there are only six outleases of the
type with the Trump Hotel in Washington, DC. That is correct?
Mr. Mathews. We have far more than six outleases.
Mrs. Fletcher. OK. But of the--actually, in a July 2018 GAO
report, prior to the 2019 report that we have been discussing,
it analyzed the GSA's outleasing program and reviewed, quote,
``the extent to which GSA has included lease provisions in its
outlease agreements related to the participation of elected
officials in these outleases.''
And, according to the GAO report, there are six, only six,
Federal buildings with at least 20 percent outleased by GSA. Do
you disagree with that report?
Mr. Mathews. I would have to have it in front of me, but we
outlease space in Federal buildings all across the country. In
our building, for example, we have three outleases that I can
think of. One is for a coffee shop, one is for a Mexican
restaurant, and another is for a sandwich shop.
Mrs. Fletcher. Does that total more than 20 percent of the
building?
Mr. Mathews. No, those do not.
Mrs. Fletcher. OK. So, of the buildings with at least 20
percent outleased by GSA, the report concludes that there are
only six of these buildings, and all but one of those leases
contains a provision restricting participation by elected
officials. And that is the Silvio O. Conte Federal Building in
Pittsfield, Massachusetts.
Are you familiar with that?
Mr. Mathews. Not with that particular building, no.
Mrs. Fletcher. Inspector General Ochoa, did your team raise
this issue with the GSA? In connection with the recommendation,
did your team raise this issue with the GSA?
Ms. Ochoa. We have had some discussion about the fact that
the language of 37.19 is still in two of those outleases and
that it has not been modified to resolve the ambiguity. And we
have also pointed out that, with respect to one of those
outleases, just a year ago, GSA told GAO that using that
language was a best practice for GSA and they intended to
modify a lease that didn't contain it.
Mrs. Fletcher. OK. And so their response was that they
intended to modify it.
Commissioner Mathews, has the GSA indeed modified that
provision or added the language to the Conte Building lease
that would restrict participation by elected officials?
Mr. Mathews. So what we agreed to do was, in future
outleases, to remove that ``interested parties'' provision,
replace it with language referencing the underlying statute
which those provisions were based upon.
Mrs. Fletcher. So the answer to my question is, no, it has
not been revised for the Conte Building lease. Is that correct?
Mr. Mathews. I don't know. We would be happy to get that
answer for you. But what we said we would do----
Mrs. Fletcher. If you could please provide that answer for
the record, that would be helpful.
And with respect to the future leases, as a practicing
lawyer before I got here, litigating leases and contracts and
disputes, I am curious as to how you determined that a
reference to the underlying statute was superior to an express
provision in the contract, an explicit provision in the lease,
requiring compliance. Can you explain the rationale for that
decision?
Mr. Mathews. Well, the rationale was to remove the
ambiguity in the contract provision, and referencing the
statute explicitly would eliminate that ambiguity.
Mrs. Fletcher. Do you think that referencing the statute
explicitly in addition to the explicit contractual provision is
an appropriate correction to the ambiguity?
Mr. Mathews. Well, I think the concern is that the
``interested parties'' provision itself in the contract has
some ambiguity to it. And so our proposed corrective action
plan would eliminate the use of that provision in future
contracts and instead replace it with a reference to the
underlying statute.
Mrs. Fletcher. With simply a reference to the statute as
amended----
Mr. Mathews. Yes, correct.
Mrs. Fletcher [continuing]. From time to time?
I have one other quick question. I want to follow up on a
question that my colleague Ms. Davids asked you about the
auditing. It was my understanding from your testimony that the
lessee selects the auditor for the audited financial statements
that you receive. Is that correct?
Mr. Mathews. Yes.
Mrs. Fletcher. OK. And do you have a list of approved
auditors?
Mr. Mathews. If we do, I would be happy to get it for you.
Mrs. Fletcher. And do you require any specific standards of
the auditors--for example, GAAP accounting--even if it is a
nonpublic company?
Mr. Mathews. They have to comply with those standards, is
my understanding.
Mrs. Fletcher. And do you have any employees who review the
audited financial statements for these six specific outlease
buildings?
Mr. Mathews. I am sorry, I couldn't hear you.
Ms. Titus. I am sorry. The lady's time is up.
Mrs. Fletcher. Oh, I believe my time has expired.
Thank you very much, Madam Chairwoman. I yield back.
Ms. Titus. Thank you.
Mr. Meadows?
Mr. Meadows. Thank you, Madam Chair.
So, Mr. Mathews, let me come back on this lease to make
sure we are crystal-clear. It is a lease that allows for a base
amount of money to be paid to the American taxpayer of
approximately $250,000 a month or $3 million a year. Is that
correct?
Mr. Mathews. That is correct.
Mr. Meadows. And then there are thresholds that are above
that that would basically be based off of gross revenue. Is
that correct?
Mr. Mathews. Correct.
Mr. Meadows. So the operational expense, wherever it is, we
are just looking at gross revenues and a percentage of that
that would adjust a lease payment. Is that correct?
Mr. Mathews. That is correct.
Mr. Meadows. Is that not the most transparent way to do a
lease where you have a plus-up from a base amount, where you
don't get into how much it costs that you paid your waiters or
how much you paid the staff or anything else? If you do a gross
revenue, is that not the most fair way to the American taxpayer
to find an adjusted base lease? Is that correct?
Mr. Mathews. Yes, that is correct.
Mr. Meadows. All right.
Ms. Ochoa, would you agree with that?
Ms. Ochoa. I haven't considered those issues.
Mr. Meadows. You haven't considered those issues?
Ms. Ochoa. No.
Mr. Meadows. All right. So let me ask you this, Ms. Ochoa.
Do you believe the American taxpayer is receiving more money
under the Trump Hotel lease or less money than they did prior
to it being leased to the Trump Organization?
Ms. Ochoa. I accept what I am hearing about the loss prior
to the hotel beginning operation and the $3 million a year
since.
Mr. Meadows. All right.
And the Delegate from DC has been very active on trying--
would you agree with this, Mr. Mathews? The Delegate has been
very active on making sure that we use underutilized buildings
in the District of Columbia and make them producing assets. Is
that something that the Delegate and I have been pestering you
about for some time?
Mr. Mathews. Yes. And I would say it has been a bipartisan
priority of this committee for well over 20 years.
Mr. Meadows. And would you say, other than the fact that
the President of the United States is associated with the Trump
Hotel, would you say that that is a good model for all of the
underutilized properties, in terms of taking it from what it
once was to what it currently is?
Mr. Mathews. Absolutely.
Mr. Meadows. All right.
Mr. Mathews. It is a tremendous financial project.
Mr. Meadows. So, Ms. Ochoa, let me come back to you,
because you make a number of assertions throughout your report
that are without citations in your report. And----
Ms. Ochoa. I would have to disagree with that.
Mr. Meadows. OK. Well, you can disagree. So I am going to
give you a chance to clarify. Because it doesn't give us any
way to verify the accuracy or context of that. And so, in fact,
just in the last few weeks, I believe that Chairman Johnson,
the Senator from Wisconsin, provided your office with some
details highlighting specifically where in your report
supporting documentation would be useful in his oversight. Do
you plan to respond to that?
Ms. Ochoa. Of course. We have been working with the
committees for several months, trying to respond to your
requests.
Mr. Meadows. All right. So Chairman Johnson's response, you
are planning to respond to that. Will you give that to this
committee as well?
Ms. Ochoa. We can do that. Are you making a request for
that same----
Mr. Meadows. I am making a request for that.
Now, when can we expect those responses? I don't want to
speak for the chairwoman, but I am assuming that she would want
clarification for any report that the IG does.
Ms. Ochoa. Look, all along, we have been providing
equivalent information to the majority and minority of the
committees who have----
Ms. Titus. And that is true. The staff has been working
with them, so we----
Mr. Meadows. So when can we expect a clarification of that
report with what Chairman Johnson is requesting and what I
believe the chairwoman is alluding to?
Ms. Ochoa. I haven't had a chance to look at what is being
requested. I understand it is a request for more documents. We
will look at it, and we will do what we can.
We have been prioritizing documents for GSA for months now.
Most of the documents that we relied on in the report that
aren't public in nature, that we already turned over, are the
agency's legal memoranda, the email exchanges among the
attorneys working on the matter and with the contracting
officer and between the contracting officer and the attorneys
and the Trump Organization. We have produced and reproduced
those and winnowed them down for GSA to look at to provide to
these committees.
Mr. Meadows. So are you aware, Ms. Ochoa, of any reason,
other than perhaps a court decision, why the Trump Organization
would be in default of the current lease? Are you aware of
anything other than perhaps this emoluments question that is
out there?
Ms. Ochoa. Section 37.19. The two of them are not
independent of each other.
Mr. Meadows. So those together--and so do you believe that
they are in breach?
Ms. Ochoa. I am going to stand on my report, Ranking Member
Meadows. We did not make that ultimate determination. I would
love to discuss with you the agency's legal opinions, but I
cannot.
Ms. Titus. The gentleman's time is up.
I just want to clarify too for the committee, the problem
has not been getting information from the IG; the problem has
been getting information from the GSA.
We will now recognize Mr. Cohen.
Mr. Cohen. Thank you, Madam Chair.
Ms.--is it Ochoa?
How do you pronounce her name?
Inspector General, how do you pronounce your last name?
Ms. Ochoa. It is Ochoa. Thank you.
Mr. Cohen. Ochoa. I had it right. Thank you.
You were talking about section 37 and 37.19?
Ms. Ochoa. Correct.
Mr. Cohen. And that seems, to me, to be pretty clearly
obvious that the exemption that is put in here to say the
public officials could engage in a lease is if they are for the
general benefit of a corporation or other entity that--and the
corporation or other entity is publicly held, and the idea
being that if an individual owns some stock in Hilton or
another hotel company or a REIT, that was--they weren't the
significant owner, significant beneficiary, or involved major
management, that it would be OK, because it was like a de
minimis involvement. And that is clear, but as previously
noted, the GSA has asserted privileges over there at the OGC's
opinion on that section when they looked to interpret it.
Why were they having to exert a privilege rather than just
release their opinion? To me, as a lawyer, it is pretty clear
that the other entities is connected to the public ownership
and it is exemption for people who own stock that it is a de
minimis amount of influence, and it is distinguished from
somebody who is a primary partner. Is that not accurate?
Ms. Ochoa. Look, I would love to talk with you about the
agency's legal opinions. I can't. I think our report does point
out that there is an interpretation along the lines that you
are----
Mr. Cohen. You can't talk to me about it because it is
privileged or they assert privilege?
Ms. Ochoa. Yes.
Mr. Cohen. Which is hooey, in my opinion.
Let me ask you this question. Let me ask Mr. Mathews this
question. In 2017, August 2, the United States went to court at
the request of GSA's Acting Commissioner of Public Buildings to
condemn a leasehold interest in a property in Myrtle Beach,
South Carolina. GSA had leased office space for the FBI at a
building owned by Rice REI, Limited Liability Corporation,
wholly owned by Congressman Tom Rice. Tom Rice is a friend. I
like Tom a lot and I am not questioning him whatsoever. He
entered into this lease way before he was elected to Congress.
But GSA went to court. And in the complaint, the United
States argued contracts between Members of Congress and the
Federal Government are prohibited, and the lease in question
was voided upon Congressman Rice's election and assumption of
office. And I have a copy of the complaint here, and I would
like to enter this into the record, without objection.
Ms. Titus. Without objection.
[The information is on pages 111-112.]
Mr. Cohen. So when GSA contracted with Congressman Rice's
LLC and disregarded his corporate shell and regarded
Congressman Rice as the beneficiary of the lease with GSA. Is
that not accurate?
Mr. Mathews. Yes, that is correct.
Mr. Cohen. Well, when it comes to President Trump, why did
you not try to go beyond the corporate shell and try to see if
President Trump was affected?
Mr. Mathews. Well, compliance with the lease is determined
by the contracting officer, and the contracting officer, in
consultation with the Office of General Counsel, made the
determination that the tenant was in full compliance with the
lease. The situations are not comparable. There is a
statutory----
Mr. Cohen. I understand all that, but basically, you are
looking for some reason to treat Mr. Rice differently than
President Trump, and there really isn't a reason, in my
opinion.
Inspector General Ochoa, does this inconsistency concern
you, that they look at the President differently than they look
at Congressman Rice?
Ms. Ochoa. We have been discussing that issue of dropping
section 37.19 from the contracts in light of the fact that up
until recently GSA thought that was the best practice and in
light of the fact that during the course of the review, we were
told that they specifically inserted the additional language
about State and local officials and the President and Vice
President to prevent interference with contracts.
Mr. Cohen. Is it not good policy to say that public elected
officials can't benefit from a Government lease? That is good
public policy. Why should we be concerned about that? We are
concerned about it because we have got a new person involved.
Is President Trump's corporate shell the only shell the GSA
has refused to look through in order to determine the
beneficial interest in a lease with GSA? Mr. Mathews, is his
corporate shell the only one?
Mr. Mathews. Again, with respect to whether or not the
tenant is in compliance with the lease----
Mr. Cohen. I am asking have you gone beyond--is his the
only corporate shell you have tried not to go into?
Mr. Mathews. I wouldn't know the answer to that question.
Mr. Cohen. Well, you should.
Are you aware of any other leases that you have where
Donald J. Trump may be the beneficiary?
Mr. Mathews. I would have to get back to you. Not that I
know of.
Mr. Cohen. Is the Monaco Hotel lease the same basically as
Trump's that is a percentage of the gross or a minimum?
Mr. Mathews. I would have to review it specifically, but I
believe it is an identical lease.
Mr. Cohen. Have you audited the Monaco Hotel to see if they
pay more?
Mr. Mathews. I believe we receive the same type of----
Mr. Cohen. Do you know if the Monaco Hotel pays over the
minimum----
Ms. Titus. The gentleman's time is----
Mr. Cohen [continuing]. And pays based on the gross
proceeds?
Can he answer my last question?
Mr. Mathews. I would be happy to get back to you with that
information.
Mr. Cohen. You would be happy to get back with me. You need
some work.
I yield back the balance of my time.
Ms. Titus. Thank you. The gentleman's time is expired.
There seems to be a lot of questions for these two
witnesses, so we will now start a second round of questioning.
We will begin with Mr. DeFazio.
Mr. DeFazio. Thanks, Madam Chair.
I just want to get back to this issue about the base rent.
As of now, adjusted by CPI, according to your testimony, the
base rent is $267,653 a month. Is that correct?
Mr. Mathews. I don't know the exact number offhand.
Mr. DeFazio. Well, that is in your testimony.
Mr. Mathews. OK.
Mr. DeFazio. OK. Good. And if the proceeds of the hotel on
an annual basis exceed 12 times that amount, OK, which would be
$3,211,836, the tenant is obligated to pay 3 percent of any
overage, $1 or $1,000 or $1 million. Is that correct?
Mr. Mathews. That is correct.
Mr. DeFazio. OK. So in the last released monthly that we
have, from April 2017, the gross was $1,965,000. So if you
multiply that times 12, that comes out to $23,580,000 a year.
But you are telling me that somehow we are back to the point
where the Trump Hotel is only grossing $267,653 a month and
doesn't owe us a penny more. Because I have asked you how much
more are we getting and you have stonewalled that and you just
keep going back to the $267,653.
Let me try it one more time. On an annual basis, has the
Trump Hotel revenues exceeded 12 times that amount, which is
$3,211,836? Yes or no?
Mr. Mathews. I think the confusion----
Mr. DeFazio. Yes or no. There is no confusion.
Mr. Mathews. I am afraid there is.
Mr. DeFazio. We are due additional funds if they exceed
$3,211,836. I am asking you a simple question. Have their
revenues exceeded that in the last year, because you have not
given us a statement on that?
Mr. Mathews. I am afraid you are conflating the gross
revenues with the rent.
Mr. DeFazio. The rent is obligated. Gross revenue that
exceeds the rent is to be--we are to get 3 percent of it. You
understand that. You just agreed to that.
Mr. Mathews. Three percent of the gross revenues.
Mr. DeFazio. Over and above the rent.
Mr. Mathews. The way this is structured, which----
Mr. DeFazio. Look, if you don't--if that is--I think you
are misinterpreting the contract. Because our understanding of
staff, and I asked you this question before, is that he pays
the base rent, and if his revenues exceed the base rent, we are
due 3 percent of the gross over that amount.
Mr. Mathews. That is not correct. That is not the way it
works.
Mr. DeFazio. Well, that is the way the staff has explained
it to me. So you tell us how it works. So very quickly.
Mr. Mathews. So the way it works is, the rent is based upon
the gross revenues, and the gross----
Mr. DeFazio. No, no. The rent was set in the original lease
and it was $250,000 and it is now up to $267,000, correct, by
CPI?
Mr. Mathews. There is a floor.
Mr. DeFazio. Right.
Mr. Mathews. So there is a minimum rent payment----
Mr. DeFazio. That is what we are asking.
Mr. Mathews [continuing]. Of approximately $3 million.
Mr. DeFazio. Right. You keep coming back to that. So you
are saying we are not getting a penny over that because there
is no revenue over and above that. That is what you are telling
us? The Trump Hotel is losing money?
Mr. Mathews. I am afraid I am not doing a good job of
explaining this. The gross revenues, with the rent that we
receive, is based upon the gross revenues. We receive 3 percent
of the gross revenues in rent, and there is a floor, a minimum
of $3 million in rent.
Mr. DeFazio. Of $3,211,836. But you are saying we are not
getting a penny more than that, that they don't owe us anything
else, the 3-percent provision hasn't been triggered?
Mr. Mathews. We are getting the minimum rent amount, that
is correct.
Mr. DeFazio. OK. So you are saying, then, that this hotel
is essentially a failure because in 1 month----
Mr. Mathews. No, I am not saying that.
Mr. DeFazio [continuing]. They have revenues of $2 million,
and you are saying now their revenues are somewhere around
$267,000 a month?
Mr. Mathews. No, I am not saying what the revenues are at
all.
Mr. DeFazio. I know. You certainly aren't because you won't
provide us the documents. So we don't know what the revenues
are or aren't.
Will you provide us the--don't have to give us what was
released here [indicating document], which is nothing
proprietary, but OK. Will you give us the gross number for last
year?
Mr. Mathews. Again, we are working with the committee to
accommodate----
Mr. DeFazio. No, you are not working with the committee. I
have been asking for this data for a very long time, and we are
going to only have one recourse if you keep stonewalling us
here. You are stonewalling us. You are not--you are telling us
that all we are getting is the base rent and nothing else is
due, but you won't substantiate that. You are accepting their
audited statements, you won't show us those, and you have, you
know--and then we have the legal opinions, of course, which we
can't see either. So we are kind of looking into a black hole
here.
I mean, there is the document we gave to Congress
[indicating document]. You even blacked out who signs for the
tenant. What the hell is that about?
Ms. Titus. The chairman's time is expired.
Mr. Meadows.
Mr. Meadows. So let me see if I can add some clarification
since I have worked on leases for a long time. You have a floor
in a lease and the lease amount is 3 percent of gross revenues
with a floor. Is that correct?
Mr. Mathews. That is correct.
Mr. Meadows. All right. So in order to hit the floor
amount, the gross revenues would have to be closer to $100
million in order to hit that floor amount. Is that correct?
Mr. Mathews. That is correct.
Mr. Meadows. All right. So what we are essentially saying
is the way the lease is structured is that in order to get
above that figure, you are actually having to have gross
receipts above $100 million. So $200 million actually would
have changed the amount that is paid to the Federal Treasury if
the gross receipts are $200 million. Is that correct, Mr.
Mathews?
Mr. Mathews. Yes, that is correct.
Mr. Meadows. So I have tried to explain that what happened
is this is a good deal for the American taxpayer. We can take
the other emoluments question separately, but indeed, when you
look at a hotel and we are getting a base amount of lease, the
way this is structured is to protect the American taxpayer, not
to penalize them. Is that correct, Mr. Mathews?
Mr. Mathews. That is absolutely correct.
Mr. Meadows. So I don't know what is so complicated about
this, because when we look at the lease, it is very clear, if
you are looking at a lease, how you would apply this.
Did you actually--have you actually worked on leases
before, Mr. Mathews, when you were a staffer?
Mr. Mathews. We reviewed them sometimes.
Mr. Meadows. You reviewed them. Did you work on legislation
that applied to public buildings when you were a staffer here?
Mr. Mathews. Yes, for a very long time.
Mr. Meadows. Did Chairman Mica have a real issue with
public buildings where--that is a softball question. Did he
have an issue with public buildings and the accountability and
what we need to be doing with public buildings?
Mr. Mathews. He did. He made it a very high priority to
protect the taxpayer through Federal real estate.
Mr. Meadows. All right. And will you commit, will you
commit to this committee that you are willing to go and look at
other ways to verify that the Trump Organization is paying the
proper amount to the American people? Are you willing to look--
so if I give you other ways to verify this number that is
beyond just an audited return, are you willing to do that?
Mr. Mathews. We would absolutely take it into--we would
certainly look at that, absolutely.
Mr. Meadows. All right. So is there any malicious part on
the part of you or the GSA to try to cheat the American
taxpayer out of revenue on behalf of the President of the
United States?
Mr. Mathews. No, of course not.
Mr. Meadows. You know, I just--I am at a loss because we
continue to come back, we have taken a nonperforming asset, we
make it a performing asset; we have taken a $6 million
liability and we have turned it into a surplus of $3 million.
We have done that all without spending American taxpayers'
dollars. We have allowed a President of the United States when
in his personal capacity to invest in Washington, DC, it was
applauded by Democrats, it was certainly championed by all of
us as a good thing for Washington, DC, and then, voila, all of
a sudden, it is a bad thing because the President of the United
States happened to win an election in 2016.
You know, we are looking for an enemy here. There are
important things for us to look at, but there is no doubt in my
mind that this particular deal was a good deal for the American
taxpayer. Would you agree with that, Mr. Mathews?
Mr. Mathews. It has been a fabulous economic performer for
the taxpayer.
Mr. Meadows. So, Ms. Ochoa, I am going to come back to you.
Here is what I need, and you know that you have come before my
other committee a number of times. This is not the first time
that we go back. I love my IGs, and here is what I am asking
you to do. There are internal documents that you keep talking
about with GSA. There are also internal documents that you have
from an IG standpoint where it comes to the constitutional
analysis that you have actually put forth in this report.
Are you aware of any other time where you actually have
been asked to come in and make substantial constitutional
analysis as it relates to the IG's work?
Ms. Ochoa. Actually, first, I have to say that there are no
internal documents that we have not----
Mr. Meadows. Emails back and forth between your counsel as
they were going back and forth whether this applied or not, you
don't have those?
Ms. Ochoa. What we relied upon for the analysis of whether
there was a constitutional issue is all public source material,
and we have provided that to your staff.
Mr. Meadows. So the three people that you have, that
internal deliberation, do we understand how they came to that
decision?
Ms. Ochoa. Absolutely. It is laid out in the----
Mr. Meadows. No, no, no. In terms of their internal back
and forth. Can you get that to us? Do you have a problem with
us having that?
Ms. Ochoa. With having source material----
Mr. Meadows. The internal deliberations of how you arrived
at your constitutional analysis.
Ms. Ochoa. That is laid out in the report.
Ms. Titus. The gentleman's time is expired.
Mr. Garamendi.
Mr. Garamendi. Thank you.
There are two issues here, one of which is the financial
situation with regard to the hotel, and that could be discussed
back and forth. The issue that I want to focus on is the
emoluments issue. And in the emoluments issue, both of you
opined a while ago that the President continues to have a
financial interest in the hotel. That was your earlier
testimony.
Without going back at that, the question then of emoluments
becomes pertinent. The Constitution is very, very clear that
the President cannot receive an emolument from a foreign power,
prince or State, or from the United States beyond his salary,
or from a State. That is very clear language. We are not--there
is not much--there is no debate about that. The question then
with regard to the hotel situation is, does the President
receive money from a foreign government?
In that earlier question, neither of you had that specific
information. And the question for Mr. Mathews is, why do you
not have that information? You have been asked that question.
Mr. Mathews. Again, so we receive financial information
based on the terms and conditions of the contract, and we
receive the information we are required under the terms----
Mr. Garamendi. Excuse me. Excuse me. It is a yes or no,
sir. You are going to blow through my time here.
Have you requested information about money from foreign
governments and from State governments?
Mr. Mathews. So the question of whether or not there is an
emoluments violation is pending before the courts. It is not
GSA's--it wouldn't be appropriate----
Mr. Garamendi. That is not my question. My question is,
have you asked for that information? I think the answer is, no,
you have not. Is that correct?
Mr. Mathews. That is correct.
Mr. Garamendi. OK. So you have not.
And, Ms. Ochoa, have you requested that information?
Ms. Ochoa. We don't have direct access to the hotel's books
and records. We have access to GSA's materials.
Mr. Garamendi. Have you requested that information?
Ms. Ochoa. We have not requested it from GSA at this point.
Mr. Garamendi. Thank you.
Madam Chair, I would ask that the committee request that
specific information.
Ms. Titus. Without objection.
Mr. Garamendi. Now, I believe we have a slide. It is
called, ``Tracking Profits from Foreign Governments to the
Trump Hotel.'' This is a slide that actually was given to the
committee, and it came from the Trump Organization. And
presumably, The Trump Organization gives back to the Treasury
whatever profits there may be. We have not determined that
there are or are not profits, but my question really goes to
how in the world we are going to determine the accuracy of any
profit contributed to the Treasury when we have absolutely no
information about any foreign government or any State
government paying anything at the hotel.
So is this useful or is this just a sham? Open question.
Mr. Mathews, have you ever attempted to track any profit that
has been returned to the Treasury?
Mr. Mathews. That is not our role at GSA.
Mr. Garamendi. So the answer is no, you have not.
And, Ms. Ochoa?
Ms. Ochoa. My question remains with any obstacles to our
access, the OIG's access to that information.
Mr. Garamendi. So once again, the rationale that the Trump
administration used to get past the emoluments issue was that
they would deliver to the Treasury any profit that was
received, and yet we have absolutely no way to determine if
there was any participation at the hotel by a foreign
government or State government. We do have press reports and we
do have the testimony of the former Governor of Maine that
apparently the State of Maine spent $22,000 at the hotel.
Now, the underlying question here goes back to the initial
lease and the question of the estoppel. We have been denied the
legal questions that were asked of the counsel, but we do know
that there was a legal analysis done by the counsel. Is that
correct?
Ms. Ochoa. That is correct.
Mr. Garamendi. OK. We also know that Mr. Terry, the
contracting officer, knew that the Office of the General
Counsel recognized a violation of the Foreign Emoluments Clause
might be relevant to a breach and that this important issue
remained open. This is your testimony, Ms. Ochoa. Do you stand
by that?
Ms. Ochoa. Yes. That is what we found in the report.
Mr. Garamendi. OK. So apparently, the Office of the General
Counsel raised a question about the emoluments and that remains
open today, and I would just simply say, this is our task.
Thank you.
Ms. Titus. The gentleman's time is expired.
Mr. Johnson.
Mr. Johnson of Georgia. Thank you.
You know, we could talk about how much would be calculated
under the lease, whether or not the lease was in violation of
the Emoluments Clause and other such issues that may escape the
scrutiny of the American people, but one thing the American
people do understand is that the American people don't get a
good deal when the President of the United States is the tenant
and also the landlord. That is pretty much like the fox being
in charge of security at the hen house. Everybody knows that
that is a setup that is doomed to benefit the lessor/lessee who
is the same person at the same time. How could that work out to
the benefit of the American people?
And that is something that this subcommittee is well poised
to address, don't you agree with that, Mr. Mathews, since you
formerly worked on this subcommittee? Isn't it our legitimate
interest to oversee the operations of the General Services
Administration, particularly in a situation where the fox is
over the hen house?
Mr. Mathews. The committee and subcommittee, absolutely,
have oversight jurisdiction over GSA, yes.
Mr. Johnson of Georgia. So all of the things that my
friends on the other side of the aisle have been saying all
morning to somehow besmirch this hearing or to take away from
its legitimacy, you don't agree with, do you?
Mr. Mathews. I am not going to opine on the minority's----
Mr. Johnson of Georgia. Well, I understand your loyalty,
but you also have a loyalty to the Constitution, do you not?
Mr. Mathews. Yes, I do.
Mr. Johnson of Georgia. And thank you.
With that, I am going to yield the balance of my time to
the gentleman from Tennessee.
Mr. Cohen. Thank you, Mr. Johnson.
Let me go back to Mr. Mathews. Would you give us the
agreement, the lease agreement with the Monaco Hotel and GSA,
and let us know, when you give it to us, if they have paid more
than the base rent and paid their rent based on the percentage
of gross proceeds provision?
Mr. Mathews. I would be happy to take that request back and
we will respond to your request.
Mr. Cohen. That is good that you will do that. But you
don't know for a fact if they have paid more than their minimum
rent?
Mr. Mathews. I don't know. And, again, if there are
provisions in the lease that restrict the financial
information, we will certainly have to work through that as
well.
Mr. Cohen. Well, it would be interesting to know if it was
similar or different. The percentage of--the Trump family has
decided at some point on their own that to not violate the
Emoluments Clause, they would pay the hotel's profits that Mr.
Trump would otherwise get to the United States Treasury at the
end of the year to avoid violating the Constitution's
Emoluments Clause. Are you familiar with that arrangement and
decision?
Mr. Mathews. Just by press reports.
Mr. Cohen. OK. Well, don't you think, Ms. Ochoa, that if
the President has decided to donate his profits so not to
violate the Emoluments Clause, that is basically an admission
that the Emoluments Clause is effective, as you have said, and
it should have been considered in determining the lease?
Ms. Ochoa. I am not going to provide an opinion on those
types of statements. We did find in the report that there is an
issue, a constitutional issue with respect to the lease.
Mr. Cohen. Thank you. And apparently, the Trump family
agrees.
Now, let me ask you this. Mr. Mathews, they give a
percentage to the Treasury. Do you know what amount of money
they give to the Treasury?
Mr. Mathews. Are you referring to the lease contract or
this other arrangement?
Mr. Cohen. The other arrangement where the Trump family
donates--Donald Trump donates his profits.
Mr. Mathews. I am not familiar with that.
Mr. Cohen. Well, I would submit to you you ought to be
familiar with it. If the President of the United States, who is
your boss, decides he is violating the Constitution if he
doesn't give this money to the Treasury, and you don't know
what--if he is actually giving the percentage of profits that
he gets from foreign governments, which you could know by
auditing his books, and you don't know, you are being derelict
in your responsibility. The President has said this is a
constitutional issue and he is going to give his profits to the
United States Treasury, and yet you don't know what he is
deciding to give and whether it is enough or not.
This is within your purview, and Mr. Trump has basically
said he is violating the Constitution, but so as not to be seen
as violating, he is going to donate a certain percentage. But
there is not going to be anybody looking over his shoulder to
see that he donates the right amount of money to not violate
the Constitution?
I guess that is an answer. You don't care.
You want to answer?
Mr. Mathews. What I would say is the question of an
emoluments violation that is pending several litigations before
the courts right now, and in those--in that forum, the
Department of Justice has argued before the courts there is no
constitutional violation right now.
Mr. Cohen. But Mr. Trump has admitted it. Mr. Trump doesn't
give away money for no reason at all. He doesn't even pay
taxes.
I yield back.
Ms. Titus. Mr. Meadows.
Mr. Meadows. Madam Chairman, I have just a few unanimous
consent requests. One would be, for the record, the Seth
Tillman ``Business Transactions and President Trump's
`Emoluments' Problem'' document. I ask unanimous consent that
that be included.
Ms. Titus. Without objection.
[The information is on page 120.]
Mr. Meadows. And then the amicus brief that was filed on
the same subject. Without going into a long dissertation, I ask
unanimous consent that that be included in the record as well.
Ms. Titus. Without objection.
[The information is on page 121.]
Mr. Meadows. I thank the gentlewoman, and I yield back.
Ms. Titus. I think--we will thank our witnesses and
appreciate them staying with us so long, and they will be
dismissed and we will welcome our second panel. We will take
about a 5-minute break.
I am sorry. It is not a break; it is a recess, a 5-minute
recess.
[Recess.]
Ms. Titus. The hearing will come back to order.
Now I want to welcome our second panel of witnesses. Mr.
Michael Foster, who is the legislative attorney for CRS'
American Law Division; Liz Hempowicz, who is director of public
policy for the Project on Government Oversight, known as POGO;
Mr. Walter Shaub, senior advisor for Citizens for
Responsibility and Ethics in Washington, CREW, and the former
Director of the U.S. Office on Government Ethics; and Mr. Hans
von Spakovsky, who is a senior legal fellow for the Edwin Meese
Center for Legal and Judicial Studies at the Heritage
Foundation.
Thank you very much for being here. We are looking forward
to your testimony.
Without objection, our witnesses' full statements will be
included in the record. And as with the previous panel, since
your written testimony is included, we would ask you to please
limit your comments to 5 minutes.
We will now proceed with the witnesses and starting with
Mr. Foster.
TESTIMONY OF MICHAEL A. FOSTER, LEGISLATIVE ATTORNEY,
CONGRESSIONAL RESEARCH SERVICE; HANS A. VON SPAKOVSKY, SENIOR
LEGAL FELLOW, EDWIN MEESE III CENTER FOR LEGAL AND JUDICIAL
STUDIES, THE HERITAGE FOUNDATION; LIZ HEMPOWICZ, DIRECTOR OF
PUBLIC POLICY, PROJECT ON GOVERNMENT OVERSIGHT; AND WALTER M.
SHAUB, Jr., SENIOR ADVISOR, CITIZENS FOR RESPONSIBILITY AND
ETHICS IN WASHINGTON, AND FORMER DIRECTOR, U.S. OFFICE ON
GOVERNMENT ETHICS
Mr. Foster. Chair Titus, Ranking Member Meadows, and
members of the subcommittee, my name is Michael Foster. I am a
legislative attorney in the American Law Division of the
Congressional Research Service. Thank you for inviting me to
testify today on behalf of CRS to provide background
information on the Emoluments Clauses of the U.S. Constitution
and recent litigation concerning those provisions.
In brief, under what I will refer to as the Foreign
Emoluments Clauses of the Constitution, any person holding any
office of profit or trust under the United States is prohibited
from accepting of any present, emolument, office, or title of
any kind whatever from a foreign government unless Congress
consents. Additionally, a separate constitutional provision,
the Domestic Emoluments Clause, provides that the President of
the United States shall receive during his term a compensation
for his services, but shall not receive within that period any
other emolument from the United States or any of them.
For most of their history, these clauses were little
discussed and largely unexamined by the courts. However, recent
litigation involving the President has resulted in multiple
Federal courts more fully addressing the scope and application
of the clauses. Though these clauses and the litigation raise a
host of legal issues, some of which I address in more detail in
my written testimony, my testimony today will focus on the
primary interpretive issue that has arisen in the recent
litigation; namely, the issue of what the term ``emolument'' as
used in the clauses means.
What constitutes an emolument within the meaning of the
constitutional provisions is a key question that has divided
legal scholars and has only recently been addressed by any
Federal courts. Several potential definitions of the term have
been offered. The narrowest definition would limit an emolument
to compensation for the personal performance of services as an
officer or employee of a foreign or domestic government, but
would not extend to ordinary business transactions between a
covered official and such a government. By contrast, a broad
definition that some have proposed would cover any profit,
gain, advantage, or benefit, including even ordinary fair
market value transactions between covered officers and a
foreign or domestic government.
The Department of Justice's Office of Legal Counsel, or
OLC, has also sometimes appeared to employ a functional fact-
specific definition in rendering legal advice to the executive
branch on whether the acceptance of particular payments or
benefits by executive branch officials would implicate the
clauses. Some OLC opinions, in assessing whether a particular
benefit would constitute a prohibited emolument, have looked to
the clauses' goals of limiting influence on the President and
Federal officers, and have accordingly inquired into whether a
benefit at issue is intended to or could influence the
recipient as an officer under the totality of the
circumstances.
Debate over the definition of an emolument has largely
centered on the text of the clauses, their history and purpose,
and historical practice. For instance, proponents of the broad
definition assert that the general anticorruptive and anti-
influence purposes of the clauses support reading it
expansively and rely on contemporaneous dictionary definitions
and practices of past Presidents. In support of the office or
employment limited definition, however, some scholars rely on
competing contemporaneous dictionary definitions and usage by
some founders, as well as the possible business practices of
early Presidents like George Washington.
In 2018 and 2019, two Federal district courts substantively
addressed the scope of the Emoluments Clauses for the first
time, with the courts concluding that the term ``emolument'' is
defined as any profit, gain, or advantage of more than de
minimis value. Regarding the clause's text, the courts found
significant the use of modifiers like ``any other'' and ``any
kind whatever,'' and rejected the proposition that the term's
office-related use in another part of the Constitution should
control under the clauses.
With respect to the clauses' history and purpose, the
courts, while acknowledging the broader and narrower
definitions of emolument both existed at the time of
ratification, found the weight of the historical evidence in
the clauses anticorruption purpose to support the more
expansive definition. Finally, the courts viewed executive
branch precedent and practice as consistent with an expansive
view of the meaning of the term ``emolument.''
