The Making of Donald Trump (11 page)

In order to prevent the legal chaos that would result from a complete collapse of the debt-laden Trump empire, the deal required fast approval by at least four of the five Casino Control Commission members. When two commissioners began asking skeptical questions, Trump attorney Nick Ribis called for a break. The dozen reporters in the front row stood up as the commission adjourned, a few looking bewildered. Why were they taking a break now instead of finishing?

“They’re rehearsing the answer to the next question,” I advised my colleagues. “When they come back, they’ll have the witness say Trump will be torn apart by the bankers unless the commission votes immediate approval of his deal with them.”

The one word I knew would not be spoken was
bankrupt
. That’s why they needed to rehearse: to convey the idea of bankruptcy without saying the word, which Trump had prohibited. The press-savvy Trump knew that the word
bankrupt
would provide easy headlines for his two favorite New York papers
—Post
and the
Daily News
—but subtle wording would pass over the heads of most journalists. He was soon proved right.

After the recess, Thomas Cerabino, a Trump lawyer at the center of the private bankruptcy negotiations, took the stand.

“What would happen if the commission delayed approving the deal between Trump and his bankers?” asked the DGE’s lawyer, Thomas Auriemma.

“I think there would be an imminent risk of the collapse [of the deal],” Cerabino responded.

One of the two skeptical commissioners asked for clarification: What would happen if the commission delayed immediate approval?

Cerabino testified in slow, deliberate words: “The banks will move apart and take whatever steps they think are appropriate to protect their interests and that is a very unhealthy state affairs for the Trump Organizations.”

With the lawyers’ subtle language, Trump avoided the “B” word but made clear to the commissioners that an uncontrolled bankruptcy was one day away.
The Philadelphia Inquirer
again bannered the story, this time with the headline, “
Trump Empire Could Tumble Today, Casino Panel Told.”

All but two of the other reporters who had been told what testimony to expect missed the story. Because the word
bankruptcy
went unsaid, these reporters did not allude to it.

Many reporters accurately quote what they are told, but don’t know much about the underlying issues. For Trump and others like him, this makes it easy to manipulate most of the press. Those who see through that manipulation and make connections themselves get a different response: complaints to editors, threats of litigation, and occasionally public denunciations. That latter strategy was on display the next day before the hearings resumed.

When I arrived, several reporters rushed up to me, one clutching my big front-page headline, asking when I would retract my story. They said that Ribis, Trump’s casino lawyer, had just told them my story was wrong, completely wrong. I marched over to Ribis, asked a series of short questions whose answers established that my story was correct, and had him confirm to my peers that no retraction or even correction would be requested.

When the commissioners entered the room, they faced a choice. They could approve the “fragile deal” with the banks or go with the evidence showing that Trump was financially unstable and rescind his license.

Four of the five commissioners, all political appointees, used their power to take Trump’s side. The commission told the bankers they were free to foreclose on Trump. However, the casino licenses would not ride with the foreclosures. Without the casinos, the banks would repossess gigantic hotels with no reason to stay in business, leaving them far worse off than if they went along with the deal. That deal would 1) allow Trump to pay them back less than he owed and 2) advance him $60 million to keep going.

Donald Trump was saved—saved by the government, deeming him too big to fail—from getting his just desserts for reckless spending. The state of New Jersey had favored the interests of Trump over those of his bankers and the people who invested in those banks.

Years later, running for president, Trump would make remarks that seemed to harken back to this day, although he did not mention it specifically.
In the spring of 2016, Trump told CNBC: “I’ve borrowed knowing that you can pay back with discounts. And I’ve done very well with debt. Now, of course, I was swashbuckling, and it did well for me, and it was good for me and all that.”

Even with the official favoritism that forgave many of Trump’s debts, he was still in financial trouble. As Christmas 1990 approached, Trump was again running out of cash. Many of the Taj Mahal contractors remained unpaid, as they would for years or, in some cases, forever. It was the beginning of Trump being forced to relinquish his stakes in a host of enterprises.

