In Washington, D.C., Another Contractor Stiffed by Trump

March 8, 2017

An IBEW signatory contractor filed suit against the Trump organization for skipping out on $2 million of work done on the luxury Washington D.C. hotel in the Old Post Office Building.

NECA-signatory contractor Freestate Electric has sued the Trump Organization for nonpayment of $2 million for work they did transforming the Old Post Office building into the Trump Hotel.
Photo used under a Creative Commons license, courtesy Mike Peel.

Freestate Electric filed a mechanic’s lien Dec. 27 and filed a complaint to enforce the lien Jan. 19 in D.C. Superior Court. Freestate alleges that they were not paid more than $2 million for work they did on the landmark hotel conversion.

This brings to five the number of contractors who have sued for nonpayment at the Old Post Office project. In total, they are claiming nearly $5 million in unpaid bills.

“We’ve only filed three [mechanics’ liens] in the past decade, so, this is not usual for us,” said Tim Miller, executive vice president at Freestate’s parent company, AES Electric. “I want to make clear that this is not political. Whether it is Trump, or somebody you never heard of, we did a good job, at an agreed upon price and we want to be paid for it. We’d rather be talking about what an excellent job our employees did on a complex project than doing this.”

An IBEW investigative piece published last year documented the Trump Organization’s reputation for underpaying or not paying its bills at all.

Jack O’Donnell, former president of the Plaza casino in Atlantic City, told the Wall Street Journal it was a common practice.

“Part of how he did business as a philosophy was to negotiate the best price he could. And then when it came time to pay the bills,” O’Donnell said, Trump would say that “‘I’m going to pay you but I’m going to pay you 75 percent of what we agreed to.’”

It was known as the “Trump discount,” according to the Economist Magazine and it led to more than 3,500 lawsuits against Trump for nonpayment.

The hundreds of IBEW members who worked on the project, along with all of Freestate’s vendors have been paid, Miller said. Just not the company.

“We are, in effect, floating them a $2 million interest-free loan,” Miller said.

The Trump organization posted a $3 million bond to cover the liens and said, in effect, that this is normal.

“In developments of this scale and complexity the filing of nominal liens at the conclusion of construction is not uncommon as part of the close-out process,” a Trump Organization spokesperson, who declined to be named, said in an emailed statement provided to Bloomberg BNA Jan. 5.

The Trump Organization won the right to redevelop the former federal office building with the landmark clock tower into the Trump International Hotel Washington, D.C. in 2014. Work on the luxury hotel took two years and cost upwards of $200 million according to the Trump organization. Rooms range from $600 to $25,000 a night.

Freestate’s base contract was for $13 million, but the national historic landmark was always going to present unexpected challenges, Miller said, and change orders were always going to be part of the job. When the soft and grand opening dates were moved forward to meet the needs of the political campaign, the number and cost of the changes also went up. The job finished at $17 million and Freestate is suing for the last $2 million, $1.6 million of which is change orders.

“In most hotel jobs, there are three, maybe four room configurations. On this job, there were 200 rooms and very few were typical. In addition, we couldn’t penetrate finishes because of the historic protections, so from a productivity point of view, it is a challenge,” Miller said. “But we are very proud of the work we did and we won the accolades that justify that pride.”

General contractor Lend Lease nominated Freestate for a Washington Building Congress Craftsmanship award for the lighting they installed, an award they won. So, Miller said, there is no question about the quality of the work they did, just whether they should be paid for it.

The lawsuit claims that the $2 million in unpaid costs were incurred after the general contractor, Lend Lease, requested an acceleration of work so the hotel would be ready for a series of Trump presidential campaign events.

In order to meet the deadlines for the Sept. 12 soft opening, Freestate says they had crews on site seven days per week, 12 to 14 hours per day for nearly 50 consecutive days. The “soft opening” was scheduled for September 12th, and without Freestate’s additional manpower, this date would not have been met. The official Oct. 26 “Grand Opening” was scheduled, according to the lawsuit, “to provide an opportunity for positive press coverage for Mr. Trump’s presidential campaign.”

Miller said he hopes the issue is resolved before it makes it to court.

“We wish this hadn’t happened, we wish it had been dealt with sooner and now we just want to get back to what we do best: delivering the jobs on time, on budget and as agreed,” Miller said.