If you lived in Washington D.C. during the Trump years and felt any attachment to the place, you may have experienced, as I did, a double-take every time you walked along Pennsylvania Avenue past the Old Post Office and saw emblazoned in front the words “TRUMP International Hotel.” The District isn’t exactly Bedford Falls, but to see that Romanesque pile, completed in 1899—in D.C., only the Washington Monument and the Shrine of the Immaculate Conception are taller—to see that gorgeous edifice tarted up with the forty-fifth president’s name in gold capital letters made me feel like George Bailey beholding Bedford Falls transformed into the honky-tonk Pottersville. Only it was worse, because Bailey was seeing the world as it was if he’d never been born. I was witnessing the world with me in it. I was born, I’d think. I live here. This happened anyway.
The scandals at the Trump International Hotel began before it opened, with an investigation by the Labor Department into whether the Trump Organization and its subcontractors were paying “prevailing wage,” the rate set by unions within the geographic area. It was not. That violated the Trump Organization’s 100-year lease with the federal General Services Administration, which owns the Old Post Office. But because it didn’t also violate the Davis-Bacon Act, which requires prevailing wage on federal projects—legally, Trump’s renovation was considered a private rather than a government construction job—the Labor Department dropped it.
The scandals resumed after the election. Lobbyists representing the government of Saudi Arabia rented 500 rooms. That was twice as many rooms as the hotel possessed, so they had to be rented serially. During inauguration week, Trump’s inaugural committee rented more than $1 million in hotel space. This prompted a lawsuit from the D.C. attorney general that the Trump Organization settled for $750,000 the week before the sale was completed.
As Trump settled into the Oval Office, the Trump International Hotel established itself as Washington’s premier shakedown venue, defying, among other things, the emoluments clause of the Constitution. Foreign governments spent $3.8 million at the hotel. The Trump Organization said it would return that money to the Treasury, but it submitted less than $500,000. The Secret Service spent more than $200,000 at the hotel just between 2016 and 2018. The Republican National Committee paid $3,000 per month to host “off the record” meetings with lobbyists, White House officials, and RNC Chair Ronna McDaniel. And so on. The reporter Zach Everson, now with Forbes, created a whole Substack newsletter, 1100 Pennsylvania, just to keep track of all the scandals the place generated.
The party ended after the 2020 election, and last week the hotel was sold to CGI Merchant Group, a Miami-based investment firm. It will reopen this summer in partnership with Hilton Worldwide Holdings as a Waldorf Astoria. The sale is a ritual of moral cleansing. CGI Merchant Group is a minority-owned firm with a Jamaica-born chairman committed to socially conscious investing. “We exhibit a mindful approach in all facets of our operations,” boasts CGI Merchant’s website. Using a “proprietary social impact tracker aligned with key United Nations Sustainable Development goals about education, employment and prosperity,” the firm will donate 1 percent of all room-night revenue to local nonprofits, as it does already with three other “Conscious Certified Hotels” owned in partnership with Hilton.
Immediately after ownership transferred, CGI Merchant scrubbed every trace from the exterior that the hotel ever had anything to do with Donald Trump. When I wandered by Friday it was easier to discern, from faint lettering still visible over a front door (“Nancy Hanks Center”), that the building previously housed the National Endowment for the Humanities; in the 1970s, NEH chairperson Nancy Hanks helped rescue the Old Post Office from the wrecking ball.
I’d last been there perhaps 30 years ago when I met an English professor friend who was reviewing NEH applications. We’d had sandwiches inside the food court. The food court was now a cavernous lobby with brown marble floors below, Schonbek crystal chandeliers above, and precious little in between: some wooden tables, a semicircular pale-blue sofa, some upholstered pale-blue chairs, all unoccupied. The BLT Prime steakhouse and the Benjamin Bar, where Rudolph Giuliani and Corey Lewandowski once held court, were closed; the only place still serving food or drink was a sushi place with a separate entrance in back. Here and there, workers employed by the new management busied themselves—one liveried fellow behind the bar, another behind the reservations desk, three harried-looking professionals huddled over a laptop inside the steakhouse. I asked the man behind the reservations desk if he could answer a question or two. He flashed a tight smile and nodded a furtive “no.” One of the professionals, a woman wearing big round glasses, was already walking our way. “How did you get in?” she asked, then gestured to the doorman to escort me out.
The most conspicuously charitable aspect of CGI Merchant’s mindful and conscious and “om”-chanting purchase of the Trump International Hotel is the reported $375 million sale price. This was, The Washington Post’s Jonathan O’Connell reported last week, “by every measure” the most expensive hotel purchase in the history of Washington real estate, about 10 percent higher than the previous record-breaker, the Rosewood Hotel in Georgetown. And unlike the Rosewood, the Old Post Office doesn’t convey; CGI Merchant purchased not a building but a lease. Like the Trump Organization, CGI Merchant will have to pay $3 million annually to the General Services Administration for the privilege of operating a hotel on federal property.
