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Vern Edwards

Trump Lease of Old Post Office - A pending breach?

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In an article in the November 28 online edition of Government Executive, Steve Schooner and Dan Gordon argued that President-elect Trump must either divest himself of his participation in the GSA lease of the Old Post Office in Washington D.C. before his inauguration or else be in breach of the lease. They base their conclusion on a clause in the lease, which they quoted as follows:

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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...

http://www.govexec.com/excellence/promising-practices/2016/11/gsas-trump-hotel-lease-debacle/133424/

According to Bernard Condon, a reporter for the Associated Press, David Drabkin, former GSA Chief Acquisition Officer, disagreed.

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David Drabkin, once the GSA's senior procurement officer, said he thinks the clause doesn't apply to Trump because it only prohibits adding elected officials to the lease after it was signed, not banning original parties to it who subsequently get elected to office.

http://bigstory.ap.org/article/0a939964cc7d4c6abdec6c2f6b44cbe4/lawyers-trump-has-sell-dc-hotel-taking-office

What do you think? How do you interpret the clause? Do you agree with Schooner and Gordon or with Drabkin?

According to the Court of Appeals for the Federal Circuit, the principle rule of interpretation of Government contracts is:

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When interpreting a contract, “ ‘the language of [the] contract must be given that meaning that would be derived from the contract by a reasonably intelligent person acquainted with the contemporaneous circumstances.’ ”

TEG-Paradigm Environmental, Inc. v. U.S., 485 F.3d 1329 (Sept. 29, 2006). In their article, Schooner and Gordon described the clause as "clear, specific, and plain." In an article in POLITICO Drabkin was quoted as saying that the clause "is inartfully written."

tic

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Drabkin has been out there on the edge for many years. However ever I agree with his position (but don't know his reason)  here. The future tense verb phrase is "shall be admitted to".  President elect Trump is already, in effect, the leaseholder.  

Edit in response to edited OP: That language is very clear and unambiguous. 

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I agree with Drabkin for the reasons stated.  Clearly this phrase is written as future tense.  May not be what was intended, but that's how it is written.   

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And "admit" means "to allow", "to permit", "...entrance to", etc. See, for instance, the definition at Dictionary.com.  

 

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Seems foolish to argue against prof. Schooner, but (hypothetically) is it legal to include this clause in a contract?

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No party to this lease shall pursue any elected office of the Government of the United States.

If the clause means what Prof. Schooner says, is it enforceable?  Could that rapidly become bribing someone to not run for office? 

Feels like a bigger problem for GSA than Trump, and I hope they can resolve it *prior* to the swearing-in ceremony, when they are still two different parties! 

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apsofacto:

So do you agree with Schooner and Gordon, with Drabkin, or with none of them?

Everybody: Please just say whether you agree with Schooner-Gordan, with Drabkin, or interpret it entirely differently, in which case please tell us what you think it says.

 

 

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1 hour ago, Retreadfed said:

Based on the language quoted, Drabkin.  Also, is Trump a party or beneficiary of the lease?  If not, the clause does not apply.

The lease is held by Trump Old Post Office LLC. I presume that Trump is the owner or one of the owners of the LLC.

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FYI, the lease clause is modeled on the old FAR "Officials Not To Benefit" clause, 48 CFR 52.203-1, which was removed from FAR in 1995. That clause implemented the prohibition in 18 USC 431, which reads in pertinent part as follows:

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Whoever, being a Member of or Delegate to Congress, or a Resident Commissioner, either before or after he has qualified, directly or indirectly, himself, or by any other person in trust for him, or for his use or benefit, or on his account, undertakes, executes, holds, or enjoys, in whole or in part, any contract or agreement, made or entered into in behalf of the United States or any agency thereof, by any officer or person authorized to make contracts on its behalf, shall be fined under this title.

Note that the statute does not apply to the president or vice president.

FAR 52.203-1, Officials Not To Benefit (APR 1984), had said:

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No member of or delegate to Congress, or resident commissioner, shall be admitted to any share or part of this contract, or to any benefit arising from it. However, this clause does not apply to this contract to the extent that this contract is made with a corporation for the corporation's general benefit.

That clause could be traced almost verbatim to a statute enacted in 1808. The GSA lease clause extends the contractual coverage to the president and the vice president. I found no case law interpreting either that clause or the GSA lease clause.

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5 hours ago, Vern Edwards said:

FYI, the lease clause is modeled on the old FAR "Officials Not To Benefit" clause, 48 CFR 52.203-1, which was removed from FAR in 1995. That clause implemented the prohibition in 18 USC 431, which reads in pertinent part as follows:

 
Quote

Whoever, being a Member of or Delegate to Congress, or a Resident Commissioner, either before or after he has qualified, directly or indirectly, himself, or by any other person in trust for him, or for his use or benefit, or on his account, undertakes, executes, holds, or enjoys, in whole or in part, any contract or agreement, made or entered into in behalf of the United States or any agency thereof, by any officer or person authorized to make contracts on its behalf, shall be fined under this title.

