While donations to the inaugural committee were not tax deductible, the organization was a nonprofit and received tax advantages from that status, the D.C. attorney general added.
“Nonprofits are unique entities that function as public trusts,” said Racine, who is trying to recover the money from the Trump businesses so it can be put to public benefit. “The committee has a legal responsibility to avoid unreasonable, wasteful expenses,” he said.
The suit alleges that the president’s daughter Ivanka Trump, a White House adviser and former senior executive at the Trump Organization, was involved in the discussions about the space rentals and was warned in writing on at least two occasions that the hotel’s pricing demands could lead to charges of self-dealing against the incoming president.
In an email submitted as part of the suit, deputy inaugural committee director Rick Gates flagged Ivanka Trump that the hotel’s initial proposal of $3.6 million for space rental and food and beverage service was out of line and might lead to bad publicity if the committee accepted it.
“The cost itself seems quite high compared to other property,” Gates wrote on Dec. 12, 2016. “I am a bit worried about the optics of PIC paying Trump Hotel a high fee and the media making a big story out of it. Let me know if you have any thoughts and if we can discuss the best path forward.”
Another inaugural planner who would eventually join the White House staff as an adviser to first lady Melania Trump, Stephanie Winston Wolkoff, also raised the issue directly with the president-elect and Ivanka Trump a few days later, the suit says.
Trump hotel officials eventually came up with a scaled-down proposal that came in at $1.03 million, which Wolkoff still said was too high.
In an email to Gates and Ivanka Trump on Dec. 17, 2016, Wolkoff appeared to say paying the Trump hotel so much would look bad when other sites were donating their space.
“Please take into consideration that when this is audited it will become public knowledge that locations were also gifted and costs underwritten to lower rental fees,” wrote Wolkoff, who left her White House post in February 2018 on unpleasant terms. “I understand that compared to the original pricing this is great but we should look at the whole context. In my opinion the max rental fee should be $85,000 per day.”
The Trump Organization issued a statement vigorously disputing the claims in the new suit.
“The AG’s claims are false, intentionally misleading and riddled with inaccuracies,” the statement from Trump’s hotel group said. “The rates charged by the hotel were completely in line with what anyone else would have been charged for an unprecedented event of this enormous magnitude and were reflective of the fact that hotel had just recently opened, possessed superior facilities and was centrally located on Pennsylvania Avenue.”
“The AG’s after-the-fact attempt to regulate what discounts it believes the hotel should have provided as well as the timing of this complaint reeks of politics and is a clear PR stunt,” the statement added.
A spokesman for Trump’s inauguration committee said the nonprofit cooperated with Washington D.C. investigators but hadn’t heard anything from them since last summer. Calling the lawsuit “without merit,” the spokesman also chided the attorney general for the “obviously suspect timing” of filing a complaint at the start of Trump’s Senate impeachment trial.
For his part, Racine noted that groups frequently receive free event space when booking a large block of rooms. He said the inaugural committee booked a “sizable” number of rooms for the inauguration, but no free space was offered.
However, Trump organization attorney Alan Garten told POLITICO that no rooms were booked by the inaugural committee.
“The crux of their argument is they should have gotten a bigger discount because there was a room block. There was none,” Garten said.
Some of the emails accompanying the suit talk about the inaugural committee arranging for rooms to be booked but there’s no indication of a firm contract on that point. Garten said the emails Racine’s office chose to release do not paint an accurate picture of what transpired.
“The documents they have in their possession tell a completely different story,” the Trump lawyer said. “They’ve cherry-picked facts and ignored others.”
The suit also alleges that the inaugural committee misspent more $300,000 by hosting a party for the Trump family that the president did not attend.
Ivanka Trump was not named individually as a defendant in the suit. A White House spokeswoman did not immediately respond to requests for comment.
The Trump inaugural committee also came under scrutiny by federal law enforcement, who examined various aspects of the group’s finances, including efforts to route foreign funds into the organization despite a federal law prohibiting that.
Criminal charges were filed in at least two cases relating to the inaugural committee.
Last year, Washington lobbyist Sam Patten got three years probation in part for helping a Ukrainian oligarch purchase inaugural tickets for $50,000.
Earlier this month, California businessman Imaad Zuberi was charged with obstruction of justice for trying to thwart a federal investigation into foreign donations to the inaugural group. No plea has been entered in the case, although Zuberi has agreed to plead guilty to other federal charges in a separate case.
Gates pleaded guilty in 2018 to conspiracy and making false statements in special counsel Robert Mueller’s probe of ties between the Trump campaign and Russia. After cooperating extensively with federal prosecutors, Gates received a 45-day jail sentence.
At Gates’ sentencing last month, the judge said Gates had traveled all over the country to help with law enforcement investigations. There were also signs he’d aided some state probes, but Racine said his office “did not directly speak with” Gates because of concerns about the other inquiries.
“I can tell you the office certainly reached out to the other investigative bodies who were conducting investigations wherein Mr. Gates was a witness,” Racine added. “I can also tell you we were very, very sensitive to requests that we frankly not otherwise interfere with ongoing, very important investigations.”
Darren Samuelsohn contributed to this report.