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

FILE: President Donald Trump (Photo: Donald J. Trump/Facebook)

WASHINGTON — An attempt to oust President 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 $15 million arbitration claim, the company owned by the president fired back with a $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 authorized 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 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 U.S. 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.

“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 the part owner 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.

After buying the units in August, Ithaca and the other owners voted in November to fire Trump’s directors, clearing the way for terminating Trump’s contract and the $15 million arbitration claim against Trump Hotels.

Not all the hotel unit owners were represented at the meeting, but those contacted by The Associated Press support the effort to fire Trump.

“They wanted to remove him quietly,” said Al Monstavicius, a retired Nevada doctor who owns a penthouse hotel unit in the building, of Ithaca’s efforts. “That didn’t work.”

Monstavicius said Trump’s statements regarding Mexicans and his determination to strip hundreds of thousands of Central Americans of their protection from deportation have made Trump’s brand toxic in Panama.

Occupancy in recent days — considered peak high season — has ranged from 26 to 28 per cent, according to Trump Hotels figures.

Overbuilding and general weakness in the Panama hotel market have contributed to problems. Trump’s team said it was proud of the hotel’s financial performance. It told owners Trump’s hotel has outperformed its peers for 81 of the last 84 months, but Finktiklis dismissed the claim as “simply delusional.”

The hostilities extended to Ithaca’s invitation of Marriott executives to the property.

“We were obviously concerned about their presence there,” Garten said, adding that he believed Marriott did not know of the circumstances.

The heart of Trump Hotels’ claim against the hotel owners is a February 2017 agreement. When it bought 202 units, Ithaca agreed not to act “in any manner adverse to the interests of Trump Hotels.” In his letter, Fintiklis acknowledged the language in the agreement but said mismanagement and misconduct by Trump Hotels rendered it invalid.

If the owners in Panama succeed, it won’t be the first time that Trump has been ousted there. In 2015, amid the early months of Trump’s presidential campaign, the owners of apartments 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, have since turned into a surplus, according to financial documents provided to the AP by an owner.