Earlier in March, reports revealed that a real estate company owned by the family of Jared Kushner, President Trump’s son-in-law and senior adviser in the White House, was on the brink of signing a staggeringly lucrative deal with a Chinese company with murky ties to the Chinese government.
Now, just a week after Democratic lawmakers wrote a letter to the White House expressing dismay over the array of conflicts of interest that the transaction posed, the deal has been called off.
As CNN reports, Kushner Companies says that it “mutually agreed” to end talks with Anbang, an insurance giant in China that’s been aggressively buying high-profile properties in the US for years. Kushner Companies made no mention of ethics concerns, and neither the White House nor Anbang have yet made comments on the collapse of the deal.
But it’s certainly plausible that the deal was called off because it could’ve ended up being politically costly for the Trump administration at a time when its policy agenda is faring poorly. There were a number of red flags surrounding the transaction that led government ethics experts to say the deal could have been a particularly flagrant instance of the Trump administration’s continued refusal to use safeguards to ensure that its members — including the president himself — do not exploit their power for private financial gain.
The terms of the deal were pretty sweet for Kushner Companies
According to a Bloomberg report published earlier in March, Kushner Companies was set to receive $400 million in a deal in which Anbang would’ve invested in the Kushner Companies’ flagship Manhattan office tower at 666 Fifth Ave. The deal valued their office building at $2.85 billion, which made it the highest valuation of a single Manhattan building ever. Kushner sold his stake in the building to his family before entering the White House.
There were many different components to the massive $4 billion transaction, but the terms of the deal were clearly a home run for Kushner Companies. The expensive Fifth Avenue property has struggled a great deal since the financial crisis, and Anbang’s investment would’ve provided the company with a cash payout and an equity stake in a new partnership.
There were two other elements of the deal that were particularly eye-catching. First, the lenders financing the project were not known.
The other striking detail was that the deal paid off almost all of a $250 million mortgage that Kushner Companies took out for the building. “According to the deal documents, the Kushners will settle the debt for just $50 million,” Bloomberg reported.
That was one-fifth of the original value of the loan. Bloomberg reported that some real estate experts considered the deal “unusually favorable” for the Kushners.
Anbang is tightly connected to the Chinese government
Anbang, a Beijing-based company with more than $250 billion in assets, is notoriously opaque. But we do know that Anbang, like many major businesses in China, is steeped in ties to the Chinese Communist Party.
Its owner, Wu Xiaohui, was able to secure a set of difficult-to-obtain licenses when he created the company in 2004, in an industry mainly populated by government-owned enterprises. He’s married to the granddaughter of Deng Xiaoping, the former iconic leader of China who helped oversee major reforms to the country’s economy in the 1980s.
Anbang also has business ties to Wen Yunsong, the son of former Prime Minister Wen Jiabao, as well as Chen Xiaolu, a former army officer whose father was a major figure in China’s Communist Revolution.
So how serious are these connections? Serious enough that after Anbang bought the Waldorf Astoria in New York, it caused Barack Obama to break with a presidential tradition dating back to Herbert Hoover in which the president stays at the Waldorf during the annual UN General Assembly. Fearing possible espionage, in 2015 he declined to stay at the premier luxury hotel and stayed at one just a block away instead.
Kushner isn’t too far from the money either
Kushner doesn’t have an ownership stake in 666 Fifth Ave. — he sold it to a family trust upon entering the White House as an adviser to the president. Kushner Companies has declined to say who exactly controls it, but his mother and siblings are beneficiaries of the trust. It’s unclear if Kushner plans to go back into real estate when he leaves Washington.
Lawrence Noble, the general counsel of the Campaign Legal Center, said during an interview after the initial report of the emerging deal that, given the reported facts, there wasn’t any evidence that federal ethics rules were being broken.
“The core ethics rule of matters affecting personal financial interest would not seem to apply if [Kushner] has totally divested himself of his financial interests in the building,” he told me. “And there are other rules involving using non-public information for someone’s financial benefit, but it doesn’t appear it would apply at this point in this situation.”
But Noble cautioned that the principles of government ethics were being threatened by the deal.
“One of the classic things that you see in cases dealing with corruption is where people try to influence a government official by financially benefiting their family,” he said. “That often goes on because directly benefiting a government official may be too obvious and may be illegal.”
Lisa Gilbert, vice president of legislative affairs for the watchdog group Public Citizen, noted in an interview when the deal was first reported that it could’ve influenced how Kushner deals with China going forward.
“The fact that the most prominent company involved [in the deal] is a Chinese one with its own murky links to the Chinese government raises questions on how this could impact everything from currency manipulation to espionage to the One China policy,” she says.
Kushner and his wife, Ivanka Trump, have both been working on US-China policy in the Trump administration. Beijing has taken measures to circumvent the typical diplomatic protocols of working through the State Department and has courted both of them directly. One of the main policy issues in Kushner’s portfolio is trade, an issue of paramount importance to China in light of Trump’s threats to slap huge punitive tariffs on Chinese goods, an act that could rip a hole in China’s economy.
It’s impossible to say if the terms of the deal that Anbang had struck with Kushner’s family business were in any way politically motivated — if it was a favor with an expectation that it would be reciprocated or a bid for some kind of access. Or maybe it was none of those things. But that in and of itself was an issue.
“Even confidence in the best decisions is going to be questioned even by the appearance of potential conflicts of interests,” Noble says. “You end up debating things you shouldn’t have to debate.”