Thu | Nov 15, 2018

Panama Hotel votes to drop Trump - but his company won't go

Published:Wednesday | January 17, 2018 | 12:00 AM
This July 4, 2011, file photo, shows the Trump Ocean Club International Hotel and Tower, third building from left, in Panama City.

An attempt to oust Donald Trump's hotel business from managing a luxury hotel in Panama has turned bitter, with accusations of financial misconduct.

Trump Hotels is contesting its firing, and its staff ran off a team of Marriott executives invited last month to visit the property during a search for a new hotel operator, according to two people familiar with the matter.

After the owners association accused Trump Hotels of mismanagement and financial misconduct in a US$15 million arbitration claim, Trump's company fired back with a US$200-million counterclaim and refused to turn over the property's financial records.

When a team from Marriott International Inc came to the property at the invitation of the hotel's majority owner, Trump staff asked them to leave, according to the two people, who spoke on condition of anonymity because they were not authorised to discuss publicly what happened behind the scenes.

The head of Trump Hotels, Eric Danziger, also called Marriott chief executive Arne Sorenson to complain about the visit, the two people said.

Marriott generally steers clear of properties facing ownership and management disputes. But the call from a senior Trump executive to the CEO of Marriott, which manages more than 6,000 hotels, raised the awkward matter of how American companies interact with a business owned by the US President.

Marriott, like most major international companies, has significant business and public- policy interests before the Trump administration. Federal employees who travel and hold government conferences pay to use its properties, and Marriott has been lobbying the administration and Congress over US tourism, trade and legal restrictions against property ownership in Cuba, disclosures to consumers about resort fees, and other issues.

Trump Organization general counsel Alan Garten said the call was not intended to pressure Marriott.

"We have a great relationship with Marriott," Garten said. "They were appreciative that we let them know that we have a valid contract."

A spokeswoman for Marriott declined to comment.

The matter highlights potential ethics concerns raised by Trump's decision not to divest himself from his businesses, said Larry Noble, head of the Campaign Legal Center, a Washington-based public-interest group that studies issues of democracy.

 

Unsure of contract validity

 

"I don't know if they've got a valid contract or not," Noble said. "But if you're a big company, you'd really have to think twice before getting into a fight with one of the President's companies."

Since Trump took office, Trump hotels in New York and Toronto have quietly reached deals to separate themselves from Trump's brand.

But the Panama dispute is shaping up as a brawl.

In a letter to fellow owners, the investor leading the hotel owners' board of directors accused Trump Hotels of "gross mismanagement, breaches of contract, conversion, and breaches of fiduciary duties". Conversion is a legal term for the misuse of someone else's property for one's own gain.

"Our investment has no future so long as the hotel is managed by an incompetent operator whose brand has been tarnished beyond repair," Orestes Fintiklis, the managing partner of Miami-based Ithaca Capital Partners, wrote in the letter. Trump Hotels, he wrote, "is refusing to maintain its last shreds of dignity and peacefully vacate our property".

Fintiklis did not respond to emails from the AP seeking comment.

Trump Hotels accused Ithaca of deceiving its fellow hotel owners and illegally terminating the Trump contract.

"Unfortunately, it is you, the unit owners, who will ultimately be the ones to bear responsibility for the bad acts of Mr Fintiklis and his cohorts," said Trump Hotels executive vice president Jeff Wagoner in an earlier letter to the owners last week.

Rising 70 stories in the shape of a wind-filled sail, the Trump hotel promised investors a chance to become part owners of one of Central America's finest hotels. It has struggled to sell units after its completion in 2011. Occupancy rates are low enough that some owners receive no income from their properties and must reach into their own pockets to pay maintenance costs.

The effort to remove Trump hotels from managing the hybrid condo-hotel units on the property began last year, after Ithaca Capital Group purchased 202 unsold hotel units from the building's struggling developer.

AP