Thursday, December 15, 2016

Trump Firm Quits Brazil Hotel Project That Was Named in Criminal Inquiry


The Trump Organization says it is pulling out of a troubled hotel project in Rio de Janeiro, just weeks after a Federal Prosecutor opened a criminal investigation that included the hotel and another Trump venture in the City.

The Prosecutor is looking into a broad range of investments across Brazil, questioning whether Public Pension Fund Managers in the Country were paid bribes to invest money in commercial projects.

The criminal inquiry names both the Trump Hotel Rio de Janeiro and a Trump Towers project in the City.

A spokeswoman for Trump Hotels said in a statement that the decision to pull out of the Rio hotel project was made because of problems in completing the 13-story, 171-room luxury property. It was opened for the Rio Olympics in August before several floors and facilities were finished, including a 4,000-square-foot nightclub.

“Unfortunately, the developers of the Rio de Janeiro hotel are significantly behind on the completion of the property, and their vision for the hotel no longer aligns with the Trump Hotels brand,” said Jennifer Rodstrom, the spokeswoman for Trump Hotels.

The hotel uses the Trump name, and the Trump Organization has been managing the property. But it does not have an equity stake in the hotel, which is owned by LSH Barra, a Brazilian company based in Rio.

Trump’s business dealings have come under intense scrutiny in countries around the world. In Turkey, India, Argentina, Scotland, the Philippines, and other Nations. Trump’s ventures have raised questions and concerns, particularly over potential conflicts of interest that could arise between his business activities and his role as President. In the United States, one Federal agency, the Office of Government Ethics, has said that Mr. Trump must divest from his properties to eliminate potential conflicts.

On Wednesday, House Democrats issued a letter suggesting that the General Services Administration, which essentially serves as the landlord for the Federal Government, had concluded that Trump would breach the lease that his Company has to operate a hotel in a Federally-owned building on Pennsylvania Avenue the moment he is sworn in.

The Democrats said that the agency’s Deputy Commissioner had made this statement in a briefing to House Staff members earlier this month, citing a provision in the 60-year lease with the Trump Organization that prohibits it from being held by any Federal Government employee. But shortly after the Democrats issued their letter on Wednesday, the Agency said that it had not yet reached a final conclusion. “We can make no definitive statement at this time about what would constitute a breach of the agreement, and to do so now would be premature,” a spokeswoman for the agency, Ashley Nash-Hahn, said in a statement. A decision on this question, she added, will not likely come until Trump takes office.

The hotel project was conceived by Paulo Figueiredo Filho, a right-wing businessman who said that he gained Trump’s interest in managing the property by boasting of family ties: Mr. Figueiredo Filho is the grandson of João Figueiredo, the last military dictator in an Authoritarian Government that ran Brazil from 1964 to 1985.

Mr. Figueiredo Filho, who spearheaded the venture until recently, is now living in the United States. In a statement, he said he found out about the split with the Trump Organization on Tuesday, adding that he respected the decision and currently did not take part in management decisions for the hotel. “My admiration for Donald Trump, with whom I share so many ideas and whom I enthusiastically supported during the campaign, has not changed one millimeter,” said Mr. Figueiredo Filho.

Anselmo Henrique Cordeiro Lopes, a Federal Prosecutor in the Capital, Brasília, opened the criminal inquiry in October, identifying $40 million in investments in the hotel made by two small Brazilian Pension Funds. One invests on behalf of retirees of a State-controlled Information Technology firm; the other manages the pensions for Civil Servants in Tocantins State.

In legal filings, Mr. Lopes said that he was examining why the two Pension Funds invested so much of their capital in the venture, positioning his inquiry within a broader Federal investigation of graft at Brazil’s Pension Funds, pillars of the economy that have been involved in an array of scandals in recent years.

As part of the same investigation, Mr. Lopes is also focusing on the Trump Towers Rio, a project to build five futuristic office towers in downtown Rio that was announced in 2012 in conjunction with MRP, a Bulgarian real estate company. Unlike the Trump Hotel Rio, the partners in the downtown venture have not started construction.

Mr. Lopes is examining whether the Trump Organization and MRP illegally benefited from support for the office-tower complex from a huge Public bank, Caixa Econômica Federal.

It remains unclear what will happen to the hotel, which was conceived as a linchpin of Rio’s overhaul for the Olympics. Parts of the futuristic beachfront property, which was the Trump Hotel Collection’s first property in South America, still resemble a construction site, despite the hotel’s inauguration months ago.











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