In 1991, the Trump Taj Mahal entered Chapter 11 bankruptcy, the first of his business bankruptcies. He later sold stock in his casinos, where investors lost their shirts (while Trump kept getting paid millions of dollars in salary, bonuses, and money to pay off his bad debts). During the fourth bankruptcy case, creditors successfully demanded that Trump get lost.

Today, Trump shrugs off the four bankruptcies in which investors lost more than $1.5 billion, saying it’s a standard business tactic to restructure debt. In truth, there were actually six bankruptcies. The last was in 2014, when Trump was a very minor investor in the Trump Taj; he had already been removed from any active role in the last casino bearing his name.

In 1990, Trump feared the word
bankruptcy
as he now fears damning questions from Hugh Hewitt or Megyn Kelly, the Fox News host. If government hadn’t saved him by taking his side against his bankers, we almost certainly would not be imagining the prospect of Donald Trump living at 1600 Pennsylvania Avenue. Instead, he would have drowned in a sea of red ink.

L
ike his father before him, Trump has often placed wildly variable values on his properties in official documents, presenting high values to bankers, investors, and the public (including when he donates property to charity), and small numbers to tax authorities, contractors, and vendors seeking payment for work. Government auditors, bankers, and investors have questioned these mismatches on multiple occasions. In every case that has been resolved, Trump has negotiated civil settlements, many on undisclosed terms. Judges sealed these files.

Of Trump’s fifteen golf courses, his Federal Election Commission disclosure form values nine of them at more than $50 million. “Golf is a small part of my business,” Trump told golf writer Michael Bamberger in 2011. “One, two percent. But you know why I spend so much time on it? Because I do what I want and I like it.”

Among Trump’s top-valued properties is the Trump National
Golf Club Westchester, about thirty miles from Trump Tower in the prosperous town of Briarcliff Manor. Homes in Briarcliff Manor typically sell for three-quarters of a million dollars. In the 1990s, Trump bought a failed golf course there. He beautified and developed it. He built a clubhouse with one and a quarter acres of floor space that he said cost $20 million. Trump boasted that “no expense was spared” in creating a “world-class” golf course. He built a majestic 101-foot-high waterfall and added numerous man-made ponds.

Bill Clinton, who owns a home six miles away, is among those who have paid the club’s initiation fee, reported to be about $300,000. Trump has testified under oath that annual revenues from golfing, weddings, and other events at Trump National Golf Club Westchester total $9.5 million.

While Trump declared (also under oath) that more than $50 million is the “true, complete, and correct” value of this golf course, he told Fernando Gonzalez otherwise when formally challenging his property tax bill. Gonzalez is the property tax assessor for Briarcliff Manor. In that instance, Trump lowered his appraisal of the golf club to less than $1.4 million. Two average Briarcliff Manor homes cost about that much.

Modest differences in property values are routine. Assessors often hold hearings for appeals on the property tax valuations they assign. In property tax appeals, the difference between a valuation and an appeal is usually no more than a few percentage points.
The difference between what Trump swore in his Federal Election Commission filings and his property tax appeal was 97 percent.

After David McKay Wilson, a watchdog reporter for the local
Gannett
newspaper and ABC News’ Brian Ross reported on the chasm between assessments, Trump upped his valuation
of the golf course to about $9 million, still less than a fifth of what he swore to be the true value as a presidential candidate.

Trump’s appeal annoyed the locals, who would have to make up for the reduced tax bill he’d receive. Richard Wishnie, a former Westchester County legislator who lives in Briarcliff Manor, said it “makes no sense to me for any of us to subsidize a billionaire so he can enjoy even more profits at that property.”

Cutting his property tax bill was not the only thing that had irritated locals. Trump has also refused to pay the town for damage it says was caused by runoff from the golf course after a series of storms drenched the area in June 2011. Water flooded the municipal swimming pool, leaving a thick layer of silt. The city said Trump had made “unauthorized alterations” to water outlets at five golf course ponds, raising the water level as much as six feet to make them more attractive, leaving no room to capture water from heavy downpours.

