Trump's Loans From Troubled German Bank Pose Conflict Of Interest

Dec 1, 2016
Originally published on December 1, 2016 12:12 pm

The Trump International Hotel in Washington, D.C., is a stately old building with turrets, arches and a clock tower soaring 300 feet into the air. Inside, the lobby is equally impressive with massive chandeliers, a grand staircase and a glass ceiling 10 floors up.

The 263-room hotel is without doubt luxurious. But it could also represent a massive conflict of interest for President-elect Donald Trump once he takes office.

In 2013, Trump signed a 60-year lease for the building, once the headquarters of the U.S. Post Office, and began a $200 million renovation to turn it into an upscale hotel with the help of loans from Deutsche Bank, a large German bank.

Trump's financial disclosure reports, viewed by NPR, show he currently owes Deutsche Bank roughly $365 million in loans for the Washington hotel, another one in Chicago and a Florida golf course.

Deutsche Bank is one of the large global banks investing in and betting on real estate around the world. So it makes some sense it would be exposed to Trump, says Simon Johnson, a professor at MIT's Sloane School of Management. He says Trump has had a relationship with the Frankfurt-based bank spanning nearly two decades, and it is his largest financial backer.

But Johnson says Deutsche Bank is in deep trouble with the Justice Department over a number of allegations.

"The tip of the iceberg is a particular fine by the Department of Justice, a large fine with the opening numbers around $14 billion, with regard to how they created and sold mortgage-backed securities before 2008," he says.

There are private negotiations underway over the amount of that fine, Johnson says, with the bank and the German government pushing back.

He says this sets up a huge conflict of interest for the president-elect: Once Trump takes office, he will be overseeing the Justice Department, which in turn is negotiating a fine with his biggest lender.

"Does it look bad? Does it look like exactly someone might cut Deutsche Bank a deal because they want their boss's boss to be happier? Yeah, absolutely, of course," Johnson says. "And that's why we try to avoid the appearance of a conflict of interest."

Richard Painter, a former chief White House ethics lawyer in the George W. Bush administration, says it would be best if the case were resolved under the Obama administration.

But Painter, now a law professor at the University of Minnesota, says even if the case against Deutsche Bank can be resolved, there are a host of other potential conflicts surrounding the Trump International Hotel — such as guests staying there as a way to curry favor with Trump.

"The foreign diplomats who are coming in to stay at the hotel at the expense of their governments could create a very serious issue for the president [-elect] under the emoluments clause of the Constitution," he says.

That clause prevents anybody holding a position of trust with the United States government, including the president, from receiving gifts and other payments from foreign governments.

Steven Schooner, with the George Washington University Law School, says Trump's lease with the hotel — which NPR has seen — should be terminated immediately, because the terms of that lease say so.

"The contract specifically says that no elected official of the United States government shall be party to, share in or benefit from the contract. It couldn't be any more clear than that," he says.

The Trump transition team did not respond to requests for comment. On Wednesday, Trump said on Twitter that he is taking steps to separate himself from his business operations. He gave no details, but promised a Dec. 15 press conference to reveal his plans.

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STEVE INSKEEP, HOST:

Forty-four Americans have been elected president of the United States. So far as we know, none has ever run a brand-new luxury hotel down the street from the White House. President-elect Donald Trump has such a hotel, the Trump International, in a landmark building that used to be the U.S. Post Office. Now that hotel is a focus of the debate over conflicts of interest between his public duty and private business. NPR's Jackie Northam reports on the loans that finance the hotel and a contract that says a government official cannot run it.

JACKIE NORTHAM, BYLINE: The Trump International Hotel is a stately old building with turrets, arches and a clock tower soaring 300 feet into the air. Inside, the lobby is equally impressive. It's a vast, airy indoor courtyard with massive chandeliers, a grand staircase and a glass ceiling 10 floors up there's a restaurant at one end. At the other, overlooked by four giant TV screens, is the bar.

(SOUNDBITE OF CHAMPAGNE CORK POPPING)

NORTHAM: In 2013, Trump signed a 60-year lease for the building and then began a $200 million renovation with the help of loans from a large German bank, Deutsche Bank. Trump's financial disclosure reports, viewed by NPR, shows he currently owes Deutsche Bank roughly $365 million dollars in loans for the Washington hotel, another in Chicago and a Florida golf course.

SIMON JOHNSON: Deutsche Bank is one of the large global banks investing in, betting on real estate around the world. So it makes some sense that they would be exposed to Mr. Trump.

NORTHAM: Simon Johnson, a professor at MIT's Sloan School of Management, says Trump has had a relationship with the Frankfurt-based bank spanning nearly two decades, and it's his largest financial backer. But he says Deutsche Bank is in deep trouble with the Justice Department over a number of allegations.

JOHNSON: The tip of the iceberg is a particular fine by the Department of Justice, a large fine, which the opening numbers are around $14 billion, with regard to how they created and sold mortgage-backed securities before 2008.

NORTHAM: Johnson says there are private negotiations underway over the amount of that fine, with the bank and the German government pushing back. Johnson says this sets up a huge conflict of interest for Trump once he takes office - because Trump will then be overseeing the Justice Department, which is negotiating a fine with his biggest lender.

JOHNSON: Does it look bad? Does it look like exactly someone might cut Deutsche Bank a deal because they want their boss's boss to be happier? Yeah. Absolutely, of course - and that's why we try to avoid the appearance of a conflict of interest.

RICHARD PAINTER: It would be best if that particular case were resolved under the Obama administration, with a settlement in the few weeks here that remain.

NORTHAM: Richard Painter is the former chief White House ethics lawyer in the George W. Bush administration. He says even if the case against Deutsche Bank can be resolved, there are other potential conflicts surrounding the Trump International Hotel, such as guests staying there as a way to curry favor with Trump.

PAINTER: The foreign diplomats who are coming in to stay at the hotel at the expense of their governments could create a very serious issue for the president.

NORTHAM: Steven Schooner with George Washington University Law School says Trump's lease with the hotel should be terminated immediately because the terms of that lease say so.

STEVEN SCHOONER: The contract specifically says that no elected official of the United States government shall be party to, share in or benefit from the contract. It couldn't be any more clear than that.

NORTHAM: The Trump transition team did not respond to requests for comment. On Wednesday, Trump said in tweets that he is taking steps to separate himself from his business operations. He gave no details but promised a December 15 press conference to reveal his plans.

Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.