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Campaign urges U.S. public pension funds to divest from owner of Trump hotel

WASHINGTON, July 19 (Reuters) - Advocacy groups launched petitions and sent letters on Wednesday urging two of the biggest U.S. public pension funds to divest from an investment fund unless it stops paying one of President Donald Trump's companies to run a New York hotel.

Reuters reported on April 26 that public pension funds in at least seven U.S. states periodically send millions of dollars to an investment fund that owns the upscale Trump SoHo Hotel and Condominium in New York City and pays a Trump company to run it, according to a Reuters review of public records.

Two legal advocacy groups sent petitions to half a million of their members and letters urging state officials who oversee the California Public Employees' Retirement System (CalPERS) and the New York State Common Retirement Fund to reconsider their investments in CIM Fund III, which owns the Trump SoHo.

"The money used for this investment comes from mandatory deductions from the paychecks of public employees. These employees are thus forced to indirectly subsidize President Trump beyond the Constitution's mandate of a fixed salary," said the letters from Free Speech for People in Newton, Massachusetts, and Courage Campaign in Los Angeles.

Article II of the U.S. Constitution bars the president from receiving additional payments beyond his salary from state governments. The fees that public pension funds pay CIM may fall into that category, several constitutional lawyers have told Reuters.

The White House in June rejected the allegation that government payments to Trump's businesses violated the Constitution and said "partisan politics" had motivated lawsuits challenging Trump's continued ownership of his businesses.

The advocacy groups urged the pension funds either to divest from the CIM fund or work with other investors to demand that CIM end its relationship with the Trump Organization.

CalPERS declined to comment, but CalPERS officials disclosed in response to a public records request that the pension fund paid CIM $1,722,418 in management fees for the first three months of 2017.

In a statement, a spokesman for New York State Comptroller Thomas DiNapoli noted that the CIM fund was in the process of gradually selling off the properties it owns and said the New York state pension fund "has limited rights as an investor and does not make or control CIM's investment choices."

CIM said in a statement that it "is committed to creating attractive investment opportunities for its investors and then overseeing those investments to produce the best outcomes possible for the funds it manages."

It added that the Trump SoHo was underperforming and said it was "working hard to restore its performance before we bring it to market.

The White House and the Trump Organization did not respond to multiple requests for comment.

Democratic officials and lawmakers have also raised concerns over the payment chain between the public pension funds and the Trump SoHo.

The public pension funds' investments in CIM Fund III were cited in a June lawsuit that the attorneys general of Maryland and the District of Columbia filed against Trump, alleging that government payments to his businesses violated the Constitution.

In May, the top Democrat on the Senate committee overseeing pensions asked the U.S. Office of Government Ethics to assess the constitutionality of the payments. The office said it was not authorized to probe presidential actions.

(Reporting by Julia Harte; Editing by Jason Szep and Peter Cooney)