These recent court decisions construing the Emoluments
Clauses are not final, however. In fact, one of the decisions
has since been reversed by the U.S. Court of Appeals for the
Fourth Circuit on a separate issue regarding the standing of
the plaintiffs to sue, and the other decision has been
certified for an immediate appeal to the U.S. Court of Appeals
for the District of Columbia Circuit. Thus, the import of these
decisions as it relates to the meaning of the Emoluments
Clauses remains unclear.
Thank you, and I will be happy to answer any questions at
the appropriate time.
[Mr. Foster's prepared statement follows:]
Prepared Statement of Michael A. Foster, Legislative Attorney,
Congressional Research Service
Chair Titus, Ranking Member Meadows, and Members of the
Subcommittee:
My name is Michael Foster. I am a Legislative Attorney in the
American Law Division of the Congressional Research Service (CRS).
Thank you for inviting me to testify on behalf of CRS to provide
background information on the Emoluments Clauses of the U.S.
Constitution and recent litigation concerning those provisions.\1\
---------------------------------------------------------------------------
\1\ Legislative Attorney Kevin Hickey assisted in preparing this
written testimony.
---------------------------------------------------------------------------
The Constitution contains three provisions that mention the term
``emolument'':
1. The Foreign Emoluments Clause: Article I, Section 9, Clause 8
provides that ``no Person holding any Office of Profit or Trust under
[the United States], shall, without the Consent of Congress, accept of
any present, Emolument, Office, or Title, of any kind whatever, from
any King, Prince, or foreign State''; \2\
---------------------------------------------------------------------------
\2\ U.S. Const. art. I, 9, cl. 8.
---------------------------------------------------------------------------
2. The Domestic Emoluments Clause: Article II, Section 1, Clause 7
provides that ``[t]he President shall, at stated Times, receive for his
Services, a Compensation, which shall neither be encreased nor
diminished during the Period for which he shall have been elected, and
he shall not receive within that Period any other Emolument from the
United States, or any of them''; \3\ and
---------------------------------------------------------------------------
\3\ Id. art. II, 1, cl. 7.
---------------------------------------------------------------------------
3. The Ineligibility Clause: Article I, Section 6, Clause 2
provides (among other things) that no Member of Congress shall ``be
appointed'' during his or her term ``to any civil Office under the
Authority of the United States, which shall have been created, or the
Emoluments whereof shall have been encreased during such time[.]'' \4\
---------------------------------------------------------------------------
\4\ Id. art. I, 6, cl. 2. This provision is sometimes referred to
by other names, such as the ``Legislative Emoluments Clause.'' E.g.,
Amandeep S. Grewal, The Foreign Emoluments Clause and the Chief
Executive, 102 Minn. L. Rev. 639, 658 (2017).
The first two Clauses are the focus of this testimony.\5\ For most
of their history, the Foreign and Domestic Emoluments Clauses
(collectively, the ``Emoluments Clauses'' or the ``Clauses'') were
little discussed and largely unexamined by the courts.\6\ But recent
litigation involving President Trump has led to multiple federal court
decisions more fully addressing the Clauses' scope and application.\7\
This testimony will accordingly provide an overview of the Emoluments
Clauses as they relate to the President, focusing on the legal issues
that have been central to the recent litigation. More specifically,
this testimony will discuss (1) the history and purpose of the Clauses;
(2) whether the President is a person holding an ``Office of Profit or
Trust under [the United States]'' for purposes of the Foreign
Emoluments Clause; (3) the scope of the Emoluments Clauses, focusing
specifically on disputes over the breadth of the term ``emolument'';
and (4) whether the Clauses may be enforced in court and by whom.
---------------------------------------------------------------------------
\5\ The Ineligibility Clause is not at issue in the litigation and
is not further discussed in this testimony except as it relates to
interpretation of the other Clauses.
\6\ See Julie Bykowicz & Mark Sherman, Why Conflict of Interest
Rules Apply Differently to the President, PBS News Hour (Jan. 9, 2016),
https://www.pbs.org/newshour/politics/conflict-interest-rules-apply-
differently-president (``Arthur Hellman, an ethicist at the University
of Pittsburgh, said he does not believe any U.S. court, much less the
Supreme Court, has ever interpreted the emoluments clause.''). Prior to
the court cases discussed in this testimony, a few judicial decisions
briefly discussed the Foreign Emoluments Clause without extensively
analyzing its scope. E.g., U.S. ex rel. New v. Rumsfeld, 350 F. Supp.
2d 80, 101-02 (D.D.C. 2004) (rejecting argument that order to wear U.N.
insignia on uniform amounted to Foreign Emoluments Clause violation and
noting apparent lack of ``Supreme Court precedent defining the scope
and application of the clause''), aff'd, 448 F.3d 403, 410 (D.C. Cir.
2006) (summarily affirming).
\7\ See generally In re Trump, 928 F.3d 360 (4th Cir. 2019);
Blumenthal v. Trump, 382 F. Supp. 3d 77 (D.D.C. 2019); Citizens for
Responsibility & Ethics in Wash. v. Trump, No. 18-474, slip op. (2d
Cir. Sept. 13, 2019).
---------------------------------------------------------------------------
History and Purpose of the Emoluments Clauses
Founding Era
Foreign Emoluments Clause. The basic purpose of the Foreign
Emoluments Clause is to prevent corruption and limit foreign influence
on federal officers. At the Constitutional Convention, Charles Pinckney
of South Carolina introduced the language that became the Foreign
Emoluments Clause based on ``the necessity of preserving foreign
Ministers & other officers of the U.S. independent of external
influence.'' \8\ The Convention approved the Clause unanimously without
noted debate.\9\ During the ratification debates, Edmund Randolph of
Virginia--a key figure at the Convention--explained that the Foreign
Emoluments Clause was intended to ``prevent corruption'' by
``prohibit[ing] any one in office from receiving or holding any
emoluments from foreign states.'' \10\
---------------------------------------------------------------------------
\8\ 2 The Records of the Federal Convention of 1787, at 389 (Max
Farrand ed., 1911) [hereinafter Farrand's Records] (Madison's notes).
\9\ Id.
\10\ See 3 Farrand's Records 327; accord Joseph Story, 3
Commentaries on the Constitution of the United States 215-16 (1st ed.
1833) (``[The Foreign Emoluments Clause] is founded in a just jealousy
of foreign influence of every sort.'')
---------------------------------------------------------------------------
The Clause reflected the Framers' experience with the then-
customary European practice of giving gifts to foreign diplomats.\11\
Following the example of the Dutch Republic, which prohibited its
ministers from receiving foreign gifts in 1651,\12\ the Articles of
Confederation provided that ``any person holding any office of profit
or trust under the United States, or any of them'' shall not ``accept
of any present, emolument, office, or title of any kind whatever, from
any king, prince, or foreign state.'' \13\ The Foreign Emoluments
Clause largely tracks this language from the Articles, although there
are some differences.\14\
---------------------------------------------------------------------------
\11\ See generally Deborah Samuel Sills, The Foreign Emoluments
Clause: Protecting Our National Security Interests, 26 J.L. & Pol'y 63,
69-72 (2018); Robert G. Natelson, The Original Meaning of
``Emoluments'' in the Constitution, 52 Ga. L. Rev. 1, 37, 43-45 (2017);
Zephyr Teachout, Gifts, Offices, and Corruption, 107 Nw. U.L. Rev.
Colloquy 30, 33-35 (2012).
\12\ See Zephyr Teachout, Corruption in America: From Benjamin
Franklin's Snuff Box to Citizens United 20-21 (2014) (citing 4 John
Bassett Moore, A Digest of International Law 579 (1906)).
\13\ Articles of Confederation of 1781, art. VI, para. 1.
\14\ Two differences are notable. First, unlike the corresponding
provision in the Articles, the Foreign Emoluments Clause expressly
provides that Congress may consent to a federal official's receipt of
emoluments. See U.S. Const. art. I, 9, cl. 8. Second, the Articles
expressly reached state officeholders as well as federal ones, while
the Foreign Emoluments Clause does not. See Articles of Confederation
of 1781, art. VI, para. 1. See also Natelson, supra note 11, at 37-38
(discussing these differences); Seth Barrett Tillman, Citizens United
and the Scope of Professor Teachout's Anti-Corruption Principle, 107
Nw. U. L. Rev. Colloquy 399, 405 (2015) (same).
---------------------------------------------------------------------------
During the Articles period, American diplomats struggled with how
to balance their legal obligations and desire to avoid the appearance
of corruption, against prevailing European norms and the diplomats'
wish to not offend their host country.\15\ A well-known example from
this period, which appears to have influenced the Framers of the
Emoluments Clause,\16\ involved the King of France's gift of an opulent
snuff box to Benjamin Franklin.\17\ Concerned that receipt of this gift
would be perceived as corrupting and violate the Articles of
Confederation, Franklin sought (and received) congressional approval to
keep the gift.\18\ Following this precedent, the Foreign Emoluments
Clause prohibits federal officers from accepting foreign presents,
offices, titles, or emoluments, unless Congress consents.\19\
---------------------------------------------------------------------------
\15\ See generally Teachout, supra note 12, 20-26; Natelson, supra
note 11, at 43-45.
\16\ See 3 Farrand's Records 327 (statement of Edmund Randolph)
(``An accident which actually happened, operated in producing the
[Foreign Emoluments Clause]. A box was presented to our ambassador by
the king of [France]. It was thought proper, in order to exclude
corruption and foreign influence, to prohibit any one in office from
receiving or holding any emoluments from foreign states. . . . [I]f at
that moment, when we were in harmony with the king of France, we had
supposed that he was corrupting our ambassador, it might have disturbed
that confidence . . . .''). It is unclear whether Randolph was
referring to the snuff box gifted to Franklin, or a similar gift made
to Arthur Lee, an American envoy to France during this same period. See
Teachout, supra note 11, at 35.
\17\ See Teachout, supra note 12, at 25-26.
\18\ See id.; Applicability of Emoluments Clause to Employment of
Government Employees by Foreign Public Universities, 18 Op. O.L.C. 13,
16 n.4 (1994).
\19\ U.S. Const. art. I, 9, cl. 8.
---------------------------------------------------------------------------
Domestic Emoluments Clause. The Domestic Emoluments Clause's
purpose is to preserve the President's independence from Congress and
state governments.\20\ To accomplish this end, the Clause contains two
key provisions. First, it provides that the President shall receive a
compensation for his services, which cannot be increased or decreased
during his term,\21\ thus preventing the legislature from using its
control over the President's salary to exert influence over him. To
preserve presidential independence further, the Clause provides that,
apart from this fixed salary, the President shall not receive ``any
other Emolument'' from the United States or any state government.\22\
---------------------------------------------------------------------------
\20\ See generally The Federalist No. 73 (Alexander Hamilton).
\21\ U.S. Const. art. II, 1, cl. 7.
\22\ Id.
---------------------------------------------------------------------------
The Domestic Emoluments Clause, which drew upon similar provisions
in state constitutions,\23\ received little noted debate at the
Constitutional Convention.\24\ Its meaning, however, was elucidated by
Alexander Hamilton in The Federalist No. 73. Hamilton wrote that the
Domestic Emoluments Clause was designed to isolate the President from
potentially corrupting congressional influence: because the President's
salary is fixed ``once for all'' each term, the legislature ``can
neither weaken his fortitude by operating on his necessities, nor
corrupt his integrity by appealing to his avarice.'' \25\ Similarly,
Hamilton explained that because ``[n]either the Union, nor any of its
members, will be at liberty to give . . . any other emolument,'' the
President will ``have no pecuniary inducement to renounce or desert the
independence intended for him by the Constitution.'' \26\ Other Framers
echoed this sentiment during the ratification debates.\27\
---------------------------------------------------------------------------
\23\ See., e.g. Mass. Const. of 1780, pt. II, ch. II, 1, art.
XIII (``As the public good requires that the governor should not be
under the undue influence . . . it is necessary that he should have an
honorable stated salary, of a fixed and permanent value . . . .''); Md.
Const. of 1776, art. XXXII (``That no person ought to hold, at the same
time, more shall one office of profit, nor ought any person in public
trust, to receive any present from any foreign prince or state, or from
the United States, or any of them, without the approbation of this
State.''); see generally Brianne J. Gorod et al., The Domestic
Emoluments Clause: Its Text, Meaning, and Application to Donald J.
Trump, Const. Accountability Ctr. (2017), at 6-7, https://
www.theusconstitution.org/wp-content/uploads/2017/07/
20170726_White_Paper_Domestic_
Emoluments_Clause.pdf (discussing state constitutional precedents for
the Domestic Emoluments Clause); Natelson, supra 11, at 24-27 (same).
\24\ See Robert J. Delahunty, Compensation, The Heritage Guide To
The Constitution (last accessed Sept. 13, 2019), https://
www.heritage.org/constitution/#!/articles/2/essays/84/compensation
(``The Constitutional Convention hardly debated [the Domestic
Emoluments Clause].''). Early in the Constitutional Convention,
Benjamin Franklin proposed that the President should receive no
compensation at all; this motion was politely postponed ``with great
respect, but rather for the author of it than from any apparent
conviction of its expediency or practicability.'' 1 Farrand's Records
81-85 (Madison's notes). The Convention unanimously agreed to the fixed
salary provision for the President on July 20, 1787. 2 Farrand's
Records 69 (Madison's notes). On September 15, 1787, Franklin and John
Rutledge moved to add the prohibition that the President should not
receive ``any other emolument'' from the federal or state governments,
which was approved by a 7-4 vote without noted debate. 2 Farrand's
Records 626 (Madison's notes); see also Natelson, supra note 11, at 36
(``Although the [emoluments] ban was added to the [presidential]
compensation feature without debate, the divided vote (7-4) suggests
competing values were at stake.'').
\25\ The Federalist No. 73 (Alexander Hamilton).
\26\ Id.
\27\ See 2 The Debates in the Several State Conventions on the
Adoption of the Federal Constitution 446 (Jonathan Elliot ed., 1836)
[hereinafter Elliot's Debates] (statement of James Wilson) (``[The
Domestic Emoluments Clause was designed] to secure the President from
any dependence upon the legislature as to his salary.'').
---------------------------------------------------------------------------
Nineteenth and Twentieth Century Practice
The Foreign Emolument Clause provides a role for Congress in
determining the propriety of foreign emoluments, in that receipt of an
emolument otherwise prohibited by the Clause is permitted with the
consent of Congress.\28\ Under this authority, Congress has in the past
provided consent to the receipt of particular presents, emoluments, and
decorations through public or private bills,\29\ or by enacting general
rules governing the receipt of gifts by federal officers from foreign
governments.\30\ For example, in 1966, Congress enacted the Foreign
Gifts and Decorations Act, which provided general congressional consent
for foreign gifts of minimal value, as well as conditional
authorization for acceptance of gifts on behalf of the United States
under certain circumstances.\31\
---------------------------------------------------------------------------
\28\ U.S. Const. art. I, 9, cl. 8.
\29\ See generally S. Rep. No. 89-1160, at 1-2 (1966) (``In the
past, the approval of Congress, as required by [the Foreign Emoluments
Clause], has taken the form of public or private bills, authorizing an
individual or group of individuals to accept decorations or gifts.'').
\30\ See, e.g., Act of Jan. 31, 1881, ch. 32 3, 21 Stat. 603,
603-04 (1881) (authorizing certain named persons to accept presents
from foreign governments, and requiring that ``hereafter, any presents,
decoration, or other thing, which shall be conferred or presented by
any foreign government to any officer of the United States . . . shall
be tendered through the Department of State'').
\31\ See Pub. L. No. 89-673, 80 Stat. 592 (1966) (codified as
amended at 5 U.S.C. 7342).
---------------------------------------------------------------------------
Several Presidents in the 19th century--such as Andrew Jackson,\32\
Martin Van Buren,\33\ John Tyler,\34\ and Benjamin Harrison \35\--
notified Congress of foreign presents that they had received, and
either placed the gifts at its disposal or obtained consent to their
receipt. Other 19th century Presidents treated presents that they
received as ``gifts to the United States, rather than as personal
gifts.'' \36\ Thus, in one instance, President Lincoln accepted a
foreign gift on behalf of the United States and then deposited it with
the Department of State.\37\
---------------------------------------------------------------------------
\32\ A Compilation of the Messages And Papers of the Presidents
1789-1902, at 466-67 (James Richardson, ed., 1907) (January 19, 1830
letter from President Jackson to the Senate and House of
Representatives, stating that the Constitution prohibited his
acceptance of a medal from Simon Bolivar and therefore placing the
medal ``at disposal of Congress'').
\33\ S.J. Res. 4, 26th Cong., 5 Stat. 409 (1840) (joint resolution
of Congress authorizing President Van Buren to dispose of presents
given to him by the Imam of Muscat and deposit the proceeds in the
Treasury);
\34\ S. Journal, 28th Cong., 2d Session 254 (1844) (authorizing
sale of two horses presented to the United States by the Imam of
Muscat); see also Teachout, supra note 11, at 42 (discussing the Van
Buren and Tyler precedents); Seth Barrett Tillman, The Original Public
Meaning of the Foreign Emoluments Clause: A Reply to Professor Zephyr
Teachout, 107 Nw. L. Rev. Colloquy 180, 190 (2013) (same).
\35\ Pub. Res. 54-39, 29 Stat. 759 (1896) (congressional resolution
authorizing delivery of Brazilian and Spanish medals to Benjamin
Harrison).
\36\ See Proposal that the President Accept Honorary Irish
Citizenship, 1 Op. O.L.C. Supp. 278, 281 (1963).
\37\ Id.
---------------------------------------------------------------------------
In the 20th century, some Presidents have sought the advice of the
Department of Justice's Office of Legal Counsel (OLC) on whether
acceptance of particular honors or benefits would violate the
Emoluments Clauses. Three such OLC opinions addressed whether: (1)
President Kennedy's acceptance of honorary Irish citizenship would
violate the Foreign Emoluments Clause; \38\ (2) President Reagan's
receipt of retirement benefits from the State of California would
violate the Domestic Emoluments Clause; \39\ and (3) President Obama's
acceptance of the Nobel Peace Prize would violate the Foreign
Emoluments Clause.\40\
---------------------------------------------------------------------------
\38\ Id. at 278 (concluding that acceptance of even ``honorary''
Irish citizenship would violate ``the spirit, if not the letter'' of
the Foreign Emoluments Clause).
\39\ President Reagan's Ability to Receive Retirement Benefits from
the State of California, 5 Op. O.L.C. 187, 189-92 (1981) (concluding
that retirement benefits are not ``emoluments'' under the Domestic
Emolument Clause because they ``are neither gifts nor compensation for
services'' and would not subject the President to improper influence).
\40\ Applicability of the Emoluments Clause and the Foreign Gifts
and Decorations Act to the President's Receipt of the Nobel Peace
Prize, 33 Op. O.L.C. 1, 4, 7-9 (2009) (concluding that the Nobel Peace
Prize is not given on behalf of a foreign government, but a private
organization).
---------------------------------------------------------------------------
Persons Subject to the Emoluments Clauses
An important threshold issue in examining the Emoluments Clauses is
determining who is subject to their terms. The scope of the Domestic
Emoluments Clause is clear: it applies to ``[t]he President.'' \41\ The
Clause prohibits the President from receiving emoluments from state or
federal governments, aside from his fixed federal salary. The Foreign
Emoluments Clause applies to any person holding an ``Office of Profit
or Trust under [the United States].'' \42\ The OLC, which has developed
a body of opinions on the Emoluments Clauses,\43\ has opined that the
President ``surely'' holds an ``Office of Profit or Trust'' under the
Constitution.\44\ OLC opinions are generally considered binding within
the executive branch.\45\
---------------------------------------------------------------------------
\41\ U.S. Const. art. II, 1, cl. 7.
\42\ Id. art. I, 9, cl. 8.
\43\ See generally Gary J. Edles, Service on Federal Advisory
Committees: A Case Study of OLC's Little-Known Emoluments Clause
Jurisprudence, 58 Admin. L. Rev. 1 (2006); Sills, supra note 11, at 75-
87 (reviewing OLC's interpretation of the Foreign Emoluments Clause).
\44\ See Nobel Peace Prize, 33 Op. O.L.C. at 4; see also Honorary
Irish Citizenship, 1 Op. O.L.C. Supp. at 278 (assuming, without
definitively stating, that the Foreign Emoluments Clause applies to the
President).
\45\ See Trevor W. Morrison, Constitutional Alarmism, 124 Harv. L.
Rev. 1688, 1711 (2011) (reviewing Bruce Ackerman, The Decline and Fall
of the American Republic (2011)) (``OLC's legal opinions are treated as
authoritative and binding within the executive branch unless
`overruled' by the Attorney General or the President.''); Memorandum
from David J. Barron, Acting Assistant Att'y Gen., Office of Legal
Counsel, Best Practices for OLC Legal Advice and Written Opinions (July
16, 2010), http://www.justice.gov/olc/pdf/olc-legal-advice-opinions.pdf
(``OLC's core function, pursuant to the Attorney General's delegation,
is to provide controlling advice to Executive Branch officials on
questions of law.'').
---------------------------------------------------------------------------
There has been significant academic debate about whether OLC's
conclusion comports with the original public meaning of the Foreign
Emoluments Clause.\46\ Some legal scholars have argued that the Foreign
Emoluments Clause does not apply to elected officials such as the
President, but only to certain appointed federal officers.\47\ Other
scholars support the OLC's view that the President holds an office of
profit under the United States under the original meaning of the
Foreign Emoluments Clause.\48\
---------------------------------------------------------------------------
\46\ See, e.g., Natelson, supra note 11, at 12 (describing this
issue as one of ``sharp disagreement''); compare Tillman, supra note
34, at 185-95 (arguing that the Foreign Emoluments Clause does not
apply to elected federal officials), with Teachout, supra note 11, at
39-48 (disputing Tillman's view).
\47\ See, e.g., Tillman, supra note 34, at 185; Josh Blackman &
Seth Barrett Tillman, The Emoluments Clauses Litigation, Part 1: The
Constitution's Taxonomy of Officers and Offices, Wash. Post: The Volokh
Conspiracy (Sept. 25, 2017), https://www.washingtonpost.com/news/
volokh-conspiracy/wp/2017/09/25/the-emoluments-clauses-litigation-part-
1-the-constitutions-taxonomy-of-officers-and-offices/ (``[T]he text and
history of the Constitution, and post-ratification practice during the
early republic, strongly support the counterintuitive view: The
president does not hold an `Office . . . under the United States.' '').
\48\ See, e.g., Teachout, supra note 11, at 48; Erik M. Jensen, The
Foreign Emoluments Clause, 10 Elon L. Rev. 73, 86-93 (2018).
---------------------------------------------------------------------------
In addition to textual and structural arguments, these scholars
debate the significance of Founding-era historical evidence. To support
the view that the Foreign Emoluments Clause does not apply to the
President, academics have observed that, among other things: (1) a 1792
list produced by Alexander Hamilton of ``every person holding any civil
office or employment under the United States'' did not include elected
officials such as the President and Vice President; \49\ (2) George
Washington accepted gifts from the Marquis de Lafayette and the French
Ambassador while President without seeking congressional approval; \50\
and (3) Thomas Jefferson similarly received and accepted diplomatic
gifts from Indian tribes and foreign nations, such as a bust of Czar
Alexander I from the Russian government, without seeking congressional
approval.\51\ On the other side of the debate, scholars have observed
that, among other things: (1) during Virginia's ratification debates,
Edmund Randolph directly stated that the Foreign Emoluments Clause
applies to the President; \52\ (2) George Mason, another Framer,
articulated a similar view in those same debates; \53\ and (3)
Alexander Hamilton, discussing the dangers of foreign influence on
republics in The Federalist No. 22, stated that this concern extends to
a republic's elected officials.\54\
---------------------------------------------------------------------------
\49\ See Tillman, supra note 34, at 186-88.
\50\ See id. at 188-90.
\51\ See Josh Blackman & Seth Barrett Tillman, The Emoluments
Clauses Litigation, Part 2: The Practices of the Early Presidents, the
First Congress and Alexander Hamilton, Wash. Post: The Volokh
Conspiracy (Sept. 26, 2017), https://www.washingtonpost.com/news/
volokh-conspiracy/wp/2017/09/26/the-emoluments-clauses-litigation-part-
2-the-practices-of-the-early-presidents-the-first-congress-and-
alexander-hamilton/.
\52\ See David Robertson, Debates and Other Proceedings of the
Convention of Virginia 345 (2d ed. 1805) (1788) (statement of Edmund
Randolph), https://archive.org/details/debatesotherproc00virg/page/345
(``There is another provision against the danger mentioned by the
honorable member, of the president receiving emoluments from foreign
powers. [citing the Emoluments Clauses]. I consider, therefore, that he
is restrained from receiving any present or emoluments whatever. It is
impossible to guard better against corruption.'').
\53\ 3 Elliot's Debates 484-85 (statement of George Mason) (``[The
President] may, by consent of Congress, receive a stated pension from
European potentates. . . . It will, moreover, be difficult to know
whether he receives emoluments from foreign powers or not.'').
\54\ See The Federalist No. 22 (Alexander Hamilton) (describing the
danger of foreign influence on ``persons elevated from the mass of the
community, by the suffrages of their fellow-citizens, to stations of
great pre-eminence and power'') (emphasis added); accord Sills, supra
note 11, at 77 (interpreting Hamilton's statement as supporting the
applicability of the Foreign Emoluments Clause to elected officials).
---------------------------------------------------------------------------
Beyond examining contemporaneous historical evidence of the Foreign
Emolument Clause's original public meaning, other evidence (such as
text, precedent, and settled practice) is often used--at least by some
jurists--to inform constitutional meaning and interpretation.\55\ As a
textual matter, both the Constitution itself \56\ and contemporaneous
sources \57\ refer to the Presidency as an ``Office.'' \58\ The
President receives compensation for his service in office (that is,
``Profit'') and is tasked with many important constitutional duties
(that is, ``Trust'').\59\ Furthermore, as discussed earlier, historical
practice from the 19th and 20th centuries could support the view that
the President is subject to the Foreign Emoluments Clause.\60\ Unlike
Washington's and Jefferson's actions, several 19th century Presidents
notified Congress or sought congressional approval upon receipt of
gifts by foreign governments.\61\ Finally, the common practice among
recent Presidents of placing their financial interests in a blind trust
or its equivalent \62\ could reflect a concern that presidential
financial holdings may implicate the Foreign Emoluments Clause.\63\
---------------------------------------------------------------------------
\55\ See generally CRS Report R45129, Modes of Constitutional
Interpretation, by Brandon J. Murrill, at 1-4, 5-7, 10-15, 22-25.
\56\ U.S. Const. art. II, 1, cl. 1 (``[The President] shall hold
his Office during the Term of four Years . . . .''); id. cl. 5 (``No
Person except a natural born Citizen, or a Citizen of the United
States, at the time of the Adoption of this Constitution, shall be
eligible to the Office of President . . . .''); id. cl. 6 (``In Case of
the Removal of the President from Office . . . .'').
\57\ See, e.g., The Federalist No. 39 (James Madison) (``The
President is to continue in office for the period of four years . . .
.''); id. No. 69 (Alexander Hamilton) (``The President of the United
States would be liable to be impeached, tried, and, upon conviction of
treason, bribery, or other high crimes or misdemeanors, removed from
office . . . .'').
\58\ It should be noted that commentators who dispute that the
Foreign Emoluments Clause applies to the President do not deny that the
Presidency is an ``office,'' but argue more narrowly that the President
does not hold an office under the United States. See supra note 47.
\59\ See Sills, supra note 11, at 81 (``The term `Office of Profit'
refers to an office in which a person in office receives a salary, fee,
or compensation. The term `Office of Trust,' refers to offices
involving ``duties of which are particularly important'' and requiring
`the exercise of discretion, judgment, experience and skill.' ''
(quoting Application of the Emoluments Clause to a Member of the
President's Council on Bioethics, 29 Op. O.L.C. 55, 61-62 (2005))).
\60\ See, e.g., Teachout, supra note 11, at 42; see generally NLRB
v. Noel Canning, 573 U.S. 513, 524 (2014) (``[L]ong settled and
established practice is a consideration of great weight in a proper
interpretation of constitutional provisions . . . .'') (quoting The
Pocket Veto Case, 279 U.S. 655, 689 (1929)).
\61\ See supra notes 32-37 and accompanying text.
\62\ Several recent Presidents have voluntarily placed their
financial interests in a blind trust or limited their investments to
assets like diversified mutual funds. See Michael D. Shear & Eric
Lipton, Ethics Office Praises Donald Trump for a Move He Hasn't
Committed To, N.Y. Times, Nov. 30, 2016, https://www.nytimes.com/2016/
11/30/us/politics/donald-trump-business-president-elect.html (citing
``four decades'' of presidential practice); Timothy L. O'Brien,
Conflicts of Interest? President Trump's Would Be Amazing, Bloomberg,
June 2, 2016, https://www.bloomberg.com/opinion/articles/2016-06-02/
donald-trump-might-make-the-white-house-a-walmart (citing presidential
``tradition'' of using blind trusts between the Lyndon B. Johnson
Administration and President Trump).
\63\ See Norman L. Eisen, et al., The Emoluments Clause: Its Text,
Meaning, and Application to Donald J. Trump, Brookings Institution 10
(Dec. 16, 2016), https://www.brookings.edu/wp-content/uploads/2016/12/
gs_121616_emoluments-clause1.pdf (``[Some recent Presidents']
recognized purpose for [putting financial holdings in a blind trust]
has been to avoid an array of conflicts, including with the Emoluments
Clause.'').
---------------------------------------------------------------------------
The parties in recent litigation involving the Emoluments Clauses
have not disputed that the Foreign Emoluments Clause applies to the
President.\64\ A single district court decision has reached the merits
of this issue. Weighing the evidence discussed above, that court held
that ``the text, history, and purpose of the Foreign Emoluments Clause,
as well as executive branch precedent interpreting it, overwhelmingly
support the conclusion'' that the Foreign Emoluments Clause applies to
the President.\65\ However, this decision was recently overturned on
appeal on other grounds.\66\
---------------------------------------------------------------------------
\64\ Blumenthal v. Trump, 373 F. Supp. 3d 191, 196 n.3 (D.D.C.
2019) (``The parties do not dispute that the [Foreign Emoluments]
Clause applies to the President.''), motion to certify appeal granted,
No. CV 17-1154 (EGS), 2019 WL 3948478 (D.D.C. Aug. 21, 2019); District
of Columbia v. Trump, 315 F. Supp. 3d 875, 880 (D. Md. 2018)
(``Although the President himself does not make the argument, as a
preliminary matter one of the Amici Curiae suggests that the President
is not covered by the Foreign Emoluments Clause.''), rev'd and remanded
sub nom. In re Trump, 928 F.3d 360 (4th Cir. 2019).
\65\ District of Columbia, 315 F. Supp. 3d at 883-85.
\66\ See In re Trump, 928 F.3d at 374-79 (holding that the
plaintiffs, the District of Columbia and the State of Maryland, lacked
standing under Article III to pursue their Emoluments Clauses claims
against the President).
---------------------------------------------------------------------------
The Meaning of ``Emolument''
A key disputed issue regarding the scope of the Emoluments Clauses
is what constitutes an ``emolument.'' \67\ This question has divided
legal scholars and has only recently been addressed by any federal
courts.
---------------------------------------------------------------------------
\67\ The Foreign Emoluments Clause may additionally be violated by
accepting without the consent of Congress a ``present, . . . Office, or
Title.'' U.S. Const. art. I, 9, cl. 8. Scholarship generally has not
focused as much on these aspects of the provision, however. See, e.g.,
Sills, supra note 11, at 82-83 (``There is general agreement to the
meaning of the terms, `present,' `office,' and `title.' As such, these
terms will not be further discussed.''). As noted above, Congress has
also consented by statute to the acceptance of certain foreign gifts
(i.e., ``present[s]''), including by the President, in limited
circumstances. See 5 U.S.C. 7342. The two recent court decisions
addressing the substance of the Foreign Emoluments Clause in relation
to the President have considered the relationship between ``present''
and ``emolument,'' as described in more detail below.
---------------------------------------------------------------------------
Scholars, courts, and executive branch agencies have offered
several potential definitions of ``emolument'':
1. Office-related definitions: Black's Law Dictionary defines an
``emolument'' as an ``advantage, profit, or gain received as a result
of one's employment or one's holding of office.'' \68\ Some scholars
argue that this employment- or office-centric definition of the term is
the definition encompassed by the Emoluments Clauses, meaning that the
Clauses prohibit covered officials from receiving compensation ``for
the personal performance of services'' as an officer or employee but do
not bar ``ordinary business transactions'' between a covered official
and government.\69\
---------------------------------------------------------------------------
\68\ Emolument, Black's Law Dictionary (11th ed. 2019).
\69\ Grewal, supra note 4, at 642; see also Natelson, supra note
11, at 55 (``[T]he word `emolument(s)' in the Constitution meant
compensation with financial value, received by reason of public office.
. . . Proceeds from unrelated market transactions were outside the
scope of the term.''). Much of the scholarship has focused specifically
on the meaning of ``emolument'' in the Foreign Emoluments Clause.
However, as discussed infra, similar arguments have been raised
regarding both the Foreign and Domestic Emoluments Clauses in the
recent litigation involving the President.
---------------------------------------------------------------------------
2. Any ``profit, gain, advantage, or benefit'': Others argue that
the term ``emolument'' is broader in scope, applying to any profit,
gain, advantage, or benefit.\70\ Under this broader conception, even
``ordinary, fair market value transactions'' with foreign or domestic
governments would be prohibited.\71\
---------------------------------------------------------------------------
\70\ See John Mikhail, The 2018 Seegers Lecture: Emoluments and
President Trump, 53 Val. U. L. Rev. 631, 666 (2019) (``When the
Constitution was written, `emolument' was a flexible term that
generally meant `profit,' `gain,' `advantage,' or `benefit.' It was
commonly used in ordinary English to refer to advantages or benefits of
different types. Not only government salaries, but also payments on
contracts, interest on loans, and profits from ordinary commercial
transactions were all referred to as `emoluments.' ''); Eisen, et al.,
supra note 63, at 11 (``[T]he [Foreign Emoluments] Clause
unquestionably reaches any situation in which a federal officeholder
receives money, items of value, or services from a foreign state.'').
\71\ Eisen, et al., supra note 63, at 11.
---------------------------------------------------------------------------
3. Functional or Purpose-based Definitions: Both the Department of
Justice's OLC and the Comptroller General of the United States, on
behalf of the Government Accountability Office (GAO), in issuing
opinions on whether the acceptance of particular payments, benefits, or
positions would implicate the Clauses, have at times appeared to adopt
a fact-specific, functional view of the Clauses. These opinions have
sometimes focused on the purpose and potential effect of the specific
payments or benefits at issue as they relate to the Clauses' goals of
limiting influence on the President and federal officers, assessing
whether they are intended to or could ``influence . . . the recipient
as an officer of the United States'' under the totality of the
circumstances.\72\ At least one commentator has asserted that the OLC
and GAO opinions support a middle view that Presidents or other federal
officers may receive ``certain fixed benefits'' without those benefits
being considered emoluments so long as they are not ``subject to
foreign or domestic government manipulation or adjustment in connection
with'' the office.\73\
---------------------------------------------------------------------------
\72\ President Reagan's Ability to Receive Retirement Benefits from
the State of California, 5 Op. O.L.C. 187, 188 (1981) (citing Assistant
Comptroller General Weitzel to the Attorney General, 34 Comp. Gen. 331,
335 (1955)); see also Emoluments Clause Questions Raised by NASA
Scientist's Proposed Consulting Arrangement with the University of New
South Wales, 1986 WL 1239553 (O.L.C.) at *2 (1986) (considering whether
specific factual scenario ``would raise the kind of concern (viz., the
potential for `corruption and foreign influence') that motivated the
Framers in enacting the constitutional prohibition'').
Other OLC and GAO opinions contain statements that could support
either a broad or a narrower reading of the Clauses' scope. Compare
Authority of Foreign Law Enforcement Agents to Carry Weapons in the
United States, 12 Op. O.L.C. 67, 68 (1988) (``The Emoluments Clause
must be read broadly in order to fulfill [its underlying] purpose.'')
and To the Secretary of the Air Force, 49 Comp. Gen. 819, 821 (1970)
(``It seems clear from the wording of the constitutional provision that
the drafters intended the prohibition to have the broadest possible
scope and applicability.''), with Letter Opinion of the Comptroller
General, B-180472 (May 9, 1974) (`` `Emolument' has been defined as
profit, gain, or compensation received for services rendered.'') and
Authority of Foreign Law Enforcement Agents, supra, at 69 (``At a
minimum, it is well established that compensation for services
performed for a foreign government constitutes an `emolument' for
purposes of the Emoluments Clause.'').
\73\ Jane Chong, Reading the Office of Legal Counsel on Emoluments:
Do Super-Rich Presidents Get a Pass?, Lawfare (July 1, 2017), https://
www.lawfareblog.com/reading-office-legal-counsel-emoluments-do-super-
rich-presidents-get-pass.
