Inside the Potential Conflict of Interest Surrounding Trump's DC Hotel

ABC News' Jordyn Phelps talks with law professor Steven Schooner.
17:12 | 12/05/16

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Transcript for Inside the Potential Conflict of Interest Surrounding Trump's DC Hotel
Hi I'm Jordan Alps with ABC news and today we're taking into the potential conflicts of interest surrounding Donald trams DC kowtow. And to join me an act as ashen eyes Steve Skinner he is a lawyer and an expert in government procurement law. Adam and Steve has really drawn everybody's intention to you. Very important cost wise in this case between Donald Trump and the federal government because of course trumps DC how talc. Is actually not owned by him he's basically leasing it from the federal government it's it's the government now playing. Ensued Steve I think so much for joining pleasure to lose her tiny little bit about what this closet as you've found and and why it's so important. OK so we're talking about a sixty year lease for about a 180 million dollars. In which Donald Trump is about overcome the landlord and the tenant in this hotel. But the specific clause that significant says that no elected official of the United States government. Shall share in the lease or benefit therefrom sell the moment he becomes the president the United States. He is and direct and complete violation of the contractual agreement. So this of course very unique situation where. Where the president could be out landlord and tenant belting but in a practical sense what's to stop him from. Well there's a couple different things so let's just be clear he will be in breach of contract and the GSA will have rights and that contract. Much more importantly though I mean remember the contract issue is that easy issue. The much more important one is the conflict of interest. We want our elected officials we want people at the president of the United States. To be focused exclusively on the nation's best interest we want them to be focused on what's best for the taxpayer and the public. We don't want them having to choose on an issue by issue basis between their own personal and financial interest and the interest of the nation. And this is a class a conflict of interest at numerous different levels and I'm sure we'll talk more about the fact. That it puts the government people associated with this lease an incredibly difficult situation. Were they true have to worry about conflicts in negotiating a lease on an annual basis. So let's talk about that those officials that would be you know in in the midst of this should Donald's trump stay honest police and become president. What with this scenario be that we face that time. Official Kabul government's keep in mind the first I don't think people necessarily come to grips with this. The present a United States is going to appoint the administrator of the General Services Administration. That means that the people managing that leads. Will work for someone who was appointed by the president and serves at the president's pleasure. So if Donald Trump gets bored with the GSA administrator he can remove them and put in someone who will be more inclined to take care of Trump's interest rather than the government's. But just think about this just for certain this is a very very complicated agreement. The agreement requires that each year the Trump Organization. Make an extensive I mean extensive disclosure of financial information regarding all aspects of the leaks. Based on that annual disclosure and you can draw your own conclusion about the track record of the Trump Organization during the campaign. With regard to disclosure and transparency of financial information. But based on that annual disclosure financial information. Jesus is supposed to sit down and negotiate annually with the Trump Organization a rent adjustment or differential. That adjustment is going to be based on adjustments in the Consumer Price Index and basically. Income and expenses so the reality is is some pour government employee is supposed to sit down and negotiate with Donald Trump. With Donald Trump's children. On behalf of the United States government understanding that the taxpayers' interest giving the greatest amount of money from trump. Is not necessarily the president or the president's family's best interest because they would like to pay the least amount of money to the federal government. So what's a little bit more about the specifics of at least there even if he becomes president there still that closet says. A government official cannot be party to at this least what went count but he some violation hair and he cannot clause go away. Well let's start at the beginning it was clearly the intent of the parties at the time they entered into this contract. That no one who was president no one who was the mayor of DC. No senators no representatives in congress would be party to this week's OK I told everybody understood that going it. He made an affirmative decision in affirmative act. To take a step that led him to breach just they didn't tell him to run for president so one party has done something to breach the contract. GSA has the authority at that point two at a minimum put him on notice but probably just go ahead and terminate the lease. At a minimum they should put him on notice that they plan to terminate the lease on inauguration on the day of inauguration. Now look let's be clear they could work this out in advance. Any responsible adult involved in this transaction. Would have come up with a continued to plan. They could've gone to marry on who happened to be headquartered in the DC metropolitan area and sent let's planet advance. For a transfer or as we say in government contracts land. An ovation of this lease if I end up winning the election. So that's please and fairness was negotiated before Donald Trott pat had to clear. But now that closure and remember