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DC attorney general sues inaugural committee over funds spent on Trump property

The D.C. attorney general is suing President TrumpDonald John TrumpBiden to nominate Linda Thomas-Greenfield for UN ambassador: reports Scranton dedicates 'Joe Biden Way' to honor president-elect Kasich: Republicans 'either in complete lockstep' or 'afraid' of Trump MORE's inaugural committee, alleging that it improperly used nonprofit funds to pay "exorbitant" prices totaling $1 million at the president's own hotel.

Attorney General Karl Racine, a Democrat, filed the lawsuit Wednesday morning, saying that his office is seeking to recover $1 million dollars that was allegedly overpaid to the Trump International Hotel.

"An independent investigation by my office has revealed that the Inaugural Committee made exorbitant and unlawful payments to the Trump hotel to rent event space for inaugural activity," Racine said on a call with reporters. "This came as a result of coordination between Inaugural Committee Deputy Chairman Rick GatesRick GatesHow to combat Putin's financial aggression Sunday shows preview: Trump COVID-19 diagnosis rocks Washington, 2020 election The Hill's 12:30 Report - Sponsored by The Air Line Pilots Association -Trump enters debate week after NYT obtains his tax returns MORE, Trump International Hotel Management and members of the Trump family."

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Kimberly Benza, a spokeswoman for Trump Hotels, dismissed the lawsuit's claims as "false, intentionally misleading and riddled with inaccuracies."

"The rates charged by the hotel were completely in line with what anyone else would have been charged for an unprecedented event of this enormous magnitude and were reflective of the fact that hotel had just recently opened, possessed superior facilities and was centrally located on Pennsylvania Avenue," Benza added. "The AG's after the fact attempt to regulate what discounts it believes the hotel should have provided as well as the timing of this complaint reeks of politics and is a clear PR stunt.”

The committee was set up to organize events around the president's January 2017 inauguration, funded by large contributions from Trump supporters. The attorney general's complaint alleges that the committee violated nonprofit laws and its own regulations by funneling that money to Trump-owned businesses, specifically the president's D.C. hotel.

Racine's complaint alleges that the committee "grossly" overpaid the Trump hotel to book event space at rates that exceeded the venue's own internal pricing guidelines.

The committee paid $175,000 a day for event space, even on days during the inaugural period on which it held no events, according to the complaint. The complaint adds that the committee booked a large block of rooms at the hotel, and the hotel's policy was to offer free event space for such large groups of guests.

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The committee allegedly rented the event space for four days, holding events on just two of those days, one of which was a private party for the president's children, Racine said in a call with reporters. The total bill for the inaugural group was at least $1,033,757, according to the complaint.

"The facts will show that the [inaugural committee] operated in compliance with the law and this suit is without merit," a spokesman for the committee said in a statement. "In fact, it reads more like a partisan press release than a legal filing. The [committee] has also received no outreach from the DC AG since last summer which, when coupled with the obviously suspect timing of the complaint, confirms the completely baseless nature of the allegations."

Gates, who served as Trump's deputy campaign manager in 2016, was recently sentenced to 45 days in jail for lying to law enforcement and charges of financial fraud. During his time at the inaugural committee, Gates raised concerns to the president's daughter Ivanka TrumpIvana (Ivanka) Marie TrumpWomen set to take key roles in Biden administration New York expands Trump tax fraud investigations to include write-offs: report Lara Trump mulling 2022 Senate run in North Carolina: report MORE after the Trump hotel initially proposed a contract that would charge $450,000 a day for the event space.

"First, the cost itself seems quite high compared to other property," Gates told Trump in an email. "Second, I am a bit worried about the optics of PIC [the presidential inaugural committee] paying Trump Hotel a high fee and the media making a big story out of it. Let me know if you have any thoughts and if we can discuss the best path forward."

Stephanie Winston Wolkoff, an event planner for the committee, also raised concerns in a meeting with the president and his daughter. Trump allegedly said in the meeting that Ivanka would handle the issues with the hotel.

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Racine said that $175,000 a day rate that the two parties ultimately agreed to was still exorbitantly high compared with the market value.

According to the complaint, the committee also reserved large blocks of rooms at the Fairmont and W hotels. The Fairmont provided rental rooms and event space for no rental charge and the W provided two rental rooms for free and charged just $20,000 for a terrace space on January 18.

After the parties agreed to the $175,000 rate, Wolkoff sent an email to Gates that Ivanka Trump was copied on reiterating her apprehension about the pricing.

"I wanted to follow up on our conversation and express my concern," Wolkoff wrote. "These are events in [president elect's] honor at his hotel and one of them is with and for family and close friends."

"Please take into consideration that when this is audited it will become public knowledge that locations were also gifted and costs underwritten to lower rental fees," she continued. "I understand that compared to the original pricing this is great but we should look at the whole context. In my opinion the max rental fee should be $85,000 per day."

—Updated at 3:59 p.m.