Trump insider pursuing bid for FBI building contract, raising questions of conflict of interest

Steven Roth is a significant business partner of both Trump and Kushner.

ByABC News
June 12, 2017, 7:19 AM

— -- In what ethics experts are calling a glaring direct conflict of interest, a significant business partner of both President Donald Trump and his son-in-law and senior adviser Jared Kushner is pursuing a $2 billion government contract to build new headquarters for the FBI.

“It creates a huge conflict,” said Rep. Gerald Connolly, a Virginia Democrat who sits on the House Oversight Committee. “It’s an enormous project. The exposure here for the Trump administration is very real.”

Vornado Realty Trust, a giant New York real estate firm whose founder and chairman, Steven Roth, is a longtime friend of and occasional adviser to Trump, is one of three finalists for the rights to develop a new FBI headquarters and campus in the Washington, D.C., region. Roth is helping head up Trump’s infrastructure advisory council and traveled with the president as he rolled out his plans last week, briefly sharing the stage with him in Cincinnati — with Trump introducing him to the crowd as one of “the greatest builders in America.”

Through business partnerships with both the Trump Organization and the Kushner Co., Roth’s firm has a level of financial co-dependence with the first family that Connolly said could spark intense debate over the Trump administration’s handling of potential conflicts.

Vornado and the Trump Organization are jointly invested in two buildings: one in Manhattan and another in San Francisco. Vornado is also in the midst of negotiations with the Kushner Co. about the future of a troubled investment by Kushner’s family in a New York City skyscraper at 666 Fifth Ave., according to a Kushner Co. spokesman. The company came to the rescue of the Kushners when it agreed to an arrangement that gave Vornado 49.5 percent of the office portion of the New York tower and 70 percent of the retail space.

Through a spokesman, Kushner told ABC News he will work hard to avoid any conflict between his White House work and his family business.

“Jared takes the ethics rules very seriously and would never compromise himself or the administration,” a White House official told ABC News. “In consultation with the Office of the White House Counsel, he is fully complying with federal ethics rules and will recuse as necessary.”

Already, Kushner has faced questions about presentations his family firm made in China — a road show in which his sister referred to his White House stature as she marketed a New Jersey development to potential investors. Noah Bookbinder, the executive director of the ethics watchdog group CREW, said he harbors even greater concerns about the FBI headquarters project. It is not uncommon in Washington, he said, to find indirect conflicts of interest, where a broad policy change might benefit someone close to a political leader, but this is different.

“This is a case where the conflict is direct,” Bookbinder said. “They have business ties to a company that stands to benefit from a direct decision of the administration.”

Earlier this year, Kushner announced he had stepped away from roughly 200 positions in the various entities that make up the vast family business, though he continues to have a financial stake in the company. In April, Kushner’s lawyer Jamie Gorelick told The New York Times that her client could not shed investment funds that were tied up in buildings.

“The real estate assets that Kushner is holding on to are unlikely to pose the kinds of conflicts that would trigger the need to divest,” Gorelick told the Times. “The remaining conflicts, from a practical perspective, are pretty narrow and very manageable.”

Reached last week, a spokesman did not indicate whether Kushner would weigh in on the decision about the FBI headquarters contract, which is expected to be made by the General Services Administration later this year. Not only will the winning bidder have the rights to develop an expansive new campus for the federal law enforcement agency, but also the government has agreed to convey ownership of the existing FBI headquarters, an iconic building that sits on Pennsylvania Avenue in one of the most coveted locations in the nation’s capital. Vornado is partnered in its bid with the JBG Companies of Chevy Chase, Maryland.

Connolly expressed concern about the ability of the General Services Administration to act independently of any influence from the White House. He and other lawmakers have questioned the way the agency handled the federal lease for the Old Post Office Pavilion, a government property in Washington, D.C., that is now home to the Trump International Hotel. The lease agreement included a provision prohibiting any elected official from holding an interest in the agreement, but the GSA ruled that Trump’s interest in the hotel did not run afoul of that requirement.

“Does GSA cut corners when it is politically convenient?” Connolly asked. “Our experience with the Trump Hotel downtown would suggest yes.”

A GSA spokeswoman was not available for comment last week.

Connolly said he believed the only solution would be for Vornado to withdraw its bid. Vornado executives did not respond to multiple requests for comment. Roth has not commented on the question but told investors on an analyst call in February he was “honored” to be asked to help lead the president’s infrastructure council and that “infrastructure matters are not political.”

Questions about the close association between the Kushner firm and Vornado have surfaced at a time when there have been reports of financial stress for the signature Kushner property at 666 Fifth Ave., in which Vornado is a partner.

One New York real estate expert told ABC News that the building is not making enough money in rental income to cover the payments on its $1.3 billion mortgage, and Vornado is likely playing a role in keeping the building afloat as the companies seek other partners for a redevelopment. The initial loan is said to be coming due in January 2019.

“When they brought in Vornado, according to the documents we’ve seen, Vornado put some cash in and made some financial commitments to cover those shortfalls on an ongoing basis,” said Thomas Fink, a senior vice president at Trepp, a firm that analyzes commercial real estate.

“I don’t know [the Kushners’] personal financial situation,” said Fink. “I don’t think they have a billion-plus in the bank to just write a check to pay off the mortgage.”

A spokesman for the Kushner firm said the company has “strong financing mechanisms in place with our partners to cover any deficits or improvements.” The depressed rental income for 666 Fifth Ave., which is only 70 percent occupied, is by design, the company said. The company has been allowing leases to expire as part of a plan to empty the building’s rental space and replace it with a condominium redevelopment.

A company official said the firm sees the value of the building in the “dirt” beneath it, not the actual building. Through its redevelopment, company officials predicted the ultimate value could be as high as $12 billion. Arthur Mirante, a New York real estate expert and friend of the Kushners’, said he believes that the Kushners and Vornado are working together to find funding for the building’s redevelopment.

“There’s risk in doing that, but these guys wouldn’t be doing that unless it made sense,” Mirante said. “Major decisions require unanimity. That includes a decision like not leasing space. And certainly the redevelopment would require mutual consent.”

As for that relationship creating a conflict for Kushner in his role as a senior adviser to Trump, Bookbinder said he already sees reason for concern. According to news reports, Kushner dined with executives from a Chinese firm during the presidential transition. The firm was in talks with the Kushner firm to invest $400 million in the redevelopment of 666 Fifth Ave. That deal fell through in March, but Bookbinder said the talks sent a message.

“What we’ve seen is not giving us confidence,” Bookbinder said. “It’s still not clear what he has divested from and what he hasn’t. We don’t believe he has sufficiently addressed all potential conflicts.”

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