Has Donald Trump Ever Been Rich?

I had always thought of Donald Trump as someone who had once been very rich, lost a great deal of money, and now tried to pass off his fractional fortune as the bounty of a Midas. This ancient article, “All of the People, All the Time” from the valuable Spy magazine archive puts that idea to rest for me. This creature was always a nuisance, and never rich.

I excerpt the beginning, three interesting points, and its conclusion.

The opening:

YOU CAN FOOL ALL THE PEOPLE ALL THE TIME

How Donald Trump Fooled the Media, Used the Media to Fool Banks, Used the Banks to Fool the Bondholders and Used the Bondholders to Pay for the Yachts and Mansions and Mistresses

by John Connolly

With his bluster and his extravagance and his tabloid love life, Donald Trump has always been a source of considerable entertainment. If we’re honest, we all have to admit that after his every achievement in greed or vanity we’ve said to ourselves, Heck, you’ve gotta love that guy! Like some funny, impossibly venal puppet in a Punch-and-Judy show, Trump has always given us a good laugh. In fact, Trump’s image as a buffoon is just another example of how the press has protected him from real scrutiny for so long. While one would prefer not to be considered a joke, that is not so bad if it distracts people from seeing what one really is: a charlatan, a liar, a cheat. But if Trump has thrown the press and public off his trail during the last year, he has not managed the same trick with law enforcement. SPY has learned that Trump’s 1988 sale of Resorts International to Merv Griffin is now the subject of two criminal investigations, one by the FBI. “We are looking into the organized-crime [side of it],” says a law-enforcement official. Furthermore, John Sweeney of the New Jersey Division of Gaming Enforcement confirms that his agency is also studying Trump’s participation in the Resorts deal.

A former…well, top Trump executive told SPY he considers Trump “evil incarnate.” A mobster who knew Trump socially said of him once, “He’d lie to you about what time of day it is – just for the practice.” And indeed, a close study of Trump’s actions over the past few years reveals a man addicted to deception, a man who invested like a fool, a man who shaved from deals and bled failing companies of cash so that he could live with absurd excess, a man who borrowed huge amounts from credulous banks and investors, a man who not only is not now a billionaire but never had $1 billion or $500 million or – very possibly – even $100 million and who has been strapped since 1987. Donald Trump is not just some cartoon character, a guy with a comb-over and a press agent and a board game named after him; he is and always has been a real and fairly treacherous human being.

In the history of finance, Donald Trump will be known for one brilliant innovation. No one before Trump had used the press so cunningly to give himself legitimacy with creditors. Trump made the media his balance sheet. Reports of Trump’s wealth in newspapers and especially in sober business magazines such as Fortune and Forbes and Business Week were the basis upon which banks lent him money and the public bought his bonds.

A spokesman for Arthur Andersen, Trump’s accountants until 1990, admitted to SPY that they had never conducted a financial audit of Donald Trump. Andersen did conduct “financial reviews” – the term for a very superficial analysis of management and procedures, a once-over quite unlike an audit, which would include the accountants’ solemn opinion of the finances under examination. Sources at Chase Manhattan and Citibank – from which Trump borrowed $290 million and $990 million, respectively – say that although Trump may have given the bank audited financial statements for certain specific properties, they never had an audited statement of Donald Trump and his finances generally. Bankers Trust – which has lent Trump more than $100 million with no collateral – declined to comment for this article. Manufacturers Hanover – which has lent Trump $160 million – also declined to comment.

Two of the most powerful banks in the world report that no one ever audited Donald Trump. Some of the loans that the banks made to Trump even had provisions stating that if his net worth fell below a certain level ($600 million, for example), Trump would have to pay back the loans immediately. Very prudent – except that the banks never insisted that Trump verify his net worth by audit.

So, without audits, often without collateral, how did Trump manage to borrow all that money? Well, every one knew that Donald Trump was a billionaire, and who wouldn’t lend money to a billionaire? Banks are in the business of making loans, and in the overheated eighties, a banker couldn’t wait to make a loan to Donald Trump. The banks and the people who bought Trump’s bonds were influenced by the news accounts of Trump’s billions.

