The Making of Donald Trump (3 page)

Years later came a stunt that would appear to be a direct inspiration to his son: While under intense criticism for plans to destroy a popular Coney Island attraction, the Steeplechase amusement ride, where he wanted to build the first apartment project bearing the family name, Fred Trump shifted the focus of news coverage by hiring a bevy of beauties in hard hats and polka-dot bikinis to hand out bricks to locals and city dignitaries. Then he summoned news photographers to watch them all throw the bricks at the symbol of the ride, a stained-glass icon called the Funny Face.
Decades later, of course, Donald Trump would surround himself with models to attract television cameras and would have his third wife pose nearly nude aboard his Boeing 757 jet for a men’s magazine while he looked on during the photo shoot.

Long before he learned to manufacture news, Fred Trump had become a main target of federal investigators looking into profiteering with the tax dollars intended to help World War II veterans. The subsequent Senate hearings about those investigations were not about diversionary tactics like young women in bikinis with bricks, but the fortunes Trump and other builders
made by gaming Federal Housing Administration rules on mortgage guarantees. Once the FHA understood the scheme, it was explained to President Dwight D. Eisenhower, who reportedly flew into a rage in the Oval Office. Soon the FHA had more than a hundred investigators combing through bureaucratic records, comparing costs to profits and discovering huge gaps between the numbers.

On July 13, 1954, the
Brooklyn Eagle
ran a banner headline, “Denies $4 Million Profit,” and above it a kicker: “But Trump has that much surplus in bank.” Trump was already a household name, at least in Brooklyn.

Testifying before the Senate Committee on Banking and Currency, Fred Trump insisted that he had not made an excess profit of nearly $4 million, as the investigative report said. Trump said it was all a misunderstanding, but his explanation employed a view of finance that does not exist in any textbook or accounting manual: Trump said the money was there, for sure, sitting in the bank account for his FHA-subsidized projects, but it was wrong to describe this as profiteering—indeed, it was not even profit, he said,
because he had not taken any of that money out of the bank
.

This description was, to anyone who understood finance, absurd. His son Donald would also use creative approaches in fostering the impression that he had earned billions of dollars through his deal-making artistry.

Fred Trump testified before Congress that the reasons he had nearly $4 million in the bank were lower costs for materials than he had expected, a faster completion of the construction, and the fact that he acted as his own general contractor. That fit with his reputation as a builder who got things done and ahead of schedule, though the schedules often had lots of slack built in, making an early finish easy. Fred then did his
best to turn the tables, attacking the investigators for, he said, doing “untold damage to my standing and reputation.” There was talk of perjury indictments, but nothing ever came of the FHA investigation.

A month after Fred Trump’s testimony in Washington, merchants in the Fort Greene area of Brooklyn complained that Trump, backed by federal slum-clearance money to take over their neighborhood, had gouged them on rent. Storekeepers told the
Brooklyn Eagle
that he was doubling rents, which was “immoral.”

Adopting the same stance he had on Capitol Hill, Fred Trump said it was all just a misunderstanding. The merchants had been paying vastly different rents for similar properties—$40 a month for one storefront, $200 for another—which Fred Trump said made no sense. He also said that he expected the merchants to be out within a couple of years so he could build a new apartment project using the slum-clearance powers the government had enacted … and from which he would soon profit.

Taxpayers were not the only source of capital for Fred Trump’s construction projects. A few years after the war ended, he took on a partner known as Willie Tomasello. When cash was short, Tomasello was able to provide Trump with operating capital on short notice. Tomasello also saw to it that there was no trouble from the unions, from the bricklayers and carpenters to the teamsters.

The New York State Organized Crime Task Force identified Tomasello as an associate of the Genovese and Gambino Mafia families in New York. In other words, just as Friedrich Trump had engaged in illicit businesses to build his fortune in the late nineteeth century, his son Fred Trump turned to an organized crime associate as his longtime partner to build his
own. Decades later, Donald Trump would also do business with the heads of the same families, though at a remove, developing numerous business connections with an assortment of criminals, from con artists and a major drug trafficker to the heads of the two largest Mafia families in New York City, as we shall see.

