The bizarre battle for control of Trump's Panama hotel

The Trump Organization is in danger of losing another of its prized hotel possessions after months of legal wranglings that are jeopardizing its operation in Panama.

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Por:
David C Adams.
Police stand guard outside the Trump Ocean Club Internatiional Hotel & Tower where owners are seeking to remove the Trump family business from a management contract.
Police stand guard outside the Trump Ocean Club Internatiional Hotel & Tower where owners are seeking to remove the Trump family business from a management contract.

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PANAMA CITY, Panama – Guests at the Trump International Hotel in Panama are being treated to unusual sights these days: police in tactical gear striding through the lobby and fights breaking out between burly security guards.

This week the hotel lost control of some its bank accounts in Panama, according to sources familiar with its operations, and its website was not taking reservations despite having plenty of rooms available.

As if things couldn’t get worse, there was no water in the rooms, including the shower and toilets, all day Wednesday and part of Thursday.

It’s all part of a bizarre legal struggle for control of the failing five-star luxury hotel that opened to great fanfare in 2011.

The battle over the eye-catching 70-story hotel, which stands out in the shape of a ship’s sail overlooking the Pacific Ocean, boiled over in recent days after the owners of the hotel, private equity fund Ithaca Capital Investments, fired 10 of its 200 employees as part of an effort to terminate the management contract held by the Trump Organization.

Since then, a game of cat and mouse has ensued as the fired employees have remained in their jobs, hiding from the owners and police, in apparent loyalty to the Trump Organization, which is vehemently opposing its ouster from what was once one of Trump’s proudest possessions.

The saga has created the unprecedented situation of a company owned by president of the United States facing an investigation by officials of a foreign government. After being elected president, Trump refused to divest himself of ownership of his multi-billion dollar global real estate brand, creating what many experts consider a potential conflict of interest between the Trump Organization and the office of the president.

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The $400 million hotel and condo project was developed by a group of investors, some of whom are alleged to have links to money laundering and drug trafficking.

Trump lent his brand name to the project, earning him around $45 million, according to court documents. The Trump Organization has not been accused of laundering money, but questions have been raised about the company’s due diligence efforts.

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Financial problems, criminal complaints

In recent years, several Trump projects around the world have hit financial trouble, including a hotel and condo in Toronto and a golf course in Puerto Rico. Other projects in Brazil, Mexico and the Dominican Republic never got off the ground.

The Trump Organization currently faces several criminal complaints by the owners of the hotel in Panama, the details of which are not public. One leaked to the press involves the hotel general manager, who is accused of illegally taping a confidential meeting of the owner’s association. Other allegations involve misuse of funds by the Trump management team as well as access to the hotel’s book-keeping records, Univision has learned from two reliable sources.

A Justice of the Peace visited the hotel with a police escort on Wednesday to order Trump hotel executives to allow owners access to a security room where surveillance cameras are monitored.

Ministry of Labor officials also visited the hotel on Wednesday to inspect if employees were still being paid.

In a statement sent to Univision, Trump Hotels accused Ithaca Capital of ignoring the terms of the management contract, as well as “mob-style tactics.” It added that a Nov 21 contract termination notice sent to the hotel by the owner "is not only invalid but the product of fraud."

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For its part, Ithaca Capital declined to make any statement, saying dispute arbitration rules require the parties to refrain from public comment until a decision is reached.

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Banking issues

On Tuesday Univision tried to book a room. The official Trump Hotels website wasn’t taking reservations, apparently a result of its Panama bank accounts being blocked by the hotel owners. A receptionist at the front desk also declined to check in a Univision reporter saying the hotel was “sold out.”

That was odd considering the owners of the 369 hotel units voted to boot the Trump Organization in October, arguing “horrific management” as well as financial irregularities, that has seen occupancy fall below 40%.

Sure enough, Univision was then able to book a room using the travel booking site Kayak.com, at a heavily discounted price of $156, breakfast included. (By the weekend the hotel website did appear to be accepting reservations once more.)

“This place is empty, it’s certainly not making any money,” said Herbert Levetown, 87, a retired chemical industry businessman from New Jersey who was vacationing at the hotel this week.

“I’d like to see him go,” he added, referring to Trump when asked about the hotel contract dispute. “He's not a nice guy, but the American people elected him," he added.

Like most guests and residents he was oblivious to the legal battle going on in and outside the hotel, and was enjoying seeing the sights, including a tour of the Panama Canal.

Staff at the hotel were also mostly in the dark. One housekeeper who has worked five years at the hotel told Univision that she continued to be paid normally and had no complaints about Trump's management team. She was previously employed at another hotel and said she much preferred Trump International.

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Trump’s outmaneuvered?

