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Vern Edwards

Trump Lease of Old Post Office - A pending breach?

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4 hours ago, Vern Edwards said:

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."

 

Vern, I think that the lease says that no elected official shall be allowed to enter any share or part of this Lease, or be allowed to enter into any benefit that may arise therefrom...

Mr.Trump already entered into a share or part of the lease and any benefits that might arise from the lease.  He was not an official, elected or otherwise at the time that "he" was admitted to (was allowed to enter into) any share or part of the lease or to any benefit that may arise therefrom. 

I think that the benefits would arise from the original lease transaction and obviously would occur during the lease. I don't think that one is re-admitted to the right to any share of benefits that may arise from an on-going lease. 

He wouldn't be allowed to enter into any renewal option or new lease with new benefits therefrom.

So, I don't think that this specific clause would be cause for a breach of the current lease or of any benefits that may arise therefrom.  There might be other reasons why he should  divest himself of his participation in the GSA lease or to decline to receive profits while he is an elected official.

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1 hour ago, Vern Edwards said:

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.

Vern - The legal definition of "benefit" as it relates to contract law - Blacks and Legal Dictionary at law.com.  

As I have tried to relate,  No to your second question.   Mr. Trump does not "benefit" the LLC does.  Mr. Trump will gain potential funds from being a shareholder in the LLC just as I would being a shareholder for any corporation.  The tax code just makes me, and Mr. Trump, have to handle those funds in a different manner for tax purposes depending on whether it is an LLC or a corporation.

Yes the issue is in play if not merely for "appearance"  but personally I can not defend a proposition of breach based on the poorly written clause and am surprised that others would use it as the lynch pin to terminating the lease.  From my view cure and show cause like that used in FAR related procurements could easily solve the matter for those that have suggested a concern.  I do acknowledge the lease terms and conditions would dictate the exact process in lieu of a jump to termination outright.

My conclusion therefore is like yours Schooner-Gordon or Drabkin all have their views and the right answer if I have to go there is that due process of the lease should be followed and the issue is not egregious enough to suggest that breach/default is the automatic end all.

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13 minutes ago, C Culham said:

My conclusion therefore is like yours Schooner-Gordon or Drabkin all have their views and the right answer if I have to go there is that due process of the FAR should be followed and the issue is not egregious enough to suggest that breach/default is the automatic end all.

Emphasis added.

The FAR does not apply to the Trump deal. The Trump deal is not an acquisition. It is the sale of a lease. (The FAR also does not apply to acquisitions of leasehold interests by GSA.) I don't know what if any regulations apply to the Trump transaction. I found nothing in Title 41 of the CFR, Public Contracts and Property Management.

Just for the record, I haven't reached any conclusion on the Schooner-Gordon v. Drabkin disagreement. That's why I'm asking for the views of other Wifconers.

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Vern - You are correct regarding FAR.  I got caught up in discussion as FAR related like most dicussions in WIFCON.  I will edit my post.

 

 

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I have done a little research on Trump Old Post Office, LLC and from what I can find, it is at least partially owned by Trump International Hotels Management, LLC.  Also there is another group called TIHM, LLC involved some way.  Thus, it is not clear who are the members of the Post Office LLC.

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1 hour ago, joel hoffman said:

He wouldn't be allowed to enter into any renewal option or new lease with new benefits therefrom.

Disagree, assuming a renewal option was part of the original agreement.

 

1 hour ago, joel hoffman said:

He wouldn't be allowed to enter into any renewal option or new lease with new benefits therefrom.

Agree.

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Retread:

I'm pretty sure that Trump will benefit from the lease, whatever the business structure.

joel and jwomack:

Your comments about renewal options are off the mark. The Trump Old Post Office deal is not a run-of-the-mill, standard government contract. I have provided a link to the lease document, above. Use it and see page 32, "Term of Lease." The term is 60 years. I doubt that Trump will (a) be president by the time of any renewal and (b) alive.

I opened this thread with a really simple question, guys.

Vern

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It appears that GSA's Deputy Public Building Service Commissioner agrees with Schooner-Gordon and rejects Drabkin's interpretation.

http://democrats.oversight.house.gov/sites/democrats.oversight.house.gov/files/documents/2016-12-14.EEC DeFazio Connolly Carson to Roth re Trump Hotel Conflicts ....pdf

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A GSA spokeswoman issued a statement Wednesday contradicting the lawmakers' characterization of the discussions:

GSA does not have a position that the lease provision requires the president-elect to divest of his financial interests. We can make no definitive statement at this time about what would constitute a breach of the agreement, and to do so now would be premature. In fact, no determination regarding the Old Post Office can be completed until the full circumstances surrounding the president-elect’s business arrangements have been finalized and he has assumed office. GSA is committed to responsibly administering all of the leases to which it is a party.