Debates over the scope of the Clauses have largely centered on
their text, their history and purpose, and historical practice.\74\
With respect to text, for instance, proponents of a broad definition
emphasize the use of the word ``any'' in both Clauses and the phrase
``any kind whatever'' in the Foreign Emoluments Clause.\75\ They also
contrast those provisions with the limiting term ``whereof'' that links
emoluments to ``civil Office'' in the Ineligibility Clause (the
provision that limits the ability of Members of Congress to hold dual
positions).\76\ But proponents of a narrower, office- or employment-
limited definition note that the word ``any'' in the Clauses may simply
be read as extending coverage to multiple forms of emoluments (beyond
just monetary remuneration).\77\ They further assert that the use of
``emolument'' in the Ineligibility Clause is clearly tied to an office-
based definition and supports applying the same definition to the other
provisions.\78\ As for the Clauses' history and purpose, both sides
point to dictionary definitions and other uses of the word (including
by Framers) contemporaneous with the Constitution's drafting to support
their preferred definition.\79\ Proponents of a broad definition also
argue that statements about the general anti-corruptive purpose of the
Clauses support reading it expansively,\80\ while proponents of an
office- or employment-limited definition assert that the Clauses were
the product of a ``balancing of values'' that included attracting
candidates for federal service who may have had conflicting commercial
interests.\81\ As for the corpus of OLC and GAO opinions interpreting
the Clauses, proponents of the broader and narrower definitions both
cite opinions that they argue support their favored definitions.\82\
---------------------------------------------------------------------------
\74\ See generally CRS Report R45129, Modes of Constitutional
Interpretation, by Brandon J. Murrill, at 1-4, 5-7, 10-15, 22-25.
\75\ Eisen, et al., supra note 63, at 11 (``[T]he clause, by
referring to `any kind whatever,' instructs that it be given a broad
construction.'').
\76\ See Plaintiffs' Memorandum in Opposition to Defendants' Motion
to Dismiss at 35, Blumenthal v. Trump, 373 F. Supp. 3d 191 (D.D.C.
2019) (No. 17-1154).
\77\ See Grewal, supra note 4, at 660-61 (maintaining that ``a
phrase like `of any kind whatever' should not affect the threshold
definition of a word that precedes it'').
\78\ See id. (arguing that reading the three constitutional
provisions referencing emoluments ``together supports'' the narrower
interpretation); Memorandum of Law in Support of Defendant's Motion to
Dismiss at 28-30, Citizens for Responsibility & Ethics in Wash. v.
Trump, 276 F. Supp. 3d 174 (S.D.N.Y. 2017) (No. 17-458) (arguing that
under Domestic Emoluments Clause, allowance of presidential
compensation ``for his Services'' and prohibition on ``any other
Emolument'' supports narrower reading).
\79\ One study examined English language dictionaries published
from 1604 to 1806 and English legal dictionaries published from 1523 to
1792 and concluded that over 92% of the dictionaries defined
``emolument'' exclusively using one or more terms favored by proponents
of the broad definition (i.e., ``profit,'' ``advantage,'' ``gain,'' or
``benefit''), while only 8% of dictionaries contained a definition tied
to ``office or employ.'' Mikhail, supra note 70, at 655. By contrast,
another scholar focused specifically on references to emoluments in
constitutional-convention and ratification-debate records and concluded
that usage was mainly limited in those contexts ``to emoluments by
reason of public office.'' Natelson, supra note 11, at 29, 39.
\80\ Brief of Amici Curiae by Certain Legal Historians on Behalf of
Plaintiffs at 14, Blumenthal v. Trump, 373 F. Supp. 3d 191 (D.D.C.
2019) (No. 17-1154) (arguing that a ``narrow definition of `emolument'
limited to official services is inconsistent with the [Foreign
Emoluments Clause's] basic purposes,'' which include ``seek[ing] to
prevent activities that have the potential to influence or corrupt the
person who profits from them'').
\81\ E.g., Natelson, supra note 11, at 54 (``That the founders
sought to encourage active members of the private sector to public
service provides further support for the Constitution's emoluments
provisions applying only to those emoluments received by reason of
office.'').
\82\ Compare Marty Lederman, How the DOJ Brief in CREW v. Trump
Reveals that Donald Trump is Violating the Foreign Emoluments Clause,
Take Care (June 12, 2017), https://takecareblog.com/blog/how-the-doj-
brief-in-crew-v-trump-reveals-that-donald-trump-is-violating-the-
foreign-emoluments-clause (asserting that OLC opinion concluding
partner at a private law firm could not accept partnership profits
derived from foreign-government clients he did not personally represent
is ``difficult to reconcile'' with office- or employment-limited
definition), with Grewal, supra note 4, at 641 n.10, 655 (citing, among
other opinions, Emoluments Clause and World Bank, 25 Op. O.L.C. 113,
114 (2001), which itself cited other OLC opinions for the proposition
that the term ``emolument'' covers ``compensation of any sort arising
out of an employment relationship with a foreign state'').
---------------------------------------------------------------------------
In 2018 and 2019, two federal district courts substantively
addressed the Emoluments Clauses' scope for the first time. Both courts
concluded that the term ``emolument'' as used in the Clauses ``is
broadly defined as any profit, gain, or advantage.'' \83\ As to the
Clauses' text, the courts found significant the use of ``expansive
modifiers'' like ``any other'' and ``any kind whatever,'' \84\ and
rejected the proposition that the term's office-related use in the
Ineligibility Clause should control its use in the other Clauses.\85\
With respect to the Clauses' history and purpose, the courts, while
acknowledging that broader and narrower definitions of ``emolument''
both existed at the time of ratification,\86\ found the weight of the
historical evidence and the Clauses' ``broad anti-corruption'' purpose
supported the more expansive definition.\87\ Finally, the courts viewed
executive branch precedent and practice as ``overwhelmingly consistent
with . . . [an] expansive view of the meaning of the term `emolument,'
'' \88\ observing that ``OLC pronouncements repeatedly cite the broad
purpose of the Clauses and the expansive reach of the term `emolument.'
'' \89\
---------------------------------------------------------------------------
\83\ Blumenthal v. Trump, 373 F. Supp. 3d 191, 207 (D.D.C. 2019);
District of Columbia v. Trump, 315 F. Supp. 3d 875, 904 (D. Md. 2018)
(``[T]he term `emolument' in both Clauses extends to any profit, gain,
or advantage, of more than de minimis value, received by [the
President], directly or indirectly, from foreign, the federal, or
domestic governments.''). As discussed infra, a third court considering
a lawsuit involving the Clauses did not reach the interpretive question
because it concluded the claims should be dismissed on threshold
grounds. Citizens for Responsibility & Ethics in Wash. v. Trump, 276 F.
Supp. 3d 174, 186 (S.D.N.Y. 2017). However, now that an appellate court
has reversed that judgment, CREW v. Trump, No. 18-474, slip op. at 26
(2d Cir. Sept. 13, 2019), the lower court may need to interpret the
term ``emolument.'' See infra Enforcement of the Clauses.
\84\ District of Columbia, 315 F. Supp. 3d at 887-88; see also
Blumenthal, 373 F. Supp. 3d at 201.
\85\ Blumenthal, 373 F. Supp. 3d at 201; District of Columbia, 315
F. Supp. 3d at 888. The courts instead viewed the context to support
the broader view, as ``when the Founders intended for an Emolument to
refer to an official's salary or payment associated with their office,
they said so explicitly.'' Blumenthal, 373 F. Supp. 3d at 201; see also
District of Columbia, 315 F. Supp. 3d at 888. Additionally, the courts
rejected the proposition that adopting a broad definition of
``emolument'' would make the prohibition on ``present[s]'' in the
Foreign Emoluments Clause unnecessary, reasoning that including
``present[s]'' simply makes clear that gratuitous benefits are also
covered. Blumenthal, 373 F. Supp. 3d at 201; District of Columbia, 315
F. Supp. 3d at 889.
\86\ Blumenthal, 373 F. Supp. 3d at 201; District of Columbia, 315
F. Supp. 3d at 889.
\87\ Blumenthal, 373 F. Supp. 3d at 202-04; District of Columbia,
315 F. Supp. 3d at 889-900. In support of the narrower definition, the
defendant had pointed to the possible business dealings of George
Washington, among other presidents, with foreign and domestic
governments and to a failed constitutional amendment that would have
extended the Foreign Emoluments Clause to all U.S. citizens. See, e.g.,
Blumenthal, 373 F. Supp. 3d at 202-04. The courts did not accord
significant weight to this historical evidence, however, essentially
viewing it as speculative. Id. at 204; District of Columbia, 315 F.
Supp. 3d at 894, 899. The courts also rejected the contention that
adopting the broad definition would lead to ``absurd consequences''
such as mutual fund holdings being prohibited, e.g., District of
Columbia, 315 F. Supp. 3d at 899, noting that the broad definition
could still account for ``context'' and de minimis exceptions. Id.;
Blumenthal, 373 F. Supp. 3d at 204.
\88\ District of Columbia, 315 F. Supp. 3d at 901; see Blumenthal,
373 F. Supp. 3d at 206 (``[A]dopting the President's narrow definition
of `Emolument' would be entirely inconsistent with Executive Branch
practice defining `Emolument' and determining whether the Clause
applies.'').
\89\ District of Columbia, 315 F. Supp. 3d at 902; see also
Blumenthal, 373 F. Supp. 3d at 206 (``OLC opinions have consistently
cited the broad purpose of the Clause and broad understanding of
`Emolument' advocated by plaintiffs to guard against even the potential
for improper foreign government influence.''). The court in District of
Columbia also cited a 2017 opinion from the House of Representatives'
Office of Congressional Ethics, which applied the Foreign Emoluments
Clause to a Delegate's receipt of profits from a rental home, noting
that the House Ethics Manual defines ``emolument'' broadly with ``no
exception or limitation . . . for when the Member generates the profit
from a fair market value commercial transaction.'' OCE Report, Review
No. 17-1147, at 12 (June 2, 2017), https://ethics.house.gov/sites/
ethics.house.gov/files/OCE%20Report%20and%20Findings_6.pdf.
---------------------------------------------------------------------------
The recent court decisions construing the Emoluments Clauses are
not final, however. In fact, as discussed below, one of the decisions
has since been reversed by the U.S. Court of Appeals for the Fourth
Circuit on a separate issue regarding the standing of the plaintiffs to
sue,\90\ and the other decision has been certified for an immediate
appeal to the U.S. Court of Appeals for the District of Columbia
Circuit.\91\ Thus, the import of these decisions is unclear.
---------------------------------------------------------------------------
\90\ In re Trump, 928 F.3d 360, 380 (4th Cir. 2019). Pending before
the appellate court is the plaintiffs' request that the court
reconsider its ruling or have the entire circuit court hear the case.
Petition for Rehearing or Rehearing En Banc, In re Trump, 928 F.3d 360
(4th Cir. 2019) (No. 18-2486).
\91\ Blumenthal v. Trump, No. 17-1154, 2019 WL 3948478, at *3
(D.D.C. Aug. 21, 2019).
---------------------------------------------------------------------------
Enforcement of the Clauses
Separate from issues regarding the scope of the Emoluments Clauses
is how the provisions' mandates are enforced and, more specifically,
whether the federal courts have a role in adjudicating violations of
the Clauses.\92\ A principal hurdle in recent litigation involving the
President has been the doctrine of standing. Standing is a threshold
limitation concerning whether the person or entity suing in federal
court has a ``right to make a legal claim or seek judicial enforcement
of a duty or right.'' \93\ The limitation includes a constitutional
component stemming from Article III of the U.S. Constitution, which
limits the exercise of federal judicial power to ``Cases'' or
``Controversies.'' \94\ The Supreme Court has interpreted this ``case-
or-controversy limitation'' \95\ to require, among other things, that a
litigant have ``a personal stake in the outcome of the controversy''
before the court.\96\ At a minimum, a plaintiff must establish that he
or she has suffered a personal injury (often called an ``injury-in-
fact'') that is actual or imminent and concrete and particularized.\97\
In other words, the injury cannot be ``abstract,'' \98\ must affect the
plaintiff in a ``personal and individual way,'' \99\ and must actually
exist or at least be ``certainly impending'' rather than merely
possible in the future.\100\ The plaintiff must also show ``a
sufficient causal connection between the injury and the conduct
complained of'' (causation) and ``a likelihood that the injury will be
redressed by a favorable decision'' (redressability).\101\
---------------------------------------------------------------------------
\92\ There is no criminal prohibition on receiving or accepting
emoluments from foreign or domestic governments that would apply to the
President, though accepting something of value in return for ``being
influenced in the performance of [an] official act'' could,
theoretically, be prosecuted as bribery under federal law. See 18
U.S.C. 201(b)(2) (prohibiting bribery of public officials and
defining ``public official'' in a way that would appear to include the
President); Andy Grewal, Trump's Obstruction of Justice Defense and the
Bribery Counterargument, Notice & Comment: Yale J. Reg. (Dec. 14,
2017), http://yalejreg.com/nc/trumps-obstruction-of-justice-defense-
and-the-bribery-counterargument/ (treating 18 U.S.C. 201 as applying
to the president).
\93\ Standing, Black's Law Dictionary (11th ed. 2019).
\94\ U.S. Const. art. III, 2, cl. 1. Constitutional standing is a
matter of a federal court's subject-matter jurisdiction that it may
raise and decide before reaching a lawsuit's merits, whether or not the
parties contest standing. See United States v. Windsor, 570 U.S. 744,
756 (2013) (referring to ``the jurisdictional requirements of Article
III''); Gonzalez v. Thaler, 565 U.S. 134, 141 (2012) (``When a
requirement goes to subject-matter jurisdiction, courts are obligated
to consider sua sponte issues that the parties have disclaimed or have
not presented.'').
\95\ DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341-42 (2006).
\96\ Warth v. Seldin, 422 U.S. 490, 498 (1975) (quoting Baker v.
Carr, 369 U.S. 186, 204 (1962)).
\97\ Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
\98\ Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548-49 (2016).
\99\ Lujan, 504 U.S. at 560 n.1.
\100\ Clapper v. Amnesty Int'l, 568 U.S. 398, 410 (2013) (quoting
Whitmore v. Arkansas, 495 U.S. 149, 158 (1990)).
\101\ Susan B. Anthony List v. Driehaus, 573 U.S. 149, 158 (2014)
(quoting Lujan, 504 U.S. at 560-61) (alteration and quotation marks
omitted). Beyond constitutional requirements, courts have also
sometimes looked to certain ``prudential'' considerations in assessing
standing. These considerations have traditionally included (1) whether
a plaintiff is asserting his or her own legal rights and interests
(rather than those of a third party); (2) whether the plaintiff's
complaint falls within the ``zone of interests'' covered by the legal
provision at issue; and (3) whether the plaintiff is merely asserting a
``generalized grievance[]'' that is more appropriate for the
representative branches of government to resolve. Valley Forge
Christian Coll. v. Ams. United for Separation of Church and State, 454
U.S. 464, 474-75 (1982) (citations omitted). However, in recent years,
the Supreme Court has appeared to move away from the concept of
prudential standing, indicating that whether a case asserts a
``generalized grievance'' is part of the constitutional analysis and
the ``zone of interests'' test (at least in the statutory context) is
actually a question of whether a plaintiff ``has a cause of action''
because he or she ``falls within the class of plaintiffs . . .
authorized to sue.'' Lexmark Int'l, Inc. v. Static Control Components,
Inc., 572 U.S. 118, 127 n.3, 128 (2014).
---------------------------------------------------------------------------
Recent lawsuits over the Emoluments Clauses have been filed in
three federal courts by (1) private parties who argue they compete for
business with properties related to the alleged violations of the
Clauses, as well as a public interest organization (the ``SDNY
litigation''); (2) the State of Maryland and the District of Columbia
(the ``Maryland litigation''); and (3) over 200 Members of Congress
(the ``Congressional litigation''). Each set of plaintiffs implicate
distinct legal issues and precedent related to standing. Private-party
competitor plaintiffs rely on the notion of ``competitor standing,''
\102\ which holds that an economic actor may have standing to challenge
unlawful action that benefits a direct competitor in a way that
increases competition in the relevant market.\103\ State plaintiffs
also rely on a competitor standing theory and additionally assert harms
to certain sovereign and ``quasi-sovereign'' interests of the state
related to tax revenue, diminution of their sovereign authority,\104\
and the economic well-being of state residents in general.\105\
Finally, Members of Congress assert standing stemming from the alleged
deprivation of their constitutionally prescribed opportunity to vote on
the permissibility of particular emoluments under the Foreign
Emoluments Clause, which implicates a unique set of standing principles
that apply specifically to legislative-entity plaintiffs.\106\ More
broadly, regardless of the status or classification of the plaintiffs,
the fact that a lawsuit involving the Emoluments Clauses seeks a court
ruling on the constitutionality of the conduct of an official within
another branch of the federal government means that courts must conduct
an ``especially rigorous'' standing inquiry given underlying
separation-of-powers concerns.\107\
---------------------------------------------------------------------------
\102\ See Citizens for Responsibility & Ethics in Wash. (CREW) v.
Trump, 276 F. Supp. 3d 174, 184 (S.D.N.Y. 2017) (``The Hospitality
Plaintiffs attempt to rely on the competitor standing doctrine to
establish injury in fact.'').
\103\ E.g., Adams v. Watson, 10 F.3d 915, 922 (1st Cir. 1993)
(surveying Supreme Court cases finding standing ``premised on a
plaintiff's status as a direct competitor whose position in the
relevant marketplace would be affected adversely by the challenged
governmental action'' (emphasis omitted)). The public interest
organization involved in the SDNY litigation also claimed harm in the
form of diversion of its resources to combat alleged violations of the
Clauses, CREW, 276 F. Supp. 3d at 189, but it has since dropped out of
the lawsuit. CREW v. Trump, No. 18-474, slip op. at 3 n.1 (2d Cir.
Sept. 13, 2019).
\104\ See District of Columbia v. Trump, 291 F. Supp. 3d 725, 738-
42 (D. Md. 2018).
\105\ See Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez,
458 U.S. 592, 607 (1982) (recognizing that a state may sue in certain
circumstances to protect its interests in ``the health and well-being--
both physical and economic--of its residents in general'').
\106\ For a fulsome discussion of those principles, see CRS Report
R45636, Congressional Participation in Litigation: Article III and
Legislative Standing, by Wilson C. Freeman and Kevin M. Lewis.
\107\ Raines v. Byrd, 521 U.S. 811, 819-20 (1997) (``[O]ur standing
inquiry has been especially rigorous when reaching the merits of the
dispute would force us to decide whether an action taken by one of the
other two branches of the Federal Government was unconstitutional.'').
---------------------------------------------------------------------------
Attempts by these various plaintiffs to sue for alleged violations
of the Emoluments Clauses have met with mixed results. With respect to
private-party competitor plaintiffs, the district court in the SDNY
litigation concluded that several such plaintiffs lacked standing
because it was ``wholly speculative'' that any loss of business or
increase in competition could be traced to alleged violations of the
Emoluments Clauses rather than ``government officials' independent
desire to patronize [the] businesses'' allegedly involved in those
violations based on factors such as service and location.\108\ But the
U.S. Court of Appeals for the Second Circuit recently reversed the
district court's ruling regarding the competitor plaintiffs,\109\
concluding that ``a plaintiff-competitor who alleges a competitive
injury caused by a defendant's unlawful conduct that skewed the market
in another competitor's favor [has standing] notwithstanding other
possible, or even likely, causes for the benefit going to the
plaintiff's competition.'' \110\
---------------------------------------------------------------------------
\108\ CREW, 276 F. Supp. 3d at 186. The district court in that case
also concluded the asserted injuries were unlikely to be redressed by
the requested relief--an injunction preventing further Emoluments
Clause violations, among other things--because it was speculative
whether such relief would ``lessen the competition inherent in any
patron's choice of hotel or restaurant.'' Id. Moreover, the court
applied another doctrine governing judicial review, ``ripeness,'' which
is ``designed to prevent courts from prematurely adjudicating cases,''
to conclude that the plaintiffs' Foreign Emoluments Clause claims were
not ripe for review. Id. at 194 (citing Abbott Labs. v. Gardner, 387
U.S. 136, 148-49 (1976)). In the court's view, the ``conflict between
two co-equal branches of government'' had ``yet to mature'' because
Congress had not ``asserted its authority and taken some sort of action
with respect to'' the ``alleged constitutional violations of its
consent power.'' Id. at 194-95.
\109\ The lower court had also determined that a public interest
organization involved in the suit did not suffer a cognizable injury
for standing purposes by having to expend its resources to combat the
alleged violations of the Emoluments Clauses, reasoning that the
organization's decisions about how to expend finite resources were
``entirely self-inflicted and not borne out of [the organization's]
need to remedy any particular adverse consequence or harmful effect
of'' the challenged conduct. Id. at 191 n.6. The public interest
organization opted not to appeal the district court's judgment that it
lacked standing. CREW v. Trump, No. 18-474, slip op. at 3 n.1 (2d Cir.
Sept. 13, 2019).
\110\ Id. at 26. The appellate court also rejected the lower
court's conclusions that the asserted injuries were unlikely to be
redressed by the requested relief and that the ripeness doctrine posed
a barrier to maintaining suit, reasoning that (1) standing is not
defeated by the ``mere possibility that customers might continue to
favor'' one product or service over another after a court enjoins
violations of law contributing to that favoritism, and (2) deferring
adjudication would not necessarily lead to further ripening but would
likely simply allow the challenged conduct to continue ``because of the
absence of an adjudicator to tell the President whether his conduct is,
or is not, permitted by the Constitution he serves.'' Id. at 42, 63-64.
One judge dissented, arguing that the majority applied an unbounded
theory of competitor standing based on speculative assertions of harm,
causation, and redressability. Id. at 15 (Walker, J., dissenting).
---------------------------------------------------------------------------
As for state plaintiffs, a different district court concluded in
the Maryland litigation that the State of Maryland and the District of
Columbia (D.C.) had standing to sue as competitors based on their
interests, along with the interests of their citizens, in hotels and
event spaces that competed with a hotel in D.C. related to the alleged
unconstitutional conduct.\111\ The court reasoned that, based on
specific factual allegations regarding diversion of business to that
hotel, the plaintiffs were ``placed at a competitive disadvantage''
because of violations of the Clauses that ``unfairly skew[ed] the
hospitality market'' against them.\112\ The U.S. Court of Appeals for
the Fourth Circuit subsequently reversed this decision, however,
concluding that the theory of standing hinged on the proposition that
government customers were patronizing the relevant hotel ``because the
[h]otel distributes profits or dividends'' in violation of the Clauses
``rather than due to any of the [h]otel's other characteristics[,]''
and such a proposition required ``speculation into the subjective
motives of independent actors . . . not before the court, undermining a
finding of causation.'' \113\
---------------------------------------------------------------------------
\111\ District of Columbia v. Trump, 291 F. Supp. 3d 725, 757 (D.
Md. 2018). Regarding the interests of citizens, the court concluded
that Maryland and the District of Columbia could sue as parens patriae,
based on their own ``quasi-sovereign'' interests in the economic well-
being of the citizens. Id. at 748; see Alfred L. Snapp & Son, Inc. v.
Puerto Rico ex rel. Barez, 458 U.S. 592, 600-02 (1982) (describing
quasi-sovereign interests and contrasting them with sovereign and
``other kinds of interests that a State may pursue''). In so doing, the
court distinguished cases casting ``doubt on a State's standing to
assert a quasi-sovereign interest . . . against the Federal
Government,'' Massachusetts v. EPA, 549 U.S. 497, 539 (2007) (Roberts,
C.J., dissenting), as involving challenges to ``the operation of
federal statutes'' rather than asserting a state's ``rights under
federal law (which it has standing to do).'' District of Columbia, 291
F. Supp. 3d at 747 (quoting Massachusetts, 549 U.S. at 520 n.17).
\112\ Id. at 745. The court also determined that Maryland and the
District of Columbia had standing stemming from injuries to a distinct
``quasi-sovereign'' interest, see Snapp & Son, 458 U.S. at 600-02, in
equal status and participation in the federal system, based on
allegations that they felt ``effectively `coerced' '' to stay at or
grant special concessions to the hotel allegedly involved in violations
of the Clauses to ``help them obtain federal favors.'' District of
Columbia, 291 F. Supp. 3d at 742.
\113\ In re Trump, 928 F.3d 360, 376, 377 (4th Cir. 2019). The
appellate court further determined that the alleged injuries were not
redressable because there was a likelihood that an injunction ``would
not cause government officials to cease patronizing'' the hotel
allegedly involved in violations of the Clauses, id. at 377, and the
court dismissed alleged injuries to the plaintiffs' other quasi-
sovereign interests as ``amount[ing] to little more than a general
interest in having the law followed.'' Id. at 378.
---------------------------------------------------------------------------
Finally, with respect to Members of Congress, the district court in
the Congressional litigation determined in 2018 that over 200 Members
had standing to sue under the Foreign Emoluments Clause based on the
deprivation of their ``opportunity to exercise their constitutional
right to vote on whether to consent prior to . . . acceptance of
prohibited emoluments.'' \114\ Faced with Supreme Court precedent
indicating that individual legislators generally lack standing to sue
for institutional injuries that amount to ``abstract dilution of
institutional legislative power,'' but may have standing when their
votes on specific items ``have been completely nullified,'' \115\ the
district court concluded that the Members alleging violations of the
Foreign Emoluments Clause fell into the latter category.\116\ Central
to the district court's decision in the Congressional litigation was
its view that the Member-plaintiffs lacked an adequate legislative
remedy for the alleged violations without court intervention.\117\
According to the court, although Congress as a whole could pass
``legislation on the emoluments issue'' to consent to or reject
perceived emoluments, the political process would do nothing to address
the deprivation of the Members' opportunity to give advance approval or
disapproval of particular emoluments in the first instance.\118\
---------------------------------------------------------------------------
\114\ Blumenthal v. Trump, 335 F. Supp. 3d 45, 63 (D.D.C. 2018).
\115\ Raines v. Byrd, 521 U.S. 811, 823, 826 (1997); see also Va.
House of Delegates v. Bethune-Hill, 139 S. Ct. 1945, 1953-54 (2019)
(observing that ``individual members lack standing to assert the
institutional interests of a legislature'' and concluding that one
house of a bicameral state legislature lacked standing where the case
``[did] not concern the results of a legislative chamber's poll or the
validity of any counted or uncounted vote'').
\116\ Blumenthal, 335 F. Supp. 3d at 62-64.
\117\ Id. at 66.
\118\ Id. at 66-68.
---------------------------------------------------------------------------
As with the court rulings on the definition of the term
``emolument,'' the judicial decisions on standing to enforce the
Emoluments Clauses all present avenues for further review: (1) in the
SDNY litigation, the case could be reheard by the panel of, or the
entire, U.S. Court of Appeals for the Second Circuit if requested;
\119\ (2) in the Maryland litigation, the plaintiffs have asked the
U.S. Court of Appeals for the Fourth Circuit to reconsider its ruling;
\120\ and (3) in the Congressional litigation, the district court
recently stayed the case and granted an immediate appeal in response to
an order from the U.S. Court of Appeals for the D.C. Circuit indicating
such an appeal would be appropriate.\121\ It is thus possible that the
outcomes in some or all of the opinions just described could change.
Given that the U.S. Courts of Appeals for the Second and Fourth
Circuits have now effectively split on the viability of competitor
standing theories as they relate to alleged violations of the
Emoluments Clauses, Supreme Court review is also possible.\122\
---------------------------------------------------------------------------
\119\ CREW v. Trump, No. 18-474 (2d Cir. Feb. 16, 2018); Fed. R.
App. P. 35, 40 (permitting petitions for rehearing en banc and setting
time limits for filing petitions for panel rehearing).
\120\ Petition for Rehearing or Rehearing En Banc, In re Trump, 928
F.3d 360 (4th Cir. 2019) (No. 18-2486).
\121\ See Blumenthal v. Trump, No. , 2019 WL 3948478, at *3 (D.D.C.
Aug. 21, 2019).
\122\ See Sup. Ct. R. 10 (indicating that, in deciding whether to
grant certiorari, the Supreme Court may consider the fact that one
federal ``court of appeals has entered a decision in conflict with the
decision of another [federal] court of appeals on the same important
matter'').
---------------------------------------------------------------------------
Beyond standing, other doctrines may present potential roadblocks
to judicial enforcement of the Clauses. For instance, though its
continued vitality is questionable,\123\ the Supreme Court has
traditionally applied as a prudential aspect of the standing inquiry a
``zone of interests'' test, which ``denies a right of review if the
plaintiff's interests are marginally related to or inconsistent with
the purposes implicit in the constitutional provision'' at issue.\124\
Applying this test in the context of the Emoluments Clauses, the
district court in the SDNY litigation involving private competitors
concluded that such competitors fell outside the zone of interests of
the Clauses, as the Emoluments Clauses stemmed from ``concern with
protecting the . . . government from corruption and undue influence''
and were not ``intended . . . to protect anyone from competition.''
\125\ Another potential barrier is the ``political question doctrine,''
a separation-of-powers-based limitation on the ability of courts to
hear disputes where there is, among other things, a ``textually
demonstrable constitutional commitment of the issue to a coordinate
political department; or a lack of judicially discoverable and
manageable standards for resolving it.'' \126\ In the SDNY litigation,
the district court concluded that the fact that the Foreign Emoluments
Clause provides authority to Congress to ``consent to violations''
meant that Congress, rather than the judiciary, would be ``the
appropriate body to determine whether'' the alleged conduct ``infringes
on that power.'' \127\
---------------------------------------------------------------------------
\123\ See supra note 101.
\124\ Wyoming v. Oklahoma, 502 U.S. 437, 469 (1992) (quoting Clarke
v. Sec. Indus. Ass'n, 479 U.S. 388, 394, 399 (1987)) (alterations
omitted).
\125\ CREW v. Trump, 276 F. Supp. 3d 174, 187 (S.D.N.Y. 2017).
\126\ Zivotofsky ex rel. Zivotofsky v. Clinton, 566 U.S. 189, 195
(2012).
\127\ CREW, 276 F. Supp. 3d at 193.
---------------------------------------------------------------------------
Reversing both rulings, however, the U.S. Court of Appeals for the
Second Circuit recently concluded that (1) ``a plaintiff who sues to
enforce a law that limits the activity of a competitor satisfies the
zone of interests test even though the limiting law was not motivated
by an intention to protect entities such as plaintiffs from
competition,'' \128\ and (2) the judiciary's responsibility to
adjudicate alleged violations of the Constitution was not lessened by
the ``mere possibility that Congress might grant consent'' to
particular emoluments.\129\ The district courts in the Maryland
litigation and the Congressional litigation likewise agreed that the
zone of interests test and political question doctrine did not bar
those suits.\130\ Nevertheless, like the other issues raised in recent
litigation involving the Emoluments Clauses, further review of the
application of these doctrines is possible.\131\ Ultimate resolution of
the issues is thus uncertain and will likely depend on the nature of
the plaintiff involved.
---------------------------------------------------------------------------
\128\ CREW v. Trump, No. 18-474, slip op. at 47 (2d Cir. Sept. 13,
2019).
\129\ Id. at 59.
\130\ Among other things, the district court in the Congressional
litigation reasoned that Congress's interests are explicitly
contemplated in the text of the Foreign Emoluments Clauses. Blumenthal,
373 F. Supp. 3d at 209-10. The district court in the Maryland
litigation viewed the Clauses as ``protect[ing] all Americans'' and
determined that without congressional approval of emoluments,
sufficient standards existed for the judiciary to review the legality
of the actions at issue. District of Columbia, 291 F. Supp. 3d at 755,
757.
\131\ The President has also raised other arguments in the
litigation involving the Emoluments Clauses, including that the
requested relief of an injunction would impermissibly interfere with
his constitutional duties and is unavailable in the Emoluments Clause
context. E.g., Blumenthal, 373 F. Supp. 3d at 208-12. Thus far, none of
the courts considering the Clauses have accepted these arguments, e.g.,
id., though one appellate court has indicated that the arguments are
``substantial'' and another has noted that whether the Foreign
Emoluments Clause supports a cause of action against the President is
``unsettled.'' In re Trump, 928 F.3d 360, 374 (4th Cir. 2019); In re
Trump, No. 19-5196, 2019 WL 3285234, at *1 (D.C. Cir. July 19, 2019).
Ms. Titus. Thank you very much.
I will now go to Mr. von Spakovsky.
Mr. von Spakovsky. Thank you, Madam Chairwoman.
It is important to note that the lease between the
Government and Trump Old Post Office LLC, a corporate entity,
not the President, became operative more than 3 years before
Donald Trump was elected.
The IG comes to a number of erroneous conclusions. The IG
claims the GSA should have considered whether the lease is a
violation of the Emoluments Clause, and it failed to consider
that issue in determining whether the leaseholder was in
violation of section 37.19 of the lease. But the emoluments
question is a constitutional issue under the authority of the
Department of Justice, not GSA.
DOJ has made it clear, from the beginning of the
administration and throughout the litigation filed against the
President, that the executive branch does not believe the lease
violates the Emoluments Clause. That position is controlling
for the entire executive branch, and the IG's criticism of GSA
is, therefore, unwarranted.
Furthermore, GSA's position as the tenant is not in
violation of section 37.19 of the lease is also correct. That
provision states an elected official cannot be admitted to any
share or part of the lease. But that section was not violated
when the lease was entered into in 2013, since Donald Trump was
not an elected official at the time. Also, the lease was not
with him personally but with a corporate entity in which he
held a majority interest, along with other shareholders. The
section does not apply to Donald Trump since it clearly states
that it, quote: ``Shall not be construed as extending to any
person who may be a shareholder or other beneficial owner of
any publicly held corporation or other entity.'' Trump Old Post
Office LLC clearly falls within the definition of other entity.
Trump's interests in this LLC, as you know, were
transferred to a trust after he was sworn in. He relinquished
his management control and announced that all profits from
foreign government payments would be donated to the U.S.
Treasury. Therefore, GSA was correct when it issued an estoppel
certificate saying the tenant was in full compliance with the
lease.
It is also important to note that after interviewing two
dozen employees and reviewing over 10,000 documents, the IG
found that there was no undue influence, pressure, or
unwarranted involvement of any kind by anyone, including the
Executive Office of the President.
The IG's conclusion that GSA's unwillingness to address the
constitutional emoluments issue affected its analysis of
section 37.19 makes no sense. Since it was and is the Justice
Department's position that there has been no violation of the
Emoluments Clause, there was and is no reason for GSA to
independently consider the issue.
The plain text of the Emoluments Clause, as well as
historical practice, makes it clear that it was intended to
prevent gifts, presents from foreign and State governments, as
well as payments for services rendered in the President's
official capacity. They were not meant to bar a President from
having private business interests or owning businesses in which
customers, including foreigners, pay the fair market value of
products or services they receive in an open exchange. As DOJ
has pointed out in its briefs, neither the text nor the history
of the clauses show they were intended to reach benefits
arising from a President's private business pursuits having
nothing to do with his office or personal service to a foreign
power.
The argument advocated by those who say that the Emoluments
Clause prevents anything of value being received by a President
is far outside the intentions of the Framers. Under that
theory, the Governor's pension that Ronald Reagan received as
President would violate the Domestic Emoluments Clause. A DOJ
opinion concluded that did not fit within the Emoluments
Clause. Under this dubious theory, a President could not even
hold U.S. Treasury bonds because the interest that he would
receive in payments on those bonds would be considered a
violation of the Emoluments Clause.
The concerns raised by the IG have no basis in fact or law.
There was no violation of the Emoluments Clause when the Trump
Organization was selected to be the developer of the Trump
Hotel in 2012. There was no violation after the President was
elected based on the specious claim that any Government
official staying in the hotel is paying an emolument to the
President. The President is not providing any services in his
official capacity as President.
Given that DOJ has maintained since the beginning of the
administration that the lease is not in violation of the
Emoluments Clause, there was no reason for GSA to consider that
issue contrary to the criticisms of the IG. And the GSA was
correct in its assessment of the lease by its own terms, it
does not apply to this situation. This is all much ado about
nothing.
[Mr. von Spakovsky's prepared statement follows:]
Prepared Statement of Hans A. von Spakovsky, Senior Legal Fellow, Edwin
Meese III Center for Legal and Judicial Studies, The Heritage
Foundation
Introduction
My name is Hans A. von Spakovsky.\1\ I appreciate the invitation to
be here today. The views I express in this testimony are my own, and
should not be construed as representing any official position of the
Heritage Foundation or any other organization.
---------------------------------------------------------------------------
\1\ The Heritage Foundation is a public policy, research, and
educational organization recognized as exempt under section 501(c)(3)
of the Internal Revenue Code. It is privately supported and receives no
funds from any government at any level, nor does it perform any
government or other contract work.
The Heritage Foundation is the most broadly supported think tank in
the United States. During 2017, it had hundreds of thousands of
individual, foundation, and corporate supporters representing every
state in the U.S. Its 2017 income came from the following sources:
Individuals 71 %
Foundations 9%
Corporations 4%
Program revenue and other income 16%
The top five corporate givers provided The Heritage Foundation with
3.0% of its 2017 income. The Heritage Foundation's books are audited
annually by the national accounting firm of RSM US, LLP.
Members of The Heritage Foundation staff testify as individuals
discussing their own independent research. The views expressed here are
my own and do not reflect an institutional position for The Heritage
Foundation or its board of trustees.
