27 Jan Electrical Subcontractor for Trump’s DC Hotel Project Sues for Unpaid Work

AES Electrical, Inc. (d/b/a Freestate Electrical Construction Company), an electrical subcontractor who worked on the Trump International Hotel in Washington D.C., has sued Trump Old Post Office LLC, the holding company for the Trump hotel, as well as Lend Lease (US) Construction, Inc., the general contractor for the project, for unpaid work.  The historic Old Post Office building is a few blocks from the White House.

This is the latest in a string of lawsuits involving Trump’s renovation of the historic Old Post Office building.  For example, Joseph J. Magnolia, Inc., the plumbing and heating subcontractor on the project, recently filed a mechanic’s lien against the property, causing Trump Old Post Office LLC to post a bond of nearly $3 million last week to release the lien on the property, while the Trump and Magnolia firms either negotiate or litigate how much Magnolia is owed.

Lawsuit Allegations

In AES Electrical d/b/a Freestate Electrical Construction Company v. Trump Old Post Office LLC c/o the Trump Organization, et al., D.C. Sup. Ct. (1/19/17), Freestate alleged it completed electrical work on the hotel, for which it has not been fully paid.  Specifically, the complaint alleged Freestate entered into a subcontract with Lend Lease, pursuant to which it performed electrical work required by the prime contract for the project, between September 29, 2014 through the date of the filing of the complaint.

According to the complaint, Freestate is due (1) $388,817.98 in “unpaid retainage on the work performed;” (2) $37,636.63 in “unpaid progress billings for base contract and approved change work performed;” and (3) $1,649,277.00 in unpaid change work performed for which Trump has refused to approve, by way of a change order, and has refused to pay.   Freestate also claims Lend Lease is holding back funds from Freestate at the Trump Organization’s direction.

While Freestate admits in its filing that Trump did not approve the over $1.6 million in change orders incurred by Freestate, Freestate claims it necessarily incurred the majority of the change work costs because of  “Trump’s directives, delivered through Lend Lease, to accelerate work and to perform extra work on the Project in order to permit the ‘soft opening’ of the Trump Hotel by September 12, 2016, due to the fact that Trump had booked paid events and had planned for the use of Hotel rooms on or about that date.”  According to Freestate, “[b]efore this could happen, Freestate’s electrical work and fire alarm work had to be completed, inspected and approved by DC code officials.”  Freestate said its workers were required to “work nonstop, seven days per week, 10 to 14 hours per day for nearly 50 consecutive days” to finish the electrical and fire alarm work at the building before the campaign event.

Political Use of the Hotel and Trump’s Alleged Business Practices

Trump’s campaign orchestrated a lavish ribbon-cutting event at the hotel, at which the Trump president-elect claimed the hotel was opening earlier than scheduled and under budget.  Trump’s DC hotel was a hub for inaugural activities and has proved controversial for what top Democrats and some ethics advisers see as the new president’s conflicts of interest.

According to the complaint, Trump saved money on the project by refusing to pay his bills, his typical business practice: “Trump’s actions in refusing to pay for work performed, after a project has opened, is a repeated practice of the Trump organizations on various projects; evidencing a typical business practice meant to force subcontractors to accept ‘pennies on the dollar’ with respect to amounts owed for the cost of work performed,” the lawsuit alleged.

A statement issued by the Trump Organization said these types of business disputes are not uncommon in large-scale and complex deals such as this one, during the close-out phase of the construction project.  “The Trump Organization has invested over $200 million dollars into the redevelopment of the historic Old Post Office and is incredibly proud of what is now considered to be one the most iconic hotels anywhere in the country,” the statement said.

Trump’s long history of allegedly refusing to pay vendors and contractors was the subject of numerous news stories last year.  Democratic nominee Hillary Clinton sought to make it a campaign issue, including airing a television commercial that featured an architect who said his small business was nearly bankrupted when Trump refused to pay him for designing a club house at one of his golf courses.

AES Electrical, doing business as Freestate Electrical Construction Co., is a California corporation maintaining a principal office in Maryland and is a licensed electrical contractor in the District of Columbia.  Lend Lease is a Florida corporation with a principal place of business located in New York, New York, but is not registered to do business in the District of Columbia.

The Trump Old Post Office is the owner of a leasehold interest in the real property in which the hotel is located.  Trump’s lease with the federal government to develop and operate the hotel expressly prohibits any elected official from benefiting from the property, although Trump’s lawyers contend the provision only restricts participants in the lease at its outset, and not situations arising after the lease is signed. The White House says Trump has turned over management of his companies to his two adult sons.