According to court documents filed by Briarcliff Manor when Trump wouldn’t pay for the mess, “the failure of the Trump storm water facilities to perform as designed was the sole direct cause of the village damage.” Alan Garten, general counsel for the Trump Organization, denied any responsibility and told Wilson that “local taxpayers would end up suffering from the legal battle.” Garten blamed the flooding primarily on a drainage pipe that “was clogged because the village was too cheap to put up a grate to prevent rocks and boulders from coming in.” Garten further accused town officials of “letting their egos get in the way. It’s not the best use of taxpayer dollars.” The litigation remained unresolved when this book was completed in July 2016.

•    •    •

The Westchester golf course is not the only one about which Trump’s property tax filing and campaign disclosure reports are at odds.

In the rolling open hills of Bedminster, New Jersey, Trump acquired the former farm of John Z. DeLorean, creator of the eponymous steel car and defendant in a much-publicized drug-trafficking trial that ended in his acquittal. Trump bought the 580 acres out of bankruptcy for what he said was “far less” than the actual $34 million that was spent buying the land and starting work on the golf course, a discount that enhanced his future return in the investment.

He christened it the Trump National Golf Club Bedminster. World-class golf course architects Tom Fazio and son designed the course. Trump’s daughter Ivanka was married there in 2009, and it might be Trump’s final resting place. He sought permission for a cemetery for ten people, but a special deal zoned ten acres of the property as a future cemetery for almost three hundred souls, exempting them from property taxes.

In his campaign disclosures, Trump valued his National Golf Club Bedminster at more than $50 million and said it had annual revenues of more than $16 million. For that valuation to be accurate, it would have to be calculated after Trump gave away the rights to develop the land (with, for example, housing or retail). To this end, Trump signed what is known as a land conservation easement. No cash changed hands, but the value of the property was reduced in exchange for being preserved as an open space—in this case, in the form of a golf course. Public documents indicate that this entitled Trump to an income tax deduction of $39.1 million.

For property tax purposes, assessors make separate determinations of value for the parcels that make up the old DeLorean estate. Bedminster Township tax records show the
golf club land and buildings to be valued (for property tax purposes) at $32.3 million.
The property tax in 2015 was just under $440,000 at a property tax rate of 1.4 percent, well below the statewide average of 2.2 percent. On part of the property, Trump nearly wipes out his property tax bill by penning in a small herd of goats. Without the goats, the bill would be $80,000 a year, but because the goats qualify it as active farmland, the tax comes to just under $1,100.

Trump has also offered widely varying values of his California golf course.
The Trump National Golf Club Los Angeles—located on the Palos Verdes Peninsula overlooking the Pacific Ocean—opened in 2006. Trump and his publicists said the golfing property was worth more than a quarter of a billion dollars. News reports blindly accepted that figure, even though public records show that Trump paid only $27 million when he bought the old Ocean Trails Golf Course after the eighteenth hole slid into the ocean in 1999. Trump’s 2015 presidential disclosure form lists the value only as “more than” $50 million.

Yet despite this impressive valuation, Trump filed papers with the Los Angeles County assessor valuing the golf course at a humble $10 million, less than four cents on the dollar of his highest public statements.

Trump gained property tax and income tax breaks on the Palos Verdes property by giving away his right to build luxury homes on the land—another conservation easement like the one in Bedminster Township. His disclosure papers value the Palos Verdes easement at $26 million.

That is an exceptionally high value to place on land that can never be developed.

Locals knew, as did Trump and anyone with a basic grasp of geology, that land on this part of the Palos Verdes Peninsula is unstable and therefore not suitable for development. The
acres Trump identified in the easement shift frequently because of fault lines and unstable soil. The continual land movements sometimes force the closure of Palos Verdes Drive, the curving road that winds along the water’s edge. Even when the roadway is open to traffic, the shifting land forces drivers on parts of the road to navigate around asphalt moguls.