That clause could be traced almost verbatim to a statute enacted in 1808. The GSA lease clause extends the contractual coverage to the president and the vice president. I found no case law interpreting either that clause or the GSA lease clause.

If the intent is to apply to an existing leaseholder who is later elected to public office, the GSA clause does not say that and I would agree with Drabkin that it is"inartfully written". 

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Drabkin.

Has anyone here read the actual lease agreement?  How are the "benefits" (assumedly "profit sharing") delineated?  Is it in the form of typical fee determinations based on achievements towards targets?  

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The text of the lease is here: https://www.gsa.gov/portal/content/305477

It is very long and very unwieldy.

It seems to me that you would have to be an owner or employee of Trump Old Post Office LLC, the tenant, in order to have any of the tenant's share of, part of, or benefit from the lease.

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Different....

Share or part...the LLC carries the lease and is liable for the adherence to the lease.  Trump as an individual doesn't share or have a part of the lease.

 

Benefit...aka profit is attributed to the individuals of the LLC.

Trump, assumed as a member of the LLC, has no issue until a profit is realized.

 

 

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Carl,

Why do you think that profit is the only benefit to be derived from the lease? Isn't cost recovery a benefit? Moreover, the clause does not limit "benefit" to monetary benefits. 

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On 12/12/2016 at 5:42 AM, joel hoffman said:

And "admit" means "to allow", "to permit", "...entrance to", etc. See, for instance, the definition at Dictionary.com. 

Joel:

If admitted means permitted or allowed, doesn't that work against Drabkin's interpretation?

Drabkin seems to have interpreted the word admitted as meaning allowed to enter, as in allowed to enter the deal for shares, parts, and benefit. He seems to have reasoned Trump entered the deal before he became an elected official and will not need to enter into the deal again after he becomes an elected official. But if admitted means simply permitted or allowed, as in permitted or allowed to have a share, part, or benefit, those actions will occur continuously after he is inaugurated so long as he has not divested himself, and so he would be in continuous violation of the lease.

I find your choice of definitions to be peculiar, since the first definition of admit at Dictionary.com is "to allow to enter; grant or afford entrance to."

 

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Drabkin, but slightly different.

 

Drabkin’s rationale - “…it only prohibits adding elected officials to the lease after it was signed…”

 

I think the prohibition is more restrictive and also includes an individual’s status at the time the lease is signed.

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I doubt that it has any bearing on the interpretation of the contract in question, but FAR Subpart 3.6 restricts a contracting officer from knowingly (emphasis added) awarding a contract to a "Government employee or to a business concern or other organization owned or substantially owned or controlled by one or more Government employees."  The policy even provides for an exception to the policy.  The policy does not address what to do if after award, it is discovered (whether due to the contracting officer not knowing of the preexisting ownership or because ownership was acquired subsequent to award).

I'm not sure what statute, if any, or other source this restriction flows from.  If there is one, maybe it also applies to leases of real property.

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2 hours ago, Vern Edwards said:

Carl,

Why do you think that profit is the only benefit to be derived from the lease? Isn't cost recovery a benefit? Moreover, the clause does not limit "benefit" to monetary benefits. 

Vern - Benefit via a contract is profit, privilege, and right acquired through the contract.  The LLC acquired the profit, privilege, and right not Mr. Trump.  Cost recovery as such is a right is to the LLC not Mr. Trump.   Mr. Trump is only required to report the profits, if any, via his personal taxes per tax code.   From my view the LLC is not only a shelter to liabilities but to the profits, privileges, and rights too. 

Following the logic of Schooner and Gordon as the article tries to lay out Mr. Trump is both "landlord and tenant".  Mr. Trump is not, the Trump Old Post Office LLC is.

Further if in fact the contract is in breach the LLC would be terminated for default not Mr. Trump. In the end I believe the article personalizes a matter rather than keeping it a purely business matter.  It should be about the LLC and this is not made entirely clear by the authors with many references to "Mr. Trump" as opposed to the LLC.    If the LLC is not operating properly then go through the process for T4D, instead Schooner and Gordon want to jump immediately to breach (default) and noting the confusion caused by the poor wording of the clause on which the breach would be based such a jump seems bad Federal Acquisition Regulation process to me. 

Pandora's box all the way around!

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20 minutes ago, C Culham said:

Benefit via a contract is profit, privilege, and right acquired through the contract.

Carl:

Do you have an authoritative source for that assertion, or is that your personal definition?

If Mr. Trump is the owner of the LLC or one of the owners, won't he benefit from the lease? If so, wouldn't that put the issue in play? It wouldn't necessarily make either Schooner-Gordon or Drabkin right.

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