It should be no surprise that Donald Trump took after his father.
Fred Christ Trump was a stern father who expected his sons to learn the family business. He had his oldest son, Fred Jr., and the younger boys, Donald and then Robert, learn the business from the ground up, actually driving them regularly to his properties in his blue Cadillac. (He bought a new one every two years. It had what at the time was a novelty, a customized license plate reading “FCT”.) The boys were assigned to sweep out storage rooms, empty coins from the basement washers and dryers, make minor repairs under the supervision of maintenance crews, and, as they got a little older, collect rents.

It was not that the boys needed the little bit of money Dad gave them for their labors. When Donald was still in diapers, he and his siblings had a trust fund. His share was about $12,000 a year, which in the late nineteen forties was roughly four times the typical income for a married couple with children if the husband held a full-time job.

Fred worked out of an austere Avenue Z office in Brooklyn, assisted by a secretary who stayed with him for more than a half century. (He told others it was best to hire an overweight and unattractive secretary because she would stay on the job.)

I’ve talked with people who sat across from Fred’s plain desk, proposing to do plumbing, window, and electrical work. They describe a ritual that was certainly not unique to that office. First, a plain envelope would be presented. Fred would take a second to test its weight in his hand before putting it
into a drawer. Then he would listen to the pitch about contract terms for work on his buildings.

The cost of these secretive extras was built into the contract cost when it could be passed on to Uncle Sam or tenants. Otherwise it reduced the profit the contractor made. This was, and remains today, a widespread but illegal practice unless the cash payments are reported on income tax returns—which of course would defeat the purpose of the inducements. It’s a low-risk crime: Unless the party handing over the envelope is a government agent and the bills are marked, who’s to know? The practice also meant there was little need to withdraw cash from bank accounts, thereby leaving no records for tax authorities to discover during an audit.

As first-born, Fred Jr. was first in line to rise in dad’s business. Neither the work nor his father’s methods appealed, apparently. Fred Sr. was a no-nonsense businessman who watched every penny, kept regular hours, and, after dinner at home each night, resumed doing business on the telephone. Fred Jr. was more of a free, albeit troubled, spirit. He went off in a Corvette to Lehigh University in Bethlehem, Pennsylvania, and learned to fly airplanes. Although he was not Jewish, he said he was in order to join the Jewish fraternity.

When Fred Jr. tried working for his namesake early on, the father and son did not see the landlord business the same way. For example, when Fred Jr. bought new windows for one of the Trump apartment houses instead of having the old ones repaired, his father upbraided him for wasting money. In recounting this episode years later, Donald said his father freely dispensed criticism, but rarely praise. Donald said that was just fine with him, but not his older brother.

Donald was what school counselors might call “maladjusted.” In his first book,
The Art of the Deal
, he boasts about
slugging his music teacher in second grade because he didn’t think the teacher knew the subject, although the story might be apocryphal. Neighbors have told stories over the years, including to me, of a child Donald throwing rocks at little children in playpens and provoking disputes with other kids. By his own account, Donald got into lots of trouble—so much that his father shipped him off to the New York Military Academy in upstate New York to develop discipline when he was a teenager.

Donald turned eighteen in 1964, when the death toll in Vietnam was rising fast. He got four student deferments and one medical deferment after his doctor wrote that he had a bone spur in his foot. Which foot? a journalist asked years later. Trump said he could not recall. He was accepted into a Catholic school in New York City, Fordham College, but in his junior year transferred to an Ivy League school, the University of Pennsylvania in Philadelphia. Penn has a famous and highly regarded graduate business school that Trump often invokes. He did not in fact study there. He was enrolled as an undergraduate and received a bachelor of science in economics.