---------------------------------------------------------------------------
I am a Senior Legal Fellow in the Meese Center for Legal and
Judicial Studies at The Heritage Foundation. Prior to joining The
Heritage Foundation, I was a Commissioner on the U.S. Federal Election
Commission for two years (2006-2007). Before that, I spent four years
at the U.S. Department of Justice as a career civil service lawyer in
the Civil Rights Division, where I received three Meritorious Service
Awards (2003, 2004, and 2005). I began my tenure at the Justice
Department as a trial attorney in 2001 and was promoted to be Counsel
to the Assistant Attorney General for Civil Rights (2002-2005).\2\
---------------------------------------------------------------------------
\2\ I am a 1984 graduate of the Vanderbilt University School of Law
and received a B.S. from the Massachusetts Institute of Technology in
1981.
---------------------------------------------------------------------------
Summary of Testimony
This hearing concerns the lease of the Trump International Hotel
(``Trump Hotel'') with the General Services Administration (``GSA'').
Congress passed the ``Old Post Office Building Redevelopment Act of
2008,'' which directed GSA to redevelop the Old Post Office Building
located on Pennsylvania Avenue in Washington, D.C., and originally
built between 1892 and 1899. According to a report issued by the IG on
January 16, 2019 (the IG Report), GSA solicited bid proposals in 2011.
lt selected the Trump Old Post Office LLC in 2012 as the developer. GSA
entered into a 60-year lease in 2013.\3\
---------------------------------------------------------------------------
\3\ Evaluation of GSA's Management and Administration of the Old
Post Office Building Lease, Office of Inspector General, U.S. General
Services Administration, JE19-002 (Jan. 16, 2019).
---------------------------------------------------------------------------
lt is important to note at the outset that the lease between the
government and Trump Old Post Office LLC became operative more than
three years before Donald Trump was elected President of the United
States.
The IG comes to a number of erroneous conclusions with regard to
the lease of the Old Post Office Building to the Trump Old Post Office
LLC (Tenant).\4\ The IG claims that GSA failed to consider whether the
lease amounts to a violation of the two Emoluments Clauses of the
Constitution, and that it failed to consider the emoluments issue when
determining whether the leaseholder was in violation of Section 37.19
of the lease.
---------------------------------------------------------------------------
\4\ Id.
---------------------------------------------------------------------------
But as the deputy counsel of GSA, Lennard Loewentritt, properly
concluded, the emoluments question was a constitutional issue subject
to evaluation by the Department of Justice's Office of Legal Counsel,
not GSA.\5\ lt is the Office of Legal Counsel that determines the
position of the executive branch on constitutional issues and agencies
like GSA are bound by its legal opinions.\6\
---------------------------------------------------------------------------
\5\ Id. at 5.
\6\ See https://www.justice.gov/olc.
---------------------------------------------------------------------------
The Justice Department has made clear throughout the litigation
filed against the president under the Emoluments Clauses that the legal
position of the executive branch is that the lease of the Old Post
Office Building by the Trump Hotel does not violate the Constitution.
That position is controlling and the IG's criticism of GSA is
unwarranted.
Furthermore, GSA's position that the Tenant is not in violation of
Section 37.19 of the lease is also correct. That provision states that
an elected official cannot be ``admitted to any share or part'' of the
lease.\7\ But Section 37.19 was not violated when the lease was entered
into in 2013, since Donald Trump was not an elected official at that
time. Also, the lease was not with him personally but a corporate
entity in which he held a majority interest. This provision does not
apply to the Tenant under its plain text since it clearly states that
it ``shall not be construed as extending to any Person who may be a
shareholder or other beneficial owner of any publicly held corporation
or other entity'' if the lease is for ``the general benefit of such
corporation or other entity.'' \8\
---------------------------------------------------------------------------
\7\ IG Report at 3.
\8\ IG Report at 3.
---------------------------------------------------------------------------
As the IG herself admits, that is the situation with regard to this
Tenant. The Tenant is an entity in which Trump was one of the
shareholders and ``in which several other business entities also held a
small interest each.'' \9\ All of Trump's interests in that entity were
transferred to a trust after he was sworn into office; he relinquished
his management authority; and his counsel announced that all profits
from the hotel from foreign government payments would be donated to the
U.S. Treasury.\10\ Therefore, GSA was correct when it issued an
estoppel certificate on March 23, 2017, stating that the Tenant was in
full compliance with the lease.\11\
---------------------------------------------------------------------------
\9\ IG Report at 8.
\10\ IG Report at 8.
\11\ IG Report at 1O.
---------------------------------------------------------------------------
Even the IG noted that the GSA lease-contracting officer, Kevin
Terry, was ``walled'' off to ``avoid any political influence over him
and preserve his independence.'' \12\ GSA's general counsel, Jack St.
John, notes that after interviewing two dozen employees and reviewing
over 10,000 documents, the IG ``found not a single instance in which a
political appointee or career federal employee at GSA attempted to
improperly interfere with or exert pressure on the contracting
officer's decision-making process.'' In fact, the IG ``found no undue
influence, pressure, or unwarranted involvement of any kind by anyone,
including the Executive Office of the President and the Office of
Management and Budget.'' \13\ Thus, there is no evidence of any undue
influence over GSA's determination that the Tenant was in full
compliance with the lease.
---------------------------------------------------------------------------
\12\ IG Report at 4.
\13\ Memorandum from Jack St. John, General Counsel, to Carol F.
Ochoa, Inspector General, General Services Administration (Jan. 9,
2019); Appendix B, IG Report.
---------------------------------------------------------------------------
The IG's conclusion that GSA's ``unwillingness to address the
constitutional [emoluments] issues affected its analysis of Section
37.19'' makes no sense. Since it was and is the Justice Department's
position that there has been no violation of the Emoluments Clauses,
there was and is no reason for GSA to independently consider the
emoluments issue. Furthermore, the Tenant has satisfied the plain
language of the exception in this provision of the lease.
The Emoluments Clauses
The Foreign Emoluments Clause of the Constitution states that no
person ``holding any Office of Profit or Trust under [the United
States] shall, without the Consent of Congress, accept of any present,
Emolument, Office, or Title, of any kind whatever, from any King,
Prince, or foreign state.'' \14\ As the Heritage Guide to the
Constitution explains, the Framers adopted this clause to prevent the
corruption of U.S. officeholders, particularly foreign ministers,
through the receipt of bribes and improper benefits--presents, gifts,
and emoluments--from foreign officials.
---------------------------------------------------------------------------
\14\ U.S. Constitution, Art. I, Sec. 9, Cl. 8.
---------------------------------------------------------------------------
As Heritage outlines, this clause was meant as an ``antidote'' to
what the Framers had ``observed during the period of the [Articles of]
Confederation.'' \15\ Louis XVI had a habit of giving expensive gifts
to foreign diplomats, including Americans, who had signed treaties with
France. For example, he gave Arthur Lee and Benjamin Franklin portraits
of himself set in diamonds. The King of Spain gave John Jay a horse
while he was negotiating with Spain.
---------------------------------------------------------------------------
\15\ The Heritage Guide to the Constitution; https://
www.heritage.org/constitution/#!/articles/l/essays/68/emoluments-
clause.
---------------------------------------------------------------------------
As the Justice Department pointed out in its ``Writ of Mandamus''
in the Fourth Circuit, ``interpreting the term `Emolument' to reach
essentially anything of value renders entirely superfluous the Foreign
Emolument Clause's prohibition on receipt of any `present'.'' \16\
According to the Justice Department, such a reading of the Emoluments
Clause ``is belied by Founding-era history and context.'' In fact:
---------------------------------------------------------------------------
\16\ In re Donald J. Trump, No. 18-2486 (4th Cir.), Petition for a
Writ of Mandamus to the United States District Court for the District
of Maryland and Motion for Stay of District Court Proceedings Pending
Mandamus (Dec. 17, 2018), p.21-22.
[S]everal early Presidents owned plantations and continued to
export cash crops overseas while in office, including [George]
Washington, who exported flour and cornmeal to `England,
Portugal, and the island of Jamaica,' and Thomas Jefferson, who
exported tobacco to Great Britain. Yet there is no evidence
that they took steps to ensure that foreign governments were
not among their customers.\17\
---------------------------------------------------------------------------
\17\ Id. at 23 (citations omitted).
Such normal, customary business transactions were not considered
emoluments because they were not gifts or presents, and they were not
compensation tied to the president's services in his official position.
In contrast to President Trump, no one has raised any claim that former
President Barack Obama violated the emoluments clause for earning over
$10 million in foreign book sales during his presidency.\18\
---------------------------------------------------------------------------
\18\ John-Michael Seibler, Democrats' Suit Claims Constitution
Means One Thing for Obama, but Another for Trump, Daily Signal (June
13, 2017); https://www.dailysignal.com/2017/06/13/democrats-suit-
claims-constitution-means-one-thing-for-obama-but-another-for-trump/.
---------------------------------------------------------------------------
Entering into a lease with the federal government on a property
that will generate profits over and above what is paid to the
government for the lease is also not a prohibited emolument. This is
especially true when the lease was entered into with a private company,
whose major shareholder held no public office whatsoever at the time
the lease was ratified.
George Washington directly transacted business with the federal
government, purchasing public land up for public sale in the then
Territory of Columbia. As the Justice Departments relates:
[N]o concern was raised that such transactions conferred a
benefit, and thus a prohibited emolument, on Washington. The
absence of any such concern is especially telling because one
of the three Commissioners [of the district who were appointed
by Washington] had, like Washington, attended the
Constitutional Convention, and the other two had voted in the
state ratification conventions.\19\
---------------------------------------------------------------------------
\19\ CREW v. Trump, Case No. 17-458 (So. D. N.Y.), Memorandum of
Law in Support of Defendant's Motion to Dismiss (June 9, 2017), p. 38.
Additionally, in the early days of our Republic, the term
``emolument'' was comprehensively defined as ``compensation or
pecuniary profit derived from a discharge of the duties of the
office.'' \20\ Thus, the Justice Department argues persuasively that
the Foreign Emoluments Clause ``prohibits benefits arising from
services the President provides to the foreign state either as
President (e.g., making executive decisions favorable to the paying
foreign power) or in a capacity akin to an employee of a foreign state
(e.g., serving as a consultant to a foreign power).'' \21\
---------------------------------------------------------------------------
\20\ Hoyt v. U.S., 51 U.S. 109, 135 (1850) (emphasis added).
\21\ CREW v. Trump, Case No. 17-458 (So. D. N.Y.), Memorandum of
Law in Support of Defendant's Motion to Dismiss (June 9, 2017), p. 29.
---------------------------------------------------------------------------
This provision was intended to prevent gifts and presents from
foreign leaders, as well as payments for services rendered in the
president's official capacity. lt was not meant to bar a president from
having private business interests or owning businesses in which
customers and consumers--including foreigners--pay the fair market
value of products or services they receive in an open exchange. This
would include paying for a hotel room and hotel services in a luxury
hotel in Washington, D.C. In fact, at the time of our founding,
government officials were not paid very well ``and many federal
officials were employed with the understanding that they would continue
to have income from private pursuits.'' \22\
---------------------------------------------------------------------------
\22\ CREW v. Trump, Case No. 17-458 (So. D. N.Y.), Memorandum of
Law in Support of Defendant's Motion to Dismiss (June 9, 2017), p. 36
(citing Leonard D. White, The Federalists: A Study in Administrative
History (1st ed. 1948), pages 291-92, 296).
---------------------------------------------------------------------------
But here, Donald Trump, upon becoming President, put his interests
in the private company that owns the hotel into a trust, which he has
zero ability to control or manage.
The terms of the Domestic Emoluments Clause directly support this
interpretation as well. This clause provides that the president shall
``receive for his Services, a Compensation . . . during the Period for
which he shall have been elected, and he shall not receive within the
Period any other Emolument from the United States, or any of them.''
\23\ In other words, he cannot receive any other compensation for his
service, tying the term ``emolument'' directly into the president's
service as president. Thus, none of the fifty states may provide him
with presents, gifts, or additional compensation for his services as
president, just like foreign governments.
---------------------------------------------------------------------------
\23\ U.S. Constitution, Art. Il, Sec. 1, Cl. 7.
---------------------------------------------------------------------------
The very same reasoning applies to this provision as to the Foreign
Emoluments Clause. As the Justice Department points out, ``[n]either
the text nor the history of the Clauses shows that they were intended
to reach benefits arising from a President's private business pursuits
having nothing to do with his office or personal service to a foreign
power.'' \24\ Similarly, this provision does not ``preclude a President
from acting on the same terms as any other citizen in transacting
business with a federal or state instrumentality, such as entering into
a lease or applying for a tax credit.'' \25\
---------------------------------------------------------------------------
\24\ CREW v. Trump, Case No. 17-458 (So. D. N.Y.), Memorandum of
Law in Support of Defendant's Motion to Dismiss (June 9, 2017), p. 26.
\25\ Id. at 29.
---------------------------------------------------------------------------
The arguments advocated by Donald Trump's opponents are far beyond
what the Framers ever intended for the Emoluments Clauses. Under the
claim that the receipt by a president of anything of value outside of
his salary as president is a violation of either of the two Emoluments
Clauses, Pres. Ronald Reagan's receipt of a pension from the State of
California based on his service as governor would have been a violation
of the Domestic Emoluments Clause. As the Office of Legal Counsel
concluded, however, those benefits were not ``emoluments in the
constitutional sense'' and their receipt by the president did not
``violate the spirit of the Constitution'' either.\26\
---------------------------------------------------------------------------
\26\ President Reagan's Ability to Receive Retirement Benefits from
the State of California, 5 Op. O.LC. 187, 192 (1981).
---------------------------------------------------------------------------
Under this theory, a president could not even hold U.S. Treasury
bonds while in office since the interest paid on those bonds could be
considered an ``emolument'' from the U.S. government over and above his
salary and compensation. Such a broad interpretation makes no sense and
is not in according with the historical understanding of the clause. In
truth, the Emoluments Clauses are not the sweeping anti-corruption laws
that Trump's opponents would like them to be.
The Inspector General misinterprets and misapplies the past
opinions of the Office of Legal Counsel on the Emoluments Clauses on
pages 18 and 19 of the IG Report. All of the opinions the IG cites
concern federal employees receiving stipends, consulting fees,
employment compensation, gifts, awards, and partnerships fees from
foreign governments.
None of these opinions apply to the lease agreement for the Trump
Hotel.\27\
---------------------------------------------------------------------------
\27\ In his Jan. 9, 2019, response to the IG Report, GSA's general
counsel, Jack St. John, points out ``despite its lengthy historical
analysis of the Emoluments Clauses,'' the IG Report ``does not find
that any constitutional violation occurred.''
---------------------------------------------------------------------------
When state government officials choose to stay in the Trump Hotel
and pay the fair market value of their hotel room and room services,
that is not a gift, a present, or an emolument tied to the president's
official duties. They are engaging in a normal, standard business
transaction, no different from staying in any other hotel in the
nation's capital. Neither of the Emoluments Clauses was intended to
prohibit a company or a business in which a president has an ownership
or financial interest from doing business with any foreign, federal or
state government.
As of the date of this hearing, there have been no federal court of
appeals decisions on the substantive interpretation of the Foreign and
Domestic Emoluments Clauses and their applicability to the Trump Hotel
and the lease that is the subject of the IG Report.
A three-judge panel of the Fourth Circuit Court of Appeals has
thrown out claims made by the State of Maryland and the District of
Columbia, concluding that neither the state nor the federal district
has Article III standing to even assert a claim against the
president.\28\ The court said that their interest in enforcing the
emoluments clauses, based on a theory that the Trump Hotel supposedly
keeps customers from choosing their own hotels and facilities, ``is so
attenuated and abstract that their prosecution of this case readily
provokes the question of whether this action against the President is
an appropriate use of the courts.'' \29\
---------------------------------------------------------------------------
\28\ In re Donald J. Trump, 928 F.3d 360 (4th Cir. 2019). In
addition to the claim involving hotel services provided to guests by
the Trump Hotel, the court also dismissed claims contending that
granting a $32 million historic-preservation tax credit for the hotel
and government officials using the facilities of the Mar-a-Largo Club
would violate the emoluments clauses.
\29\ 928 F.3d at 379.
---------------------------------------------------------------------------
On the other hand, a divided panel of the Second Circuit recently
reinstated a similar claim that had been dismissed by a federal
district court for lack of standing.\30\ In his dissent, Judge John M.
Walker explained that ``nothing in the plain text of either Emoluments
Clause addresses competition in the marketplace or the conduct of
business competitors generally.'' \31\ The plain text ``concerns only
the receipt of `emoluments' from foreign governments or their officials
by those `holding any Office of Profit or Trust' on behalf of the
United States and the Domestic Emoluments Clause only prohibits the
President from receiving `emoluments' beyond the salary of the office
from `the United States, or any of them.' '' According to Walker, ``the
text and historical meaning plainly do not evidence concern for
protecting fair competition in the marketplace.'' \32\
---------------------------------------------------------------------------
\30\ CREW v. Trump, __ F.3d __, 2019 WL 4383205 (2nd Cir. 2019).
\31\ 2019 WL43832205 at *19.
\32\ Id.
---------------------------------------------------------------------------
Conclusion
The concerns that have been raised by the Inspector General of GSA
have no basis in fact or law. There was no violation of the Emoluments
Clauses of the Constitution when the Trump organization was selected to
be the developer of the Trump Hotel in 2012 and entered into a lease in
2013. Further, there was no violation after the president was elected
based on the specious claim that any state, federal, or foreign
government official staying at the hotel and paying for the standard
services provided by the hotel is paying an ``emolument'' to the
president. The president is not providing any services to such
officials in his official capacity as president.
Given that the Justice Department has maintained since the
beginning of the administration that the lease is not a violation of
the Emoluments Clauses, there was no reason for GSA to consider that
issue when evaluating the lease, contrary to the criticisms of the IG.
The IG's disapproval of GSA is unjustified and the IG is incorrect when
she claims that ``the uncertainty over the lease remains unresolved.''
The Justice Department has the last word on constitutional issues, not
GSA and not the IG.
GSA was also correct in its assessment that there was no violation
of Section 37.19 of the lease. Under the plain terms of that provision,
the Tenant--Trump Old Post Office LLC--was not an ``elected official''
of the government and Donald Trump was not president when the lease was
entered into. By its own terms, the lease also does not apply to the
president who was merely a shareholder in the Tenant, especially given
the fact that the president transferred his shareholder interest to a
trust after his inauguration.
Ms. Titus. Thank you.
Ms. Hempowicz.
Ms. Hempowicz. Chair Titus, Ranking Member Meadows, and
Chair DeFazio, and members of the subcommittee, thank you for
the opportunity to testify today on behalf of the Project on
Government Oversight.
At the root of it, we are here today because President
Donald Trump has not fully divested from his private
businesses, and his continued financial relationship with the
Trump Organization creates a specific conflict of interest
regarding the organization's lease with the GSA. This
arrangement possibly implicates the Constitution's Foreign and
Domestic Emoluments Clauses. It also presents a possible
violation of the clause in the lease meant to ensure that
Government officials do not benefit from a lease of this sort.
As we heard this morning, earlier this year, the GSA's
Office of Inspector General found serious shortcomings in the
agency's process of determining whether the Trump Organization
was in compliance with the lease. Early on in the GSA's review,
the agency's Office of General Counsel acknowledged that the
President-elect's business interest in the Trump Organization
might constitute a violation of the Emoluments Clauses. Such a
violation could constitute a breach of the lease.
Despite this knowledge, GSA officials did not consider this
issue when determining compliance. Instead, GSA's review
focused solely on whether Donald Trump's having been elected
President constituted a violation of section 37.19 in the
lease. Based on a flawed legal analysis by the Trump
Organization and a legal analysis by the agency's general
counsel that has not been released to the public, the
contracting officer determined there was no violation of this
section.
For example, in an effort to limit the scope of the
section, the Trump Organization attorneys narrowly interpreted
the word ``admitted''; however, the definition they put forth
plainly states that it could also mean give access to. Under
this meaning, the assertion that the President was admitted to
the lease before he was elected is unconvincing as it doesn't
address the fact that he can still access benefits from the
lease.
I know that Members of the minority have expressed
frustrations that the GSA IG in its review of the Emoluments
Clauses didn't definitively answer whether the President's
interest in his private businesses constitute a violation of
those clauses, but it appears that no one at GSA wants to be
responsible for making that decision.
When GSA's contracting officer determined that the Trump
Organization was in full compliance with the lease, he knew of
the existence of this possible violation and ignored it. This
decision was made before litigation on the Emoluments Clauses
began. This calls into question the prudence of his decision to
issue an unqualified estoppel certificate to the Trump
Organization.
Even absent undo interference, serious questions remain
about GSA's handling of this matter. Given the serious nature
of the inspector general's findings, the agency's response was
grossly inadequate. Written by the agency's general counsel,
the response ignored all but the inspector general's one
recommendation, and placed the blame for the report's primary
findings on former agency officials. The tone of the letter
was, at times, jarringly contemptuous, appearing more concerned
with protecting the President's reputation than ensuring the
agency is operating in full accordance with the law.
Ignoring the inspector general's statement that it would
not examine whether the President's interests in the hotel
violates the Emoluments Clauses, the general counsel misstated
that the inspector general does not find any constitutional
violation occurred. He further asserted that the inspector
general found an emoluments violation is merely possible, but
disputes that claim pointing to ongoing litigation in which the
Justice Department is arguing that the President's business
interests do not pose a violation of the Emoluments Clauses.
The general counsel ignored the fact that in those
lawsuits, Justice Department attorneys are exercising their
role as the President's civil defense attorneys. The Federal
program's branch of the civil division, as described on the
Department's website, defend civil actions against the
Executive Office of the President, such as the Emoluments
Clause lawsuits the general counsel cited in his response.
As the Justice Department is zealously arguing for an
interpretation of the law most favorable to its client, it is
hardly an impartial arbiter of fact or law in this situation.
To present the Department's assertions as impartial like the
GSA's general counsel did in his response is misleading.
The conflicts of interest apparent in the lease for the Old
Post Office Building may well be being managed appropriately,
but it is inadequate and unfair to ask the public to blindly
trust that an agency under the President's authority will
manage those conflicts properly. Instead, the Trump
Organization and the GSA should cooperate fully with oversight
efforts of Members of Congress. That oversight extends to
examining the IG's review of the agency decisionmaking process.
I am, therefore, additionally concerned by a lack of
productive response to a request for records from the GSA
inspector general submitted in part by Ranking Member Meadows.
In closing, it is important for us to take a step back and
consider the broader policy implications of our conversation
today. The fundamental issue is whether we as a country are OK
with the system that allows elected officials to privately
profit off their official actions. If the answer to that
question is no, as is suggested by the Emoluments Clauses in
the Constitution, then we need to take a serious accounting of
the laws and policies governing the conduct of those elected
officials to ensure that they are sufficient. In this
committee, that starts with GSA contracts.
Thank you very much. I look forward to your questions.
[Ms. Hempowicz's prepared statement follows:]
Prepared Statement of Liz Hempowicz, Director of Public Policy, Project
on Government Oversight
Chair Titus, Ranking Member Meadows, and members of the
Subcommittee, thank you for the opportunity to testify about how the
General Services Administration (GSA) oversees the federal government's
lease with the Trump Organization for the Old Post Office Building. I
am Liz Hempowicz, director of public policy at the Project On
Government Oversight (POGO).
POGO is a nonpartisan independent watchdog that investigates and
exposes waste, corruption, abuse of power, and when the government
fails to serve the public or silences those who report wrongdoing. We
champion reforms to achieve a more effective, ethical, and accountable
federal government that safeguards constitutional principles.
Throughout our nearly 40-year history, we have consistently worked with
lawmakers from all points on the political spectrum to advance policy
solutions to systemic issues in the federal government. Regardless of
their party affiliation, we hold those to account who need to be held
accountable and give credit where credit is due.
At the root of it, we're here today because President Donald Trump
has not fully divested from his private businesses. In addition to the
conflicts of interest posed by President Trump's serving as both
landlord and primary tenant of a federally owned building, this
arrangement implicates the Constitution's foreign and domestic
emoluments clauses. It also presents a possible violation of a clause
in the lease meant to ensure that government officials do not benefit
from a lease of this sort.
Earlier this year, the GSA's Office of Inspector General released a
report on how the agency had handled the lease. The watchdog found
``serious shortcomings'' in the agency's process of determining whether
the president was in compliance with the lease.\1\ Perhaps more
disturbing was the GSA general counsel's inadequate response to the
report's conclusions. That response prompted POGO to urge the head of
the agency to supplement the general counsel's response, to more
completely address the report's findings and detail how the GSA would
correct the deficiencies the inspector general identified.\2\ I also
understand that members of this subcommittee have concerns about GSA's
actions in response to congressional oversight requests.\3\
---------------------------------------------------------------------------
\1\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, January 16, 2019, 23. 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
\2\ Letter from POGO Executive Director Danielle Brian to GSA
Administrator Emily W. Murphy about the agency's response to the
Inspector General's review of the Trump International Hotel lease for
the Old Post Office building, January 24, 2019. https://www.pogo.org/
letter/2019/01/watchdog-report-on-trump-hotel-review-raises-serious-
questions/
\3\ Letter from Chair of the House Transportation and
Infrastructure Committee Peter DeFazio and Chair of the Subcommittee on
Economic Development, Public Buildings, and Emergency Management Dina
Titus to Administrator of the General Services Administration Emily
Murphy, following up on earlier requests for documents from the agency,
September 10, 2019. https://transportation.house.gov/imo/media/doc/
2019-09-10%20DeFazio-Titus%20Letter
%20Response%20to%20GSA.pdf
---------------------------------------------------------------------------
My testimony will address the possible conflicts presented by the
relationship between the Trump Organization and the GSA, the inspector
general's findings, the GSA general counsel's response, and this
committee's oversight efforts.
Potential Conflicts of Interest
The Trump Organization's lease with the GSA for the Old Post Office
Building is perhaps the clearest instance in which President Trump's
personal financial interests may be at odds with what is best for
taxpayers.
The Trump International Hotel in the Old Post Office Building
opened in 2016, a few weeks before Donald Trump was elected president.
After the election, POGO and other ethics and legal experts from across
the political spectrum urged the president-elect to divest his business
enterprises into a true blind trust managed by an independent trustee
with no family relationship with him, in accordance with the guidelines
of the Ethics in Government Act.\4\ Given the nature of President
Trump's personal businesses, this trustee would have then had to
liquidate all business enterprises and invest the new assets without
providing the president any information about the new holdings.
---------------------------------------------------------------------------
\4\ Letter from POGO et al. to President-elect Donald Trump, urging
the president-elect to fully divest from his private business
interests, December 9, 2016. https://www.pogo.org/letter/2016/12/pogo-
and-bipartisan-ethics-experts-in-new-letter-to-trump-divest-now-to-
prevent-ongoing-conflicts/
---------------------------------------------------------------------------
This course of action would likely constitute a considerable
financial sacrifice for the president. However, I believe that such a
personal sacrifice is necessary to erase any doubt as to whether
President Trump--or any other executive branch official--is making
decisions to further his own financial interests or the interests of
the American taxpayer.
Because the president instead stepped away from management of his
businesses and put his interests in those businesses into a revocable
trust, he still stands to benefit financially from them. The contention
that this arrangement is sufficient because he won't benefit while in
office is disingenuous, ignoring the simple fact that a benefit doesn't
need to be immediate to cause a conflict of interest.
The president has considerable influence over the GSA, the agency
from which his private business leases the Old Post Office Building.
Any enhancements the government makes to the building will provide a
clear benefit to President Trump, and the current legal arrangement
does not deny him this financial benefit--it just delays the receipt of
any benefit until he leaves office.
More concretely, the president's own political appointee who leads
the agency is in the position to influence negotiations with the
president's private business to determine future changes to the lease
agreement that could have significant financial consequences. For
example, it appears that, under the lease, in addition to the fixed
rent the Trump Organization will pay for the space it is also subject
to a ``percentage rent difference,'' to be calculated annually.\5\ The
terms for determining this possible increase are redacted from the
publicly released version of the lease. But it appears that the lease
provides the GSA, as landlord, a range of numbers to choose from to
calculate the percentage rent difference.
---------------------------------------------------------------------------
\5\ Ground Lease by and between the United Stated of America and
Trump Old Post Office LLC, Lease No: GS-LS-11-1307, Section 5.1(b),
August 5, 2013, 35. https://www.gsa.gov/cdnstatic/
Part_One_of_Segment_001_of_OPO_Ground_Lease_%282013%29_RA.pdf
---------------------------------------------------------------------------
The Trump Organization can authorize the GSA to release the
redacted information in the lease. I recommend that the company do so,
to allow for independent oversight of this contract. As it stands, the
public is essentially being asked to trust that the GSA, an agency
under the president's authority, will do what is right for taxpayers
even if that comes at the expense of the financial interests of its
boss.
The fact that President Trump has not completely divested from his
businesses has created an untenable situation. His responsibilities as
president of the United States and head of the executive branch
unavoidably conflict with his personal financial interests as the
individual who may still benefit from the trust with a controlling
interest in the Trump International Hotel at the Old Post Office
Building. This conflict is starkly demonstrated by the GSA's repeated
deference to the Trump Organization's arguments in favor of withholding
documents in response to congressional inquiries.\6\
---------------------------------------------------------------------------
\6\ Letter from Chairs DeFazio and Titus to Administrator Murphy,
September 10, 2019 [see note 3].
---------------------------------------------------------------------------
Significant conflicts of interest like these cast an unnecessary
shadow over the decisions made by federal agencies under President
Trump, and will continue to cast that shadow as long as he maintains a
financial interest in his private businesses.
The GSA Inspector General's Report
After the 2016 election, the GSA's Office of Inspector General
received ``numerous complaints'' from Members of Congress and the
public about the potential conflicts of interest posed by the
president-elect's lease for the Old Post Office Building.\7\ The
inspector general undertook an examination of the agency's decision-
making process for determining whether the president's inauguration
breached the lease. Because the report covers a period that includes a
presidential transition, some of the events examined occurred under
President Barack Obama while others occurred under President Trump.
---------------------------------------------------------------------------
\7\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, 1 [see note 1].
---------------------------------------------------------------------------
The inspector general report, released in January of this year,
highlights deficiencies in the agency's post-2016 election review of
whether the president-elect's business interests in the tenancy of the
Old Post Office Building breached the government's contract with those
business interests. The post-election review was conducted by members
of the GSA's office of general counsel between November 2016 and March
2017. According to the inspector general, the GSA's central error was
its decision to decline to consider whether the Constitution's foreign
or domestic emoluments clauses ``barred the President's business
interest'' in the building.\8\ As the inspector general concluded,
``GSA's unwillingness to address the constitutional issues affected its
analysis of . . . the lease.'' \9\
---------------------------------------------------------------------------
\8\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, 23 [see note 1].
\9\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, 1 [see note 1].
---------------------------------------------------------------------------
The foreign emoluments clause of the Constitution was intended ``to
prevent corruption and limit foreign influence on federal officers'' by
prohibiting ``federal officers from accepting foreign emoluments
without congressional consent,'' as the Congressional Research Service
explains.\10\ Courts have adopted a broad definition of emolument as
any benefit, gain, or advantage, including profits from private market
transactions. However, the meaning of the word as used in the
Constitution is the subject of ongoing and significant debate.\11\
Whether the foreign emoluments clause is implicated by President
Trump's continued financial interests in his private businesses remains
an open legal question.
---------------------------------------------------------------------------
\10\ Kevin J. Hickey and Michael A. Foster, ``The Emoluments
Clauses of the U.S. Constitution,'' Congressional Research Service,
August 23, 2019, 1. https://fas.org/sgp/crs/misc/IF11086.pdf
\11\ Hickey and Foster, ``The Emoluments Clauses of the U.S.
Constitution,'' 1 [see note 10].
---------------------------------------------------------------------------
The domestic emoluments clause was intended ``to preserve the
President's independence'' by preventing the president from receiving
any emoluments from federal or state governments, other than his fixed
salary.\12\ Whether the domestic emoluments clause is implicated by the
president's continued financial interests in his private businesses is
an open question as well.
---------------------------------------------------------------------------
\12\ Hickey and Foster, ``The Emoluments Clauses of the U.S.
Constitution,'' 1 [see note 10].
---------------------------------------------------------------------------
Errors in the GSA's Review of the Trump Organization's Compliance with
the Old Post Office Lease
President Trump's continued financial interests in his private
businesses also present a possible violation of Section 37.19 of the
lease between the Trump Organization and the GSA. The section reads as
follows:
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;
provided, however, that this provision shall not be construed
as extending to any Person who may be a shareholder or other
beneficial owner of any publicly held corporation or other
entity, if this Lease is for the general benefit of such
corporation or other entity.\13\
---------------------------------------------------------------------------
\13\ Ground Lease by and between the United Stated of America and
Trump Old Post Office LLC, Lease No: GS-LS-11-1307, Section 37.19,
August 5, 2013, 103. https://www.gsa.gov/cdnstatic/
Part_Two_of_Segment_001_of_OPO_Ground_Lease_%282013%29_RA.pdf
During the 2016 presidential campaign, the media and the public
began scrutinizing a number of potential conflicts of interest
presented by then-candidate Trump's involvement with the Trump
International Hotel at the Old Post Office Building.\14\ The potential
conflicts implicated both emoluments clauses and the aforementioned
provision in the lease; a violation of any of the three could
constitute a breach of the lease.
---------------------------------------------------------------------------
\14\ Russ Choma, ``Donald Trump Has a Huge Conflict of Interest
That No One's Talking About,'' Mother Jones, August 15, 2016. https://
www.motherjones.com/politics/2016/08/trump-conflict-of-interest-old-
post-office-hotel/; Bloomberg News, ``Trump's Pricey Washington Hotel
Is a Showcase and Test for Ivanka,'' Investor's Business Daily,
September 16, 2016. https://www.investors.com/news/trumps-pricey-
washington-hotel-is-a-showcase-and-test-for-ivanka/
---------------------------------------------------------------------------
Despite these concerns, GSA did not begin discussing these issues
until after Donald Trump was elected president, according to the
inspector general report.\15\ This was GSA's first error in this
matter. The agency and the public would have been better served had GSA
begun a rigorous review of these legal implications when Donald Trump
became the Republican nominee in July 2016.
---------------------------------------------------------------------------
\15\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, 8 [see note 1].
---------------------------------------------------------------------------
``Early on'' in the GSA's post-election review, according to the
inspector general, the agency's office of general counsel acknowledged
that the president-elect's business interests in the Trump Organization
might constitute a violation of the emoluments clauses and could cause
a breach of the lease for the Old Post Office Building.\16\ But the
office of general counsel did not consider that issue, and did not
document the rationale for this decision. This was the GSA's second
error in this matter.
---------------------------------------------------------------------------
\16\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, 5 [see note 1].
---------------------------------------------------------------------------
The agency's review instead focused solely on whether Donald
Trump's having been elected president constituted a violation of
Section 37.19.
As detailed in the inspector general's report, in December 2016,
the Trump Organization notified the GSA contracting official handling
the Old Post Office Building lease that the company would be
restructuring the president-elect's financial interest in the company
as it pertained to the lease. Over the next few months, the contracting
officer communicated with Trump Organization attorneys and the GSA
general counsel's office to determine whether there was a violation of
Section 37.19. The Trump Organization communicated to the contracting
officer that after his inauguration the president had transferred his
interest in the Old Post Office Building to a revocable trust and
relinquished management over that interest, though he retained his
financial interest in the property.\17\
---------------------------------------------------------------------------
\17\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, 8-10 [see note 1].
---------------------------------------------------------------------------
The contracting officer then requested a ``written submission''
from President Trump laying out his position on whether the Trump
Organization was in compliance with the lease, ``specifically Section
37.19.'' \18\ Attorneys for the company responded with a written legal
analysis concluding that the organization was in full compliance with
the lease.\19\
---------------------------------------------------------------------------
\18\ Letter from GSA contracting officer Kevin Terry to Donald J.
Trump, requesting a written submission of Tenant's (Donald J. Trump's)
position regarding its compliance with the lease, February 10, 2017, 16
[page in PDF]. https://www.gsa.gov/cdnstatic/
Contracting_Officer_Letter_March_23_2017_Redacted_Version.pdf
\19\ The Trump Organization's analysis rested on three principal
assertions. The first was that the phrase ``shall be admitted to any
share or part of this Lease'' cannot apply to the president because he
was admitted to the lease before he entered an elected official. The
second was that the president fits under the exclusionary clause in
Section 37.19, which states that ``this provision shall not be
construed as extending to any Person who may be a shareholder or other
beneficial owner of any publicly held corporation or other entity, if
this Lease is for the general benefit of such corporation or other
entity.'' The lawyers argue ``other Person'' is the President and the
Trump Organization is an ``other entity'' of which he is an ``indirect
beneficial owner.'' Finally, even if Section 37.19 does apply to the
president's interest in the Old Post Office building lease, the lease
does not provide a remedy for the violation of the provision presented
and therefore would not affect the validity of the lease. Letter from
partner at Morgan, Lewis & Brockius LLP Sheri A. Dillon to GSA
contracting officer Kevin Terry in response to request for Tenant's
position on its compliance with the GSA lease, February 17, 2017, 23-32
[pages in PDF]. https://www.gsa.gov/cdnstatic/
Contracting_Officer_Letter_March_23_2017_Redacted_Version.pdf
---------------------------------------------------------------------------
The contracting officer then asked the GSA general counsel's office
to provide a legal opinion on the matter. After deliberations with the
general counsel's office, the contracting officer issued a document
known as an estoppel certificate, stating unequivocally that GSA
believed the Trump Organization was in full compliance with the terms
of the lease.\20\
---------------------------------------------------------------------------
\20\ After this conclusion was reported, in March 2017, POGO and a
coalition of partner organizations asked the inspector general to
review the decision-making process. Without a transparent legal
analysis, the letter conveying the decision raised significant
questions; we requested an independent review to ensure propriety.