It was unclear Thursday how long Trump would be able to cling to the management contract after seemingly being out-maneuvered by the hotel owner, Orestes Fintiklis, the 39-year-old founder of Ithaca Capital, a little-known private equity fund.

The Trump Organizations already lost its management contract in 2015 for more than 600 condo apartments in the 1,000-unit hotel and tower, which also boasts a casino, shops, four swimming pools and three restaurants.

A judge is expected to rule later this week if the firings are legal. A ruling in favor of the owners would be a major blow to Trump’s authority over the rest of the hotel staff.

The hotel’s stunning design and luxury amenities make it an attractive proposition even in Panama City’s saturated upscale hotel market. It boasts the largest conference center in Central America, as well as a casino, owned by Sol Kerzner the billionaire South African luxury resort developer.

The Trump name comes off a sign at the entrance to the Trump Ocean Club International Hotel & Tower, where a dispute is ongoing for control of the hotel's management.
Orestes Fintiklis, the Cyprus-born ounder of Ithaca Capital, the majority owner of the hotel, plays a Greek folktune on a piano in the hotel lobby after declaring victory in the management battle, March 5, 2018. Photo by Reuters.
Trump security guards block access to the hotel offices in Panama, to the frustration of the hotel's majority owner Orestes Fintiklis, founder of Ithaca Capital Investments. A judge later evicted the Trump Organization from management of the hotel. March 5, 2018.
A large wood sculpture, titled 'Big Foot' by French-Israeli artist Idan Zareski in the lobby of Trump's Panama hotel. "Bigfoot, a peaceful individual with big feet, bares witness to human foolishness," according to the online art gallery Saatchi Art. 
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The lobby of Trump's Panama hotel is dominated by a large wood sculpture titled 'Big Foot,' by French-Israeli artist Idan Zareski. "It carries the odors of mass deportation, forced labor, slavery and abuse that countless cultures have suffered through history," according to the online art gallery Saatchi Art. 
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The view overlooking the Pacific coast from the 31st floor of the Trump Ocean Club International Hotel & Tower in Panama.
The Trump hotel's distinctive sail-like design can be seen (just right of center) from the air as airplanes come in to land at Panama International Airport.
The Trump International Hotel & Tower's distinctive sail-like design (far left) stands out on the Panama City skyline. Seen here on the main road entering the city from the international airport.
One of two infinity pools at the Trump Ocean Club International Hotel & Tower in Panama overlooking the Pacific Ocean.
Mouthwash and soap bear Trump's name in the hotel rooms.
Numerous items in the rooms are adorned with Trump's name, from bathrobes to soap and mouthwash. The bathrobe is available for purchase.
Even the hotel's bottled water bears the Trump name. The bottles came in handy this week after water to the hotel was cut off Wednesday. It came back Thursday, then was cut again Thursday afternoon. Hotel staff gave out extra bottles.
On Wednesday and Thursday the water supply at the Trump International Hotel & Tower in Panama was interrupted. Guests were delivered cases of Trump branded bottled water to wash with.
Rooms at Trump's Panama hotel are elegantly furnished and a bath tub is positoned in the middle of the room.
Almost everything bears the Trump name. But for how much longer?
The Trump Ocean Club International Hotel & Tower was designed by a Colombian architect and built by a German engineering firm.
The Trump Ocean Club International Hotel & Tower (on left with lights) at night.
Moon rising over the Trump Ocean Club International Hotel & Tower (on left with lights).
Trump hotel management security guards at the entrance to the administration office. Earlier this week a scuffle ensued when guards refused to let the hotel owners enter the offices to obtain financial records.
Police in the elevator at the Trump Ocean Club International Hotel & Tower on Wednesday accompany a judge looking into a dispute between the hotel's owners and the Trump management team.
Model souvenirs of Trump Ocean Club International Hotel & Tower on sale in the gift shop for $8.
The view from the 14th floor hotel lobby restaurant at Trump Ocean Clun, Panama. Photo by David Adams/Univision
A street view of the Trump Ocean Club International Hotel & Tower in Panama.
The Trump hotel magazine includes a welcome note from two of President Trump's sons, Donald Trump Jr. and Eric Trump. "Happy travels and we hope to see you very soon," they write.
The rental office at Trump Ocean Club offers luxury apartments for prices varying from $900,000 to $400,000. Rents go for as low as $1,600 a month for a one bed loft.
Trump Hotels continues to offer rooms at the hotel which it no longer manages in Panama. But it is unable to take reservations.
Owners have given the former Trump International hotel a new name: The Bahia Grande Panama
Ithaca Capital is seeking $15 million in damages for the alleged mismangement of the hotel. Trump has countersued for $150 million.
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The Trump name comes off a sign at the entrance to the Trump Ocean Club International Hotel & Tower, where a dispute is ongoing for control of the hotel's management.
Imagen Reuters

Other hotel management groups, including JW Marriott, have already shown interest in the property.

