Welcome!
2016-12-21 19:42:17
Trump’s Role in Son’s Failed Deal May Yield First Test for a State Regulator

Donald J. Trump, in bailing his eldest son out of a business deal gone bad, may have gotten something unexpected in return — a costly environmental cleanup.

At issue is a six-acre factory site in North Charleston, S.C., that was once owned by Titan Atlas Manufacturing, an industrial venture that Donald Trump Jr. helped to start and that ceased operating in 2012.

In 2014, his father, now the president-elect, formed a new Trump Organization affiliate called D B Pace, which took over a $3.65 million bank loan made to Titan Atlas with the property as security.

Now, South Carolina officials are considering a decision about a cleanup at the site that could be the first state regulatory action affecting the Trump Organization since Mr. Trump was elected.

This year, D B Pace applied under a state program to undertake a voluntary cleanup of the property. If approved, the company would also gain protection against liabilities related to any pollution there, such as chemical contamination of local groundwater, caused by Titan Atlas and other past owners.

There is, however, a catch: To qualify for the protections, the buyer of a contaminated property must not be affiliated with a former owner, or have had involvement with the site.

The program’s rules exist, lawyers said, to prevent a polluter from evading liability by using another company to stand in its place. “You are basically drawing a line in the sand,” said John P. Boyd, a lawyer in Columbia, S.C., who negotiates such so-called brownfields agreements for companies buying contaminated land.

D B Pace, which took title to the North Charleston property in January after a foreclosure proceeding, stated to South Carolina regulators that it was free of such associations. But according to a lawsuit, both the younger Mr. Trump and a Trump Organization lawyer, who is also a D B Pace executive, managed the Titan Atlas facility for two years before D B Pace applied to the state’s program.

The lawsuit at issue was filed in April by a former tenant at the Titan Atlas factory. In it, a building products company, Saint-Gobain Adfors, charged that it had complained since 2014 to Donald Trump Jr. and the Trump Organization lawyer, Michael Cohen, that rain coming through the building’s rotting roof was damaging materials stored there.

Mr. Trump and Mr. Cohen, according to the lawsuit, insisted that the roof would be repaired only if the company extended its lease. In late 2015, when heavy rains hit the Charleston area for days, $4.5 million worth of products were destroyed, Saint-Gobain Adfors maintains.

Titan Atlas and D B Pace, which are named as defendants in the suit, have rejected the claims.

Donald Trump Jr., who along with his brother Eric is expected to run the Trump Organization when their father becomes president, did not respond to written questions from The New York Times. A lawyer for the Trump Organization, Alan Garten, said the younger Mr. Trump was only a “passive investor” in Titan Atlas and was never involved with D B Pace or the management of the North Charleston property.

Mr. Cohen, who in his capacity as a D B Pace executive signed the company’s application to the South Carolina program, did not respond to an email seeking his responses.

Mr. Boyd, the environmental lawyer, said a decision about D B Pace’s ability to use the state program would require an extensive legal analysis. But he added that any ties between Donald Trump Jr., Titan Atlas, D B Pace and the Trump Organization could complicate or violate the affiliation issue.

A decision by South Carolina officials could have significant legal and financial consequences. If the voluntary cleanup agreement is approved, the costs incurred by D B Pace would probably be minimal because its environmental obligations would be limited to controlling the spread of existing pollution on the property. But if regulators reject the agreement, the Trump affiliate could bear legal responsibility for damage caused by previous occupants, including Titan Atlas.

Titan Atlas, which manufactured precast construction panels at the North Charleston site, never applied to take part in the state’s voluntary cleanup program. On a recent day, the property was littered with rusting equipment and rotting chemical drums. The factory on the site once functioned as a Lockheed Martin plant that made aircraft adhesives.

In a public notice issued in May, the South Carolina Department of Health and Environmental Control said that D B Pace planned to develop the property for warehousing and/or manufacturing.

“D B Pace did not create the pollution but will control it to keep the property safe for reuse,” the agency said at that time.

When first contacted, Jeff Tallion, a spokesman for the South Carolina agency, said it was waiting for D B Pace to return a final version of the agreement that the state had sent it in July. Informed by a reporter about possible ties between Titan Atlas and D B Pace, the agency said it would review any relevant information before executing a contract.

Donald Trump Jr. started Titan Atlas in 2010 with a friend, Jeremy Blackburn, who served as the company’s chief executive. A few years earlier, Mr. Blackburn acknowledged while settling an unrelated lawsuit that he had been part of a scheme to defraud a businessman who claimed he had lost $1 million. He recently claimed that he did nothing wrong.

In late 2011, Deutsche Bank made a $3.65 million loan to Titan Atlas that was co-signed by Donald Trump Jr. However, Mr. Blackburn soon declared personal bankruptcy, and when Deutsche Bank sought in 2014 to collect on the loan, Mr. Trump faced paying back a larger share.

It was then that the Trump Organization formed D B Pace, taking over the loan from Deutsche Bank and assuming the site’s mortgage as security. According to a public filing, Deutsche Bank, a frequent lender to the Trump Organization, received a payment of $10 as part of the transaction. A spokeswoman for Deutsche Bank declined to elaborate on the terms of the deal.

According to a public filing, the president-elect has an interest in D B Pace. Mr. Garten, the Trump Organization lawyer, said he did not have information about its other principals.