The following article by Ben Protess, Steve Eder and Jesse Drucker was posted on the New York Times website March 10, 2018:
LONG BRANCH, N.J. — Jared Kushner’s family company recently began construction on an oceanfront development in this Jersey Shore city, a project that has the strong backing of local officials, who agreed to support it with $20 million in bonds.
But unknown to Long Branch officials, the Kushners have been in talks to team up with another family-run company that has an even bigger presence in the White House: the Trump Organization.
The Kushners are in private discussions to have President Trump’s company manage at least one hotel at the center of the development known as Pier Village, according to people briefed on the previously unreported talks. The Kushner Companies and the Trump Organization have signed a letter of intent, though no deal is final and the Kushners are not required to inform city officials.
The long-running talks blur the line between family, business and politics in ways that lack precedent: Both Mr. Trump and Mr. Kushner, the president’s senior adviser and son-in-law, retain financial interests in their family businesses. The Trump Organization’s outside ethics adviser has raised questions about a potential deal — one reason the two-year-long discussions have not been completed.
The talks are underway as the White House role of Mr. Kushner has become increasingly strained because of his business dealings. Mr. Kushner lost his top-secret security clearance last month, in part because of worries that foreign governments might try to gain influence by doing business with him.
While Mr. Kushner has sold some holdings in Kushner Companies, he has held on to a majority of his stake, including an ownership interest in the recent $283 million expansion of Pier Village. Mr. Trump has handed over management of his company to his two oldest sons, but the president continues to own it.
“The concern is that the president might not want to do anything that would upset the Kushner family agreement to do business with his company,” said Marilyn L. Glynn, who served as general counsel in the Office of Government Ethics during Republican and Democratic administrations, when told by The New York Times about the Trump-Kushner talks.
The White House declined to comment. Both companies on Friday confirmed their discussions about the hotel in Pier Village, while dismissing ethics concerns.
The plans under discussion in Long Branch have called for the Kushners to own the hotel and make payments to the Trump Organization to run it. The bonds issued by the city, part of a broader renewal effort, are not earmarked for the hotel, but they will support public infrastructure around Pier Village, and in turn help the hotel and nearby properties succeed.
Last year, in another previously unreported endeavor involving the two family businesses, the Trump Organization began managing a Kushner-owned hotel in Livingston, N.J., people briefed on the matter said. That property, the Westminster Hotel, is believed to be the only hotel that the Trumps manage but do not brand.
The behind-the-scenes activity signals a deepening of the Trump-Kushner business relationship, which until recently appeared to be limited to a single residential project in Jersey City. It also poses potential ethical headaches for the White House, Ms. Glynn and other legal experts say.
Deals between the two families, said Ms. Glynn, who also served as acting director of the ethics office for part of George W. Bush’s presidency, do not inherently violate any ethics rule. But, weighing whether new financial entanglements posed more of a problem than existing family ones, she added, “I think the financial concerns trump the familial ones, so to speak.”
Walter M. Shaub Jr., who led the ethics office under President Barack Obama and is a frequent critic of Mr. Trump, said: “If a subordinate is your son-in-law, maybe you like them, but once you have entangled business interests, they’ve got leverage over you. Blood is not thicker than money for a lot of people.”
In a statement, the Kushner Companies said the Trumps “have zero equity of any type in our properties or businesses.” In Long Branch, the statement said, “we are contemplating a third-party operator agreement with their hotel management division at market rate.” Noting that it did not specialize in the hospitality industry, the company said it had “a business obligation to seek the most capable resource.”
In an interview, Eric Danziger, the head of Trump Hotels, disputed that teaming up with the Kushners might pose a conflict.
“This is a straight-up business deal,” he said. “If there were something out of the ordinary about the deal, then I think that question is fair,” he said, but “we do market transactions that are reviewed and checked.”
Mr. Danziger said that Bobby Burchfield, the Trump Organization’s outside ethics adviser, had asked about the financing involved in a potential Long Branch deal with the Kushners. Mr. Burchfield, who scrutinizes how the Trump Organization’s partners finance deals, among other things, often requires more information before approving a deal.
Whether or not the Trumps and Kushners reach a deal, Mr. Kushner stands to gain. He is expected to eventually own 20 percent of the hotel in Pier Village, according to documents obtained through a public records request. And he was personally involved in the project early in the presidential campaign. In documents provided to Long Branch, the Kushner Companies stated that Mr. Kushner “is strictly a passive investor.”
He also retains a stake in a Kushner residential tower in Jersey City that bears the Trump name.