the lease was signed in 2013 sure any announces candidacy more than a year before the election go ahead so now that he is now lacked. What should the GSA doing in Europe. So first and foremost they should sit down with the Trump Organization and just say look this is unacceptable we need a solution and we have to have a solution before the inauguration. Personally I think transfer an ovation is the easiest way to do it. They should also make clear that if the Trump Organization is unwilling to walk away from this lease either through a voluntary transfer or literally just walking away. They should put trump on notice that they need to terminate at least because he's in breach. But more importantly. Even if they don't want to hold him in breach and forced him to litigate. They should affirmed if we intend to basically and that leaks so even if trump thinks they're wrong even if trump plans to sue them. The amount of monetary damages he'll get in this case you'll be nominal house because it's all speculative but the key thing is the principle here's much more important. We cannot have the president of the United States setting this kind of example on conflicts of interest it's just too important. So they are mounting on the flip side that is that track is not in violation of this leads yet IE you know all. All signs he's been a good tennis he's paid rent he's you know I did by the rules of that we sing and tell January to money it will not violation. Well look I'm I'm not here to try about the other portions at least that he may or may not have been fully complying with. If you do the research you'll see there have been other problems for example he's in litigation or at least on his way to litigation with the DC government over his tax bill. There's an extremely complicated issue with regard to the financing. The original financing that he proposed is not his current status. And of course there's all the issues associated with the restaurant shall looks not fall into the trap of calling in the model tenant here because it's just not true. Selling out let's look at it at Houston our hands like. Donald Trump it's right himself at against the power over to his children as an absolutely unacceptable and sort out. He's indicated that you know he's got himself out of the management. Okay so it appears quite clear that trump or the Trump Organization doesn't get the concept of the blind trust. What he announced recently. Was that he was going to give up business operations to his children. That fundamentally flawed for two separate reasons first. Business hope or operations are not ownership. So if you turn to lease on page one where the recitals are. The least says that the tenant is Donald. So he owns it either way so even if he's not running release he is benefiting from the leaks the profits go to him so that first. But second turning this operation over to his children accomplishes nothing. His children were named to the transition team his children are actively engaged in talking with heads of state of other countries. They're actively participating. In the running of the United States government so there is no arms length. Distinction or difference between Donald Trump and the children so that's an area just doesn't work at all. OK so and that's an area basically his name would be opt the least in name only but. It's still a conflict of interests would still be tests say. Actually and remember what we're focused on here's the benefit and of course you hear many people talk about the constitutional issue. Many people never had to say let alone spell the word a mall you meant until a couple of weeks ago. But remember the constitution. Itself. Was crafted so that people like the president of the United States would not receive. Benefits from foreign states foreign dignitaries. The idea that the message is unequivocally clear to dignitaries around the world. That the president wants him just wants them to stay at his hotel and he thinks that's a good thing and he doesn't see that as a problem. Indicates why are believed it was Larry Tribe's language he's a walking talking violation of the constitution the moment we have an inauguration. So we've got a real problem. Now on the constitutional. Side we Ari scenes at foreign dignitaries. Different embassies adding up. Events parties at the trump hotel according to some reports we've seen and tell me how exactly what I'm violation. So and you don't have to just worry about reports me the invitations are route for the massive celebration of the state of Bahrain which they're going to host in the trump hotel. And this is this is not hypothetical anymore. So the bottom line is that foreign states got the message that the president would be pleased if they used his. Frankly expensive hotel so he is going to benefit from that understanding and that's exactly what the constitution did not want to happen. OK now. Constitutional language forest what does it far from from dealings with so the key thing is the benefit from the foreign dignitaries but let's also be clear. Homeland defer to the constitutional law school is as as to how you're actually effectuate this but the key thing to remember is. Your monuments clause in the constitution much more complicated than talking about the contract which he's going to breach. In order to get some kind of a remedy under the constitution that's going to require congressional action. That's why people are talking about the potential for impeachment on this issue. Let's be clear that complicated and that's a long way down the road. The let's go back the why it's so important to focus on the hotel first the hotel is easy. The hotel we have a contract where trump agreed to not do what he's doing. But more importantly this is the one issue where a single government agency holds all the callers. GSA is the landlord they of the lease with trump all they have to do is in. Forced the language of their