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On 12/13/2016 at 3:45 PM, Vern Edwards said:

...I opened this thread with a really simple question, guys.

Vern

Vern, Actually, you opened the thread with three separate questions.

Quote

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

I responded to the three questions. 

Keep in mid that the post and cited article indicated that Schooner's and Gordon's conclusion is based upon the wording of a single contract clause (37).  The other cited article  indicated that Drabkin's position was that Clause 37 would not be the reason to cancel the lease.  Drabkin said "Whether the language of the provision was inartfully drafted is another matter.".

I said:

Quote

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.  

Quote

That language is very clear and unambiguous. 

 

Quote

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

In response to a comment by Vern concerning benefits continuously occuring  during the lease, during Mr.Trump's term of office, I said:
 

Quote

 

Vern, I think that the lease says that no elected official shall be allowed to enter any share or part of this Lease, or be allowed to enter into any benefit that may arise therefrom...

Mr.Trump already entered into a share or part of the lease and any benefits that might arise from the lease.  He was not an official, elected or otherwise at the time that "he" was admitted to (was allowed to enter into) any share or part of the lease or to any benefit that may arise therefrom. 

I think that the benefits would arise from the original lease transaction and obviously would occur during the lease. I don't think that one is re-admitted to the right to any share of benefits that may arise from an on-going lease. 

 

I was attempting to say that Trump wasn't entering any "new" benefit because the benefits of holding the lease were already "entered" before he takes office. The benefits would directly result from the lease already entered into. 

Not being familiar with the lease, I did state that any extension or renewal of the lease would fall under the clause 37 prohibitions because there would be a new "entering".  Vern corrected me - The lease is for a 60 year period, no options for extensions and Trump wouldn't be involved in a renewal after 60 years.

I also said:

Quote

So, I don't think that this specific clause would be cause for a breach of the current lease or of any benefits that may arise therefrom.  There might be other reasons why he should  divest himself of his participation in the GSA lease or to decline to receive profits while he is an elected official.

In rereading the originally cited article at http://bigstory.ap.org/article/0a939964cc7d4c6abdec6c2f6b44cbe4/lawyers-trump-has-sell-dc-hotel-taking-office ,  various sources cite other possible problems., outside of the questions and background that Vern described in his OP.

My answers to the original questions are based upon the information initially provided.

I don't know where this thread was veering off topic at the point that Bob interjected.

 

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3 hours ago, Vern Edwards said:

Thanks for the extended review, Joel.

So... Where do you stand now? Do you agree with Schooner-Gordon or Drabkin?

To repeat my response to one of your original questions, I agree with Drabkin, that clause 37 wouldn't result in a breach, and "Whether the language of the provision was inartfully drafted is another matter". I also said that I agree that there may be other reasons why Mr Trump may have to divest any control or economic interest in the lease arrangement.  

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Someone else posted this in a different thread.   Was part of the press release from GSA yesterday and I didn't see it mentioned in this thread.  Not sure if this exception applies to the entity in question.

https://www.gsa.gov/portal/content/153578

The full language of section 37.19 is below:

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 (emphasis added).

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Note the phrase "publicly held." Does it apply only to corporations or does it also apply to other entities? The company that holds the lease is a limited liability company.

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Corporations are often, but not always publicly held (publicly traded).  I haven't researched the matter much, but I believe other types of business entities (e.g. LLC, LLP, sole proprietorship, etc) are not generally publicly held/traded, but may sometimes be made up of multiple owners (e.g. partnerships). 

My interpretation of the provision is that it is referring to a shareholder or beneficial owner of 1) a publicly held corporation or 2) any other entity (not necessarily one that is publicly held).  If the author meant for the term to apply to other publicly held entities (assuming such things exist), it would have been more clear to state "publicly held corporation or entity."  Instead the words "or other entity" were used.   So long as the lease is for the general benefit of the publicly held corporation or general benefit of the other entity, I think the exception may apply.  In other words, maybe the restriction is concerned with a single person (shareholder/beneficial owner) solely benefiting, rather than they entity (whatever kind it may be) benefiting generally.  If the other entity was a sole proprietorship, then I don't think the "general benefit" exception could apply.

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19 hours ago, Vern Edwards said:

Note the phrase "publicly held." Does it apply only to corporations or does it also apply to other entities? The company that holds the lease is a limited liability company.

