Donald Trump's inaugural committee spent more than US$1 million to book a ballroom at the Trump International Hotel in the nation's capital as part of a scheme to "grossly overpay" for party space and enrich the president's own family in the process, according to a lawsuit filed Wednesday.

The District of Columbia's attorney general, Karl Racine, said the committee misused nonprofit funds and coordinated with the hotel's management and members of the Trump family to arrange the events.

He said one of the event's planners raised concerns about pricing with Trump, the president's daughter Ivanka Trump and Rick Gates, a top campaign official at the time.

Former Trump campaign aide Rick Gates leaves federal court after sentencing December 17, 2019 in Washington. Photo / Getty Images
Former Trump campaign aide Rick Gates leaves federal court after sentencing December 17, 2019 in Washington. Photo / Getty Images

"District law requires nonprofits to use their funds for their stated public purpose, not to benefit private individuals or companies," Racine said. "In this case, we are seeking to recover the nonprofit funds that were improperly funnelled directly to the Trump family business."

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It was the latest allegation that Trump and his family have used public and nonprofit funds spent at Trump-owned properties to enrich themselves — part of the peril of Trump not fully withdrawing from his businesses while he is president.

Trump has maintained ownership but turned the reins over to his adult sons, who have bristled at the charge that they are profiting off their father's presidency.

The committee has maintained that its finances were independently audited, and that all money was spent in accordance with the law. The committee raised an unprecedented US$107 million ($162 million) to host events celebrating Trump's inauguration in January 2017.

But the committee's spending has drawn mounting scrutiny.

Prosecutors found that Gates, a former Trump campaign aide who flipped on the president during the special counsel's Russia investigation, personally managed discussions with the hotel about using the space, including ballrooms and meeting rooms.

In one instance, Gates contacted Ivanka Trump and told her that he was "a bit worried about the optics" of the committee paying such a high fee, Racine said.

(L-R) David Wolkoff, Stephanie Winston Wolkoff, Melania Trump and Donald Trump in 2008. Photo / Getty Images
(L-R) David Wolkoff, Stephanie Winston Wolkoff, Melania Trump and Donald Trump in 2008. Photo / Getty Images

Stephanie Winston Wolkoff, a former adviser to first lady Melania Trump who played a leading role organising the inaugural parties, had also told Trump, when he was president-elect, and Ivanka Trump that she was uneasy with the offer, Racine said.

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Winston Wolkoff later followed up with an email to Gates and Ivanka Trump warning that the hotel's proposal was at least twice the market rate, Racine said.

But Gates went through with it anyway, at a cost of $1.03 million ($1.5 million), the suit says.

Prosecutors say the committee could have hosted inaugural events at other venues either for free or for reduced costs but didn't consider those options.

Gates pleaded guilty to charges tied to his lucrative political consulting work in Ukraine and was sentenced last month to 45 days in prison, a punishment that a judge said reflected the extensive cooperation Gates had provided to the Justice Department.

Racine's office said investigators did not directly speak with Gates in as they pursued the suit. A lawyer who represented Gates for the criminal proceedings didn't immediately return a message seeking comment.

The White House didn't immediately return a message nor did the Trump Organisation. The suit contends that the hotel went against industry practice and refused to discount the space, and double-booked its largest ballroom with a different organisation that was still affiliated with the inauguration, the Presidential Inaugural Prayer Breakfast.

US President Donald Trump leaves the World Economic Forum in Davos, Switzerland. Photo / AP
US President Donald Trump leaves the World Economic Forum in Davos, Switzerland. Photo / AP

Both organisations were nonprofits, but the breakfast paid US$5000 for the ballroom. The committee, however, paid US$175,000, the suit claims.

Prosecutors say the committee also used nonprofit funds to throw a private party on January 17, 2017, the night off the inauguration, for Trump's family — a US$300,000 affair.

The reception was for three of Trump's children — Donald, Jr., Ivanka and Eric.

"There will be an after party at the OPO (Trump Hotel) following the inaugural balls on Friday. DJT is not expected to attend but was more for you, Don and Eric," Gates wrote in an email to Ivanka Trump, according to the suit.

DJT is a reference to Donald J. Trump.

Event staff within the inaugural committee recognised this would not be a proper use of committee funds and had tried to cancel this event, according to the suit, but Gates and the Trump family went ahead anyway.

Racine said his office focused on the inaugural committee and the companies that profited because investigators believe that's the best option for them to possibly recover the funds.

Racine had been sending subpoenas for months related to the investigation.

The inaugural committee was also being investigated by New York and state authorities in New Jersey, who are looking into, among other things, whether foreigners illegally contributed to the inaugural events.

- AP