Letter from POGO et al. to General Services Administration Inspector
General Carol F. Ochoa requesting an independent review of the GSA's
contracting officer's determination that the Trump Organization is in
compliance with the Old Post Office building lease, March 29, 2017.
https://www.pogo.org/letter/2017/03/pogo-requests-review-of-conclusion-
that-president-trump-isnt-violating-his-dc-hotel-lease/
---------------------------------------------------------------------------
The inspector general's report noted that when the contracting
officer issued the certificate, he knew that the GSA general counsel
``recognized a violation of the Foreign Emoluments Clause might be
relevant to a breach and that this important issue remained open.''
\21\ It is therefore disconcerting that the certificate does not
include a qualifier acknowledging that potential breach.
---------------------------------------------------------------------------
\21\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, 10 [see note 1].
---------------------------------------------------------------------------
Due to redactions in the inspector general's report, it isn't
possible to fully examine the GSA general counsel's legal analysis. But
the report plainly states that the decision to ignore the implications
of the emoluments clauses was ``improper'' and left a cloud of legal
uncertainty over the lease. The GSA's third and most serious error in
this matter was ignoring the emoluments clauses in its legal analysis.
The three errors I've described raise significant concerns about
the internal GSA review process that led to the issuance of an
unqualified legal certificate confirming that the Trump Organization
was in compliance with its lease.
The GSA General Counsel's Response to the Inspector General Report
Given the serious nature of the inspector general's findings, the
agency's response was grossly inadequate. Written by the agency's
general counsel, the response ignored all but the inspector general's
one recommendation and placed blame for the report's primary findings
on former agency officials.\22\ The tone of the letter was at times
jarringly contemptuous, appearing more concerned with protecting the
president's reputation than ensuring the agency is operating in the
best interests of American taxpayers.
---------------------------------------------------------------------------
\22\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, Appendix B, 45 [page in PDF] [see note 1].
---------------------------------------------------------------------------
The response began by saying the GSA was ``gratified'' by the fact
that the inspector general found no instances of improper interference
in the contracting officer's decision-making process when he determined
that the Trump Organization was in compliance with the terms of the
lease. While this is certainly notable, it does not mitigate the
inspector general's findings that the review was subject to ``serious
shortcomings'' and was ``improper.'' \23\ The general counsel's
response mentioned neither of those findings; nor did it detail any
course of action for the agency to remedy those shortcomings.
---------------------------------------------------------------------------
\23\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, 23, 16 [see note 1].
---------------------------------------------------------------------------
Perhaps the most significant part of the agency's response comes in
its second-to-last paragraph. Ignoring the statement at the beginning
of the inspector general's report establishing that it would not
examine whether the president's interest in the hotel violates the
emoluments clauses, the general counsel stated that the inspector
general ``does not find that any constitutional violation occurred,''
and asserted that the inspector general found ``an Emoluments violation
is merely possible.'' \24\ The GSA general counsel goes on to dispute
the assertion that an emoluments violation is even possible under the
current circumstances, pointing to ongoing litigation in which the
Justice Department is arguing that the president's business interests
do not pose a violation of the emoluments clauses.
---------------------------------------------------------------------------
\24\ General Services Administration Office of Inspector General,
Evaluation of GSA's Management and Administration of the Old Post
Office Building Lease, Appendix B, 46 [page in PDF] [see note 1].
---------------------------------------------------------------------------
The general counsel appeared to discount the fact that in those
lawsuits, Justice Department attorneys are exercising their role as the
president's civil defense attorneys. The Federal Programs Branch of the
Civil Division, as described on the department's website, ``defends
civil actions against the Executive Office of the President,'' \25\
such as the emoluments clause lawsuits the general counsel cited in his
response. As the Justice Department is zealously arguing for an
interpretation of the law most favorable to its client, it is hardly an
impartial arbiter of fact or law in this situation. To present the
department's assertions as impartial, like the GSA's general counsel
did in his response, is misleading.
---------------------------------------------------------------------------
\25\ ``About the Civil Division--Federal Programs Branch,''
Department of Justice, last modified October 12, 2018. https://
www.justice.gov/civil/federal-programs-branch
---------------------------------------------------------------------------
Rather than substantively addressing any of the deficiencies in the
agency's legal analysis caused by ignoring the emoluments clause
issues, the general counsel attempted to deflect criticism by implying
that such a review wouldn't have made a difference to the agency's
final determination.
The Committee's Oversight Efforts
Chairs DeFazio and Titus have been engaged in efforts to oversee
the GSA's handling of the Trump Organization's lease for the Old Post
Office building.\26\ It is my understanding that Chairs DeFazio and
Titus have taken issue with the GSA's refusal to comply fully with
document requests from this committee. POGO has worked for many years
to strengthen Congress's oversight capacity, and I am particularly
sympathetic to the frustrations the chairs expressed in their latest
letter to the GSA administrator.
---------------------------------------------------------------------------
\26\ Letter from Chair of the House Transportation and
Infrastructure Committee Peter DeFazio and Chair of the Subcommittee on
Economic Development, Public Buildings, and Emergency Management Dina
Titus to Administrator of the General Services Administration Emily
Murphy, following up on earlier questions asked about the leasing of
the Old Post Office building, January 22, 2019. https://
transportation.house.gov/news/press-releases/chairman-defazio-rep-
titus-press-gsa-on-the-repeated-refusal-to-respond-to-questions-
surrounding-trumps-conflicts-of-interest; Letter from Chairs DeFazio
and Titus to Administrator Murphy, September 10, 2019 [see note 3].
---------------------------------------------------------------------------
That letter, sent earlier this month, explained that the GSA has
passed along claims from Trump Organization attorneys to withhold
documents from the committee, in which the organization argued that the
records constitute confidential business information and that the
requests lack a legislative purpose.\27\ POGO has long objected to
federal agency general counsels' reflexive acceptance of third-party
denials by private leaseholders or contractors as sufficient
justification to withhold documents from Congress.
---------------------------------------------------------------------------
\27\ Letter from Chairs DeFazio and Titus to Administrator Murphy,
September 10, 2019, 1 [see note 3].
---------------------------------------------------------------------------
The GSA's refusal to release documents to Members of Congress in
this case may also be a result of the conflict presented by the
president's continued interests in the GSA lease. GSA officials have
found themselves caught in the crossfire in a fight between their
boss's personal business interests and Congress's responsibility to
oversee the executive branch.
Fortunately, past Supreme Court rulings offer guidance for the GSA
to ensure that its officials are acting in accordance with the law. As
the committee notes, the court has repeatedly ruled that it is not the
obligation of a congressional committee to provide a valid legislative
purpose for an inquiry to a federal agency or to a presidential
administration.\28\ As the Supreme Court has previously ruled, ``valid
legislative'' inquiries do not need to be publicly declared to make
them valid.\29\
---------------------------------------------------------------------------
\28\ Letter from Chairs DeFazio and Titus to Administrator Murphy,
September 10, 2019, 2 [see note 3].
\29\ Todd Garvey, ``Legislative Purpose and Adviser Immunity in
Congressional Investigations,'' Congressional Research Service, May 24,
2019, 3. https://fas.org/sgp/crs/misc/LSB10301.pdf
---------------------------------------------------------------------------
Clearly, the GSA should give the Supreme Court's rulings greater
weight than the president's personal attorney's legal argument as to
why the agency should withhold information the committee has requested.
The GSA must respond to your legitimate oversight requests
regardless of whether your committee identifies any potential
legislative actions that may result from the information. We similarly
believe that the GSA's Office of Inspector General must fully comply
with the request for information and documents it received from Ranking
Members Graves and Meadows in February of this year.\30\
---------------------------------------------------------------------------
\30\ Letter from Ranking Member of the House Transportation and
Infrastructure Committee Sam Graves and Ranking Member of the
Subcommittee on Economic Development, Public Buildings, and Emergency
Management Mark Meadows to Inspector General of the General Services
Administration Carol Ochoa, requesting information and documents
related to the GSA inspector general's investigation, February 4, 2019.
https://republicans-oversight.house.gov/wp-content/uploads/2019/02/
2019-02-04-JJ-MM-RJ-SG-to-Ochoa-GSA-IG-re-Old-Post-Office-Building-due-
2-18.pdf
---------------------------------------------------------------------------
The administration of public buildings and the work of the GSA
inspector general are squarely within the jurisdiction of this
committee. This level of agency obfuscation is not new. But it should
worry Members on both sides of the aisle, as it will do lasting damage
to Congress' oversight authorities if allowed to go unchecked.
What's at Stake
The inspector general review provided two notable conclusions.
First, that the GSA contracting officer's decision to certify that the
Trump Organization was in compliance with its lease was not tainted by
improper interference. Second, that despite the absence of overt
political pressure, there were ``serious shortcomings'' in that
decision-making process. The shortcomings mean that the legality of the
lease between the Trump Organization and the GSA is still in question.
I urge the GSA to comply with all document requests from members of
this committee so that the Congress has what it needs to establish
whether current laws have been violated as well as to determine whether
it is necessary to update those laws. The American public deserves to
be able to trust that our public officials, whether in the federal
agencies or in the White House, are acting in our best interest.
Ms. Titus. Thank you.
Mr. Shaub.
Mr. Shaub. Chair Titus, Ranking Member Meadows, and members
of the subcommittee, thank you for inviting me to discuss GSA's
management of the Old Post Office, which the President's
business leases from the Government he leads.
Nearly 3 years ago, Donald Trump declared that, quote,
``the President can't have a conflict of interest.'' But that
is not right. A conflict of interest arises when any official's
personal interests are at odds with the duty to the American
people. True, Presidents and Vice Presidents aren't covered by
a law that prescribes criminal penalties for conflicts of
interest, but this exemption isn't a perk of high office.
Conflicts of interest endanger the fabric of our Republic.
The Justice Department and the Office of Government Ethics have
advised Presidents to act as though the law applied, and for
the better part of four decades they did. They took the kinds
of measures their appointees took to prevent conflicts of
interest.
Now, a federally owned landmark houses the Trump Hotel,
which is patronized by individuals and groups with interests
affected by the Federal Government. For example, T-Mobile
infamously sent executives to stay at the hotel while it sought
Federal approval of a merger. Lobbyists, advocacy groups,
businesses, nonprofits, and political candidates frequent the
hotel. And why wouldn't they? White House staff and other
appointees mingle there with influence seekers. The hotel is
even frequented by Members of Congress who are responsible for
oversight of the executive branch.
CREW has also tallied nearly 60 foreign governments
visiting Trump properties. One diplomat suggested it would be,
quote, ``rude to come to his city and say I am staying at your
competitor.'' In fact, today a transcript was released that
shows that the Ukrainian President was highlighting that he
once stayed at a Trump Hotel. Apparently, he seemed to think
that that would ingratiate himself to the President.
Bahrain, Kuwait, and the Philippines hosted major events at
the hotel. The Romanian Prime Minister personally stayed there.
The Saudi Government has been one of the Trump Organization's
bigger customers, raising concerns about the kingdom's
relationship with the administration.
The consequence of these circumstances has been an
unprecedented ethics crisis. This scandal-plagued
administration has seen one appointee after another resign amid
inquiries into their conduct, while others remain in Government
under the cloud of ethics concerns.
For their part, GSA officials emphasized that aspects of
their work occurred before the inauguration. They claimed this
meant that they weren't under any pressure. That defense
ignores the very real risks they faced if they challenged the
Trump Organization's lease compliance. The election was over.
They were about to get a whole new set of bosses, and every
career official knew this. In fact, GSA was the lead agency for
the Presidential transition.
Now, there are two main problems with GSA's March 2017
lease determination. First, GSA refused to even consider the
Constitution's Emoluments Clauses. In failing to even consider
them, GSA fell below the standard for agency action. Failing to
consider an important aspect of a problem renders an agency
action arbitrary and capricious. More importantly, GSA
officials failed to fulfill their oath to support and defend
the Constitution.
Second, the lease makes clear that an elected official
cannot be admitted to any part or share of the lease and cannot
benefit from it. Rather than interpreting this contract
language, GSA sidestepped the issue. The determination only
recites steps taken by the Trump Organization that create the
illusion of separation from the President.
The Trump Organization said the President's share of hotel
profits will sit in a capital account while he is in
Government, but this doesn't solve the problem. The money stays
in a property he owns and he will benefit from any improvements
they make with it. There is also nothing to stop it from coming
back to him when he leaves Government.
GSA also noted that President Trump's assets are now in a
revocable trust, but the trust is meaningless. OGE has
explained that putting assets in a revocable trust does nothing
to resolve a conflict of interest. I discuss these issues in
more detail in my written testimony.
In closing, I will just emphasize that GSA needs to conduct
a new evaluation of the lease, one that properly takes into
account the Emoluments Clauses and the relevant contract
language. And, of course, the most effective way to avoid
issues would be divestiture.
Thank you again for inviting me, and I am happy to answer
questions today.
[Mr. Shaub's prepared statement follows:]
Prepared Statement of Walter M. Shaub, Jr., Senior Advisor, Citizens
for Responsibility and Ethics in Washington, and Former Director, U.S.
Office on Government Ethics
Chair Titus, Ranking Member Meadows and members of the
Subcommittee, thank you for the invitation to discuss the General
Services Administration's failures in appropriately managing the lease
for the Trump International Hotel located on the site of the Old Post
Office building in Washington, D.C. Before turning to legal problems
with the lease's management, I would like to draw the Subcommittee's
attention to the impact of these failures on government ethics in the
executive branch and on the public's confidence that government
officials are upholding the most basic ethical principle, that public
service is a public trust.
I. GSA's Role in the Executive Branch Ethics Crisis
It has been nearly three years since President Trump declared that
``the president can't have a conflict of interest.'' \1\ This statement
was quite obviously wrong. In fact, a conflict arises any time personal
interests create incentives that are at odds with an official's duty to
the American people. Abuse of entrusted power for private gain is the
very definition of corruption.\2\
---------------------------------------------------------------------------
\1\ Isaac Arnsdorf, Trump: `The president can't have a conflict of
interest', Politico, Nov. 22, 2016, https://politi.co/2kPDw5L.
\2\ See Transparency International (website), How do you define
corruption?, https://bit.ly/2IMPCX9 (last viewed Sept. 18, 2019).
---------------------------------------------------------------------------
It is true that the President is exempt from a law that prescribes
criminal penalties for conflicts of interest.\3\ But this exemption was
never intended as a perk of high office. Both the Office of Government
Ethics and the Department of Justice have emphasized the importance of
presidents acting as though they were covered by the law.\4\ As the
Supreme Court cautioned, a conflict of interest is ``an evil which
endangers the very fabric of a democratic society.'' \5\ This is no
less true for the President than for his cabinet secretaries. The
public's faith in those who govern is shattered when they engage in
activities that arouse ``suspicions of malfeasance and corruption.''
\6\
---------------------------------------------------------------------------
\3\ 18 U.S.C. 202, 208; but see 18 U.S.C. 201 (subjecting
presidents to the criminal prohibition against bribery).
\4\ U.S. Office of Gov't Ethics, OGE Inf. Adv. Op. 83 x 16 (1983),
https://bit.ly/2fRpIG0; Letter from Antonin Scalia, Assistant Attorney
Gen., Office of Legal Counsel, to Kenneth A. Lazarus, Associate Counsel
to the President, Dec. 16, 1974, https://bit.ly/2Zv0xgb.
\5\ United States v. Mississippi Valley Generating Co., 364 U.S.
520, 562 (1961).
\6\ Id.
---------------------------------------------------------------------------
That is why government employees are told to avoid even the
appearance of a conflict of interest.\7\ This admonition should apply
equally to the President. We entrust him with great power, and we
expect him to use that power solely for our benefit--not his own. The
American people should never have to wonder whether government action
is motivated by the President's stated policy objectives or his
personal interests. We should also never have to wonder whether he is
using his high office for profit.
---------------------------------------------------------------------------
\7\ 5 C.F.R. 2635.101(b)(14).
---------------------------------------------------------------------------
But today we are talking about precisely those questions. President
Trump's decision to retain his interests in the Old Post Office
building lease (``OPO Lease'') was and continues to be part of a broad
pattern that has called into question the government's integrity in
countless ways. The first agency subjected to the influence of those
conflicts of interest was the General Services Administration
(``GSA''). Even before President Trump was sworn into office, there
were signs GSA officials were feeling hard pressed to enforce the
Constitution they swore to support and the terms of the lease they had
negotiated with his company. For instance, they initially tried to
dodge questions about the OPO Lease by referring media inquiries to the
agency I was then leading, the Office of Government Ethics
(``OGE'').\8\ I had to ask GSA to either stop suggesting OGE was
involved or start involving us.
---------------------------------------------------------------------------
\8\ Jordyn Phelps, Inside the Potential Conflict Posed by Trump's
DC Hotel, ABC News, Dec. 15, 2016 (``[W]hile the terms of the lease do
allow for the GSA to pull out under certain conditions, the agency at
this point is continuing to hold up the terms of the lease and is
deferring ethics questions to the Office of Government Ethics . . . `It
is the Office of Government Ethics that provides guidance to the
executive branch on questions of ethics and conflicts of interest. GSA
plans to coordinate with the president-elect's team to address any
issues that may be related to the Old Post Office building,' a GSA
spokesperson told ABC News.''), https://abc7ne.ws/2mcKHZw; Steven
Schooner and Daniel Gordon, GSA's Trump Hotel Lease Debacle, GovExec
Magazine, Nov. 28, 2016 (``We are sympathetic to GSA's quandary. Yet,
despite media suggestions to the contrary, GSA cannot foist this
challenging situation on the Office of Government Ethics.''), https://
bit.ly/2mgjntnxx; Charles Clark, GSA Will Examine Ethics Issues Around
Trump's D.C. Hotel Lease, GovExec Magazine, Nov. 17, 2016, https://
bit.ly/2kPoJLM.
---------------------------------------------------------------------------
GSA failed to make a determination before the inauguration as to
whether it would continue the OPO Lease. That delay raised the stakes
for GSA officials because they were no longer in the position of
potentially having to cancel a major deal with a President-elect--which
alone may have been overwhelming for many executive branch officials--
but now faced the even more daunting prospect of canceling a deal with
a sitting President after declaring him in violation of the
Constitution. By then, GSA and the public had already witnessed the
then-Chairman of the House Oversight Committee issue a menacing letter
to me the day after I sounded the alarm about the President's refusal
to divest his conflicting financial interests, and the President's
Chief of Staff issue what seemed like a threat that I ``ought to be
careful.'' \9\ It was, by then, also public knowledge that the White
House had breached the norms of government by leaning on the Federal
Bureau of Investigation (``FBI'') to refute allegations about the Trump
campaign.\10\ Closer to home for GSA officials, President Trump had
removed the acting GSA Administrator and installed a hand-picked
replacement shortly after the inauguration, and it would be months
before he nominated a replacement.\11\
---------------------------------------------------------------------------
\9\ Rob Garver, Team Trump Steps Up Intimidation of Government
Ethics Officer, Fiscal Times, Jan. 16, 2017, https://bit.ly/2kO7XNd;
Richard Painter and Norman Eisen, Just when you thought the Trump
ethics disaster couldn't get worse, it did, Washington Post, Jan. 16,
2017, https://wapo.st/2jhInex; Dana Liebelson, Chaffetz Skipped Meeting
With Ethics Chief He Threatened To Subpoena, Emails Show, Huffington
Post, Jan. 18, 2017, https://bit.ly/2mejzcC.
\10\ Jim Sciutto, Evan Perez, Shimon Prokupecz, Manu Raju, and
Pamela Brown, FBI refused White House request to knock down recent
Trump-Russia stories, CNN, Feb. 24, 2017 (``The direct communications
between the White House and the FBI were unusual because of decade-old
restrictions on such contacts. Such a request from the White House is a
violation of procedures that limit communications with the FBI on
pending investigations.''), https://cnn.it/2mlu7qC.
\11\ Isaac Arnsdorf, Trump picks leader for federal agency
overseeing his D.C. hotel, Politico, Jan. 26, 2017 (``The reason for
the whiplash isn't clear. It appears the GSA's outgoing leadership
wanted Dong to take over temporarily but Trump preferred Horne.''),
https://politi.co/2lZajJc; Mark Rockwell, Pick to lead GSA is popular,
but faces political challenges, Federal Computer Week, Sept. 5, 2017,
https://bit.ly/2kRe1Ez.
---------------------------------------------------------------------------
Indeed, President Trump had created what must have been an
unnerving environment for GSA officials confronting the challenge of
evaluating his compliance with constitutional and contractual
requirements applicable to him. They were not up to the challenge. As
GSA's Office of Inspector General (``OIG'') reported this past January,
they balked entirely at evaluating the constitutional issues the
situation presented.\12\ As I discuss later, their failure to consider
these issues rendered GSA's determination ``arbitrary and capricious.''
Their conclusory determination that President Trump remained in
compliance with the OPO Lease was inconsistent with its terms. To be
fair, though, they should never have been put in this position--caught
between their duty to the people and the President's conflicts of
interest.
---------------------------------------------------------------------------
\12\ GSA OIG, Evaluation of GSA's Management and Administration of
the Old Post Office Building Lease, JE19-002 (Redacted), Jan. 16, 2019,
at 1, https://bit.ly/2RAV9ct (``GSA OIG Report'').
---------------------------------------------------------------------------
There is simply no getting around the fact that our President has
chosen to undertake a dual role as both landlord and tenant of a
historic property belonging not to him but to us. There is no getting
around the fact that he has now spent close to a third of his days in
office visiting his private properties, including his D.C. hotel at the
Old Post Office.\13\ With the media in tow, every one of these visits
amounts to an advertisement for those properties--only we are the ones
paying for that advertising. This past May, the cost to taxpayers of
trips to his golf courses alone was conservatively estimated to have
exceeded $100 million--an amount that excluded the costs of trips to
his other properties.\14\ After a little more than two years, that cost
was closing in on costs attributed by Judicial Watch to all
presidential family travel during the entire eight years of the Obama
administration.\15\
---------------------------------------------------------------------------
\13\ Liz Johnston, Tracking President Trump's visits to Trump
properties, NBC News, https://nbcnews.to/2h7kRjo (last visited Sept.
17, 2019).
\14\ Daniel Moritz-Rabson, Trump's golfing has cost taxpayers $102
million, just $12.7 million behind Obama's travel during entire
presidency: report, Newsweek, May 22, 2019, https://bit.ly/2EHK9kX.
\15\ Id.
---------------------------------------------------------------------------
This circumstance flows from the original sin of this
administration: the President's refusal to divest his conflicting
financial interests. That breach of ethical norms has had a profoundly
deleterious effect on the executive branch ethics program. The litany
of the Trump administration's ethics scandals is far too expansive to
recount today, and the unprecedented pace of ethics scandals in this
administration shows no sign of slowing.\16\ Such are the wages of a
bad tone at the top.
---------------------------------------------------------------------------
\16\ See, e.g., Presidential Profiteering: Trump's Conflicts Got
Worse in Year Two, Citizens for Responsibility and Ethics in
Washington, Jan. 16, 2019, https://bit.ly/2FBC2IK; The Most Unethical
Presidency, Year One, Citizens for Responsibility and Ethics in
Washington, Jan. 4, 2018, https://bit.ly/2DrM9y1.
---------------------------------------------------------------------------
Earlier this month, President Trump announced a desire to host the
G7 Summit at his own Miami resort.\17\ He then gave an internationally
televised sales pitch for the property as he stood beside another world
leader.\18\ As CREW explained in a complaint to an Inspector General,
his words suggested a degree of personal involvement in the site
selection process, potentially putting him in position to influence a
federal procurement for a meeting he will lead.\19\ That would be a
crime for any other executive branch official, besides the Vice
President.\20\ This spectacle undermines our government's reputation
for integrity on the world stage, which could hurt our anti-corruption
agenda in developing countries.\21\ Though it marks a possible
escalation of his behavior, this aggressive bid to mix personal and
official business was typical of his messaging about the overlap of
official and personal business from the start.
---------------------------------------------------------------------------
\17\ Remarks by President Trump and President Macron of France in
Joint Press Conference, White House, Aug. 26, 2019, https://bit.ly/
328d7Uc.
\18\ Jennifer Jacobs, Josh Wingrove, and Jonathan Levin, Trump
Pitches Luxury Miami Property for Next G-7: His Own, Bloomberg, Aug.
26, 2019, https://bloom.bg/2PkyIHK.
\19\ CREW requests investigation of Trump Doral G-7 announcement,
Citizens for Responsibility and Ethics in Washington, Sept. 9, 2019,
https://bit.ly/2kmlU4J.
\20\ 18 U.S.C. 208(a).
\21\ The State Department works internationally to strengthen ``the
ability of governments and their citizens to promote better public
transparency, accountability, and integrity.'' U.S. Department of
State, Combating Corruption and Promoting Good Governance, https://
bit.ly/2lVBXqM (last viewed Sept. 18, 2019).
---------------------------------------------------------------------------
It is no wonder lobbyists, companies, industry associations,
nonprofits, and others with interests affected by the government are
flocking to the Trump International Hotel in Washington., D.C., as well
as his other properties.\22\ Among other incentives, top administration
officials congregate at the hotel.\23\ Numerous members of Congress
similarly frequent his hotel, though they are responsible for oversight
of presidential conflicts of interest.\24\ Even Attorney General Barr,
who is responsible for ongoing investigations affecting the President,
has drawn criticism based on his booking a $30,000 holiday party at the
President's hotel.\25\ The line between official and personal
activities in the Trump administration is a blurry one. Just this month
Secretary Pompeo spoke at the Old Post Office hotel to the President's
paying customers, and his remarks may have implicated the misuse of
position rule when he praised the venue they chose.\26\ Displaying a
disdain for government ethics endemic to this administration, Secretary
Pompeo joked that his effective endorsement of the hotel was ``for the
Washington Post.'' \27\
---------------------------------------------------------------------------
\22\ Bernard Condon, Vaping group plotted lobbying efforts at
Trump's DC hotel, Associated Press, Sept. 11, 2019, https://abcn.ws/
2kCpZC9; Jonathan O'Connell and David Fahrenthold, T-Mobile announced a
merger needing Trump administration approval. The next day, 9
executives had reservations at Trump's hotel, Washington Post, Jan. 16,
2019, https://wapo.st/2mep7Uu; Ben LeFebvre, Oil group to lobby
president after stay at Trump hotel, Politico, Mar. 14, 2018, https://
politi.co/2Hzm2nj.
\23\ Trump's 2,000 Conflicts of Interest (and Counting), Citizens
for Responsibility and Ethics in Washington, updated Aug. 15, 2019,
https://bit.ly/31FxDeP (``CREW Conflicts Report''); Eric Lipton and
Annie Karni, Checking In at Trump Hotels, for Kinship (and Maybe Some
Sway), New York Times, Sept. 7, 2019, https://nyti.ms/2m8VmVh.
\24\ CREW Conflicts Report, https://bit.ly/31FxDeP; David A.
Fahrenthold, Jonathan O'Connell, and Anu Narayanswamy, Trump's
properties made $4.2 million from Republican campaigns, even as GOP
suffered defeats, Washington Post, Nov. 8, 2018, https://wapo.st/
2mfe7Gr.
\25\ Aaron Rupar, William Barr's $30k Trump hotel party illustrates
how corruption is becoming more brazen and blatant, Vox, Aug. 28, 2019,
https://bit.ly/2kpy7Ws; Madeleine Carlisle and Olivia Paschal, After
Mueller: The Ongoing Investigations Surrounding Trump, Atlantic, Mar.
22, 2019, https://bit.ly/2OlF71d.
\26\ John Bowden, Pompeo jokes about speaking at Trump hotel: `The
guy who owns it' is `going to be successful,' The Hill, Sept. 13, 2019
(``I look around. This is such a beautiful hotel.''), https://bit.ly/
2kGcj9h.
\27\ Id.; 5 C.F.R. 2635.702(c).
---------------------------------------------------------------------------
CREW has also tallied sightings of officials from nearly 60 foreign
governments at Trump properties.\28\ Not long after the election,
Bahrain and Kuwait moved their annual galas to the Old Post Office
hotel.\29\ The Philippine embassy similarly celebrated the country's
120th anniversary at the hotel.\30\ The Romanian Prime Minister
personally stayed at the hotel this year.\31\ Then there's Saudi
Arabia, which is reportedly a big customer of the President's
business.\32\ Lobbyists for the Saudi government ran up a tab of
$270,000 at his D.C. hotel at a time when it was lobbying against
legislation that would allow victims of terrorist attacks to sue
foreign governments.\33\ In this context, it is easy to understand how
even the appearance of a conflict of interest can be as damaging as an
actual conflict of interest.
---------------------------------------------------------------------------
\28\ Eric Lipton and Annie Karni, Checking In at Trump Hotels, for
Kinship (and Maybe Some Sway), New York Times, Sept. 7, 2019, https://
nyti.ms/2m8VmVh.
\29\ Alex Altman, Donald Trump's Suite of Power: How the
President's D.C. outpost became a dealmaker's paradise for diplomats,
lobbyists and insiders, Time, Mar. 14, 2018, https://bit.ly/2kmmxLD.
\30\ Ali Dukakis, Watchdog group finds more spending at Trump
properties by foreign governments, political groups, ABC News, June 27,
2018, https://abcn.ws/2GVc9VH.
\31\ Ilya Marritz, Justin Elliott, and Zach Everson, Romanian Prime
Minister Is Staying at Trump's D.C. Hotel, Pro Publica, Mar. 25, 2019,
https://bit.ly/2kplQkT.
\32\ David A. Fahrenthold and Jonathan O'Connell, Saudi-funded
lobbyist paid for 500 rooms at Trump's hotel after 2016 election,
Washington Post, https://bit.ly/2kF4lNG.
\33\ Altman, Time, Mar. 14, 2018.
---------------------------------------------------------------------------
In that vein, it bears emphasizing that questions linger as to the
President's role in the decision to scrap the long-planned FBI
headquarters relocation project.\34\ The move was abruptly canceled
after the government had spent $20 million and more than a decade on
planning.\35\ The public did not fail to notice to how this
cancellation could benefit President Trump, whose Old Post Office hotel
lies just up Pennsylvania Avenue from prime real estate that might
attract a competitor if the FBI were to relocate its headquarters.\36\
But GSA Administrator Emily Murphy, who personally met with President
Trump before cancelling the move, seems disinclined to supply the
transparency needed to assess the decision, and her agency is resisting
CREW's requests for more information.\37\
---------------------------------------------------------------------------
\34\ Jonathan O'Connell, Federal government cancels costly, decade-
long search for a new FBI headquarters, Washington Post, July 10, 2017,
https://wapo.st/2ubVdmz.
\35\ Was the FBI headquarters relocation scrapped to protect
Trump's hotel from competition?, Citizens for Responsibility and Ethics
in Washington, Oct. 13, 2018, https://bit.ly/2krLLZe.
\36\ Editorial Board, The FBI needs new digs. For some reason,
Trump doesn't seem inclined to help, Washington Post, Aug. 8, 2018,
https://bit.ly/2lVIK3L.
\37\ General Servs. Admin., Office of Inspector, Review of GSA's
Revised Plan for the Federal Bureau of Investigation Headquarters
Consolidation Project, Aug. 28, 2018, https://bit.ly/2kkl20s; CREW sues
GSA for FBI HQ renovation records, Citizens for Responsibility and
Ethics in Washington, updated July 29, 2019, https://bit.ly/2kPgC1W.
---------------------------------------------------------------------------
It is in the context of this entirely foreseeable ethics crisis
that Congress turns its attention to the fateful decision GSA made
regarding the OPO Lease on March 23, 2017. That decision, with its
profound consequences, was the wrong one.
II. Legal Problems with GSA's Management of the OPO Lease
In March 2017, GSA issued a letter determining that the Trump Old
Post Office LLC (``Trump-OPO'') was in compliance with its lease for
the Trump International Hotel, located in the federally-owned Old Post
Office building in Washington, D.C. There are two major legal problems
with GSA's decision and its overall management of the OPO Lease
warranting congressional scrutiny.
First, as the GSA OIG found in its January 2019 report, GSA's
lease-compliance determination ignored critical questions regarding the
Constitution's Emoluments Clauses. There is also no indication that, in
response to the OIG report, GSA has undertaken any evaluation of
emoluments issues relating to the OPO Lease.
Second, GSA's determination was analytically flawed because it
failed altogether to construe section 37.19 of the lease, which forbids
any ``elected official of the Government of the United States'' to ``be
admitted to any share or part of this Lease, or to any benefit that may
arise therefrom.'' Rather than interpreting this lease language, GSA
merely recited steps Trump-OPO took ostensibly to insulate President
Trump from active management of the hotel and summarily concluded that
those steps were sufficient to avoid a violation of section 37.19. GSA
reached this conclusion even though the President, an elected official
of the United States government, still holds a 77.5% interest in the
hotel through a revocable trust, and therefore is plainly ``admitted
to'' a share or part of the OPO Lease from which he derives a
``benefit.''
GSA should, at a minimum, undertake a new assessment of Trump-OPO's
compliance with the lease that properly evaluates both the emoluments
issues agency officials previously ignored and the application of
section 37.19 to the facts. Given that all federal officials have a
duty to support and defend the Constitution, it is incumbent on GSA to
take all steps within its power to ensure compliance with the
Emoluments Clauses and the terms of the OPO Lease.
A. Factual Background
In August 2013, Trump-OPO executed a 60-year ground lease with GSA
under which the Old Post Office building would be redeveloped as a
luxury hotel.\38\ At that time, Donald J. Trump had a majority interest
in Trump-OPO.\39\ The Trump International Hotel opened on the site in
October 2016.\40\ Just before taking office in January 2017, President
Trump resigned from his position with Trump-OPO but retained a 77.5%
interest in it through DJT Holdings LLC and DJT Holdings Managing
Member LLC, both of which he placed in the Donald J. Trump Revocable
Trust (``DJT Revocable Trust'').\41\
---------------------------------------------------------------------------
\38\ GSA OIG Report, at 2.
\39\ Id.
\40\ Id. at 3.
\41\ GSA Determination, Exhibit B to Exhibit 7 (Exhibit 7 is a Dec.
29, 2016 letter from Adam L. Rosen of Trump-OPO to GSA, and Exhibit B
to that letter includes an ownership chart for Trump-OPO). Donald J.
Trump Resignation Letter, Jan. 19, 2017, https://bit.ly/2kolESM; Letter
from GSA Contracting Officer Kevin M. Terry to Trump Old Post Office
LLC, March 23, 2017, at 6, https://bit.ly/2nhKfaB (``GSA
Determination'').
---------------------------------------------------------------------------
Upon taking office, Mr. Trump became an elected official of the
Government of the United States, a change in status that implicated
section 37.19 of the OPO Lease. Section 37.19 of the lease provides:
No . . . elected official of the Government of the United
States . . . shall be admitted to any share or part of this
Lease, or to any benefit that may arise therefrom; provided,
however, that this provision shall not be construed as
extending to any Person who may be a shareholder or other
beneficial owner of any publicly held corporation or other
entity, if this Lease is for the general benefit of such
corporation or other entity.\42\
---------------------------------------------------------------------------
\42\ Ground Lease By and Between the United States of America and
Trump Old Post Office LLC, Lease No. GS-LS-11-1307, Aug. 5, 2013,
https://bit.ly/2kHtmaT (``OPO Lease'').
As GSA's OIG explained, ``[f]ollowing the publication of the first
of several articles about section 37.19 on November 15, 2016, the OGC
attorneys working on the OPO project began discussing whether President
Trump's business interest in the OPO Lease constituted a breach of the
section.'' \43\ Ultimately, GSA issued a determination in March 2017
finding that Trump-OPO was in full compliance with section 37.19 and
that the lease remained in full force and effect.\44\ That
determination failed to provide any legal analysis of the meaning of
section 37.19. In addition, it failed to address the Constitution's
Emoluments Clauses, which were implicated by the benefits accruing to
President Trump. It also failed to consider related sections of the OPO
Lease, sections 6.2 and 37.2, barring Trump-OPO from ``us[ing]'' the
property, or ``permit[ting]'' it ``to be used,'' for ``any unlawful or
illegal business, use or purpose'' or ``in any way in violation . . .
of any . . . Applicable Laws,'' including the Constitution.\45\
Instead, it concluded that certain measures Trump-OPO took ostensibly
to insulate President Trump from the hotel's management and profits
were sufficient to avoid a violation of section 37.19.\46\
---------------------------------------------------------------------------
\43\ GSA OIG Report, at 8.
\44\ GSA Determination, at 1.
\45\ Id.; OPO Lease, 6.2, 37.2.
\46\ See GSA Determination, at 2-8.
