irraa is licensed under CC BY-NC 2.0Picture of Donald Trump at at the Trump Taj Mahal, 2007
President Trump’s post-election machinations are not a bungled coup attempt; they add up to a scam to enrich himself. A coup would require broad collaboration from the courts and, failing that, from the military. The evidence suggests that Trump may not even be serious about election fraud. If he were, he would have recruited serious election law experts in the states he has contested. Instead, Rudy Giuliani and Sidney Powell blanketed the country with a blizzard of lawsuits, offering fever dreams from the dark web as their legal justification and evidence.
The president’s post-election campaign demonstrates his singular talent for taking care of himself even when he loses. It is a momentous historic attack on the democratic process, on the order of Reconstruction. But for Trump, as Michael Corleone put it, “it’s just business.” Ultimately, Trump’s goals are to remain a star, make money, and solidify his clout. The corrosive effects on democracy are collateral damage.
Donald Trump has always craved fame, a drive common to national politicians. But he alone honed his approach to politics through his stint as a reality TV star. That’s where he learned how he could weave a narrative around his personality that tapped into the fantasies of a national audience. His quixotic claim to have won an election that he knows he lost rests entirely on his curated public persona. And as long as he pursues his claims, he is the center of attention instead of an ignored, sad, lame duck.
Trump’s intrigues embody his drive to come out ahead whether he succeeds or fails. His campaign hardly touched on the pandemic, the economy, or even his signature complaints about immigrants. Instead, he offered a narrative about systemic voter fraud and a stolen election. The strategy was smarter than Trump’s consultants and most media understood. It strengthened his connection to Americans who feel vulnerable to powerful shadowy forces beyond their reach, sufficient to drive nearly enough of them to reelect him.
This approach also laid a foundation for Trump to come out on top again, albeit not as president, and monetize the loss. Soon after the polls closed, his campaign announced an “Official Election Defense Fund” to help pay for his election challenges – with much of the proceeds diverted to his personal PAC, Save America. And by mobilizing his millions of true believers around a false narrative that his enemies have cost them their leader, Trump secured an enormous fan base for whatever he does as an ex-president. Millions will pay to attend more rallies or perhaps subscribe to a new Trump streaming service or cable network.
The strategy will give Trump a global stage to spotlight
his inevitable grievances with President Joe Biden. It
could become a means to mobilize public pressure
against ongoing criminal investigations and possible
indictments. Even from Mar-a-Lago, he could keep
officeholders aligned with his interests, even as an ex-
president.
Ensuring that Trump benefits even when he loses—and so never appears to fail – is an approach he has honed over his career. It nearly always involves making himself richer. He forged the strategy in Atlantic City. When he issued $100 million in junk bonds to bail out the failing Trump Plaza casino in 1993 temporarily, he used half of those proceeds to cover his personal debts. When his three casino hotels went bankrupt, he collected $160 million in management fees from the time the hotels declared Chapter 11 to the inevitable moment, years later, when he had to surrender them to his creditors.
Trump had figured out how to win while losing other people’s money. The final collapse of his Atlantic City properties also became personal paydays: He walked away with $916 million in tax losses based on $3.4 billion in defaulted debts owed to the banks and junk bondholders that actually put up the capital. To make it legal, Trump had assumed personal liability for the loans. But that was at the heart of the scam: Since he had not put up his own money, he couldn’t claim the losses without putting himself technically “at-risk” for the loans.
As president, Trump continues to profit from losing other people’s money. He owns 16 golf courses, all financed by accommodating lenders who put up the money to buy and operate them. As any real estate operator knows, golf courses are notorious money losers. Here too, Trump is personally “at-risk” for those loans – because otherwise, he couldn’t write off their annual losses. Based on the tax returns described in the New York Times, he claimed $15.3 million in those tax losses in 2017, his first year in the White House. For that year, he also reported personal income of nearly $14.8 million from branding deals, income tied to his old reality TV show, and revenues from favor seekers joining Mar-A-Lago and taking suites at his hotels. The losses Trump claimed for ventures paid for with other people’s money enabled him, even as president, to avoid paying personal income tax on all of his $14.8 million income.