"or" - inclusive or exclusive?  A court would have to decide in the end and good luck with that!   The matter could also be decided when Mr. Trump and his organization figures out what they plan to do.   In the end the clause is, as I have already noted, poorly written and to depend solely on it as a definitive conclusion that there is breach as a result of Mr. Trump having any connection to the LLC  is careless thinking.  With the full language of the clause noted I continue to disagree with Schooner, Gordon, Drabkin.  An impossible task to figure out and for some reason  "Snipe hunt" comes to mind.

 

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Some of you might be interested in learning that the language of the clause dates to a statute enacted in 1808, 2 Stat 484, Ch. XLVIII, Sec. 3:

Quote

That in every such contract [a contract with the United States] or agreement to be made or entered into, or accepted as aforesaid, there shall be inserted an express condition that no member of Congress shall be admitted to any share or part of such contract or agreement, or to any benefit to arise therefrom.

That law was signed by Thomas Jefferson. The law ultimately was implemented by FAR 52.203-1, using almost the exact verbiage. The clause was removed from FAR in 1994.

 

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1 hour ago, Vern Edwards said:

Some of you might be interested in learning that the language of the clause dates to a statute enacted in 1808, 2 Stat 484, Ch. XLVIII, Sec. 3:

That law was signed by Thomas Jefferson. The law ultimately was implemented by FAR 52.203-1, using almost the exact verbiage. The clause was removed from FAR in 1994.

 

Actually removed from the FAR in 1995 - https://www.gpo.gov/fdsys/pkg/FR-1995-07-21/pdf/95-17935.pdf - reasoning as stated in this reference because statute changed.

Begs the question as to why the dang clause is in the lease in the first place?

I will admit my research is left looking at what is dribbled out as each new comment is posted but my read of the above reference appears to indicate any violation is not a contract matter ( and I do mean lease in this context) but a possible criminal one.   Should not this matter be of a concern and determination of the Attorney General and not that of contract (lease) professionals?

 

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27 minutes ago, Retreadfed said:

Carl, why do you think there is a potential criminal violation here?  It is not a crime to violate a law that is not a criminal statute.

Retread - Admittedly no research beyond this statement in the Fed Reg that I used as reference in my previous post.....

'The criminal provisions found at 18 U.S.C. 431 and 432 remain in effect."

Now that I read it especially 18 USC 432 it makes me wonder why someone is not calling out the leasing officer to be fined if in fact the clause applies even though Mr. Trump is still just an elect and not the President yet?

I am still left in the fog that Schooner, Gordon, Drabkin, and this thread for that matter, is trying to reason something that is beyond reason!!!!!!

Again the clause is sloppy and worthless and I have now come to the conclusion that it does not belong in the lease as there is no basis in statute to have it in the lease.

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Sorry meant to add this - 18 USC 432

"Whoever, being an officer or employee of the United States, on behalf of the United States or any agency thereof, directly or indirectly makes or enters into any contract, bargain, or agreement, with any Member of or Delegate to Congress, or any Resident Commissioner, either before or after he has qualified, shall be fined under this title."

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Carl:

You're right about the removal of the clause--1995. Thanks. Congress deleted the statutory requirement to include the clause in contracts in 1994, as part of the Federal Acquisition Streamlining Act.

The clause is in the lease to implement 18 USC 431-433 and 41 USC 6306, but the statutes do not include elected officials other than members of Congress. GSA added the prohibition against admitting other elected officials, i.e., the president, the vice president, and D.C. officials. I do not know why, but they were not the first to do so. Other versions of the same clause that were used in the 19th Century included such elected officials.

Violation of 18 USC 431 and 432 are criminal acts for which a fine must be assessed. That criminal statutes date to 1808.

I could find no instance of enforcement of the statute against a member of Congress or anyone else.

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Thank you Vern - A very interesting discussion especially considering the fact that I was watching a national news show last night where a pundit affirmatively stated that the Mr. Trump had in fact breached the lease.  More experts!!   I continue to wonder on what basis exactly and if the basis is the sole clause discussed in this thread  then why hasn't the lease been terminated?  Maybe it will be concluding that it will be a long shot to do so under the specific clause discussed in this thread, a very long shot!

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In my opinion, the key to the clause is the phrase "shall be admitted" and the key word in the phrase is "admitted." Everything depends on what it means to admit an official to a share, part, or benefit of the lease.

In effect, the clause says: The tenant shall not admit any elected offcial to any share, part, or benefit of the lease.

To commit that act of admittance would be to perform a prohibited act, which would be a breach of contract. So the question is: What kind of behavior by the tenant would constitute an instance of that act?

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