---------------------------------------------------------------------------
The Domestic and Foreign Emoluments Clauses are two constitutional
provisions designed to prevent self-dealing and corruption by federal
officials, including the President. The Domestic Emoluments Clause
provides: ``The President shall, at stated Times, receive for his
Services, a Compensation, which shall neither be increased nor
diminished during the Period for which he shall have been elected, and
he shall not receive within that Period any other Emolument from the
United States, or any of them.'' \47\ Similarly, the Foreign Emoluments
Clause bars any person ``holding any Office of Profit or Trust''--
including the President--from, ``without the Consent of the Congress,
accept[ing] . . . any present, Emolument, Office, or Title, of any kind
whatever, from any King, Prince, or foreign State.'' \48\ In
establishing these prohibitions, the Framers sought to prevent foreign
governments, the federal government and the states from improperly
influencing the President through financial rewards,\49\ and to address
their ``concern that the President should not have the ability to
convert his or her office for profit.'' \50\
---------------------------------------------------------------------------
\47\ U.S. Const., art. II, 1, cl. 7.
\48\ U.S. Const. art. I, 9, cl. 8.
\49\ 5 Op. O.L.C. 187, 189 (1981).
\50\ Griffin v. United States, 935 F. Supp. 1, 4 (D.D.C. 1995); see
also Brianne J. Gorod, Brian R. Frazelle, and Samuel Houshower, The
Domestic Emoluments Clause: Its Text, Meaning, and Application to
Donald J. Trump, Constitutional Accountability Center, July 2017,
https://bit.ly/2kuOXmE.
---------------------------------------------------------------------------
In January 2019, the GSA OIG released a report finding that GSA's
``decision to exclude the emoluments issues from GSA's consideration of
the lease was improper because GSA, like all government agencies, has
an obligation to uphold and enforce the Constitution; and because the
lease, itself, requires that consideration.'' \51\ GSA's Office of
General Counsel deliberately chose not to consider the Constitution's
Emoluments Clauses because they mistakenly believed the issue was
outside GSA's purview.\52\ The report further found that ``GSA's
unwillingness to address the constitutional issues affected its
analysis of section 37.19 of the lease that led to GSA's conclusion
that Tenant's business structure satisfied the terms and conditions of
the lease.'' \53\ The GSA OIG did not, however, recommend that GSA take
any action to remedy this deficiency in the agency's evaluation of the
lease.
---------------------------------------------------------------------------
\51\ GSA OIG Report, at 1.
\52\ Id. at 4, 16-17.
\53\ Id. at 1.
---------------------------------------------------------------------------
In its response to the OIG's report, GSA did not dispute that it
failed to consider the impact of the Constitution's Domestic and
Foreign Emoluments Clause in approving the OPO Lease, nor did it commit
to undertake an analysis of those issues.\54\ GSA instead referenced
the Department of Justice's (``DOJ'') litigation filings from the
various pending emoluments suits against the President to support the
proposition that the lease ``does not violate the Emoluments Clauses.''
\55\ Unlike the decision of a court, however, DOJ's litigation briefs
are not binding on GSA and do not relieve the agency of its obligation
to evaluate known constitutional questions.
---------------------------------------------------------------------------
\54\ Id., App. B.
\55\ Id. at 2.
---------------------------------------------------------------------------
B. Legal Issues
There are at least two major problems with GSA's management of the
OPO Lease that deserve congressional scrutiny: its wholesale failure to
consider the impact of the Constitution's Emoluments Clauses and its
failure to properly analyze section 37.19 of the lease.
1. The Domestic and Foreign Emoluments Clauses
GSA has never properly evaluated the impact of the Constitution's
Emoluments Clauses on the OPO Lease. The OIG report confirms that GSA
consciously chose to ignore this issue as part of its March 2017 lease-
compliance determination, and the agency has given no indication that
it plans to consider them in the future. The closest GSA has come to
addressing the topic publicly was its response to the OIG's report,
where it summarily adopted DOJ's litigation position that the lease
itself ``does not violate the Emoluments Clauses.'' But this lackluster
effort falls far short of satisfying GSA officials' constitutional
duties.\56\ As the D.C. Circuit has observed, ``[f]ederal officials are
not only bound by the Constitution, they must also take a specific oath
to support and defend it,'' and thus an agency's failure to properly
evaluate known constitutional issues is ``the very paradigm of
arbitrary and capricious administrative action.'' \57\ GSA's
determination was also arbitrary and capricious because GSA ``entirely
failed to consider an important aspect of the problem.'' \58\
---------------------------------------------------------------------------
\56\ Id. at 17.
\57\ Meredith Corp. v. FCC, 809 F.2d 863, 874 (D.C. Cir. 1987);
accord Graceba Total Commc'ns, Inc. v. FCC, 115 F.3d 1038, 1041-42
(D.C. Cir. 1997); McBryde v. Comm. to Review Circuit Council Conduct,
264 F.3d 52, 62 (D.C. Cir. 2001).
\58\ Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983).
---------------------------------------------------------------------------
In addition, GSA misstates the scope of the problem: the question
is not merely whether the lease itself ``violate[s] the Emoluments
Clauses,'' but whether Trump-OPO is using the property, or permitting
it to be used, in an ``unlawful or illegal'' manner, in violation
sections 6.2 and 37.2 of the OPO Lease and the Emoluments Clauses.\59\
CREW and others have documented numerous instances of the apparent
receipt of prohibited emoluments via payments to the Trump
International Hotel.\60\
---------------------------------------------------------------------------
\59\ GSA OIG Report, App. B at 2 (agency's Jan. 9, 2019, response
to the OIG); OPO Lease. 6.2, 37.2.
\60\ Trump's 2,000 Conflicts of Interest (and Counting), Citizens
for Responsibility and Ethics in Washington, updated Aug. 15, 2019,
https://bit.ly/31FxDeP; Jonathan O'Connell, Joshua Partlow, and David
A. Fahrenthold, Trump pledged not to use his office to help his
business. Then he pitched his Florida club for the next G-7, Washington
Post, Aug. 31, 2019, https://wapo.st/2ZKTIXL (noting that ``[t]he Post
has identified at least nine examples of foreign governments spending
money at Trump Properties since Trump took office'' and noting a Trump
Organization official's estimate that ``about 90%'' of the money
foreign governments paid to the Trump Organization was spent at the
Trump International Hotel in Washington, D.C.).
---------------------------------------------------------------------------
2. Section 37.19 of the OPO Lease
GSA also has never properly assessed whether Trump-OPO is in
compliance with section 37.19 of the OPO Lease, which provides that
``[n]o . . . elected official of the Government of the United States .
. . shall be admitted to any share or part of this Lease, or to any
benefit that may arise therefrom.'' Critically, the President has not
divested his 77.5% interest in Trump-OPO; he merely placed it in his
revocable trust, the DJT Revocable Trust. GSA's March 2017 lease-
compliance determination concluded that Trump-OPO had avoided a
violation of section 37.19 based on: (1) President Trump's
establishment of the DJT Revocable Trust; (2) the fact that the
President no longer held a position with any member entity of Trump-
OPO; and (3) amendments to the Trump-OPO internal operating agreement
requiring that money that otherwise would have been distributed to
President Trump during his term in office be credited to an unrecovered
capital contribution account that may only be used for Trump-OPO's
business activities.\61\
---------------------------------------------------------------------------
\61\ GSA Determination, at 4-8.
---------------------------------------------------------------------------
But in reaching this conclusion, GSA failed to conduct any
substantive analysis of the meaning of section 37.19. GSA failed
entirely to consider what qualifies as a ``benefit'' arising from the
OPO Lease or what it means to be ``admitted to any share or part of
th[e] lease.'' This failure falls below the basic standard required for
administrative decision making, for not only must the result of agency
action be within the scope of its lawful authority ``but the process by
which it reaches that result must be logical and rational.'' \62\ Were
the agency to properly analyze the issue, it would see that, in fact,
the trust does not sever the President's interest in the trust
property, nor does Trump-OPO's use of an unrecovered capital
contribution account deprive him of the benefits of the OPO Lease.
---------------------------------------------------------------------------
\62\ Michigan v. EPA, 135 S. Ct. 2699, 2706 (2015).
a. President Trump's revocable trust does not sever his
financial interests in the trust property and, as a result, he derives
---------------------------------------------------------------------------
a benefit and is admitted to a share or part of the OPO Lease.
A reasoned analysis reveals that President Trump does, indeed,
derive ``benefit'' from the OPO Lease and has been ``admitted to a
share or part'' of it in violation of section 37.19. The discussion of
the President's trust in GSA's determination letter ignored the nature
of that trust, which is merely a revocable trust for which he is both
grantor and beneficiary.\63\ It does nothing to sever his financial
interest in the trust property.
---------------------------------------------------------------------------
\63\ Establishing that President Trump is the grantor of the DJT
Revocable Trust, his attorney explained that, ``[a]mong other steps
taken, Mr. Trump conveyed all of his business and investment assets to
The Donald J. Trump Revocable Trust . . . .'' GSA Determination,
Exhibit 1.B at 5 (Letter from Sheri Dillon to Kevin Terry). President
Trump's financial disclosure report likewise establishes he is the
trust's beneficiary, disclosing his financial interest in Trump-OPO
through the DJT Revocable Trust. See Donald J. Trump, Public Financial
Disclosure Report, May 15, 2019 (Part 2, Line 95 (Trump-OPO), App.,
Item 408 (Trump-OPO), and App., at A1 (``All of the Interests listed
below in this exhibit, which were formerly held by Donald J. Trump,
directly or indirectly, are now held by The Donald J. Trump Revocable
Trust.'')), https://bit.ly/2WhTs0Q (``Trump 2019 Financial
Disclosure'').
---------------------------------------------------------------------------
A revocable trust can remain subject to modification and
dissolution at the whim of the grantors after its establishment.\64\
This feature of a revocable trust leaves its property within reach of
the grantor's creditors, for the establishment of a revocable trust
does not truly alienate the grantor from trust property.\65\ In the
analogous context of conflict of interest laws--which, like section
37.19, guard government integrity against the conflicting financial
interest of high officials--OGE has explained: ``[T]he grantor of a
revocable living trust retains such rights of control and enjoyment
with respect to the trust property that OGE must view the grantor as
the true owner of the property.'' \66\ OGE has also emphasized that,
``OGE believes this to be the case whether or not the grantor actually
receives any distribution of trust income and whether or not the
grantor actually serves as trustee.'' \67\
---------------------------------------------------------------------------
\64\ See, e.g., In re: Marriage of Githens, 227 Or. App. 73, 88
(Or. Ct. App. 2009) (``Only nomenclature distinguishes the remainder
interest created by [a revocable] trust from the mere expectancy
arising under a will. Under either the trust or the will, the interest
of the beneficiaries is both revocable and ambulatory.'') (quoting John
Langbein, The Nonprobate Revolution and the Future of the Law of
Succession, 97 Harv. L. Rev. 1108, 1113 (1984)); see also Restatement
(Third) of Trusts 25 (2003) comment a (``[T]he revocable trust is
widely used as a legally accepted substitute for the will as the
central document of an estate plan.''); 67 Fed. Reg. 37965 (May 31,
2002) (grantor of a revocable trust has the power ``to revoke the trust
entirely and to make lessor changes, such as substitutions of
beneficiaries or trustees''), https://bit.ly/2lXz7RS.
\65\ See, e.g., In re Estate of King, 196 Misc. 2d 250, 256, 764
N.Y.S.2d 519, 524 (Surr. Ct. Broome. Co. 2003) (``A revocable trust is
subject to the claims of the grantor's creditors.''); Ackerman v.
Abbott, 978 A.2d 1250, 1256 (D.C. 2009) (``[Trust] had an enforceable
right to require the personal representative to convey the property to
it under the terms of the will (subject, to be sure, to any outstanding
creditor claims and expenses of administration . . . )'').
\66\ Office of Gov't Ethics, DO-02-15, at 7 (2002), https://bit.ly/
2lyKYWB.
\67\ 67 Fed. Reg. 37965, 37966 (May 31, 2002), https://bit.ly/
2lXz7RS.
---------------------------------------------------------------------------
This explanation by OGE demonstrates the ineffectiveness of a
revocable trust to separate a grantor from the trust property. In fact,
Congress gave similar treatment to the property of revocable trusts
when it designed a qualified blind trust mechanism for executive branch
officials.\68\ The mechanism Congress designed, which is predicated on
the establishment of revocable trusts,\69\ treats all known trust
property as the financial interest of the grantor for purposes of the
conflict of interest law:
---------------------------------------------------------------------------
\68\ 5 U.S.C. app. 102(f)(3).
\69\ 5 U.S.C. app. 102(f)(5)(C) (establishing procedures
attendant to dissolution of the qualified blind trust); 5 C.F.R.
2634.410 (Dissolution); Office of Gov't Ethics, Model Qualified Blind
Trust Provisions, OMB No. 3209-0007, at 2 (2016) (lines 18-19 provide
for dissolution by revocation), https://bit.ly/2kkMv25.
An asset placed in a trust by an interested party shall be
considered a financial interest of the reporting individual,
for the purposes of any applicable conflict of interest
statutes, regulations, or rules of the Federal Government
(including section 208 of title 18, United States Code), until
such time as the reporting individual is notified by the
trustee that such asset has been disposed of, or has a value of
less than $1,000.\70\
---------------------------------------------------------------------------
\70\ 5 U.S.C. app. 102(f)(4).
Thus, this mechanism frees grantors from coverage of the primary
conflict of interest law only after they lack the requisite knowledge
of their financial interests to violate that law--a clear recognition
by Congress that placing property in a revocable trust does nothing to
eliminate a financial interest in the property.\71\
---------------------------------------------------------------------------
\71\ 18 U.S.C. 208(a) (conflict of interest prohibition
applicable only to known assets of an employee).
---------------------------------------------------------------------------
Consistent with these well-settled principles of revocable trusts,
the terms of the DJT Revocable Trust make clear that President Trump
has a continuing financial interest in the trust property. Its stated
purpose is to ``hold assets for the exclusive benefit of Donald J.
Trump, and President Trump retains the power to revoke the trust or
appoint new trustees.\72\ President Trump's attorney has also publicly
acknowledged that President Trump has the right to withdraw money or
assets from the trust any time he wishes.\73\ A tax expert who reviewed
this arrangement, summed it up by explaining that ``[f]or tax purposes,
it's as if the trust doesn't exist at all. . . . It's just an entity on
paper, nothing more.'' \74\
---------------------------------------------------------------------------
\72\ Certification of Trustee, Jan. 26, 2017, https://bit.ly/
2lWUsew; GSA Determination, at 6-7 & Exhibit 14.
\73\ Derek Kravitz and Al Shaw, Trump Lawyer Confirms President Can
Pull Money From His Businesses Whenever He Wants, Pro Publica, Apr. 17,
2017, https://bit.ly/2o1OM1C.
\74\ Id. President Trump recently acknowledged his continuing
financial interest in an asset he placed in the revocable trust:
``Turnberry Resort (which I do own) in Scotland.'' Donald J. Trump
(@realDonaldTrump), Twitter, https://bit.ly/2mrywsd; Trump 2019
Financial Disclosure (Part 2, Line 38 and App., Item 157).
b. President Trump continues to derive benefits from the
lease notwithstanding Trump-OPO's distributions to the unrecovered
---------------------------------------------------------------------------
capital contribution account.
Trump-OPO's use of an unrecovered capital contribution account is
likewise insufficient to bring it into compliance with section 37.19 of
the OPO Lease. GSA's determination regarding the OPO Lease cited
assurances by Trump-OPO that ``amounts that would have been distributed
to DJT Holdings LLC,'' through which President Trump holds an interest
in Trump-OPO, ``will instead be credited to the unrecovered capital
contribution account of DJT Holdings LLC'' and ``treated as capital
contributions'' to Trump-OPO.\75\ GSA offered the following summary of
this arrangement: ``In plain terms, what this means is that the funds
will remain in [Trump-OPO] instead of being distributed to DJT Holdings
LLC.'' \76\ Nevertheless, President Trump still benefits from the OPO
Lease in several ways, both tangible and intangible.\77\ I will
summarize highlights of CREW's discussion in a prior submission to
Congress regarding ways he benefits.\78\
---------------------------------------------------------------------------
\75\ GSA Determination, at 7.
\76\ Id.
\77\ Id.
\78\ Letter from CREW to Sens. John Barrasso and Tom Carper, April
25, 2017, https://bit.ly/2lT1hh8.
---------------------------------------------------------------------------
GSA's explanation that ``the funds will remain in [Trump-OPO]''
ignored the fact that the President retained his financial interest in
Trump-OPO. Stated even more plainly, the money remains invested in an
asset that President Trump owns. In addition, any money remaining in
the capital contribution account can be distributed directly to
President Trump or his businesses after he leaves office.\79\ If no
money is drawn from the capital contribution account while he is in
office, all of it may flow to him in the future.
---------------------------------------------------------------------------
\79\ GSA Determination, Exhibit 1.C (the relevant document is the
``First Amendment to Second Amended and Restated Limited Liability
Company Agreement of Old Post Office LLC,'' which is attached to the
Mar. 20, 2017 letter from Sheri Dillon to Kevin Terry).
---------------------------------------------------------------------------
The capital contribution account is broadly available for
``business activities and purposes, such as repayment of debt, capital
improvements, maintenance and repairs, operating expenses, etc.'' \80\
With this broad language, the opportunities for benefitting President
Trump are nearly boundless. The company could use the capital
contribution account to make enhancements to the hotel, which would
benefit President Trump both by increasing the value of his investment
and attract additional revenue. The success of the hotel, in turn,
would strengthen the Trump brand, which further inures to the
President's benefit by increasing the value of, and revenue from, the
vast web of business entities he refused to divest.\81\ In addition,
the value of his investment in Trump-OPO would increase if the capital
contribution account made payments toward the company's loans or other
liabilities. Further, the capital contribution account could be used to
subsidize his other businesses--for example, by purchasing wine for the
hotel from his Trump Vineyards Estates LLC.\82\
---------------------------------------------------------------------------
\80\ GSA Determination, Exhibit 1.C., at 4 (letter from President
Trump's attorney, Sheri Dillon).
\81\ Trump 2019 Financial Disclosure (Part 2).
\82\ Trump 2019 Financial Disclosure (Part 2, Line 110).
---------------------------------------------------------------------------
For these reasons, President Trump has not deprived himself of the
benefits of the OPO Lease by arranging for Trump-OPO to credit money to
an unrecovered capital contribution account that would otherwise be
distributed to him. It was inappropriate for GSA to rely on this
arrangement to justify a conclusion that Trump-OPO remained in
compliance with the OPO Lease. At a minimum, GSA should conduce a new
review of the lease that takes into account the fact that President
Trump continues to be admitted to the benefits of the OPO Lease.
c. Arguments made by President Trump's attorney, on which
GSA may have relied, run contrary to the natural meaning of the lease
language.
Although GSA's lease-compliance determination does not grapple with
the meaning of section 37.19, President Trump's attorney offered
arguments on that issue in urging the agency to deem Trump-OPO in
compliance with the OPO Lease. She argued that Trump-OPO qualified for
an exception to section 37.19 and, alternately, that section 37.19 was
inapplicable because President Trump was a private citizen when the
lease was executed. The extent to which GSA relied on either of these
arguments is unclear, but the OIG report (which is redacted in key
places) seems to suggest GSA accepted the former and rejected the
latter. As the OIG report explains, however, both arguments were
without merit.\83\
---------------------------------------------------------------------------
\83\ GSA OIG Report, at 20-23.
---------------------------------------------------------------------------
As to the first argument, the President's attorney urged GSA to
conclude that, as a privately-held limited liability company (``LLC''),
Trump-OPO qualified for an exception to section 37.19. I encourage the
Subcommittee to review the discussion of the issue in the OIG report,
which ably refutes this argument.\84\ The exception provides that
section 37.19 is inapplicable to ``a shareholder or other beneficial
owner of any publicly held corporation or other entity.'' \85\
President Trump's attorney argued that the phrase ``publicly held''
modified only ``corporation'' and was, therefore, available to Trump-
OPO.\86\ But this nonsensical reading would make the exception
unavailable to a privately held corporation while leaving it available
to any privately held LLC, limited liability partnership, statutory
trust, business trust, common-law trust, real estate investment trust,
unincorporated association, and any other conceivable type of legal
entity that is privately held. Such an outcome would fail to achieve
the section's goal of reducing conflicts of interest. No one could
reasonably argue that a large financial interest in a privately held
LLC--owned primarily by a few family members and bearing an elected
official's name--poses less risk than a few shares of a privately held
corporation with thousands of shareholders, officers, and employees.
---------------------------------------------------------------------------
\84\ GSA Determination, Exhibit 1.B, at 7; GSA OIG Report, at 20-
23.
\85\ OPO Lease at 39.17 (emphasis added).
\86\ GSA OIG Report, at 21-22.
---------------------------------------------------------------------------
As to the second argument, the President's attorney argued that
section 39.17 was inapplicable because the lease was executed when he
was a private citizen, but the OIG Report seems to suggest GSA rejected
this argument.\87\ The attorney essentially urged GSA to read the
phrase ``admitted to'' out of context to support a conclusion that the
term referred to a ``singular transaction or act'' occurring when the
lease was executed.\88\ The language, however, does not bar an elected
official's admittance to the lease. Rather, it bars admittance to any
``share or part'' of the lease or any benefit ``arising therefrom.''
The benefits of the lease will arise across the life of the lease. In
fact, the public statements of GSA and Trump-OPO show they were focused
on ensuring that benefits arise after the President entered
government.\89\
---------------------------------------------------------------------------
\87\ Id.
\88\ GSA Determination, Exhibit 1.C at 6.
\89\ GSA Lease-Compliance Determination, at 2 (``[T]he Lease turned
a building that had been costing taxpayers millions of dollars per year
into a revenue-generating asset.''); Betsy Woodruff, Trump Inc. Had a
Rough Year, but His D.C. Hotel Is Killing It, Daily Beast, Dec. 29,
2017 (``Patricia Tang, the hotel's director of sales and marketing,
said the team there is happy with its success this year. `We are very
pleased with the performance of the hotel in its first full year of
operation, not just financially but also with regards to the
recognition of the high service standards achieved by our associates as
indicated in the reviews and rankings on TripAdvisor, Expedia,
Booking.com,' she told The Daily Beast. `We are looking forward to an
even more successful 2018.' ''), https://bit.ly/2lUPS08.
---------------------------------------------------------------------------
III. Conclusion
For all of these reasons, GSA should undertake a new assessment of
Trump-OPO's compliance with the lease to properly evaluate both the
emoluments issues and the application of section 37.19 to the facts. I
will close by noting an important point: while we strongly disagree
with GSA's actions in this case, ultimate responsibility for the harms
we have identified lies with President Trump. His decision to break
from ethical norms by retaining his vast portfolio of conflicting
financial interests is the true source of these problems.
Thank you for the opportunity to address the Subcommittee today. I
respectfully request that this written testimony be entered into the
record of this hearing. I am also happy to answer questions members of
the Subcommittee may have.
Ms. Titus. Thank you, Mr. Shaub.
We will now go to Chairman DeFazio for the first questions.
Mr. DeFazio. Thanks, Madam Chair.
Ms. Hempowicz, the gentleman sitting next to you said that
because the Justice Department is defending the President in
civil litigation, that this becomes a controlling opinion over
employees of the Government of the United States. Is that
correct?
Ms. Hempowicz. I believe he may have been talking about the
Office of Legal Counsel as its opinions involve this issue
ongoing. I am unaware of any OLC opinion directly on this
situation, although they are notoriously private.
Mr. DeFazio. And for it to be binding, it would have to be
an official opinion, not involved in pleadings in a civil
lawsuit?
Ms. Hempowicz. I think so. But I also think, you know, the
problem is, is that when the GSA initially decided not to look
into this issue, the Department of Justice wasn't involved in
any ongoing litigation on it.
Mr. DeFazio. That is a very good point. I mean, GSA has its
own counsel. They say, well, they certainly couldn't handle
that, why wouldn't they ask the Office of Legal Counsel for an
opinion?
Ms. Hempowicz. I think that is a great question, and I
think the inspector general report highlights an instance 20
years ago where they did exactly that when the question
involved Members of Congress rather than the President.
Mr. DeFazio. Yeah. Mr. Shaub, did you--because you also
talked about GSA and dereliction of duty and not asking that
question. You want to expand on that a little bit?
I don't think your mic's on, or get closer or something.
Mr. Shaub. Sorry. Can you hear me now?
Mr. DeFazio. Yeah.
Mr. Shaub. They had a duty to consider the issue. First of
all, they swore an oath to uphold and support the Constitution.
Second of all, courts have ruled that an agency's failure to
even consider an important issue renders its action arbitrary
and capricious. So that means that they haven't done the basic
thing that agencies do to evaluate a problem. They just simply
punted. They decided not to address it.
Mr. DeFazio. Well, of course, we don't know what was in the
general counsel's legal opinion which led to the estoppel by
the career employee who, shortly after the election, was
corresponding with Ivanka Trump and saying this is all
nonsense, there is nothing wrong with this lease, and by the
way, I want to tell you about my trip to New York and let's
have coffee. Is that normal behavior by a contracting officer
of the Government in the United States dealing with the
daughter of and/or ultimate beneficiary of this?
Mr. Shaub. Yeah, that is not normal for any Government
official. I spent years of my career working with Presidential
nominees, and I never once asked any of them out to coffee.
Mr. DeFazio. I think there was a different attraction there
for this employee.
Mr. Foster, I don't know if you can answer this or not,
but, again, the gentleman sitting next to you alleged that
because the Department of Justice has made pleadings in a civil
litigation case, that that becomes a binding legal opinion upon
employees of the United States Government?
Mr. Foster. Thank you for your question. I can't speak to
the legal impact of the Department of Justice's pleadings. I do
agree that, generally, formal opinions of the Office of Legal
Counsel within the Department of Justice are binding within the
executive branch, unless or until they are overruled by the
Attorney General or the President.
Mr. DeFazio. OK. Thank you.
All right. Thank you, Madam Chair.
Ms. Titus. Mr. Meadows.
Mr. Meadows. Thank you, Madam Chairman.
Mr. Spakovsky, in your prior work, I think you served as an
attorney at DOJ. Is that correct?
Mr. von Spakovsky. That is correct.
Mr. Meadows. And so given that history, can you maybe
elaborate on the role of the DOJ lawsuits and particularly, I
guess, the one involving the constitutional interpretation?
Mr. von Spakovsky. The Justice Department is the lawyer for
the executive branch, including independent agencies and
executive branch agencies and agencies such as GSA.
Mr. Meadows. And they put forth an opinion. Is that
correct?
Mr. von Spakovsky. They put forth all kinds of opinions.
They certainly have a whole long string of opinions on the
Emoluments Clauses. But the point here is that when they take a
position in litigation that a particular Federal issue is
constitutional or unconstitutional, that is binding on the
executive branch, including other agencies.
I not only worked at the Justice Department, but I was a
Commissioner for 2 years at the Federal Election Commission.
And when we had a case, for example, before the U.S. Supreme
Court, even if I as a Commissioner personally believed, or in
my official capacity, that a particular statute was
unconstitutional, it was the Solicitor General of the Justice
Department that argued before the court and argued about its
constitutionality. I had no power to change that.
So this idea that GSA can come up with its own view on the
constitutionality of the Emoluments Clause, it just doesn't--it
is just not in accord with the way the law has been practiced
and the way the Justice Department operates. Just look back to
former Attorney General Eric Holder, who refused to defend
certain Federal statutes, including those affecting gay
marriage, because he said they were unconstitutional. The
Federal agencies involved with those particular statutes could
not have appeared in court and said, oh, well, we disagree with
the Attorney General.
Mr. Meadows. So what you are saying is it would break
historical precedence in terms of the executive branch to allow
the GSA Administrator here, I guess the ranking official that
has been here on the panel before you, who is not an attorney,
to opine on the constitutionality of the Emoluments Clause. Is
that correct?
Mr. von Spakovsky. He can opine all he wants, but his
opinion is irrelevant, as is the opinion of the IG. The
controlling authority is the U.S. Department of Justice.
Mr. Meadows. All right. And so, Ms. Hempowicz--is that
correct--let me come to you. I want to clarify one thing, and I
see they have called votes so I will try to be very brief here.
In your written testimony, on page 4, you say, the ``courts
have adopted a broad definition of emolument as any benefit,
gain, or advantage, including profits from private market
transactions.''
I am not aware of any case that would identify private
market transactions. Can you help me with the case that was
decided where that definition was included? Was that in a
majority opinion?
Ms. Hempowicz. Unfortunately, I can't off the top of my
head, but I will tell you that I----
Mr. Meadows. I don't think there is one. And so here I
would ask you to clarify that, because I don't think there is
one. We have looked, and when you look at it, it seems like,
you know--and you made a definitive statement, so perhaps you
can go back and verify that, either get us the citation or
remove it, and that would be very helpful.
Ms. Hempowicz. I would be happy to.
Mr. Meadows. All right. Thank you.
Mr. Foster, let me come back to you in the 1 minute and 12
seconds I have remaining. CRS, I am a big fan, and in fact, I
applaud the Democrats for continuing to have CRS come as
witnesses. I think it is good in a bipartisan spirit of
transparency.
Has the opinion on the Emoluments Clause, has it changed
over time? Has what CRS interpreted as the emoluments, has it
changed over time? And I know you are new, and so if you don't
know, don't answer.
Mr. Foster. Thank you for your question. I think what I
would say is that CRS' determinations are based in the law and
are based in kind of existing legal precedent. And there is
very little legal precedent on the question of what an
emolument is. It has only recently been addressed by the
Federal courts.
Mr. Meadows. So what you are saying is, is that basically
we need for CRS to have a definitive opinion, we probably need
the courts to rule on this with the pending litigation that is
out there?
Mr. Foster. There are ways that CRS can look at legal
provisions that haven't been definitively interpreted and apply
existing----
Mr. Meadows. But you have, and that has changed over time.
From 2012 to 2016, it has changed in terms of your
interpretation from CRS. Are you aware of that?
Mr. Foster. I am not aware.
Mr. Meadows. I will let you--I see your staff over there. I
will let you get with them, and you can get back with us.
And I yield back.
Ms. Titus. Thank you, Mr. Meadows.
Mr. Foster, we keep hearing from the--or we heard from the
GSA that they were trying to make the new practice consistent
with underlying law, and they quote 8 U.S.C. section 431, 41
U.S.C. section 603(a). That is a criminal provision and a civil
provision that has to do with Members of Congress and
contracts. I would argue that that is not really relevant here,
and I am just asking you, do you think that supersedes the
Constitution that prohibits a President or any elected official
from taking emoluments?
Mr. Foster. Thank you for your question. I have not
reviewed those provisions in preparation for this testimony. I
can say, as a general matter, that statutory law does not
supersede the Constitution.
Ms. Titus. Would you agree with that, Ms. Hempowicz?
Ms. Hempowicz. Yes.
Ms. Titus. Thank you.
Also, we have been hearing all from our friends down here
how much money the post office is making now as a hotel. It is
making all this money. It has been great for the taxpayers, it
is making all this money. Well, if it is making money, then it
is making money for the President, because it is a revocable
trust which he can revoke any time, or he can defer the money
till he leaves office, or he can reinvest the money in the
property, so he is making money. The hotel's making money, the
President's making money.
Mr. Shaub, isn't that a violation of the Emoluments Clause?
Mr. Shaub. It certainly is. The revocable trust does
absolutely nothing to separate him from his assets or his
income. We dealt with revocable trusts all the time with
Presidential appointees coming in the Government, and we helped
them work through their conflicts of interest and consider
these nonentities.
Ms. Titus. We also heard from the GSA and the IG that it
used to be a best practice--that is their word--a best practice
of the GSA to put something in the lease like section 37.19
that prohibits Members of Congress or elected officials or
members of the administration. If it was a best practice before
President Trump came in, why isn't it a best practice now? Does
that make any sense to you, Mr. Shaub?
Mr. Shaub. Well, that is the most confounding thing about
GSA's response. Their solution to this hard problem is to never
address it again and eliminate this prophylactic, conflicts-of-
interest provision from future contracts. So they are
compounding a dereliction of duty with an even bigger
dereliction of duty.
Ms. Titus. And weren't you, Mr. Shaub, the Director of the
OGE when Donald Trump was elected, and didn't you give him some
advice about how to avoid these conflicts of interest? Could
you share with us that advice?
Mr. Shaub. Well, I think I have been very public about the
fact that all Presidents should divest their conflicting
financial interests, and the same is true for the current
President.
Ms. Titus. Did he follow your advice?
Mr. Shaub. He did not.
Ms. Titus. No, he didn't.
Well, thank you all very much. We are going to have to go
and--oh, where did she come from? All right. Sorry.
We now have a new Member with us. We will hear from Mrs.
Miller.
Mrs. Miller. Thank you, Madam Chairwoman.
I want to thank you all for being here.
And once again, I want to emphasize that the very first
hearing that we had on this committee was called, ``The Cost of
Doing Nothing: Why Investing in Our Nation's Infrastructure
Cannot Wait.'' It is more important to my constituents that we
act swiftly to improve our Nation's infrastructure.
Mr. Spakovsky, how appropriate is it for a contractor to
make a determination based on an unsettled law in the courts?
Mr. von Spakovsky. Well, I think that is very problematic
for a Federal agency, and I can say that as a former
Commissioner of a Federal agency, and in particular, when the
Justice Department is taking a position, again, because they
are the controlling authority particularly on constitutional
issues, GSA can't go against that. And the position of the
Justice Department throughout all of the litigation over the
Trump Hotel and the lease is that this is not a violation of
the Emoluments Clause.
Mrs. Miller. Thank you very much.
I yield back my time to Mr. Meadows.
Mr. Meadows. I just want to thank all of you. I want to
thank the gentlewoman from West Virginia, and I want to thank
the chairman. And I will yield back.
Ms. Titus. Thank you, Mr. Meadows.
Any further questions from the subcommittee?
Seeing none, I would like to thank each of the witnesses
for your testimony today. Your contribution to our discussion
has been very informative, very helpful.
I would ask unanimous consent that the record of today's
hearing remain open until such time as our witnesses have
provided answers to any questions that may be submitted to them
in writing, and unanimous consent that the record remain open
for 15 days for any additional comments and information
submitted by Members or witnesses to be included in the record
of today's hearing.
Without objection, so ordered.
If no other Members have anything to add, the subcommittee
stands adjourned. Thank you.
[Whereupon, at 1:17 p.m., the subcommittee was adjourned.]
Submissions for the Record
----------
GSA Public Buildings Service Memo of March 29, 2019, to Inspector
General, Submitted for the Record by Hon. Dina Titus
March 29, 2019
TO: Carol F. Ochoa, Inspector General (J)
THROUGH: Daniel W. Mathews, Commissioner, Public Buildings Service
(PBS)
FROM: Stuart Burns, Assistant Commissioner, Portfolio Management
and Customer Engagement (PT)
SUBJECT: Final Report--Evaluation of GSA's Management and
Administration of the Old Post Office Building Lease (JE19-002)
This transmittal memo and the attached Management Decision Record
and Corrective Action Plan (CAP) are in response to the sole
recommendation contained in the Office of Inspector General's final
report entitled Evaluation of GSA's Management and Administration of
the Old Post Office Building Lease, dated January 16, 2019 (Evaluation
Report). GSA's agency response to the Evaluation Report, dated January
9, 2019, was submitted by the Office of General Counsel since the
analysis and findings contained in the report primarily involved
actions taken by OGC. However, since the recommendation in the
Evaluation Report involves program activity residing within the Public
Buildings Service (PBS), the Management Decision Record and CAP are
being provided by PBS.
The Evaluation Report recommended:
that before continuing to use the language [in Section
37.19 of the Old Post Office (OPO) outlease], 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.
Evaluation Report at 24.
Your office found that, ``Section 37.19 [of the OPO outlease] is
based on an 1808 Act of Congress that prohibited Members of Congress
from participating in contracts or agreements with the United States,
and subjected Members and government officers who made such contracts
to criminal prosecution.'' Evaluation Report at p. 7 (citation
omitted). After tracing the development of the 1808 Act, the Evaluation
Report summarized the current status of the law as follows: `` `A
Member of Congress may not enter into or benefit from a contract or
agreement or any part of a contract or agreement with the Federal
Government.' '' Id. at p. 8, citing Pub. L. No. 111-350, 124 Stat.
3805-06 (Jan. 4., 2011); 41 U.S.C. 6306(a). See also Evaluation
Report at p. 7, note 29 (``Versions of these provisions remain in force
today in the criminal and public contract laws of the United States
Code. See 18 U.S.C. 431-432; 41 U.S.C. 6306(a).'').
Based on the findings and recommendations in the Evaluation Report,
GSA will no longer use the language contained in Section 37.19 of the
OPO outlease in future outleases. Instead, GSA will insert into all
outleases a clause putting outlessees on notice of the requirements of
18 U.S.C. 431 and 41 U.S.C. 6306(a). As noted in the Evaluation
Report, such language reflects ``the understood policy, intent, and
purpose of Congress in the original enactments. . . . '' Evaluation
Report at p. 8, citing Pub. L. No. 111-350, 2(b) (``CONFORMITY WITH
ORIGINAL INTENT''), 124 Stat. 3677, 3677 (Jan. 4, 2011).