While in college, Donald also started doing real estate deals, including one with his father in Cincinnati. He later wrote that his net worth upon graduating from college was $200,000, a figure that seems modest given the amount of money that had been flowing into his trust fund since before he learned how to walk.

Meanwhile, Fred Jr. had become a pilot for TWA. He married a flight attendant whom family members describe simultaneously as being a knockout in the looks department and yet someone whom Fred Sr. couldn’t stand—just as his paternal grandmother couldn’t stand Elizabeth Christ Trump, the woman his father, Friedrich, had married. Fred Jr. and his
wife, Linda, subsequently had two children and divorced. Afterward, Fred Jr. gave up flying when he couldn’t manage his alcoholism.

With the way now open to becoming next in line in the family business, Donald, even before graduating from college, started modeling himself more directly after his father. He drove a Cadillac with the license plate “DJT.” He took a flashy Penn student, the actress Candice Bergen, on a dinner date that ended early. The only thing she remembered years later was that Trump wore a three-piece burgundy suit with matching leather boots.

Others have said they don’t recall seeing Trump a lot around campus, an interesting observation in view of Trump’s claims years later that “nobody remembers seeing” future President Barack Obama in elementary school in Hawaii or anywhere else. In fact, many of Obama’s fellow students have spoken and written about him, as have several of his professors, notably constitutional scholar Laurence Tribe. While Obama was still a first-year law student, Tribe wrote a law review article citing Obama in the first footnote. Tribe has since written about how Obama sat in the front row in every session, offering nuanced legal analyses that Tribe remembered because of his student’s ability to examine a subtle legal issue from the perspective of each relevant party with equal weight.

Nonetheless, Trump touts his 1968 bachelor’s degree in economics and says he learned “super genius stuff” at the University of Pennsylvania’s Wharton School. “I was a really good student at the best school,” Trump told Barbara Walters on her show,
The View
. “I’m like a smart guy.”

Wharton, like all business schools, teaches fundamental tools for evaluating whether investments are likely to be profitable. One such concept is Net Present Value, or NPV. That
is the value of cash expected from an investment minus the value spent to support that investment and then reduced to a lump sum payable today. Business and finance graduates of Ivy League schools know this concept the way primary school students know that 2+2=4.

In a lawsuit Trump filed against journalist Timothy L. O’Brien for writing that Trump’s net worth may be far less than a billion dollars, a lawyer asked Trump questions about his knowledge of finance and how he determined his net worth.

“Are you familiar with the concept of net present value?” lawyer Andrew Ceresney asked.

“The concept of net present value to me,” Trump replied, “would be the value of the land currently after debt. Well, to me, the word ‘net’ is an interesting word. It’s really—the word ‘value’ is the important word. If you have an asset that you can do other things with but you don’t choose to do them—I haven’t chosen to do that.”

After hearing that gibberish, the lawyer asked Trump to explain another basic business concept taught to finance students: generally accepted accounting principles, or GAAP. Did he understand GAAP? “No,” Trump said. “I’m not an accountant.”

Once out of college, Donald Trump set his sights not just on finding young women in need of a man with a fortune, but also on establishing his name across the East River in Manhattan, where the bright lights beckoned. Less than sixteen years later, he would erect on Fifth Avenue the first building bearing his name in big, bronze letters.

I
n 2005, Donald Trump flew to Colorado to give a motivational talk. Accompanying him were his wife, Melania, and
a violent convicted felon and swindler named Felix Sater, who was
helping Trump make two major development deals in Denver.
Trump and Sater gave interviews to the
Rocky Mountain News
—interviews that would prove to be significant a few years later. The three took a limousine an hour north to Loveland, solidly Republican territory where more than a thousand people had paid to hear Trump’s advice on how to succeed in life and business.

Motivational speakers like Zig Ziglar and Tony Robbins work up audiences with carefully crafted talks. They make lofty appeals to people about vanquishing inner demons so a better self can flourish and dreams of success can morph into reality.

Trump’s talk was nothing like that.