The hotel operates as a condominium, with rooms owned individually, under a management contract with the Trump Organization, which runs until 2031.

But under Trump’s management, the hotel revenue has dropped 40% in the last three years, according to financial statements sent to the unit owners and obtained by Univision.

In December alone, the hotel lost $500,000, the unit owners were told. Trump’s management group still made a profit from its percentage of sales in 2017, although it amounted to only $200,000.

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“There are no winners and losers here. We are ALL losing money and it is getting worse,” Fintiklis wrote to the owners association on Feb 7. The Trump Organization “continues to clip management fees whilst our hotel is driven into the ground,” he added, comparing it to “a leech draining our last drop of blood.”

One option would be for the Trump Organization to settle quietly and exit the management contract, perhaps with a portion of the amount it might have earned over the next decade.

“Unlawful corporate takeover”

Right now, both sides are far apart. Ithaca Capital has sued for $15 million in damages claiming economic distress due to Trump’s alleged mismanagement. Trump countersued for $150 million, accusing Ithaca Capital of being “engaged in “an unlawful corporate take-over,” according to court documents.

“It’s a great building. Trump doesn’t want to lose it. It feeds his ego,” one of the hotel condo owners, Al Monstavicius, told Univision.

Trump’s name is all over the hotel, from the exterior signage to bathrobes and bottled water in the rooms.

In court documents, Trump’s lawyers say the owner’s decision to terminate the contract is “null and void” until the arbitration process is over. Trump’s lawyers argue that Ithaca Capital is in violation of an agreement signed when it bought into the hotel “to refrain from any action, directly or indirectly, to interfere with or undermine the rights of” it management operations.

The issue could boil down to a principle in contract law regarding legal remedies in the event a contract for “personal services” is broken. Trump’s lawyers argue the decision by Fintiklis and Ithaca Capital to break the contract is unlawful and insist on their right to continue operating the hotel. But Ithaca Capital argues that a contract can always be broken if appropriate damages are paid.

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Trump’s lawyer in the case, Todd Soloway, is a “go-to lawyer for high-stakes litigation” in complex real estate cases, according to the website of his firm Pryor Cashman.

Ironically, his website highlights as one of his most significant legal victories the case of the owner of the iconic Eden Roc hotel in Miami Beach, in which Soloway convinced a New York appeals court that the management contract between the parties was terminable as a personal services contract.

Soloway’s website observes: “This precedent-setting case frees owners of hotels worldwide to control the destiny of their own investment and to rid themselves of unproductive hotel managers and their onerous contracts.”

The man taking on Trump: Who is Orestes Fintiklis?

On the other hand, little is known about Fintiklis and Ithaca Capital, a private equity fund with undisclosed real estate holdings. It comprises a dozen wealthy family investors from the United States, Europe, Latin America and Asia, according to the company’s website.

The group paid $24 million for 202 hotel units and 13 other spaces, including the Trump restaurants and two swimming pools, according to company documents.

Fintiklis, a Cyprus-born businessman and lawyer who lives in Miami Beach, has a law degree from Oxford University and graduated first in his class in 2003, according to his biography. He also holds a master’s in business administration from the prestigious INSEAD Business School outside Paris, France, and previously worked for a top London firm Clifford Chance, where he was involved in structuring transactions for banks and high net worth individuals as well as international commercial arbitration.

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The situation grew tense last week when the owners, led by Fintiklis, arrived at the hotel seeking access to the hotel’s books and records to check for any financial irregularities. The owners allege an audit concluded $1.4 million was missing, according to legal documents.

Trump’s security guards intervened and tried to block Fintiklis entering the hotel offices, setting off a shoving match, and yelling.

Trump staff could be seen behind the manager’s glass door moving files, according to witnesses. One witness said they heard a document shredder.

In the battle for control, Fintiklis and some friends decided to stay in the hotel. They booked rooms online but when they went to check in a receptionist would not accept their reservations. After demonstrating that they had already paid, Trump officials arranged to compensate them with rooms at another hotel.

Even so, Fintiklis and his friends spent the evening hanging out in the Trump International lobby, where he played Zorba the Greek on a piano and the group ate pizza ordered from one of the hotel’s restaurants, which are not controlled by Trump.

In fact, Fintiklis has taken to playing the hotel piano each time he feels he has scored a victory over Trump. He was recorded by the Washington Post on Tuesday playing ‘Für Elise,’ a popular Beethoven composition.

There was one good piece of news for Trump on Thursday: the water came back on.