Winning by failing has been Donald Trump’s signature business strategy, and now it is his political strategy. Since he couldn’t force the Justice Department to arrest Biden or coerce the courts to overturn the election results, he is left to enrich himself and maintain his influence with his fans and GOP elected officials. Thankfully for democracy, Americans now face not a coup d’état but yet another scam from Donald Trump – and probably not his last.
Robert Shapiro is the chairman of Sonecon and a senior fellow at the McDonough School of Business at Georgetown University. He served as undersecretary of commerce for economic affairs under Bill Clinton.
New York banker: 'No bank would
touch' Trump post-presidency
Tim O'Donnell
The Week•November
2, 2020
If President Trump's re-election bid falls short, would he set
his sights on getting back into real estate full-time? At least one New York
banker doesn't think he could even if he wanted to.
The banker, who remained anonymous, told The New Yorker's
Jane Mayer that Trump is "done in the real estate business" because
"no bank would touch him," likely
leaving him without the capital necessary to get back in the game. The banker
reportedly believes that even Deutsche Bank —
which Mayer notes is, "notoriously, the one institution that continued
loaning money to Trump in the two decades before he became president" —
would shy away from reviving their relationship. "They could lose every
American client they have around the world," the banker said. "The Trump name, I think,
has turned into a giant liability."
Perhaps in some parts of the country where Trump has achieved
strong political support, or in other parts of the world where he's received
warmly, his name could still be a draw, the banker said. But it sounds like Trump would
probably have to adapt his strategy in some way, rather than pick up where he
left off. Read more at The New Yorker.
How Trump
Maneuvered His Way Out of Trouble in Chicago
David Enrich, Russ Buettner, Mike McIntire and Susanne Craig
The New York Times
The Trump
International Hotel & Tower in Chicago on June 27, 2018. (Alyssa
Schukar/The New York Times)
The financial crisis was in full swing when Donald Trump
traveled to Chicago in late September 2008 to mark the near-completion of his
92-floor skyscraper.
The fortunes of big companies, small businesses and millions of
Americans — including the Trumps — were in peril. But the family patriarch was
jubilant as he stood on the terrace of his gleaming glass tower.
“We’re in love with the building,” Trump gushed. “We’re very,
very happy with what’s happened with respect to this building and how fast we
put it up.”
He and his family hoped the Trump International Hotel &
Tower would cement their company’s reputation as one of the world’s marquee
developers of luxury real estate.
Instead, the skyscraper became another disappointment in a
portfolio filled with them. Construction lagged. Condos proved hard to sell.
Retail space sat vacant.
Yet for Trump and his company, the Chicago experience also
turned out to be something else: the latest example of his ability to
strong-arm major financial institutions and exploit the tax code to cushion the
blow of his repeated business failures.
The president’s federal income tax records, obtained by The New
York Times, show for the first time that, since 2010, his lenders have forgiven
about $287 million in debt that he failed to repay. The vast majority was
related to the Chicago project.
How Trump found trouble in Chicago, and maneuvered his way out
of it, is a case study in doing business the Trump way.
When the project encountered problems, he tried to walk away
from his huge debts. For most individuals or businesses, that would have been a
recipe for ruin. But tax-return data, other records and interviews show that
rather than warring with a notoriously litigious and headline-seeking client,
lenders cut Trump slack — exactly what he seemed to have been counting on.
Big banks and hedge funds gave him years of extra time to repay
his debts. Even after Trump sued his largest lender, accusing it of preying on
him, the bank agreed to lend him another $99 million — more than twice as much
as was previously known — so that he could pay back what he still owed the bank
on the defaulted Chicago loan, records show.
Ultimately, Trump’s lenders forgave much of what he owed.
Those forgiven debts are now part of a broader investigation of
Trump’s business by the New York attorney general. They normally would have
generated a big tax bill, since the Internal Revenue Service treats canceled
debts as income. Yet as has often happened in his long career, Trump appears to
have paid almost no federal income tax on that money, in part because of large
losses in his other businesses, The Times’ analysis of his tax records found.