GSA understands the U.S. House of Representatives passed a bill on
March 8, 2019, that would change many current laws regarding conflicts
and contracts by the President, Vice President, and Members of
Congress. See For The People Act of 2019, H.R. 1, 116th Cong. 8014
(2019). Should the provisions of this bill, or any other similar
provisions, become enacted into law, PBS will further adjust its model
forms and templates accordingly to reflect the current state of the
law.
As noted on the attached CAP, PBS is in the process of conducting a
review of its current outleasing forms and templates in order to make
the necessary changes, if any, as noted above. Please feel free to
contact Stuart Burns with any questions.
Attachments (2):
Corrective Action Plan
Management Decision Record
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Evaluation of GSA's Management and Administration of the Old Post
Office--Building Lease (JE19-002)
OFFICE OF PORTFOLIO MANAGEMENT AND CUSTOMER ENGAGEMENT
Corrective Action Plan
Designated Responding Official: Stuart Burns, Assistant Commissioner,
PBS Office of Portfolio Management and Customer Engagement (PT)
Contact Person: Maria Torres
Telephone Number: XXX-XXX-XXXX
Date: March 29, 2019
Recommendation (Only one recommendation per page)
1. We recommend that before continuing to use the language [in
Section 37.19 of the Old Post Office (OPO) outlease], 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.
------------------------------------------------------------------------
Supporting
Documentation to be
Action to be Taken Step sent to the GAO/IG Documentation will be
by Step Audit Management Sent Last Day
Division
------------------------------------------------------------------------
001 Review existing Copy of revised December 31, 2019
outlease forms to outleasing forms, if
determine what, if any, applicable
revisions need to
occur. Update
outleasing forms as
necessary.
002 Update the Copy of revised March 31, 2020
Outleasing Program Outleasing Program
Guide Guide
003 Update forms section Screenshot of updated March 31, 2020
on outleasing website outleasing site,
with updated outleasing specifics on section
forms (if applicable) with most current
forms, and replace
existing Outlease
Program Guide with
newest version
004 Update Outleasing Copy of updated June 30, 2020
Contract Training to Outleasing Contract
address recommendation Training slide deck
findings
------------------------------------------------------------------------
GSA Office of Inspector General Memo of September 6, 2019, to GSA
Deputy Administrator, Submitted for the Record by Hon. Dina Titus
September 6, 2019
TO: ALLISON FAHRENKOPF BRIGATI, DEPUTY ADMINISTRATOR
CC: DANIEL MATTHEWS, COMMISSIONER, PUBLIC BUILDINGS SERVICE
JACK ST. JOHN, GENERAL COUNSEL
THERESA OTTERY, DIRECTOR, OFFICE OF EXECUTIVE SECRETARIAT
AND AUDIT MANAGEMENT
PATRICIA SHEEHAN, ASSISTANT INSPECTOR GENERAL FOR
INSPECTIONS
FROM: CAROL OCHOA, INSPECTOR GENERAL
SUBJECT: Response to Management Decision: Evaluation of GSA's
Management and Administration of the Old Post Office Building Lease
I am responding to your August 26, 2019 Management Decision letter
with respect to the OIG's recommendation in the January 16, 2019
Evaluation of GSA's Management and Administration of the Old Post
Office Lease (Report).
After finding the agency's proposed corrective action plan (CAP)
non-responsive, Assistant Inspector General Sheehan sought your
assistance as provided in Chapter 3, 2(f) of GSA Order ADM P 2030.2D.
Your Management Decision, issued pursuant to 2(g), finds that ``the
agency's interpretation of the Report's recommendation as only applying
prospectively was reasonable.'' Your Management Decision also accepts
that the OIG ``intended for the Report's recommendation to be broader
than it was understood by the agency,'' applying both to current and
prospective leases.
I appreciate your attention to this matter, but must note my
disagreement with the conclusion that the agency's interpretation of
the recommendation was reasonable. While I accept that PBS officials
interpreted the recommendation to apply solely to prospective leases,
the language and context of the recommendation do not support that
reading.
In their June 14, 2019 memorandum to Assistant Inspector General
Sheehan, Commissioner Matthews and Assistant Commissioner Burns quoted
the Report in explaining how they reached their understanding:
[W]e interpreted the Report, and its recommendation that we
revise the language of the Interested Parties provision to
avoid ambiguity, as applying to ``other'' (namely, future)
leases.
The meaning Commissioner Matthews and Assistant Commissioner Burns
attribute to the Report's use of ``other'' overlooks the context in
which the quoted word appears. The quoted word comes from the sentence
immediately preceding the recommendation:
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.\1\
---------------------------------------------------------------------------
\1\ Report, p. 24.
These ``other leases'' are the Tariff Building and David W. Dyer
Building leases, as discussed in the paragraph immediately preceding
the Conclusion and Recommendation and elsewhere in the Report.\2\ These
and the OPO lease are existing leases, not leases GSA may enter into in
the future, a word not used in our Report.
---------------------------------------------------------------------------
\2\ Id. at pp. 7, 23.
---------------------------------------------------------------------------
In a similar vein, the agency has misconstrued the OIG's statement
in the Report that ``GSA agreed with our recommendation.'' \3\ This
acknowledgement that the agency stated its agreement with our
recommendation in its January 9, 2019 response to the Report should not
be interpreted as our concurrence with the agency's later stated
position that the recommendation was prospective only.
---------------------------------------------------------------------------
\3\ Id. at p. 24.
---------------------------------------------------------------------------
The Report recommended ``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'' (emphasis added). The agency's
response to the Report stated, ``the agency agrees with the report's
single recommendation and will take action consistent with that
recommendation prior to continuing to use the language of Section 37.19
of the Old Post Office lease in the future.'' This statement does not
in any way suggest that the agency believed our recommendation was
inapplicable to the agency's continued use of the language in existing
leases and instead pertained solely to potential use of the language in
future leases. Moreover, none of the agency attorneys who presented the
agency's comments on the draft and final Report expressed such an
interpretation in meetings with the OIG about the Report. It was only
after the OIG rejected the agency's proposed corrective action plan
that PBS officials first articulated their belief to us that our
recommendation that GSA take certain steps ``before continuing to use
the language'' meant instead that GSA should take those steps only if
it contemplated using the language in new leases.
I also considered your suggestion in the Management Decision that
the OIG amend the Report's recommendation so that PBS will be in a
position to better respond. While amending a recommendation is within
an OIG's authority, I see no need for that here. The Report
specifically addresses each matter covered by the Report's
recommendation. The Report discusses the history and original purpose
for the language that GSA used for Section 37.19; the ambiguities GSA
attorneys found with the Section's primary clause and the proviso; and
the relevance of the constitutional avoidance doctrine for interpreting
Section 37.19 in view of the potential emoluments issues that GSA
recognized and our Report supports. As noted, the recommendation itself
is also quite specific as to the steps GSA should take to correct
shortcomings in its decision-making process for interpreting Section
37.19, without being prescriptive as to the end result:
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.
Finally, to the extent PBS misunderstood the recommendation, our
exchange of memoranda on this issue should resolve that
misunderstanding.
In summary, for the reasons stated in Ms. Sheehan's July 26, 2019
memorandum to you, the OIG believes the agency's proposed corrective
action plan is not responsive to our recommendation. Your memorandum
does not address the substantive issues outlined in Ms. Sheehan's
memorandum. Pursuant to the Inspector General Act, the OIG will report
this as an outstanding recommendation in the upcoming and future
Semiannual Reports until the recommendation is resolved, 5 U.S.C. App.
3, 5.
United States of America v. 3,726 Rentable Square Feet of Office Space,
et al., 4:17-cv-02034-RBH (D.S.C. Florence Div.), Submitted for the
Record by Hon. Steve Cohen
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
SOUTH CAROLINA FLORENCE DIVSION
UNITED STATES OF AMERICA,
Plaintiff,
vs.
3,726 RENTABLE SQUARE FEET OF
OFFICE SPACE (3,240 ANSI BOMA
OFFICE AREA (ABOA USABLE
SQUARE FEET OF SPACE), more or
less, and FIVE PARKING SPACES,
situated in the City of Myrtle
Beach, Horry County, South
Carolina; Rice REI, LLC,
et. al.,
Defendants.
Civil No._____
complaint in condemnation
1. This is a civil action brought by the United States of America
at the request of the Acting Commissioner, Public Buildings Service,
General Services Administration (``GSA''), for the taking of an
interest in property in Myrtle Beach, South Carolina, under the power
of eminent domain through a Declaration of Taking, and for the
determination and award of just compensation to the owner and parties
in interest.
2. On April 2, 2007, GSA entered into a ten-year lease with Rice
REI, LLC, for office space in Myrtle Beach, South Carolina, for use by
the Federal Bureau of Investigation (``FBI''). The lease term was to
run from September 1, 2007 to August 31, 2018. Recently, GSA became
aware that Rice REI, LLC is wholly owned by Congressman Tom Rice, who
became a member of Congress in January 2013 and remains so to date.
Pursuant to 18 U.S.C. Sec. 431, contracts between members of Congress
and the federal government are prohibited, and the lease in question
was voided upon Congressman Rice's election and assumption of office.
Accordingly, the United States is condemning a leasehold interest in
the Myrtle Beach property for fourteen months to allow adequate time
for suitable accommodation for the FBI to be identified elsewhere and
outfitted for use.
3. The Court has jurisdiction over all relevant matters in the
case as provided by 28 U.S.C. Sec. 1358.
4. The authority for the acquisition of the estate in property is
set forth in Schedule A, attached hereto and made a part hereof. As
stated in Schedule A, the interest in the property is taken pursuant to
the authority of the Act of Congress approved August 1, 1888 (40 U.S.C.
Sec. 3113), as amended; the Act of Congress approved February 26, 1931
(40 U.S.C. Sec. 3114); 40 U.S.C. Sec. 581(c)(1), which authorizes the
Administrator of GSA to acquire by condemnation real estate and
interests in real estate; and the Consolidated Appropriations Act of
2017, Pub. L. No. 115-31, which appropriates funds for this
acquisition. The authority granted to the Administrator of GSA in 40
U.S.C. Sec. 581(c)(1), to acquire by condemnation real estate or
interests in real estate, was delegated to the Office of the
Commissioner by Chapter 5 Part I, paragraph 2.d of the GSA Delegations
of Authority Manual ADM P 5450.39D, Nov. 16, 2011, as revised by PBS
Order 5450.1, March 4, 2015.
5. The public purpose for which said land is taken is for the
continued use and occupancy of office space by the Federal Bureau of
Investigation, in furtherance of mission needs, as set forth in
Schedule B, attached hereto and made a part hereof.
6. A legal description of the property being taken is set forth in
Schedule C, attached hereto and made a part hereof.
7. An aerial photograph and surveys showing the property in which
the interest is being taken is set forth in Schedule D, attached hereto
and made a part hereof.
8. The estate taken is described in Schedule E, attached hereto
and made a part hereof.
9. The estimate of just compensation is stated in Schedule F,
attached hereto and made a part hereof.
10. The names and addresses of known parties having or claiming an
interest in said property are set forth in Schedule G, attached hereto
and made a part hereof.
WHEREFORE, plaintiff requests judgment that the property and
interests be condemned, and that just compensation for the taking be
ascertained and awarded, and for such other relief as may be lawful and
proper.
Dated: August 2, 2017.
Respectfully submitted,
BETH DRAKE
United States Attorney
By: s/Lee E. Berlinsky
LEE E. BERLINSKY, Fed ID #XXXXX
Assistant United States Attorney
United States Attorney's Office
151 Meeting Street, Suite 200
Charleston, SC 29401
Telephone: (843) XXX-XXXX
Facsimile: (843) XXX-XXXX
Email: [email protected]
s/Daniel W. Kastner
DANIEL W. KASTNER
Trial Attorney
Environment & Natural Resources Division
U.S. Department of Justice
Post Office Box 7611
Washington, D.C. 20044-7611
Telephone: (202) XXX-XXXX
Facsimile: (202) XXX-XXXX
Email: [email protected]
certificate of service
I hereby certify that on August 2, 2017, I electronically filed the
foregoing with the Clerk of the Court using the CM/ECF System, and
mailed by United States Postal Service the filed documents to the
following non-CM/ECF participants:
Rice REI, LLC, a Limited Liability Company
950 48th Avenue, N, Suite 200
Myrtle Beach, SC 29577
South State Bank
2440 Mall Drive
Charleston, SC 29406
s/Daniel W. Kastner
DANIEL W. KASTNER
Attorney for Plaintiff United States
Policy Excerpt, ``Trump--Donation of Profits from Foreign Government
Patronage,'' Trump Organization, Submitted for the Record by Hon. John
Garamendi
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
``Report of Material Provisions of the Old Post Office Development
Agreement,'' GSA, June 2013, Submitted for the Record by Hon. Mark
Meadows
GSA--Report of Material Provisions of the Old Post Office Development
Agreement, June 2013
V. Material Provisions of the Proposed Lease
Term: Ground Lease with a term of 60 years from the
opening date of the hotel.
Annual Rent: Trump will pay a minimum annual base rent of
$3 million, escalated on an annual basis at the Consumer Price Index
(CPI). The rent will not decrease during the term of the lease. Rent
will start the earlier of eight months from start of construction or
one year and eight months after lease execution.
Percentage Rent Difference: Trump will also pay a
percentage rent difference if the Percentage of Gross Revenues exceeds
the minimum base rent payment in accordance with the following
structure: Lease Years 1-10, three (3%) percent; during Lease Years 11-
20, three and one half (3.5%) percent; during Lease Years 21-30, four
(4%) percent; during Lease Years 31-40, four and one half (4.5%)
percent; during Lease Years 41-50, five (5%) percent; and during Lease
Years 51-60, five and one half (5.5%) percent.
Proceeds from Sale or Refinance: If there are proceeds
from a sale or refinancing by Trump, Trump first receives a 20%
Internal Rate of Return on their equity. GSA would then receive 15% of
any remaining proceeds beyond the initial Trump return. The deferred
participation continues at every such event throughout the term of the
lease for all such transactions, even if Trump (or a subsequent
purchaser) were to sell its interest. lf Trump sells the entire
leasehold interest, the new lessee would only be entitled to a 12%
return, in lieu of the Trump preferred return of 20%, with GSA
receiving the same 15% of any remaining proceeds beyond the initial 12%
return.
Taxes: Trump shall be responsible for and pay directly
all taxes arising out of or in connection with the Lease now in effect
or in the future.
Lease of Land and Improvements: GSA's fee interest in the
land and its interests under the Lease shall remain superior to the
interests of any other person and shall not be subordinated.
Public Access: Trump shall permit access to the clock
tower, which will continue to be operated by the National Park Service
(NPS), by the public and by the Washington Ringing Society. In
addition, Trump will provide public access to tour the historically and
architecturally significant portions of the cortile as well as the
newly designed Congress Bells Gallery and Exhibition Gallery. To the
maximum extent possible, Trump will permit public access to the clock
tower during construction, but, due to safety concerns, access will
most likely be curtailed for some extended duration.
Security Deposit: Upon execution of the Lease, Trump must
deliver an unconditional, irrevocable letter of credit in the amount of
$4 million. The letter of credit steps down to $2,096,308 in May 2014
(to coincide with granting Trump exclusive possession) if Permit
Termination (described below) is not exercised and to $0 at hotel
opening. The only circumstances under which the letter of credit is
returned to Trump is if Trump
* * * * * * *
``Management Agreement'' shall mean an agreement between Tenant and
Operator for the management or operation of the Hotel, a true copy of
which shall be provided to Landlord, within ten (10) days following its
execution, together with any amendments, if and when executed.
``Market Rent'' shall have the meaning ascribed thereto in Section
33.2(a).
``Memorandum of Understanding (Jurisdiction)'' shall be in the form
attached hereto as Exhibit L.
``Mezzanine Lender'' shall mean the secured lender (any Lead Lender
of which shall be an Institutional Lender) which is the holder of a
pledge of all of the direct or indirect ownership interest in Tenant.
``Mezzanine Loan'' shall mean any debt financing by a Mezzanine
Lender where the collateral for such loan is all of the direct or
indirect ownership interest in Tenant.
``Minimum Hold Period'' shall have the meaning ascribed thereto in
Section 6.5.
``Minimum Operating Standard'' shall have the meaning ascribed
thereto in Section 32.1(c).
``Minor Sublease'' shall mean a Sublease (x) or combination of
Subleases to a Space Tenant and its Affiliates totaling less than a
(b) (4) usable square feet at the Premises and (b) (4)
``Minor Subtenant'' shall mean any Space Tenant that is a party to
a Minor Sublease.
``Monetary Breach'' shall have the meaning ascribed thereto in
Section 27.1.
``Monthly Base Rent'' shall mean the following amounts paid in
advance on or before the 1st day of each calendar month during the
following periods:
Beginning on the Rent Commencement Date, Monthly Base Rent
shall be payable in the amount of Two Hundred Fifty Thousand
Dollars ($250,000.00) per month, as adjusted on the Adjustment
Date pursuant to the next paragraph.
Subject to the last sentence of this paragraph, on each
Adjustment Rent, Monthly Base Rent shall be adjusted upward, if
any, to reflect the percentage (b) (4) (b) (4)
during the immediately preceding Adjustment Period, calculated
as follows: the Monthly Base Rent in effect as of such
Adjustment Date shall be multiplied by a fraction, the
numerator of which is the CPI published most recently prior to
the Adjustment Date, and the denominator of which is the CPI
published for the month and year of the immediately preceding
Adjustment Date. (On the first Adjustment Date, the
``immediately preceding Adjustment Date'' shall mean the
Commencement Date.) In computing any upward adjustment, the
percentage adjustment to Monthly Base Rent on any Adjustment
Date shall not exceed (b) (4) of the Monthly Base Rent in
effect during the immediately preceding Adjustment Period.
(b) (4)
(b) (4)
``Monthly Base Rent Floor'' shall have the meaning ascribed thereto
in the definition of Monthly Base Rent.
``Mortgaged Premises'' shall have the meaning ascribed thereto in
Section 18.1(d).
``Mortgagee Excused Defaults'' shall have the meaning ascribed
thereto in Section 18.4.
``Mortgagee Trigger Event'' shall have the meaning ascribed thereto
in Section 18.4.
``Net Worth'' shall mean, as of a given date, (x) the total assets
of such Person as of such date less (y) such Person's total liabilities
as of such date, as determined in accordance with GAAP.
``NHPA'' shall mean the National Historic Preservation Act of 1966,
as amended, 16 U.S.C. 470 et seq. and all regulations promulgated
thereunder as such statute and regulations may be amended, and any
successor act or regulations.
``Non-Compliance Cure Period'' shall have the meaning ascribed
thereto in Section 32.1(f).
``Non-Compliance Notice'' shall have the meaning ascribed thereto
in Section 32.1(e).
``Non-Hotel Tenant Affiliate Products'' shall have the meaning
ascribed thereto in the definition of Excluded Tenant Affiliate
Revenues.
``Non-Lead Lender'' shall mean any lender who is not a Lead Lender.
Any Non-Lead Lender shall be a Person that (i) is not listed on any
Government Lists and is not an Excluded Contractor, (ii) is not a
Person who has been determined by competent authority to be subject to
the prohibitions contained in Presidential Executive Order No. 13224
(Sept. 23, 2001) or any other similar prohibitions contained in the
rules and regulations of OFAC or in any enabling legislation or other
Presidential Executive Orders in respect thereof, and (iii) has not
been previously indicted for or convicted of any Patriot Act Offense.
``Non-Monetary Breach'' shall have the meaning ascribed thereto in
Section 27.1.
``Notice to Mortgagee'' shall have the meaning ascribed thereto in
Section 18.5(a).
``NPS'' shall mean the U.S. Department of the Interior, National
Park Service.
Photos Submitted for the Record by Hon. Mark Meadows
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Old Post Office, 2013
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Hotel groundbreaking, 2014
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Hotel groundbreaking, 2014
Joint Statement of Professor Josh Blackman and Lecturer Seth Barrett
Tillman, Submitted for the Record by Hon. Mark Meadows
Chairman Titus and Ranking Member Meadows:
We thank you for the opportunity to submit a written statement, as
we were not able to attend the hearing in person. Our biographical
information appears at the end of our written statement.
Since January 2017, litigants have alleged that President Trump is
violating the Foreign and Domestic Emoluments Clauses. We have filed
several amicus briefs in these cases. We contend that the phrase
``emolument'' used in the Constitution does not extend to business
transactions for value. Rather, ``emoluments'' are the lawful
compensation or profits that are derived from the discharge of the
duties of an office. See Hoyt v. U.S., 51 U.S. (10 How.) 109, 135
(1850). President Trump's business activities may raise ethical
conflicts under modern good governance standards, but they raise no
constitutional conflicts under the Foreign or Domestic Emoluments
Clauses.
Our briefs have discussed an important historical incident in the
early years of our Republic. In 1793, President George Washington
purchased four lots of land at a public auction in the new federal
capital. If an ``emolument'' includes anything of value, then President
Washington received something of value from the Federal Government,
beyond his regular salary--that is, he received the land. Therefore, he
would have violated the Domestic Emoluments Clause. The better reading,
we contend, is that ``emolument'' is limited to the lawful compensation
or profits that arise from the discharge of the duties of an office.
Under this position, Washington was not a lawbreaker.
However, a January 2019 report from the Office of Inspector
General, General Services Administration, reached a different
conclusion. The report asserted that Washington purchased private,
rather than public property at the auctions.\1\ Specifically, the
report stated that the sales ``did not provide [President Washington
with] a benefit from the United States.'' Therefore, the Inspector
General reasoned, these transactions did not implicate the Domestic
Emoluments Clause. This conclusion is not correct.
---------------------------------------------------------------------------
\1\ Evaluation of GSA's Management and Administration of the Old
Post Office Building Lease, at 15-16 & App'x A (Jan. 16, 2019), http://
bit.ly/2FWQbQl.
---------------------------------------------------------------------------
Bob Arnebeck, a historian with particular expertise concerning
President Washington and land transactions in the early federal
capital, responded to the Inspector General's Report. He explained that
our first President purchased public, not private land.\2\ And, if
there were any doubts about this record, the President's own
correspondences repeatedly referred to the land and the sale as
``public.'' \3\ We discussed the Inspector General's error at some
length in an amicus brief submitted to the U.S. Court of Appeals for
the Fourth Circuit.\4\
---------------------------------------------------------------------------
\2\ Bob Arnebeck, Not Gogol's IG, but close, Washington Examined
(Jan. 19, 2019), https://perma.cc/H3MR-2G3M.
\3\ See Letter from George Washington to the District of Columbia
Commissioners (Sept. 28, 1798), https://founders.archives.gov/
documents/Washington/06-03-02-0023 (stating that ``all the lots I have
purchased'' as having been purchased ``from the Public'' (emphases in
the original)); id. (describing the auction as a ``public sale,'' not a
private sale); Letter from George Washington to Thomas Jefferson (Mar.
31, 1791), https://founders.archives.gov/documents/Washington/05-08-02-
0019 (explaining the agreement between the proprietors and federal
government as follows: ``The Landholders [Proprietors] to have the use
and profits of all their ground until the city is laid off into lots,
and sale is made of those lots which, by this agreement, become public
property.'' (emphasis added)).
\4\ Brief of Amici Curiae Scholar Seth Barrett Tillman and the
Judicial Education Project in Support of Defendant-Appellant at 5-10,
District of Columbia and State of Maryland v. Donald J. Trump, in his
individual capacity, App. No. 18-2488 (4th Cir. Jan. 31, 2019), ECF No.
31-1, 2019 WL 411728, http://bit.ly/CA4Brief.
---------------------------------------------------------------------------
The Inspector General's error was understandable, She was reviewing
intricate financial and historical records from two centuries ago in an
area where her office and staff may lack the requisite expertise. We
object, however, to her continued unwillingness to acknowledge this
serious error. Specifically, Tillman wrote, emailed, and called the
Inspector General's Office many times over the past nine months,
flagging the plain errors in the report. The Inspector General has
taken no actions to correct its error. Here is a brief summary of the
communications:
February 4, 2019: Tillman mailed a letter to the Office
of Inspector General noting that the ``report errs.'' \5\ Tillman urged
the Inspector General to ``consider modifying your findings,'' as the
report ``has been cited'' in litigation in two federal courts. Tillman
did not receive any response.
---------------------------------------------------------------------------
\5\ Letter from Seth Barrett Tillman to Office of Inspector General
(Feb. 4, 2019), http://bit.ly/2m91UTS.
---------------------------------------------------------------------------
April 8, 2019: Tillman wrote a second, more extensive,
letter to Inspector General Ochoa.\6\ Neither General Ochoa nor anyone
else at the Office of Inspector General responded to Tillman's April 8,
2019 letter. The letter explained, in part:
---------------------------------------------------------------------------
\6\ Letter from Seth Barrett Tillman to the Honorable Carol Fortine
Ochoa, Inspector General, U.S. General Services Administration (Apr. 8,
2019), http://bit.ly/2mATqF7.
Anyone can make a mistake--but it would be far worse than
stubbornness not to correct this report. The OIG Report is
being actively used in litigation against the President of
the United States in regard to a point where the report
plainly errs. It is now long past time for your office to
address that error. There is no inspector general to look
---------------------------------------------------------------------------
into wrongdoing by the inspectors general's offices.
April 29, 2019: Tillman called the Office of Inspector
General's public affairs office. A representative from that office
asked Tillman to retransmit his prior two letters (from February 4 and
April 8, 2019) to them by email. He did so on April 29, 2019.\7\ That
message included several attachments, including extracts from books by
leading historians supporting his position. Once again, Tillman
received no response from the public affairs office or from anyone else
at the Office of the Inspector General.
---------------------------------------------------------------------------
\7\ Email from Seth Barrett Tillman to IG/GSA Office of Public
Affairs (Apr. 29, 2019), http://bit.ly/2kBCFcf.
---------------------------------------------------------------------------
April 30, 2019: Tillman and Martin spoke by telephone.
Martin asked Tillman to share his materials. Tillman did so on April
30, 2019.\8\ Tillman received only a pro forma response from Martin,
also on April 30, stating: ``I have received your email.'' \9\ Tillman
replied, and offered ``to answer[] any questions [Martin] or [his]
staff/colleagues might have.'' \10\
---------------------------------------------------------------------------
\8\ Email from Seth Barrett Tillman to Edward Martin, Counsel to
the Inspector General (Apr. 30, 2019), http://bit.ly/2kCgK4R.
\9\ Letter from Edward Martin to Seth Barrett Tillman (Apr. 30,
2019), http://bit.ly/2161xJm.
\10\ Letter from Seth Barrett Tillman to Edward Martin (Apr. 30,
2019), http://bit.ly/2161xJm.
---------------------------------------------------------------------------
May 3, 2019: Tillman emailed Martin, and asked ``if you
or your colleagues are giving my letter (and its attachments) active
consideration, and when I might expect either: [1] a response to my
letter; or, [2] a revision to JE19-002 (or both).'' \11\ Martin
responded: ``I have reviewed the documents you sent me on April 30,
2019. The GSA OIG's Evaluation of GSA's Management and Administration
of the Old Post Office Lease, dated January 16, 2019, is a final report
and speaks for itself.'' \12\
---------------------------------------------------------------------------
\11\ Email from Seth Barrett Tillman to Edward Martin (May 3,
2019), http://bit.ly/2kX0onE.
\12\ Email from Edward Martin to Seth Barrett Tillman (May 3,
2019), http://bit.ly/2kX0onE.
The report does not speak for itself. It is in error. And the
Inspector General has taken no steps to correct a plain historical
error.
Because we are unable to participate in the hearing, we provide the
subcommittee with the following questions that should be asked of the
Inspector General.
1. The report states ``The evidence that we found suggests that
Washington purchased privately owned property during his presidency.''
What evidence did you rely on to reach this conclusion? In addition to
the sources you. identify, specify the particular passages and pages
supporting your conclusion.
2. The report states ``The evidence similarly suggests that the
Commissioners' participation in the sales did not provide a benefit
from the United States.'' What evidence did you rely on to reach this
conclusion? In addition to the sources you identify, specify the
particular passages and pages supporting your conclusion.
3. Can OIG/GSA identify any financial records proving that, after
the public auctions were held by the commissioners, private landowners
were paid for the land which was sold at the auction?
4. Can OIG/GSA identify any nonfinancial records, such as personal
correspondence, where a private landowner stated that, following the
public auctions held by the commissioners, the private landowner was
paid the monies connected to the successful bids?
5. Can you confirm that the report was generated entirely
internally by OIG/GSA employees? Were the report's authors in contact
with or did they consult any non-GSA-employees (eg, outside historians
and/or others with purported expertise)? If ``yes,'' identify those
non-GSA employees and reproduce for the subcommittee all such
communications sent to or received from those non-GSA employees.
6. Did any OIG employees discuss or share any drafts or
prepublication versions of the report prior to January 16, 2019 with
any persons outside the OIG/GSA? If ``yes,'' identify those persons and
reproduce for the subcommittee all communications sent to or received
from those persons.
7. Did any OIG employees hold any discussions with anyone inside
or outside the OIG/GSA about how the report could be used in the 3
Emoluments Clauses cases? If ``yes,'' identify those OIG/GSA employees
and reproduce for the subcommittee all such communications.
8. Professor Tillman's letters and emails demonstrate that the
Inspector General's office was in error. Why did your office fail to
put forward any substantive response?
9. Since the publication of the report, and the receipt of
Professor Tillman's communications, has the Inspector General reviewed
the historical sources Professor Tillman has submitted? If not, why
not?
10. Does the Inspector General have any plans to correct or modify
the report? If not, why not? Keep in mind that this report has been
cited in litigation in federal court as an authoritative government
document.
We thank you for the opportunity to submit this statement.
Biographical Information for Josh Blackman
Josh is an Associate Professor of Law at the South Texas College of
Law in Houston who specializes in constitutional law, the United States
Supreme Court, and the intersection of law and technology. Josh is the
author of three books: Unprecedented: The Constitutional Challenge to
Obamacare (2013), Unraveled: Obamacare, Religious Liberty, and
Executive Power (Cambridge University Press, 2016), and An Introduction
to Constitutional Law: 100 Supreme Court Cases Everyone Should Know.
Josh was selected by Forbes Magazine for the ``30 Under 30'' in Law
and Policy. Josh has twice testified before the House Judiciary
Committee on the constitutionality of executive action on immigration
and health care. He is an adjunct scholar at the Cato Institute. Josh
is the founder and President of the Harlan Institute, the founder of
FantasySCOTUS, the Internet's Premier Supreme Court Fantasy League, and
blogs at JoshBlackman.com. Josh is the author of over four dozen law
review articles, and his commentary has appeared in The New York Times,
Wall Street Journal, Washington Post, USA Today, L.A. Times, and other
national publications.
Biographical Information for Seth Barrett Tillman
I am an American and a legal academic. Before becoming an academic,
I graduated from the College of the University of Chicago and Harvard
Law School. After graduating from law school, I practiced law in the
District of Columbia and in Delaware. I was also a law clerk for three
federal trial court judges, in the Middle District of Alabama, in the
Middle District of Pennsylvania, in the District of New Jersey, and for
one federal appellate judge, on the United States Court of Appeals for
the Third Circuit.
Now, I teach law in the Republic of Ireland, at the Maynooth
University Department of Law. Maynooth University has been my academic
home since 2011. I am part of the permanent faculty there--in. other
words, I have tenure. My title--following European conventions--is
lecturer. Since 2008, that is, long before Trump's running for
president appeared on anyone's radar, the primary focus of my research
has related to the Constitution's office under the United States
language, which is a drafting convention or term of art appearing in
several clauses of the Constitution, including the Foreign Emoluments
Clause. I have also written on the Constitution's use of the term
``emoluments.'' My publications on these issues have appeared in a
variety of fora--including peer reviewed academic journals, both
domestic and foreign, eg, Election Law Journal and the British Journal
of American Legal Studies, and traditional American student-edited
journals, such as Harvard Journal of Law & Public Policy, Northwestern
University Law Review, and South Texas Law Review. All these articles,
along with many of my amicus briefs filed in the three Emoluments
Clauses cases (which remain ongoing during appellate review), have been
actively cited in the scholarly literature.
``Business Transactions and President Trump's `Emoluents' Problem,'' by
Seth Barrett Tillman, Harvard Journal of Law and Public Policy, Vol.
40, No. 3, 2017, Submitted for the Record by Hon. Mark Meadows
[The 13-page article is retained in committee files and is
available online at: https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=2957162.]
Brief of Amici Curiae Scholar Seth Barrett Tillman in District of
Columbia and State of Maryland v. Donald J. Trump, in his individual
capacity, No. 18-2488 (U.S. 4th Cir.), Submitted for the Record by Hon.
Mark Meadows
No. 18-2488
_______________________________________________________________
_______________________________________________________________
United States Court of Appeals for the Fourth Circuit
DISTRICT OF COLUMBIA AND STATE OF MARYLAND, Plaintiffs-
Appellees,
v.
DONALD J. TRUMP, in his individual capacity, Defendant-
Appellant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MARYLAND AT GREENBELT IN CASE NO. 8:17-CV-01596-PJM
PETER J. MESSITTE, SENIOR U.S. DISTRICT JUDGE
_______________________________________________________________
_______________________________________________________________
BRIEF OF AMICI CURIAE SCHOLAR SETH BARRETT TILLMAN AND THE
JUDICIAL EDUCATION PROJECT IN SUPPORT OF DEFENDANT-APPELLANT
_______________________________________________________________
_______________________________________________________________
[The 32-page brief is retained in committee files and is available
online at: https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=3314702.]
Appendix
----------
Questions from Hon. Peter A. DeFazio and Hon. Dina Titus to Dan
Mathews, Commissioner, Public Buildings Service, U.S. General Services
Administration
Implementation of GSA IG Recommendation
Question 1. In preparing its response to the January 2019 GSA IG
report on the Old Post Office Building lease, did you or anyone else
you are aware of at GSA communicate with or receive guidance from:
a. The Office of Management and Budget?
Answer. See below.
b. The U.S. Department of Justice?
Answer. See below.
c. The White House?
Answer. See below.
GSA's goal is to accommodate the Committee's oversight requests to
the greatest extent possible while, at the same time, preserving the
legitimate, long-standing confidentiality interests of the Executive
Branch. I respectfully decline to discuss internal communications that
I, or others within GSA, may have had with the Office of Management and
Budget, the U.S. Department of Justice, or the White House about the
preparation of draft documents. Notwithstanding the above, I am unaware
of anyone at GSA receiving guidance from the listed entities regarding
GSA's written response to the recommendations in the OIG report
referenced above.
Question 2. If so, please provide all records regarding these
communications or guidance to the Committee.
Answer.
Revision of Interested Parties Provision in the Old Post Office Lease
Question 1. Even before the GSA Office of Inspector General issued
its January 2019 report, our Committee had already added language to
the resolutions accompanying GSA prospectuses that pass our Committee.
Following our Subcommittee's July 2017 hearing on GSA, our Committee
added the following language to resolutions accompanying GSA lease
prospectuses:
``Provided further, the Administrator of General Services may
not enter into this lease if it does not contain a provision
barring any individual holding a Federally-elected office,
regardless of whether such individual took office before or
after execution of this lease, to directly participate in, or
benefit from or under this lease or any part thereof and that
such provision provide that if this lease is found to have been
made in violation of the foregoing prohibition or it is found
that this prohibition has been violated during the term of the
lease, the lease shall be void, except that the foregoing
limitation shall not apply if the lease is entered into with a
publicly-held corporation or publicly-held entity for the
general benefit of such corporation or entity.''
Please provide the committee with the specific number of leases GSA
has signed since this resolution language was added to prospectus
resolutions passed out of our committee. Please also identify which of
these leases included the language referenced above.
Answer. Since April 2018, the Committee has adopted 39 resolutions
approving prospectuses that have included the above-referenced
language. Of those 39 resolutions, GSA has awarded five leases that
contain a new clause GSA drafted to implement the resolution:
PDC-07-WA17 for the State Department in Washington, DC;
PVA-04-WA17 for the Patent and Trademark Office in
Arlington, VA;
PFL-04-WE18 for the Drug Enforcement Agency in Weston,
FL;
PCO-01-DE18 for the Internal Revenue Service & the
Treasury Inspector General for Tax Administration in Denver, CO; and
PMD-01-WA18 for the Department of Defense in Landover,
MD.
a. If a lease did not include this language please provide the
Committee with a written response explaining why the lease did not
include this language.
Answer. GSA did award one new lease for the Federal Bureau of
Investigation in Seattle, WA (Lease Prospectus PWA-01-SE18) that did
not contain the new clause. While the language was included as part of
the Request for Lease Proposals and placed the market on notice of the
prohibition, the new clause was inadvertently omitted from the awarded
lease. GSA is working with this lessor to amend the lease to insert the
clause.
Tracking Domestic/Foreign Government Transactions
Question 1. Is GSA aware of any effort by the Trump International
Hotel to attempt to identify customers who may be patronizing the hotel
while on state or federal business?
Answer. No. GSA is not involved in the day-to-day operations of the
Trump International Hotel.
a. If so, please describe the efforts they have informed you that
they have taken.
Question 2. Does GSA know if, for example, a guest registers with
an email addresses ending in ``.gov'' or ``maine.gov''--does the Trump
International Hotel look into whether that is a state or federal
government transaction?
Answer. No. GSA is not involved in the day-to-day operations of the
Trump International Hotel.
a. If so, please describe the efforts they have informed you that
they have taken.