In Livingston, Mr. Kushner has divested from the Westminster Hotel, a three-story property overlooking strip malls. While it is unusual for the Trumps to manage hotels that do not carry one of their brands, Mr. Danziger said he was discussing similar deals with other companies as a way to expand the business under the “right circumstances.”
“An owner wants to know they can depend on and rely on the operator, and we have a lot of credibility as operators,” he said.
The growing relationship between the families could be helpful to the Trumps, as the ethical restraints they voluntarily adopted after the election have proved to be a hindrance to new business. The Trump Organization, which agreed not to start any new foreign projects during the presidency, has yet to open a new hotel in the United States since Mr. Trump took office.
While Mr. Danziger said the pipeline of potential deals was “still very active,” the company has also shown some signs of scaling back: Since the election, the Trump name has been removed from properties in Manhattan, Toronto and Panama.
A pairing with the Kushners could bring other complications. If the Trumps manage a Kushner property that received foreign or domestic government funding, it could test the Constitution’s emoluments clauses, which essentially prohibit the president from accepting certain gifts from foreign or domestic governments. Some legal experts argue that local bonds like the ones issued in Long Branch could brush against the domestic clause.
The Kushners, who co-own the development with Extell Development, a New York real estate firm, said they would not accept money from foreign governments.
The firm, however, has a history of seeking cash from investors with strong connections to foreign governments, including Anbang, an insurance company in China.
The Kushners also have a history of teaming up with Israeli investors, which is ethically thorny for Mr. Kushner, whose central responsibilities in the White House include handling Middle East policy. Extell’s bonds have traded on the Tel Aviv stock exchange.
The Kushners also used money from Chinese investors to finance the construction of Trump Bay Street, the residential tower in Jersey City. The Chinese money came through the so-called EB-5 program, which offers visas to foreigners in exchange for $500,000 investments in real estate projects. Federal prosecutors have been investigating the Kushner businesses’ use of the program, though the company has said it no longer pursues this type of funding and “did nothing improper.”
In addition, investigators working for Robert S. Mueller III, the special counsel looking into Russian interference in the 2016 election, have asked questions about Mr. Kushner’s interactions with foreign businesspeople, according to a person with knowledge of the matter.
In Long Branch, the Kushners are moving ahead with building the hotel in Pier Village and may add more hotels in the area.
The talks with the Trumps have focused largely on the Pier Village property under construction, which might carry the Scion brand, a new line of four-star hotels the Trumps announced in 2016. The Kushner Companies, however, said on Friday that it planned only to have the Trumps manage the hotel.
The hotel construction is part of the latest phase of a decades-long effort to remake the Long Branch waterfront after a fire destroyed the boardwalk in 1987 and contributed to a downward spiral.
Mayor Adam Schneider and local business leaders spearheaded a redevelopment plan in the 1990s that gave rise to Pier Village. The effort increased the city’s annual beachfront revenue from $200,000 in the early 1990s to more than $2 million in 2017, the mayor said.
The Kushners have long owned an oceanfront house in an exclusive section of town, and in 2014, they teamed up with Extell to buy Pier Village.
With the purchase, the Kushners took over the part of Pier Village that already had a row of restaurants and shops, as well as a vacant strip of land that will eventually feature luxury residential condominiums, retail stores and the hotel.
Mr. Kushner was involved in planning the project. He was copied on emails with city officials, and the mayor recalls meeting with him twice.
Mr. Kushner assumed a role in the White House, but his sister, Nicole Meyer, and his father, Charles Kushner, continued to work on the effort, including discussions with officials about the bonds.
In September, the City Council unanimously approved the bonds to help close a “funding gap.” The city will borrow the money to reimburse Kushner Companies and Extell for approved costs that arise from building public improvements such as a boardwalk, public restrooms and a children’s play area.
Mr. Schneider said that the arrangement would not cause a tax increase, and that the city had struck a better deal with the Kushners and Extell than with the previous owners of Pier Village.
The city expects to more than recoup its investment by collecting an annual service charge and other payments that the Kushners and Extell pay in lieu of certain taxes. And the city said it had obtained a personal guarantee from Charles Kushner.
“It’s actually a very lucrative deal to municipalities,” Mr. Schneider said.
A week after the city approved the bonds, emails show, Ms. Meyer invited local officials to lunch at the Beach House restaurant at Pier Village. “Please let us know if you would like to join,” the invitation said, “and thank you for all your support and efforts!”
When informed by reporters that the Trump Organization might ultimately be involved in a hotel in his town, Mr. Schneider, a Democrat first elected in 1990, sighed and expressed concern.
But he added: “Our success is that we have a hotel that’s doing a great volume of business that’s creating jobs and economic vitality. It can be achieved no matter what name is on any building.”
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