Alan Garten, the Trump Organization’s chief legal officer, said
the company and Trump appropriately accounted for and paid all taxes due on the
forgiven debts.
“These were all arm’s-length transactions that were voluntarily
entered into between sophisticated parties many years ago in the aftermath of
the 2008 global financial crisis and the resulting collapse of the real estate
markets,” Garten said.
On television back in those heady Chicago days, the future
president was playing a wildly successful real estate developer, and the
shimmering new skyscraper became part of that mystique.
It was the biggest thing Trump ever built. It was also the last.
The Money Behind the Project
Since at least the 1990s, Trump had dreamed of erecting a
skyscraper in the Windy City. “I had hoped to build something fantastic in
Chicago for some time,” Trump would later write in the Chicago Tribune.
He selected a riverside plot that was home to the squat,
seven-floor Sun-Times building. In 2001, he unveiled plans for what would be
the tallest high-rise built in the United States since the 110-story Sears
Tower was completed in Chicago in 1973.
The Trump International Hotel & Tower would include 486
condominium units, 339 hotel rooms, restaurants, a bar, two parking garages, a
health club, a spa, and tens of thousands of square feet in retail space and
conference facilities.
The condos, some priced at more than $4 million, would have
sweeping views of Chicago and Lake Michigan. Rooms in the hotel, occupying
lower floors of the building, would be for sale, too. Trump’s company would
make money from selling the units (and parking spaces) and operating the
building.
To pay for the construction, Trump arranged for two of his LLCs,
401 North Wabash Venture — named for the project’s address — and its parent
company, 401 Mezz Venture, to borrow more than $700 million.
Trump went to his longtime lender, Deutsche Bank, for the bulk
of the money. Since 1998, he had borrowed hundreds of millions of dollars from
the German bank. It had been so eager to establish a foothold in the United
States that it had overlooked his history of defaults.
This time, Trump assured Deutsche Bank officials, including
Justin Kennedy, the son of now-retired Supreme Court Justice Anthony Kennedy,
that the Chicago development was a guaranteed moneymaker. In a sign of the
Trump family’s commitment to the project, Trump told his bankers that his
daughter Ivanka would be in charge. (Trump also appointed the 2004 winner of
“The Apprentice” as the development’s “president.”)
Deutsche Bank agreed to lend $640 million to 401 North Wabash
Venture. Trump agreed to personally guarantee $40 million of the loan. If his
LLC were to default, Deutsche Bank could collect that money directly from
Trump.
Trump also went to Fortress Investment Group, a hedge fund and
private equity company, for $130 million. This was a so-called mezzanine loan,
which meant that it would be repaid only after the Deutsche Bank debt had been
satisfied. Because of the greater risk, the Fortress loan came with a double-digit
interest rate. The agreement with Fortress also required Trump’s 401 Mezz
Venture to pay a $49 million “exit fee” when it repaid the loan.
If Trump defaulted, his lenders could seize the building.
Deutsche Bank and Fortress both planned to chop up the loans and
sell at least some of the pieces. Deutsche Bank sold them mostly to American,
European and Asian banks, Fortress mostly to private equity and hedge funds,
including Dune Capital Management, which had recently been co-founded by Steven
Mnuchin, the future Treasury secretary.
The loans were due in May 2008. By then, the proceeds from
selling condos, hotel units and parking spaces were projected to generate
enough cash for Trump to repay what he owed.
Using a thick black pen, Trump signed the loan agreements Feb.
4, 2005. A month later, construction began.
Lenders Come Calling
Work on the project went more slowly than planned, and the
residential portion was still under construction as the loans came due.
With the financial crisis enveloping the world, finding buyers
for multimillion-dollar apartments suddenly became much harder. In the spring
of 2008, Trump asked Deutsche Bank to delay the loan’s due date. The bank gave
him an extra six months.
In mid-September, the crisis crescendoed with the bankruptcy of
Lehman Bros. Financial markets went haywire. The economy was on the precipice
of a depression.
About a week later, Trump showed up in Chicago for the ceremony
to mark the skyscraper’s near-completion.