lease. Which is entirely consistent with a long policy intended to prohibitive clock for intended to prohibit the kind of conflicts that we're seeing him. So GSA has the tools to deal with this. We think they should and it's really a good thing we're starting to see folks in congress both on the senate and the house on putting pressure on GSA to step up to the plate and do the right thing. So even trump isn't that in violation. Of three cents heat you could argue since he's not. Yet the president nor saying that GSA has grounds right now to pull out. Well I think they have grounds to pull out. But by the same token I don't think the verdict issue here is what they do in the next 24 hours if they want to put him on notice that they're going to terminate on January 20. I'm okay with that. What I'm not okay with is the GSA has basically turned turtle on this they've been very very quiet. And frankly they were rather deceptive with the media for. And it for a number of weeks in this. Many of the media have received the stock response from GSA that they were going to basically point the finger at Fuji you the Office of Government Ethics on this. Let's be unequivocally clear. This is not the Fuji's problem this is to yesterday's brawl. The arms of government ethics is policy shop they give guidance they don't investigate. They don't litigate they don't solve these kinds of wrong. So that was just a dodge and a faint on GSA's part and I think it was somewhere between disingenuous and deceptive I really don't understand why they did it other than to stall. The let's go back to restore. It's GSA's lease it's their problem they made the mess they need to clean enough and quite frankly it's pretty easy for them to do so. The worst thing that happens. If TSA does the right thing is that the Trump Organization sues them. We know the Trump Organization is notoriously. Litigious if the Trump Organization sues. We think the government's going to win. But even if trump went there's not going to be significant monetary damages and more importantly. An important message will have been sent that the integrity of federal contractor is more important than presence wall. Okay so it if Donald Trump wants to do you. The right thing from an ethics perspective and in your mind what without required giving your saying it's not enough to just signed company over to his children what what does it mean. Okay actually I think yes two very very easy options the easiest option is to find. A partner where to find another hotel manager. And literally transfer the entire thing to them the class of blind trust will be you'd find some independent third party. But this isn't rocket science this is not a complicated. Problem it's just a hotel so I don't care if you talk to marry under one of their competitors like keep saying merry up because they happen to be local and there's Mary. All around the DC metropolitan area but find another hotel manager sit down and negotiate an ovation we're transfer basically just say look. You need to give me a certain amount of money to make this worthwhile while you take it over and I wash my hands of it in its in tarred. And again one of the other benefits of that is the president of the United States name would not be on commercial property on Pennsylvania Avenue. Also not a very very good sign to countries around the world but that's the easy stuff. Assuming and I think we have to assume at this point that the president has no intention of doing the right thing on this because he just doesn't appreciate. The important of this and frankly. He likes the hotel and he likes having the money. Fed GSA can step up to the plate. TSA can work that out with him or again one hypothetical if trump could literally pack up and walk away just walk away from leaks. I don't believe for a minute the GSA. Would sue him for breaching leads TSA would be so relieved it be ecstatic. I'm against someone else can come in and taken over. But he could literally just give GSA Norris tomorrow and say. I realize that governing the nation is more important than my ego than my wallet than this particular piece of property. Which wasn't even open three months ago so. I'm walked away from the brief somewhat with police you do whatever you want with that property that would be much better than the situation we're in today. And in that scenario could trump get back all the money that the trump organization's board and to use this hotel in renovating it. So again there would probably be a complicated negotiation as to what that amount would be but anybody who objects to that I just disagree with remember. This is our government building. To the extent the trump improved or cleaned up that building the government gets all the benefit so the government should pay for the improvements to the building but remember it's the government's building either way. And if there were improvements made they should pay for. Okay Steve wrap up here I just really quick you believe people need to pay attention to us what's. Poker there's a lot of things going on right now. Trump Organization trump Philly has tremendous number of conflicts but the hotel is easy first of all we have contractual. Provision language in the contract that specifically prohibits the president being a part of this or benefiting from second. The GSA holds all the court they can solve the problem before the inauguration. The bottom line is is there are much more important issues but this issue is easy and if they do the right thing the important stuff follows. Got it Steve thanks so much for joining us pleasure to be here. And thank you heard checking out our live stream featured a lacked all our life streets at ABC news dot con you can follow me on Twitter. At Jordan Phelps thanks much for watching and have a great day.

This transcript has been automatically generated and may not be 100% accurate.

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