Question 3. Likewise, does GSA know if, for example, a guest
registers with a state or federal government credit card, does the
Trump International Hotel look into whether this may be a state or
federal government transaction?
Answer. No. GSA is not involved in the day-to-day operations of the
Trump International Hotel.
Question 4. Has GSA asked the Trump Organization to take any steps
to identify Trump International Hotel transactions with states or the
federal government?
Answer. No. GSA is not involved in the day-to-day operations of the
Trump International Hotel.
a. If so, please provide the Committee with all relevant records,
including e-mails, letters or other correspondence regarding GSA's
efforts in this regard.
Question 5. Is GSA aware of any effort by the Trump International
Hotel to attempt to identify customers to its hotel who are there
representing foreign governments or their agencies?
Answer. GSA is aware of public statements by the Trump Organization
regarding the donation of its profits from foreign governments to the
U.S. Treasury. For instance, as reported by the Wall Street Journal:
The company has declined to specify how it calculates its
foreign profits. Last year, it said it arrived at the $150,000
figure ``in accordance with our policy and the Uniform System
of Accounts for the Lodging Industry,'' but declined to provide
further details on what its policy entails and how the company
was tracking which guests' stays were being paid for by foreign
governments.
Trump Organization Details Level of Profits from Foreign
Governments, available at https://www.wsj.com/articles/trump-
organization-details-level-of-profits-from-foreign-governments-
11551116974.
a. If so, please describe the efforts they have informed you that
they have taken.
Answer. I am unaware of any efforts the Trump Organization has made
to inform GSA of the efforts they have taken.
Old Post Office Clocktower During Government Shutdown
Question 1. During the most recent government shutdown in late 2018
and early 2019, National Park Service sites around the country and the
National Capital Region were shuttered and non-essential National Park
Service staff were furloughed--yet the Old Post Office Tower reopened
on January 6, 2019--weeks before the rest of the government.
According to the National Park Service Website, ``The National Park
Service provides interpretive programming within the Old Post Office
Tower under an agreement with the building's owner, the General
Services Administration.'' Under the Old Post Office Building lease,
the tenant, the Trump Old Post Office LLC, is required to grant the
public access to the tower. The tenant covers the cost of maintaining
the spaces and it is our understanding that the Trump Old Post Office
LLC is reimbursed for these costs.
Who made the decision to reopen the Tower when the rest of the
government was still closed?
Answer. Career GSA officials contacted the National Park Service
(NPS) to address the closure of the clock tower. I would add that, in
1983, Congress directed GSA to enter into an agreement with NPS for
operating the observation tower (see Public Law 98-1). As a result, and
as outlined in section 4 of Public Law 98-1, GSA and NPS have executed
a series of agreements under which GSA provides funds from the building
operations account in the Federal Buildings Fund (FBF) and NPS provides
staff at the observation tower. Copies of the more recent agreements
between GSA and NPA may be found on GSA's Electronic FOIA Reading Room:
https://www.gsa.gov/reference/freedom-of-information-act-foia/
electronic-reading-room.
Services to operate the clock tower, along with thousands of other
GSA properties, are paid through the building operations account within
the FBF. The building operations account had available budget authority
during the recent partial government shutdown, and GSA continued to pay
all invoices from contractors due under that account for building-
related services such as janitorial, grounds keeping, snow removal, and
operations and maintenance.
Question 2. To your knowledge, was GSA Administrator Murphy
involved in that decision?
Answer. No.
Question 3. To your knowledge, was the GSA Contracting Officer
involved in that decision?
Answer. No.
Question 4. To your knowledge, was the GSA Office of General
Counsel involved in that decision?
Answer. It is my understanding that career attorneys in the Office
of General Counsel reviewed the agreement between GSA and NPS.
Question 5. Did you or any other GSA officials that you are aware
of receive any requests from the White House to open the Tower?
Answer. No.
a. If so, please describe that request and provide the Committee
with all supporting records, including e-mails, letters or other
correspondence with GSA on this matter.
Question 6. Did anyone at the Trump Old Post Office LLC, Trump
Organization or Trump International Hotel ask to open the Tower?
Answer. No.
a. If so, please describe that request and provide the Committee
with all supporting records, including e-mails, letters or other
correspondence with GSA on this matter.
Contracting Officer
Question 1. Commissioner Mathews, in your written testimony you
mention that the career contracting officer overseeing the Trump Hotel
lease ``has legal authority and responsibility for making contract
decisions'' and, after consulting with career attorneys at GSA, the
contracting officer ``found the tenant in compliance with Section 37.19
of the lease.''
Is the contracting officer who made that decision the same
contracting who helped negotiate the deal between GSA and the Trump
Organization? Yes or No
Answer. Yes.
Question 2. Is he the same contracting officer who (based on emails
we've obtained) appears to have tried to develop a social relationship
with Ivanka Trump? Yes or No
Answer. I respectfully decline to respond to this question because
it does not specify the emails to which it refers, and I am therefore
unable to review or characterize them.
Question 3. Do you believe this contracting officer made an
unbiased and objective decision? Yes or No
Answer. Yes. I would add that the Inspector General's report, which
followed a 16-month investigation, did not identify a single instance
in which a political appointee or career federal employee at GSA
attempted to improperly interfere with or exert pressure on the
contracting officer's decision-making process.
Question 4. Now that the GSA IG has found that the contracting
officer failed to take into account the Emoluments Clauses to the U.S.
Constitution, do you intend to ask him to reconsider his decision? Yes
or No
Answer. It would be inappropriate for GSA to comment on a question
that implicates the t Emolument Clause issues that are the subject of a
number of active lawsuits. The Department of Justice has taken the
position in those cases that the President's interest in the Trump
International Hotel does not violate the Emoluments Clauses. When these
issues are conclusively resolved in the courts, GSA will respond
accordingly, to the extent necessary.
Legal Guidance from GSA Office of General Counsel
Question 1. The failure of GSA to appropriately consider the
Emoluments Clauses to the U.S. Constitution in regard to the Old Post
Office lease was a central finding of the Office of Inspector General's
January 2019 report.
Mr. Mathews, has anyone in the GSA Office of General Counsel (OGC)
provided you or any other staff in the office of the Public Buildings
Service (PBS) with any guidance at all on these issues since the report
was published?
Answer. GSA's goal is to accommodate the Committee's oversight
requests to the greatest extent possible while, at the same time,
preserving the long-standing confidentiality interests of the Executive
Branch. In light of the interest in the confidentiality of attorney-
client communications, I respectfully decline to discuss communications
that I, or others within GSA, may have had with the Office of General
Counsel.
a. If so, please describe the guidance you were provided and
provide the Committee with all relevant records, including e-mail
correspondence, letters, memoranda or other records.
Answer.
Question 2. Has the GSA Office of General Counsel provided you with
any guidance on whether or not GSA should attempt to track expenditures
at the Trump International Hotel that GSA receives in the form of
rental or lease fees that are derived from either foreign, federal or
state governments?
Answer. GSA's goal is to accommodate the Committee's oversight
requests to the greatest extent possible while, at the same time,
preserving the long-standing confidentiality interests of the Executive
Branch. I respectfully decline to discuss communications that I, or
others within GSA, may have had with the Office of General Counsel.
a. If so, please describe the guidance you were provided and
provide the Committee with all relevant records, including e-mail
correspondence, letters, memoranda or other records.
Answer.
Question 3. Have you or the Public Buildings Service (PBS) asked
the GSA Office of General Counsel to provide you with any guidance on
these issues?
Answer. GSA's goal is to accommodate the Committee's oversight
requests to the greatest extent possible while, at the same time,
preserving the long-standing confidentiality interests of the Executive
Branch. I respectfully decline to discuss communications that I, or
others within GSA, may have had with the Office of General Counsel.
Question 4. Please provide copies of the legal guidance you have
received from GSA to the committee.
Answer.
Corporate Shells as Signatories to GSA Leases
Question 1. Has GSA ever looked past a corporate shell to determine
a beneficial interest in any of its leases--other than GSA's lease with
Rice REI in Myrtle Beach, South Carolina?
Answer. The lease referenced in your question was between GSA and
Rice REI, LLC, an entity in which a Member of Congress owned an
interest. As referenced in the Inspector General's report, GSA sought
guidance from the Office of Legal Counsel 20 years ago as to whether a
proposed lease transaction involving Members of Congress would violate
18 U.S.C. Sec. 431-433. Since August of 2017 (when I became the
Commissioner of the Public Buildings Service), GSA's lease with Rice
REI, LLC in Myrtle Beach, South Carolina is the only one I am aware of
which raised issues concerning 18 U.S.C. Sec. 431.
Question 2. Is Trump Old Post Office LLC the only shell that GSA
has refused to look through in order to determine the beneficial
interest in a lease with GSA and whether such beneficiary is legally
allowed to accept such benefits?
Answer. I disagree that GSA failed to inquire as to Trump Old Post
Office LLC's organizational structure. In his letter dated March 23,
2017, the contracting officer detailed the meetings and discussions
that occurred between GSA and Trump Old Post Office LLC regarding the
tenant's organizational structure. For instance, the contracting
officer listed the individuals and entities with an ownership interest
in Trump Old Post Office LLC and included organizational charts as
exhibits to his letter. Almost immediately following issuance of his
March 23 letter, GSA made the contracting officer's letter publicly
available in an electronic reading room. Accordingly, GSA was, and has
been, forthcoming and transparent regarding its understanding of the
ownership structure of the Old Post Office LLC.
Question 3. Is GSA aware of any other GSA lease or outlease to
which Donald J. Trump may be a beneficiary?
Answer. No.
a. If so, please identify the specific leases and the dates they
were signed.
Communications as Public Buildings Service Commissioner
Question 1. Before you accepted your current job in the summer of
2017, did anyone affiliated with the Trump Administration, Trump
transition team, Trump campaign, or Trump Organization ask you for your
opinion on whether the Trump Organization was in violation of the terms
of its lease at the Old Post Office?
Answer. No.
a. If so, who asked you for your opinion? When? What did you say?
Question 2. Have you ever had any communication with any current or
former GSA employees about how the White House or President Trump would
respond if he was forced to divest from his business interests in the
Trump hotel?
Answer. To the best of my knowledge, no.
a. If so, who have you discussed this with? When? What was said?
Questions from Hon. Mark Meadows to Dan Mathews, Commissioner, Public
Buildings Service, U.S. General Services Administration
Question 1. Mr. Mathews, could you please explain GSA's standard
process in auditing out-lease contracts such as the OPO? Specifically,
as it relates to the OPO, what audits have occurred and when would GSA
perform an audit? Who has the legal authority under GSA's outlease
contracts to initiate an audit?
Answer. The terms and conditions of GSA's outleasing contracts as
they specifically relate to audit rights differ depending upon the
particular transaction. Regarding the Old Post Office outlease, the
contract allows GSA to audit the tenant's books and records. Much like
other GSA contracts, the contracting officer would make the decision
whether to conduct an audit. The tenant at the Old Post Office Building
has provided annual financial statements audited by an independent
certified public accountant setting forth (among others), gross
revenues, percentage rent, and percentage rent difference. To date, the
tenant has paid GSA all of the rent that is due under the outlease.
Question 2. Mr. Mathews, when GSA receives audited financial
statements, what controls are in place to ensure the audits meet
industry standards? Does the auditing firm need to meet certain
accreditation requirements? If so, which?
Answer. Regarding the qualifications of government contractors,
such requirements are set forth in the contract. For example, Section
5.4 of the Old Post Office lease states, in part, as follows:
Tenant shall furnish Landlord annually, within one hundred
twenty (120) days following the end of each Lease Year, a
complete copy of Tenant's annual audited financial statements
audited by an independent certified public accountant
reasonably acceptable to Landlord or a nationally recognized
accounting firm prepared in accordance with the Uniform System
and reconciled in accordance with GAAP and the requirements of
this Lease covering the Hotel for such Lease Year, including
statements of members' equity, income and expense and cash flow
for Tenant and a balance sheet for Tenant (the ``Annual
Statement'').
As set forth above, the annual financial statements must be audited
by an independent certified public accountant.
Question 3. Mr. Mathews, please explain how the rent is calculated
on the OPO under the contract.
Answer. During my recent testimony before the Committee, there
seemed to be some confusion on this very point. As noted in a prior
letter to Chairman DeFazio dated February 12, 2019, GSA explained the
rent calculation as follows:
Trump Old Post Office LLC pays a minimum annual base rent of $3
million ($250,000 per month), escalated on an annual basis at
the Consumer Price Index. Trump Old Post Office LLC also pays a
percentage rent difference if the percentage of gross revenues
exceeds the minimum base rent payment in accordance with the
following structure: Lease Years 1-10, three (3%) percent;
during Lease Years 11-20, three and one half (3.5%) percent;
during Lease Years 21-30, four (4%) percent; during Lease Years
31-40, four and one half (4.5%) percent; during Lease Years 41-
50, five (5%) percent; and during Lease Years 51-60, five and
one half (5.5%) percent.
Gross revenues are just that; all of the revenue generated by the
hotel (subject to any exclusions set forth in the lease). Thus, for
instance, if gross revenues were $50 million and the base rent was $3
million, there would be no additional rent payment due to GSA (i.e., a
percentage rent difference) because 3% of $50 million is $1.5 million,
which is below the base rent. Conversely, if gross revenues were $200
million and the base rent was $3 million, there would be an additional
rent payment due to GSA in the amount of $3 million because 3% of $200
million is $6 million, which is $3 million in excess of the base rent.
Questions from Hon. John Garamendi to Dan Mathews, Commissioner, Public
Buildings Service, U.S. General Services Administration
Foreign and State Government Payments
Question 1. Does GSA currently have any information regarding
payments that Trump Old Post Office LLC or the Trump Organization
receives from foreign governments or State governments through Trump
International Hotel at the Old Post Office Building? If so, please
provide any such information.
Answer. Please refer to the Answer provided in response to Question
5 above on page [124].
Question 2. Furthermore, has GSA discussed seeking or plan to
request information from Trump Old Post Office LLC or the Trump
Organization regarding payments from foreign governments or State
governments through Trump International Hotel at the Old Post Office
Building?
Answer. To the best of my knowledge, no.
Questions from Hon. Sharice Davids and Hon. Steve Cohen to Dan Mathews,
Commissioner, Public Buildings Service, U.S. General Services
Administration
GSA Outleases
Question 1. Has GSA conducted any audits on outleases the agency
has with non-federal entities?
Answer. Outleases that provide for potential additional rent above
a base amount (e.g., revenue sharing) are very infrequent transactions
under the Outleasing Program, which, as an entire program, consists of
603 outleases. Of these outleases, only five, including OPO, provide
the potential for an additional rent payment above a base amount. A
majority of the outleases are considered low risk, as defined by the
total contract value. Approximately 85% of outleases have a total
contract value of less than $250,000; approximately 15% of outleases
have a total contract value of less than $10 million; and, only six
outleases, or 0.5% of the outleasing inventory, have a total contract
value exceeding $10 million. Accordingly, program wide audits are not
conducted on a regular basis.
a. If so, please identify the lease and the year it was signed.
Answer.
Question 2. How many GSA outleases include ``profit-sharing''
provisions in which rent is at least partially based on revenues,
profits, etc.?
Answer.
a. If so, please identify the lease and the year it was signed.
Answer. Below is a list of outleases that provide for the potential
for an additional rent payment above a base amount.
----------------------------------------------------------------------------------------------------------------
Building Name Tenant Effective Date of Lease
----------------------------------------------------------------------------------------------------------------
William O. Lipinski Fed. Bldg. Rush Development 11/1/1998
General Post Office Tariff Bldg. Assoc., LP/Jay 12/1/1999
Ariel Rios Federal Building NOMA Retail 9/1/2009
Tacoma Union Station Parking Republic Parking Northwest 9/1/2012
Old Post Office Bldg. Trump Old Post Office, LLC 8/5/2013
----------------------------------------------------------------------------------------------------------------
Question 3. How is monthly rent owed by the Tariff Building/Hotel
Monaco outlease tenant to GSA calculated? Has the tenant paid more than
the base rent over the course of the lease?
Answer. The rental consideration at the Tariff Building consists of
three components: (1) the base rent; (2) percentage rent; and (3)
participation rent. The base rent is a fixed annual rent paid monthly.
This amount escalates annually in accordance with the Consumer Price
Index. Percentage rent is calculated as a sum of a percentage of annual
food and beverage revenues and a percentage of annual room rents. The
outlease has two schedules of percentages that increase throughout the
life of the contract. Participation rent is calculated as a percentage
of net cash flows generated. The tenant has paid more than the base
rent over the course of the lease.
Question 4. Please provide the Committee with an unredacted copy of
the Tariff Building/Hotel Monaco lease and all accompanying amendments
to the lease.
Answer. The requested information is confidential information under
the terms and conditions of the lease. The GSA contracting officer has
requested the tenant's consent to releasing the information to the
Committee. Subject to such consent, GSA will forward the lease to the
Committee under separate cover.
Questions from Hon. Lizzie Fletcher to Dan Mathews, Commissioner,
Public Buildings Service, U.S. General Services Administration
Elected Officials Clauses in GSA Outleases
Question 1. A July 2018 GAO report analyzed GSA's outleasing
program and reviewed ``the extent to which GSA has included lease
provisions in its outlease agreements related to the participation of
elected officials in these outleases.'' According to the GAO report,
there are six federal buildings at least 20 percent outleased by GSA,
and all but one has a lease provision restricting certain participation
by elected officials--the Silvio O. Conte Federal Building in
Pittsfield, Massachusetts. GSA indicated to GAO that it would add this
provision to the Conte Building lease.
Has GSA added language to the Conte building lease that would
restrict certain participation by elected officials in the lease?
Answer. No.
a. If so, please provide the Committee with copies of this lease
language.
b. If not, please explain why GSA has not added this language to
the lease.
Answer. Since the July 2018 GAO report, the Inspector General
issued her report on the management and administration of the Old Post
Office Building. In response to the IG's recommendation, and as noted
in the agency's Management Decision Record (MDR) and Corrective Plan
(CAP), GSA indicated that it would no longer use the language contained
in the Old Post Office lease (i.e., Section 37.19) in future outleases.
Rather, GSA noted its intention to insert into all outleases a clause
placing outlessees on notice of the requirements of 18 U.S.C. Sec. 431
and 41 U.S.C. Sec. 6303(a), which already apply to the Conte outlease.
Moving forward, GSA plans to implement its MDR and CAP on future
outleases.
Question 2. Does GSA maintain an approved list of auditors from
which tenants can choose for the completion and submission of an annual
audit?
Answer. No.
Questions from Hon. Mark Meadows to Hon. Carol Fortine Ochoa, Inspector
General, U.S. General Services Administration
General Services Administration (GSA) Office of Inspector General (OIG)
Response to Congressional Request on OIG Emoluments Report:
Question 1. Ms. Ochoa, on February 4, 2019, you received a letter
from the Republican leadership on this Committee, the Oversight Reform
Committee, as well as Senate Committee on Homeland Security and
Governmental Affairs (Senate HSGAC), requesting the case file
information supporting your OIG report on the Old Post Office (OPO).
The information requested was similar to that requested of your Federal
Bureau of Investigations (FBI) Headquarters report. Yet, unlike the FBI
Headquarters request, your office refused to comply. Specifically,
after staff negotiations, all the Committee has received so far are
publicly available legal research documents you used for the
constitutional analysis. Can you explain why you have not responded?
Answer. The Inspector General responded by letter dated February
19, 2019, to the February 4 request for all documents ``gathered,
reviewed, or used'' in our evaluation. Our February 19 letter explained
that most of the documents requested are GSA documents and that GSA had
asserted attorney-client and deliberative process privilege in
connection with our evaluation report. On March 12, 2019, we provided
to GSA the more than 2 million agency documents that we had ``gathered,
reviewed, or used'' in our evaluation so that GSA could review the
materials for privilege and produce them to the requestors. On the same
date, we also produced to the requestors all of the publicly available
documents we used in the evaluation.
Since then, the OIG has engaged in extensive discussions with
members of the congressional requestors' staffs and has made concerted
efforts to facilitate the staffers' subsequent, narrower requests for
agency documents. For example, at the staffers' request, we identified
the GSA documents in the subset of ``over 10,000 documents'' referenced
on page 4 of our Evaluation of GSA's Management and Administration of
the Old Post Office Building Lease (Report), and provided those
documents again to GSA in May and June 2019. Thereafter, on July 23,
again at the request of staff members, we prioritized an even smaller
batch of those documents for GSA's review and production, starting with
32 pages of legal memoranda and followed by approximately 2,000 emails
and attachments.
We understand from the agency's General Counsel that members of the
requestors' staffs have asked the agency to hold off on review or
production of those documents.
a. Ms. Ochoa, this Committee has received similar documentation
from your office in previous investigations and Inspector General (IG)
reviews and there has never been an issue. Why are there concerns with
this report and review now?
Answer. The OIG treated this request for agency documents the same
way the office has treated previous requests for such documents during
Inspector General Ochoa's tenure: by providing them to GSA for review
and production. In past cases, the agency promptly cleared the
documents for production to the congressional requestors. In this case,
the agency has asserted attorney-client and deliberative process
privileges. In addition, we understand that members of the requestors'
staffs asked the agency to hold off on review and production of the
documents to the requestors.
With respect to OIG records of interviews, as we stated in our
February 19 response, we believe that any release outside the OIG has a
chilling effect on the willingness of witnesses generally to provide us
with candid and complete information. In this matter, release of the
records outside the OIG would be especially problematic given GSA's
assertion of attorney-client and deliberative process privilege. The
attendant redaction process would mandate wholesale disclosure to the
agency of everything witnesses told the OIG in the course of an OIG
evaluation. That would open the door to witness retaliation or fears of
retaliation, and could seriously deter individuals not just in GSA but
throughout the government from cooperating with OIG investigations,
audits, reviews, and evaluations.
b. Did you put together a justification memo for this report? If
so, please provide to the Committee.
Answer. No. As stated on page 4 of our report, we conducted our
evaluation in accordance with the Council of the Inspectors General on
Integrity and Efficiency Quality Standards for Inspection and
Evaluation.
c. Please provide all requested information from the February 4,
2019 letter.
Answer. As detailed in our answers above, most of the over 2
million documents the February 4 letter requested are agency documents.
We have provided all of those documents to the agency for review and
production to the requestors on multiple occasions and in various
subsets, in coordination with requests from members of the requestors'
staff. Please direct your request for those documents to the agency.
The OIG cannot assert or waive privilege on the agency's behalf.
Question 2. Ms. Ochoa, you make a number of assertions throughout
your report without citations or any way for the Committee to verify
accuracy and context. In fact, last month Chairman Johnson of Senate
HSGAC provided your office details highlighting specifically where in
your report supporting documentation would be useful in the Committee's
oversight. When do you plan to respond? Please provide this Committee
with a copy of your response.
Answer. The 24-page report and its 6-page appendix together contain
154 endnotes citing the source material. In addition, the report
contains abundant additional textual citations to documents and
information we received from witnesses. For example, pp. 17-18 of the
report contain textual citations such as ``OGC's [GSA's Office of
General Counsel] March 3, 2017 memorandum,'' ``the emoluments guidance
OGC provided in 2013,'' and ``Deputy General Counsel Loewentritt, OGC's
senior career attorney, acknowledged.'' The report's citation format
comports with the Council of the Inspectors General on Integrity and
Efficiency Quality Standards for Inspection and Evaluation.
In addition, as we noted in our February 19 letter, we provided the
agency with a final draft of the report, received their proposed
redactions and informal comments on the report, and met with GSA's
General Counsel and his staff to discuss them. After those discussions,
we received the agency's final comments and included them in their
entirety in our report. The agency's response to the report does not
dispute the accuracy of any facts asserted in the report. See Report,
Appendix B.
We will continue to work to facilitate Committee requests for
information. To that end, we are reviewing the September 20 request
from Senator Johnson's staff. We will contact the relevant staffers
when our review is complete.
a. Ms. Ochoa, while we appreciate your willingness to protect
privilege, it is hard to believe that e-mails even within the OIG
office about this report could not be provided to the Committee.
Further, for all documents, we know that in prior items occasionally
there are taint teams created to expediate this process. Has your staff
has met with GSA attorneys to determine a way to expediate the
Committee's request for documents aside from merely provided over 300
GBs on a hard drive? If not, why and when do you plan to do so?
Answer. OIG staff have had numerous meetings and conversations with
agency attorneys in attempts to expedite this process. While we cannot
assert or waive privilege on the agency's behalf, as noted above, we
have made extensive efforts in coordination with the requestors' staff
to facilitate the agency's production of the documents. On March 12, we
provided a hard drive to GSA containing 342 GB of agency documents, in
direct response to your February 4 request for all documents
``gathered, reviewed, or used'' in our evaluation. Since then, in
response to staffers' subsequent, narrowed request, we identified the
GSA documents in the subset of ``over 10,000 documents'' referenced on
page 4 of our report and provided those to GSA for review and
production. After further dialogue with requestors' staff, we asked
GSA's General Counsel to prioritize review and production of 32 pages
of legal memoranda and approximately 2,000 emails and attachments. We
understand that members of the requestors' staffs have asked the agency
to hold off on review and production of these documents to the
requestors.
Question 3. Ms. Ochoa, in your report you mention that your office
conducted over two dozen interviews with personnel. Please provide the
Committee with the exact number of interviews and the specific dates of
each interview.
Answer. Please see our previous answers regarding the production of
witness interview records.
OIG Response to Legal Historians on OIG Emoluments Report:
Question 1. Ms. Ochoa, after your report was released, Seth
Tillman, Lecturer at Maynooth University Department of Law, wrote your
office detailing a factual error in your constitutional analysis of the
Emoluments Clause. Prof. Tillman expressed his concerns that some of
your historical assertions informing your analysis on the Emoluments
Clause were wrong and did not rely on historians, legal historians, or
similar experts. He was concerned given that the report's conclusions
were used to criticize GSA's actions and used as an authority in
pending court actions. Given that the report was being used as
authority in legal cases, did your office ever review his comments or
look to correct your report? If not, why?
Answer. We reviewed Mr. Tillman's letter carefully and found no
need to revise our report. The suggestion that Mr. Tillman's argument
identified a factual error ignores our report's clear statement that we
do not purport to resolve definitively the issue of private versus
government ownership of land lots President Washington bought in the
late 1700s. Moreover, Mr. Tillman has filed amicus curiae briefs on
this subject in pending litigation. We concluded that he was seeking
our endorsement of his legal theory that the Foreign Emoluments Clause
does not apply to U.S. Presidents. Because Mr. Tillman appeared to seek
our agreement with his legal theory in a matter in pending litigation,
we rejected his request.
a. Can you point the Committee to the specific authorities you
used to assert that the example of transactions conducted by George
Washington do not apply to the Emoluments Clause because they were
private land deals?
Answer. Our report does not make this assertion. As we stated in
the report, if the United States owned certain lots of land that
Washington bought during his presidency, Washington's purchase might
provide a historical precedent that private business dealings did not
offend the Presidential Emoluments Clause. We reported that we found
evidence suggesting that the lots in question were held privately. See
Report at pp. 15-16, and Appendix A. However, we did not purport to
resolve the issue of private versus government ownership one way or the
other. Instead, we stated that we ``are mindful that disputes over the
lot sales bred litigation for over 170 years'' and that ``our report
does not reach a definitive judgment on whether Washington's lot
purchases show a historic practice of the first President conducting
private business with the United States.'' Id. at Appendix A, p. 6. We
also stated that, ``whether any business Washington had with the United
States or any foreign government violated the Foreign or Presidential
Emoluments Clauses also requires an examination of broader issues of
constitutional interpretation, such as a structural analysis of the
clause and an inquiry into its purpose,'' id. at Appendix A, Endnotes
p. 7, n. 2, an analysis we did not undertake.
In Appendix A of our report, we cite all the historical sources and
authorities we used for this discussion. All of these materials are
public source documents that we provided to congressional staff in
March 2019.
Question 2. Ms. Ochoa, Professors Blackman and Tillman have written
analyses detailing why there is no violation of the Emoluments Clauses.
With legal experts on both sides of this issue, why would you think it
would have been appropriate for a GSA contracting officer to base a
contractual decision on a constitutional question that still had not
been sorted out by the courts?
Answer. We agree that there are legal experts on both side of the
Emoluments Clauses issue. The robust legal debate confirms our finding
that GSA lawyers were correct in recognizing that the President's
business interest in the Old Post Office Building lease raised issues
under the Emoluments Clauses. We found it was improper for the agency
lawyers to ignore the issue for the reasons stated in the report.
Ignoring the issue foreclosed the opportunity for GSA to work with the
Department of Justice (DOJ) Office of Legal Counsel (OLC) before the
litigation arose to determine a possible solution satisfactory to all
parties.
Question to Ms. Ochoa on OIG Emoluments Report and Legal Analyses:
Question 1. Ms. Ochoa, can you provide the Committee with examples
of other OIG reports that included legal analyses and conclusions on
constitutional questions pending before a court?
Answer. Our report does not make conclusions on constitutional
questions pending in litigation.
Question 2. Ms. Ochoa, did it factor into your analysis the
potential legal and financial exposure to the taxpayer had the
contracting officer made a decision based on unsettled constitutional
law?
Answer. We considered the reasons the agency offered in support of
its decision to ignore the constitutional issues. The agency lawyers
and the contracting officer did not cite potential liabilities as a
factor in their decision to ignore the issue. We found that because of
their decision, they missed the opportunity to find a possible solution
satisfactory to all parties.
Question 3. Ms. Ochoa, your report criticizes GSA for not
consulting DOJ on the constitutional question yet you seem to ignore in
your report that the DOJ asserted a position in the pending legal
cases. Did you take into account the DOJ's position? If not, please
justify your reasoning for not doing so.
Answer. Our report does not address DOJ positions in pending
litigation because DOJ articulated those positions after GSA made the
decisions we reviewed in this evaluation. Our evaluation focused on
GSA's December 2016 decision to ignore the constitutional issues and
its March 2017 determination that the OPO tenant met the terms and
conditions of the lease. DOJ did not advocate an interpretation of the
Foreign Emoluments Clause in civil litigation until June 2017. We
considered the decisions GSA made in the context of the guidance that
was available at the time GSA acted. Our findings do not depend or
opine on the merits of positions taken in subsequent litigation.
Question 4. Ms. Ochoa, at the hearing, Mr. von Spakovsky noted that
once the Department of Justice has rendered a position on a
Constitutional question, which it has done in this case concluding
there has been no violation of the Emoluments Clause, there is no
reason for GSA to independently consider the issue. The DOJ is the
lawyer for the Executive Branch. In other words, once the DOJ
established its position, that position is controlling. Why did you not
take this into consideration or the DOJ's position in your report? Can
you provide the Committee with examples of OIG reports suggesting an
agency, outside of DOJ, should have taken a legal position contrary to
an established legal opinion of the DOJ in a pending case?
Answer. Our report does not find or suggest that GSA ``should have
taken a legal position contrary to an established legal opinion of the
DOJ in a pending case.'' As noted in our previous answers, we
considered the decisions GSA made in the context of the guidance that
was available at the time GSA acted. The DOJ positions relevant at that
time are the OLC opinions cited in our report that provided controlling
legal advice to GSA and other Executive agencies on the Constitution's
Emoluments Clauses during the period covered by our review. As our
report finds, when GSA lawyers made their decision in December 2016,
they did not research the emoluments issues or refer them to OLC. OLC
had previously helped GSA by identifying permissible business
structures when GSA sought its guidance for Members of Congress
interested in investing in government land. Had GSA timely reached out
to OLC for guidance, rather than ignore the issue in this case, OLC may
have been able to do the same here.
Question 5. Ms. Ochoa, did you consult with any outside legal
experts during the course of your review of this lease and the drafting
of the report? If so, who? If not, please explain why.
Answer. No, because the matters we addressed in the report were
within the expertise of the OIG team assigned to the matter.
Question 6. Ms. Ochoa, did you or anyone in your office have any
communication about the review or report before, during, or after your
review and issuance of the report with any legal counsel or parties to
any of the legal cases regarding the Trump Hotel pending now or at the
time, excluding any communications your office may have had with
congressional offices in their official capacities? If so, please
provide with whom the communications occurred, the dates, and the
nature of the communications.
Answer. Neither the Inspector General nor anyone in her office, to
her knowledge, has had any communications with legal counsel or parties
to any of the legal cases.
Question 7. Ms. Ochoa, have you or anyone in your office, met with
any individuals who are plaintiffs in any of the ongoing emoluments
lawsuits, excluding any meetings your office may have had with
congressional offices in their official capacities, or any of their
counsels? If so, please provide names and dates of such meetings.
Answer. Neither the Inspector General nor anyone in her office, to
her knowledge, has had any such meetings.
Question to IG Ms. Ochoa on GSA Corrective Action Plan and
Recommendation:
Question 1. Ms. Ochoa, my understanding is that GSA and the GSA IG
went back and forth on the corrective action plan. Could you enlighten
us as to why this occurred and what the dispute was over your
acceptance of the plan?
Answer. The OIG provided memoranda documenting our position on this
issue to the Committee. The agency has its own correspondence on this
issue that you may wish to seek from them.
Question 2. Ms. Ochoa, the Committee received your response to
GSA's Management Decision on your recommendation regarding reviewing
the contract clause in question (37.19). You describe GSA's response as
``non-responsive'' based on the argument that you intended GSA to
determine the purpose of the clause and conduct a formal legal review
of the clause ``before continuing to use the language.'' GSA
interpreted that to mean before using it in future contracts. However,
your office seems to suggest GSA should change the clauses in the
existing contracts. Can you provide examples where GSA unilaterally
changed provisions in a legal contract? Please explain the legal
justification for why such action would not result in subsequent legal
challenges?
Answer. We did not propose that GSA unilaterally change any lease
provisions. As we noted in our September 6, 2019, response to the
Deputy Administrator, our recommendation described the steps GSA should
take to correct shortcomings in its decision-making process for
interpreting Section 37.19, without being prescriptive as to the end
result:
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.
The agency itself has previously suggested to the Government
Accountability Office (GAO) that it was in the process of adding an
amendment to insert an Interested Parties provision in an outlease (see
Federal Real Property: GSA Outleasing and Restrictions on Participation
of Elected Officials, GAO-18-603R (July 25, 2018), page 5). You may
wish to consult with the agency about how they sought such an
amendment, whether through bilateral modification or some other
process.
Question 3. Ms. Ochoa, in recommending changes to existing
contracts, can you detail the role of the contracting officer and the
legal parameters surrounding actions and decisions of the contracting
officer? Is it accurate to say that others at an agency, including its
leadership, are not supposed to influence or direct the contracting
officer to take specific actions on a specific contract? Would GSA
leadership or others directing or suggesting specific actions to the
contracting officer absent his request for guidance be considered undue
influence?
Answer. As noted above, we did not propose that GSA unilaterally
change any lease provisions. The agency itself has previously suggested
to the GAO that it was in the process of adding an amendment to insert
an Interested Parties provision in an outlease (see Federal Real
Property: GSA Outleasing and Restrictions on Participation of Elected
Officials, GAO-18-603R (July 25, 2018), page 5). You may wish to
consult with the agency about the roles of the contracting officer and
agency management in that process.
Question to IG Ms. Ochoa on OIG Emoluments Report Internal
Deliberations:
Question 1. Ms. Ochoa what is the standard operating procedure or
GSA OIG guidance as it relates to internal document review prior to
publicly submitting a report? Please provide a copy of that process to
the Committee.
Answer. We follow the Council of the Inspectors General on
Integrity and Efficiency Quality Standards for Inspection and
Evaluation, which is publicly available at https://www.ignet.gov/sites/
default/files/files/iestds12.pdf.
Question 2. Ms. Ochoa, did the report your office issued on the
Emoluments Clause go through internal deliberations or standard edits
both as it went through the OIG review process or in response to GSA
agency comments on the original report? If so, please provide all
drafts of the report including the dates of each draft report and who
reviewed each draft.
Answer. Before issuing the report publicly, we provided the agency
with a draft of the report, received their proposed redactions and
informal comments on the report, and met with GSA's General Counsel and
his staff to discuss them. After those discussions, we made redactions
to the public version of our report requested by agency management
based on their assertions of attorney client and deliberative process
privileges, and included their final comments in their entirety in our
report. As the agency's final comments reflect, the agency did not
contest any of the facts stated in the report.
Question 3. Ms. Ochoa, on February 4, 2019, you received a letter
from the Republican leadership on this Committee, the Oversight Reform
Committee, as well as Senate Committee on Homeland and Governmental
Affairs (Senate HSGAC), requesting the case file information supporting
your OIG report on the Old Post Office (OPO). To date the production
has been limited and during the hearing you were asked further about
internal emails between your staff discussing this report and the
internal deliberations that lead to various conclusions. Please provide
for the record all copies of staff emails and meeting invites about
this report; including scheduling of interviews, legal research and
analyses performed, discussions on conclusions reached in the report,
discussions on feedback from GSA, and responses to requests from
individuals questioning the report's conclusions.
Answer. Please see our answers above regarding our extensive
efforts to facilitate the production of documents in response to the
February 4 request. We will continue to work with the Committee to
facilitate production of materials the Committee needs for its
oversight mission, while seeking to protect the integrity of the
Inspector General's function.
[all]