All this for a money-losing hotel for which the Trump Organization overpaid back in 2012, when it pledged to invest $200 million in renovations. That price was so high, wrote The Washington Post’s Steve Pearlstein, citing industry experts, that Trump would need to charge well above every other hotel in Washington. Pearlstein couldn’t foresee, of course, that by the time the hotel opened Trump would be three months away from becoming president. Despite the ocean of cash poured into the hotel by Trump supporters, foreign dignitaries, and the federal government itself, Trump ended up losing an estimated $70 million in operating expenses. Even so, the Trump Organization walked away from the sale to CGI Merchant with about $100 million in profit.
Why would CGI Merchant pay so much? Politics would seem a good guess, and CGI Merchant’s chairman, Raoul Thomas, gave nearly $100,000 in political donations over the past decade and a half. The trouble is, he gave it all to Democrats.
An answer began to emerge Saturday when Mother Jones’s Russ Choma and Hannah Levintova, after reviewing paperwork filed with D.C.’s Recorder of Deeds, reported that $285 million of the $375 million purchase price was put up not by CGI Merchant but by the New York bank MSD partners, which in turn received financing at least in part, and perhaps more than in part, by something called Axos Bank, an online-only lender with no physical branches that was founded in 2000 under the name Bank of Internet USA. Based in San Diego and Las Vegas, Axos Bank “has recently done several big deals with the Trump and Kushner families,” Choma and Levintova wrote. Writing in Rolling Stone in March, Tim Dickinson and Andy Kroll called Axos “an unusual lender, steeped in controversy,” with “strong financial ties to the GOP.”
Axos’s chairman is Greg Garrabrants, and its biggest noninstitutional investor is Don Hankey. They are both highfliers.
Garrabrants came to Axos in 2007 from IndyMac, a Pasadena, California, bank where he was senior vice president. If “IndyMac” rings a bell, that’s because a year after Garrabrants left, it became one of the more spectacular bank failures in the housing crash of 2008. IndyMac specialized in “Alt-A mortgages” to borrowers who couldn’t demonstrate a reliable stream of income. Its collapse cost the Federal Deposit Insurance Corporation $12 billion. At Axos, Garrabrants pulled down $34.5 million, the Los Angeles Times reported in 2018. That was more than JPMorgan Chase paid Chairman Jamie Dimon that year. Axos had $9.8 billion in assets; JP Morgan Chase had $2.62 trillion.
Hankey, whom the Los Angeles Business Journal identified last year as the fourteenth-richest person in L.A.—two notches above Peter Thiel—made his fortune financing subprime loans to automobile buyers with bad credit ratings. He cleared a profit by charging 19 percent interest, more than double the average rate. Not everyone could pay, of course. “Hankey repossesses around 250 cars every day,” Forbes reported in 2015, “and his debt collectors have been known to spoof their caller ID so it appears that they are calling from the local pizzeria.”
Garrabrants and Hankey are both extremely active in Republican politics. Garrabrants donated nearly $10,000 to Trump’s reelection. Hankey has been less active lately, but in the 2016 cycle he gave more than $100,000 to the Republican National Committee. According to a 2018 report by Justin Elliot in Pro Publica, Axos Bank started doing business with the Kushner Company only a few months after a Securities and Exchange Commission investigation of Axos, initiated under President Barack Obama and continued under Trump, closed out in 2017 with no charges. The SEC investigation was prompted by a complaint by an Axos auditor, Charles Matthew Erhart, who was fired after alleging various irregularities. Erhart subsequently filed suit, and a jury trial is now underway in California. A second auditor, Jennifer Brear Brinker, filed suit in March alleging Axos deliberately understaffed its compliance department to conceal violations. Axos told NBC News’s Gretchen Morgenson last month that it disputes both sets of allegations.
Axos drew attention in February when it refinanced a $100 million mortgage for Trump Tower in New York mere days after the Trump Organization’s longtime accounting firm, Mazars USA, resigned, saying it no longer judged reliable nine years of financial statements ending in 2020 that were based on information it received from the company. Not exactly what a loan officer wants to hear! But Axos engages in a lot of unconventional transactions. According to Morgenson, Axos has
teamed up with nonbank lenders on loans to small businesses that carried cripplingly high double- and triple-digit effective annual interest rates, loan documents show. The bank has also specialized in loans to foreign nationals, internal documents and its website state, and has offered a type of loan that allows borrowers who paid cash for a property to turn around and instantly take money out. Such loans may pose money laundering risks, banking analysts say.
As Morgenson reported two years ago, the high-interest loans to small businesses on which Axos thrives were eased substantially by two Trump-era regulations from the Office of the Comptroller of the Currency.
“WELCOME TO A NEW UNFORGETTABLE,” greets a sign bearing the Waldorf Astoria logo that went up in front of the Old Post Office last week. The old unforgettable will be hard to forget (as unforgettable things, by definition, are). More than a little mindfulness will be necessary to erase memories of the Trump hotel’s corrupt, honky-tonk past. But under its new ownership, just a bit of that squalor lingers on, should you ever feel a pang of nostalgia for Pottersville.