After addressing the small crowd, Trump and three of his adult
children — Ivanka, Donald Jr. and Eric — placed their hands in wet cement
rectangles to commemorate the day. “I don’t want to tell you what that feels
like,” Donald Trump cracked before waving his cement-caked hands for the cameras.
At that point, at least 159 units in the building were still
unsold, and many more were under contract but hadn’t closed, according to New
York court records. That meant hundreds of millions of dollars that Trump and
his family had counted on to repay Deutsche Bank and Fortress hadn’t yet
materialized. And the loans were due in barely six weeks.
Trump sought another extension. This time, Deutsche Bank said
no.
Trump’s company still owed Deutsche Bank about $334 million in
principal and interest, and Fortress $130 million, not including interest and
fees.
Trump went on the offensive. In a letter to Deutsche Bank on
Nov. 4, he accused it of helping ignite the financial crisis. This was
important, because Trump went on to claim that the crisis constituted a “force
majeure” — an act of God, like a natural disaster — that entitled him to extra
time to repay the loans.
A few days later, Trump and his companies sued Deutsche Bank and
Fortress, along with the other banks and hedge funds that had purchased pieces
of the loans.
The suit accused Deutsche Bank of engaging in “predatory lending
practices” against Trump. He sought $3 billion in damages.
Deutsche Bank soon filed its own lawsuit, accusing its longtime
client of being a habitual deadbeat and demanding immediate repayment of the
now-defaulted loans.
Inside Deutsche Bank, angry executives and lawyers vowed to
never again do business with Trump, according to senior executives.
With the litigation pending (the parties soon entered into a
series of “standstill agreements” that paused hostilities), the Trump family
kept trying to find buyers for the condos.
“As it nears completion, it’s time for you to take your place in
the one-of-a-kind Trump lifestyle this building offers,” Ivanka Trump said in
an April 2009 sales video. “And you can be living it, right here, very soon.”
Turning Unpaid Debt Into Canceled Debt
Why didn’t the lenders seize the building?
Going to court to take over the unfinished skyscraper promised
to be a costly, yearslong process, especially given Trump’s reputation for
using the legal system to drag out fights and grind down opponents. It seemed
simpler to resolve the dispute.
On July 28, 2010, lawyers for Trump, Deutsche Bank and Fortress
notified the court that they had reached a private settlement. The terms
weren’t disclosed.
But Trump’s federal tax returns, as well as loan documents filed
in Cook County, Illinois, provide clues to what happened: Trump was let off the
hook for about $270 million. It was the type of generous financial break that few
American companies or individuals could ever expect to receive, especially
without filing for bankruptcy protection.
Before Trump defaulted, Fortress had expected to receive more
than $300 million from his company: the $130 million in principal and roughly
$185 million in anticipated interest and fees.
But Fortress and its partners — including Mnuchin’s Dune
Capital, as well as Cerberus Capital Management, whose co-chief executive,
Stephen Feinberg, would become a major Trump fundraiser and go on to lead a
White House advisory panel — quickly realized they wouldn’t ever collect that
full amount.
Ultimately, Fortress settled for $48 million, which Trump wired
to the firm in March 2012, according to people familiar with the deal.
The forgiven debts showed up in Trump’s tax returns. For 2010,
Trump’s 401 Mezz Venture reported about $181 million in canceled debts. Two
years later, DJT Holdings, an umbrella company that the Chicago project had
been folded into, reported that another $105 million of debt had been forgiven.
Most of that appears to reflect the unpaid Fortress sum.
In many ways, it repeated a pattern that had played out more
than a decade earlier at Trump’s Atlantic City casinos: a cycle of defaulting
on debts and then persuading already-burned lenders to cut him a break.
The Last $99 Million
Trump’s companies got a pass on the money they owed on the
Deutsche Bank loan, too.
The 2010 settlement gave Trump a couple of years to sell hotel
units, condos and parking spaces to repay that loan, according to Steven
Schlesinger, a lawyer who represented the Trump Organization in the Chicago
litigation.
By 2012, the Trump Organization had drummed up about $235
million to repay the financial institutions to whom Deutsche Bank had sold
pieces of the original loan. They included banks and asset managers in the
United States, Germany, Ireland and China, according to court records.
