Washington — The owners of a Trump-branded hotel in Panama sued President Donald Trump's family-owned company in federal court Tuesday, 16 January, alleging that the namesake business committed mismanagement and fraud.
The lawsuit includes previously confidential arbitration filings before the International Chamber of Commerce. It alleges that Trump Hotels tried to "bully, intimidate and harass" its way out of a $15 million (about R184m at R12.30/$) arbitration claim. The owners, led by investment firm Ithaca Capital Management, are seeking to fire Trump's company and abandon the Trump brand.
The lawsuit, filed in US District Court for the Southern District of New York, was intended to terminate Trump's 20-year contract, and alleged "gross negligence and potentially fraudulent conduct" by the Trump Organisation, including "looted" bank accounts. The hotel currently carries a $1.9 million (about R23m) deficit in its reserve accounts, Trump's opponents allege, because of improper use of funds.
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Trump's hotel company, meanwhile, alleged in arbitration filings that Ithaca and other hotel unit owners committed fraud and racketeering. That claim on behalf of Trump International Hotels Management argued that the owners acted in bad faith and lacked the authority to terminate the contract. The Trump claim also alleged that Ithaca's managing director, Orestes Fintiklis, falsely promised to support the hotel's management before undertaking "a lawless coup" in the building.
At stake in the dispute is control over the operations of the Trump International Hotel in Panama City, a 70-story luxury waterfront high-rise.
The hotel has been struggling with occupancy in recent days — a period considered peak high season — ranging from just 26 to 28 percent. Ithaca and its allies among the unit owners blame that performance on mismanagement and damage to Trump's brand since he assumed the presidency. Trump attorney Alan Garten, meanwhile, blames a widespread downturn in Panama's hotel business.
Business owned by the president
Earlier on Tuesday, The Associated Press reported that staff at the hotel ran off a team of Marriott executives invited to visit the property as part of the owners' search for a company to take over the hotel's operation from Trump. The head of Trump Hotels later called the head of Marriott to discuss the visit. Garten says the call was friendly.
"We have a great relationship with Marriott," Garten says. "They were appreciative that we let them know that we have a valid contract."
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 president.
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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.
A spokeswoman for Marriott declined to comment.
The dispute between Ithaca and Trump's hotel business was previously known only due to the feuding parties' communications with individual hotel unit owners.
"Our investment has no future so long as the hotel is managed by an incompetent operator whose brand has been tarnished beyond repair," Fintiklis, the managing partner of Miami-based Ithaca Capital Partners, wrote in a letter.
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 Fintiklis and his cohorts," Trump Hotels executive vice president Jeff Wagoner says in an earlier letter to the owners last week.
Trump's brand toxic in Panama
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.
After buying the units in August with Trump Hotels' blessing, Ithaca quickly turned sour on the brand.
Fintiklis did not respond to emails from the AP seeking comment.
Al Monstavicius, a retired Nevada doctor who owns a penthouse hotel unit in the building, says Trump's statements regarding Mexicans and his determination to strip hundreds of thousands of Central Americans in the US of protection from deportation have made Trump's brand toxic in Panama.
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If the owners in Panama succeed, it won't be the first time Trump has been ousted there. In 2015, amid the early months of Trump's presidential campaign, the owners of apartments and other businesses in the same building voted to fire Trump's management company over budget issues and allegations of misspent funds.
Since then, the property's overall finances have improved. Its annual deficits, which exceeded $1 million (about R12m), have since turned into a surplus, according to financial documents provided to the AP by an owner.
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