By Joseph Tanfani, Los Angeles Times, December 22, 2016
The Trump hotel in Baku, Azerbaijan, would be “among the finest in the world,” Donald Trump promised two years ago, another example of “our involvement in only the best global development projects.”
But the dream of a world-class Trump Baku died this month, with Trump saying he was backing out of the deal because of delays and blown deadlines caused by the developer, a 34-year-old with close family connections to the country’s government.
The demise of Trump Baku is not an isolated decision. With his inauguration less than a month away, President-elect Trump’s company has pulled out of a few international business deals that might have created especially sticky conflicts and controversies for his administration.
In addition to Azerbaijan, the company began to back out of a deal in another former Soviet republic, Georgia. It also canceled a hotel project in Rio de Janeiro that had been mentioned in a fraud investigation. And just days after the election, the Trump Organization shut down four companies formed this year seemingly in anticipation of a hotel deal in Jidda, Saudi Arabia.
Domestically, Trump’s companies this week agreed to a union contract at his hotel in Las Vegasand an organizing campaign at his new hotel in Washington, D.C. And his son Eric announced that he was suspending the activities of his charitable foundation after questions arose about whether donors might get favorable treatment by the new administration, a move first reported by the Washington Post.
Alan Garten, chief counsel for the Trump Organization, said the international moves were “business decisions, based purely on the status of the projects,” not because the president-elect was scrambling to clean up potential conflicts before he takes office.
Trump himself was not even involved, Garten said, only sons Donald Jr. and Eric, along with other company executives.
“His focus is solely on filling out his Cabinet and turning the country around,” Garten said of the president-elect.
Even with the recent cancellations, Trump’s family company still profits from deals all over the world — a golf course in Dubai, United Arab Emirates; two hotel towers in Turkey; a luxury condo tower in the Philippines; a resort complex in the Dominican Republic.
Trump initially said he would announce his plan to resolve the potential conflicts between his business and his presidency this month, then pushed the date to next month. He has not provided any details and has blamed the controversy over his holdings on “the crooked media.”
He has said he will turn over operations of his company to his children. But that alone would not necessarily resolve conflicts, experts said.
Past presidents put their assets in a blind trust, outside their control; letting the children run the company would not meet the legal requirements for a blind trust, according to the Office of Government Ethics.
“Unless the president divests himself completely from his business, even a seemingly innocuous thing can make a big difference,” said Farok Contractor, a professor of international business at Rutgers University. For example, a move as common as a policy change that could raise the value of the U.S. dollar could hurt Trump’s bottom line on overseas projects if they’re tied to other currencies, he said.
Several ethics lawyers have said Trump would need to sell his holdings to someone outside the family to avoid conflicts.
“Just because the president isn’t legally prohibited from financial conflicts of interest, there’s going to be this cloud of doubt that follows every policy decision he makes,” said Jordan Libowitz, communications director at Citizens for Responsibility and Ethics in Washington, a group that has been highly critical of the president-elect.
“People are going to ask, is he making this decision in the interest of the American people, or in the interests of one of his foreign companies?”
Garten would not discuss any details of how Trump plans to turn over control of his businesses, saying that would “all be coming out in the next few weeks.”
The now-terminated Azerbaijan deal was one illustration of how Trump’s business dealings could complicate foreign policy for the new administration. The oil-dependent country has a reputation for cronyism and corruption, with a small group of elite families controlling a large share of the country’s economy.
“I would say corruption is a whole system in Azerbaijan,” said Thomas de Waal, a senior associate with the Carnegie Endowment for International Peace who has written extensively about the country and its neighbors.
“There is no rule of law as we know it in the U.S. or a European country,” he said. “Everything is done through personal connections. When you deal with business in Azerbaijan, you’re dealing with individuals, and you’re dealing with politically powerful individuals.”
For the Trump International Hotel & Tower in Baku, Trump made a deal with a company called Garant Holding, controlled by Anar Mammadov, a son of the country’s transportation minister.
Mammadov has had a substantial profile in Washington, where he had a nonprofit called the Azerbaijan America Alliance. The organization now has a dead phone number and website. Mammadov and the group’s Washington lobbyist, James Fabiani, did not return requests for comment.
Like most of his hotel deals, Trump did not develop the building but licensed his name. He entered the deal in 2014 and reported receiving $2.8 million in management fees for the hotel, housed in a gleaming 33-story curved tower in Baku — even though the hotel never opened. De Waal said the the real estate market in Azerbaijan has been hammered by the drop in oil prices and devaluations of the country’s currency.
Azerbaijan shares a border with Iran, and the company has lobbied vigorously for the interests of its state-owned oil company and in hopes of swaying members of Congress to its side in a long-running territorial dispute with Armenia, another neighbor.
But Garten said any potential issues on conflicts with U.S. policy are “not a basis to terminate the contract.” The Baku tower had been stalled for over a year, he said; he wouldn’t talk about how much money the company may be owed. The letter canceling the deal was sent Nov. 30.
“It’s terminated — I mean, it’s over,” Garten said, saying there’s no continuing business dispute: “They don’t have to agree.”
For now, the Trump name is still on the building, said Alex Raufoglu, an Azerbaijani journalist working in Washington. He said the cancellation will be seen as a message that Trump is creating some distance from the country’s president, Ilham Aliyev, who has cracked down on dissent and jailed opponents.
The country had tried to play up the association with Trump by co-hosting a holiday party in Trump’s Washington hotel after the election.
The Azerbaijani Embassy declined to comment on Trump or the hotel project.
Garten said the company also has sent a default notice to the developers of another stalled Trump-branded project, in a Black Sea resort town in Georgia — also because, the Trump Organization says, the developers did not live up to the terms of the licensing deal. The developers, Silk Road Group, did not return requests for comment; after the election, it was quoted as saying it still hoped to complete the deal, even with Trump as president.
The Trump family also has apparently shelved hopes of a luxury hotel in Saudi Arabia. In 2015, as the Trump Organization was scouting for hotel deals in the Middle East, it set up eight companies with names like THC Jeddah Hotel Advisor, apparently a reference to the Saudi Arabian city. Four were closed that year, and the other four were shut down a week after the election, according to Delaware corporate filings.
“We looked at a deal and created entities in anticipation of a transaction, but there was never a transaction,” Garten said, adding that he did not know the details.