But Trump still owed $99 million, according to people familiar
with the debt. Where would he come up with that money?
Although Deutsche Bank had vowed to do no more business with
Trump, his son-in-law, Jared Kushner, introduced him to his personal wealth
manager at the bank, Rosemary Vrablic. Vrablic, with the support of her
superiors, soon agreed to restart the relationship with Trump.
In 2012, Vrablic’s division made two loans secured by the
Chicago skyscraper: one for nearly $54 million, another for $45 million,
according to loan documents filed with the Cook County Recorder of Deeds. Trump
agreed to personally guarantee the new loans, according to several people
familiar with the deal.
The funds were used to immediately repay the $99 million that
Trump still owed on the original Chicago loan, the people said. In other words,
one wing of Deutsche Bank was providing Trump the money to repay another
division of the same bank.
The following spring, the Trump Organization repaid $54 million,
according to a person briefed on the matter and Cook County records. That left
$45 million outstanding. But in 2014, Deutsche Bank agreed to lend another $24
million on the property and to extend the due date until 2024, records show.
Trump now owed the bank $69 million. By May 2016, he had repaid the $24
million.
At that time, the Chicago loans were only one element of the
relationship between Deutsche Bank and Trump. Vrablic’s team also lent Trump’s
company $125 million for work on his Doral golf resort in Florida and up to
$170 million to transform the Old Post Office building in Washington into a
luxury hotel. Trump personally guaranteed those loans, too.
The guarantees were advantageous for him. Because they counted
as investments in his business for tax purposes, the guarantees increased the
amount of losses he could use to avoid income taxes in the future. Trump’s
federal tax returns show that he has personally guaranteed the repayment of
$421 million in debts.
Most of that is on loans from Deutsche Bank. At the end of 2018,
Trump and his companies owed the bank $330 million.
Whittling Down Tax Bills
The IRS requires taxpayers to treat forgiven debts as income
when calculating what they owe in federal taxes. The New York attorney general,
Letitia James, is investigating whether Trump followed the law.
The tax records reviewed by The Times show that while Trump
accounted for $287 million of income from his canceled debts, he managed to
avoid paying income taxes on nearly all of it.
Trump reported $40 million of forgiven debt as income in 2010.
But losses from his businesses — including $30.8 million in red ink on the
Chicago project — meant he had no taxable income that year.
Trump avoided immediate income taxes on another $104.8 million
of the forgiven loans in a way that could increase his taxes later. He would
generally have been entitled to write off the total amount he spent on a building
over a number of years, a process known as depreciation. Instead, he agreed to
reduce those eventual write-offs by $104.8 million, an alternative allowed in
tax law.
For the other $141 million, Trump took advantage of a law,
passed after the 2008 financial crisis, that allowed income from canceled debts
to be deferred for five years and then spread out over the next five. Each year
from 2014 through 2018, Trump declared $28.2 million of canceled-debt income.
As it turned out, though, losses in other parts of his business
wiped out most of his federal tax bill on that income. He paid nothing for
2014; $641,931 for 2015; and, after credits, only $750 a year for 2016 and
2017. It isn’t clear how much he paid for 2018.
Loans Coming Due
Like Trump’s other properties, the Trump International Hotel
& Tower in Chicago has benefited in some ways from its connection to the
president.
Last year, for example, an aviation company that was lobbying
the Trump administration for contracting work held an event there. Trump
attended an October 2019 lunch fundraiser at the hotel, which generated about
$100,000 in revenue for his company, The Washington Post reported.
But the skyscraper’s fortunes have withered. Most of its retail
space has never been occupied, The Real Deal reported last year. Its revenue
declined from $67 million in 2014 to $50 million in 2018, while profits plunged
from $16.3 million to $1.8 million over the same period.
The problems intensified in 2020, as the coronavirus forced
restaurants, including Trump’s in Chicago, to close. The Trump family sought
financial relief from Deutsche Bank among others.
The bank offered to let Trump’s companies pause interest
payments on their loans. The Trump Organization decided the bank’s proposal was
insufficiently generous and turned it down.
The loans come due in 2023 and 2024.
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