Inside the Potential Conflict Posed by Trump's DC Hotel

PHOTO: Outside view of Trump International Hotel - Old Post Office, in Washington, Oct. 26, 2016.PlayCheriss May/NurPhoto via Getty Images
WATCH Inside the Potential Conflict of Interest Surrounding Trump's DC Hotel

President-elect Donald Trump's glittering new hotel in the nation's capital was opened with much fanfare this fall.

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But now the real estate mogul may find himself in the position of becoming both landlord and tenant for the historic property, presenting what could be a unique ethical dilemma for the future president.

Background

The Trump International Hotel was constructed inside the landmark Old Post Office in Washington, D.C. In 2013, the General Services Administration (GSA), a federal agency, awarded Trump Hotels the right to lease the property for 60 years at a cost of $3 million each year. Trump spent $200 million renovating the 117-year-old structure, located at 1100 Pennsylvania Ave. Once Trump is sworn into office, he would effectively become both his own landlord and tenant because he will oversee the GSA.

But the terms of the agreement effectively forbid Trump from being a party in the lease, stating 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.”

So what happens next?

Although Trump tweeted on Nov. 30 that he "will be leaving my great business in total in order to fully focus on running the country," he has yet to announce the specific plans.

When The New York Times asked Trump last month about potential conflicts of interest and ethics laws, he responded, “The law’s totally on my side. The president can’t have a conflict of interest."

As president, Trump has the power to pick the next head of the GSA. Once that individual is confirmed by the Senate, he or she could, in theory, rewrite the terms of the lease to remove the clause forbidding an elected official from being a party in the lease.

"Trump and the GSA could collude to remove the contractual prohibition or make it so he is not breaching the contract," according to Steven Schooner, a government procurement law expert who teaches at George Washington University. "However, removing that clause in no way removes any of the fundamental underlying problems. It in no way removes the conflicts of interest of the federal contracting system."

Even if Trump's children were to take over complete management of the family business, Schooner said the GSA could ultimately be choosing between the interests of taxpayers and those of the first family, who Schooner says would have the ability to renegotiate the lease every year with the GSA.

"Will the GSA employee who is managing the contract, and renegotiating the contract, is that individual going to act in the public's best interest or act to please the president, the president's children, or their boss who serves at the pleasure of the president?" Schooner asked rhetorically.

And while 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.

How could Trump resolve the situation?

Even if Trump fully transfers the management of his business interests to his children, as he has indicated (he has also discussed the possibility of a blind trust), ethics experts tell ABC News that move does not adequately solve the conflicts of interest presented.

“Handing off management of the assets does nothing to minimize the conflict of interest that he has because he has a financial interest as the holder of the lease and then has indirectly an official role to play as the head of the U.S. government,” said Kathleen Clark, who serves on the DC Bar Rules of Professional Conduct Review Committee.

Beyond the hotel lease, attorney and former Republican Federal Election Commission Chairman Trevor Potter says an arrangement whereby Trump transfers control of his business to his children could spell trouble for the future president.

“The proposal he has made ... is an alternative that no ethics lawyer would suggest,” said Potter. “It’s a recipe for disaster for him and for his administration.”

Alternatively, ethics experts suggest Trump should do what every president before him over the last 38 years has voluntarily done: liquidate his assets or put together blind trusts, administered by an independent person or body, to prevent even the appearance of impropriety. While Trump has said that "legal documents are being crafted which take me completely out of business operations," it is not yet clear if those documents will rise to the level of liquidation or a blind trust.

“If president-elect Trump actually wants to put the interests of the public ahead of his private interests, there’s a way for him to do that, and it’s to divest himself of those private interests which will cause a conflict,” said Clark.

ABC News' Ben Siegel contributed reporting.

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