If Trump had told the press the truth, or if the press had held his claims up to even a rudimentary level of scrutiny, then Trump might not owe the banks $2 billion on which he has suspended interest payments, and he might not have sold $1.277 billion in bonds that are now worth only $493 million. But Trump didn’t tell the truth, and the media were pathetically gullible. Even the press reports of Ivana’s prenuptial agreement are wrong – it is for $10 million, not $25 million. The information presented below is not based on hindsight – if journalists had been inclined to look, they could have found out the truth at any time.

Interesting point one:

Trump Tower and the Grand Hyatt were Trump’s first major projects. Both were initiated when New York was still reeling from the fiscal crisis of the mid-seventies and was willing to make any deal with any developer, just as long as he developed. As New York’s economy took off in the early eighties, the deals made Trump look like a winner. What the media have ignored for purposes of assessing Trump’s wealth and ability, though, is that neither project was Trump’s alone. The Hyatt, a renovation of the 64-year-old Commodore Hotel, is half owned by the Pritzker family of Chicago. Equitable Life holds the mortgage to the hotel, and since the Pritzkers presumably really are worth about $5 billion, Equitable probably felt safe entering a deal with them. What did Trump bring? He knew his way around city government, so he won the tax abatements that made the Hyatt a success.

Equitable then agreed to be Trump’s partner in Trump Tower, putting up half the money. Equitable sold those condos at the height of the market and then wanted out of the market and then wanted out of the retail and commercial space. Trump bought them out with a $75 million loan from Chase Manhattan. He has come to them with other plans, but they have decided to pass on these ventures.

It is difficult to determine exactly what value to place on Trump’s equity in the Hyatt and Trump Tower. One popular misconception is easily remedied, however: Donald Trump in no sense owns Trump Tower. The condominiums that make up all but 19 floors of the building are owned, of course, by the people who bought the apartments. Trump owns only the retail space and his apartment and office. He surely made some money on those condominiums, with Equitable’s help, and the Hyatt continues to be profitable. But like a movie star with a couple of early hits, Trump traded on those successes for a decade.

Two:

During our look into Trump’s stock transactions, we came across an interesting item. In 1986, Trump, the “billionaire,” needed $31 million to meet a margin call for his purchase of Bally Corporation stock. The funds to meet the margin call came from his Holiday Corporation stock profits; a credit line from Bankers Trust; a distribution from Trump Equitable 5th Avenue Corporation, which is the agent for Trump Tower commercial space; miscellaneous credit lines from other banks; and a 1985 federal income tax refund. All this desperate scrounging by a top-of-his-form billionaire for a measly $31 million.

And three; the cited article is “The Unmaking of a Documentary” by Edwin Diamond.

“[Trump] had the accounting firm of Arthur Andersen & Company do a special audit. The CPAs declared Trump had cash assets of $700,125,00 as of November 30, 1988…So much for Trump’s not being as big as he says he is”

– “The Unmaking of a Documentary,” New York, September 4, 1989

Ah, yes, “So much for Trump’s not being as big as he says he is.” In some ways, his use of the Arthur Andersen letter is Trump’s most elegant deception. The accountants’ carefully worded letter did say – perfectly accurately – that on the specified date Trump had $700,125,000 in cash, cash equivalents and marketable securities. Having seen the lengths to which Trump was driven in order to raise a mere #31 million back in late 1986, we may be surprised to learn that on a typical day in 1988 he had 20 times that in liquid assets. Fortunately, a simple explanation presents itself: if one interprets it properly, which the Trump-adoring editors at New York were in no way inclined to do, the Andersen letter actually demonstrates that on November 30, 1988, Donald Trump was $20 million in the red.

The date of the review was not the end of a fiscal year or quarter, but neither was it arbitrary. It happened to be eight days after Merrill Lynch had given Trump $651 million in cash specifically for the purpose of building the Taj Mahal. The money had been raised through a junk-bond offering. The accountants’ letter made only passing reference to the possibility that any of the $700 million was earmarked for specific projects. It also failed to explain that the marketable securities were shares in Alexander’s department stores – stock that Trump had borrowed $69 million from Citibank and Bear Stearns to buy.

Andersen stated that Trump had $700 million in cash and stock. Deduct the $69 million owed on the stock, and that leaves Trump with $631 million. But Merrill Lynch had just given Trump $651 million for the Taj Mahal, so, in fact, he was “overdrawn” for $20 million.

The conclusion. The Castle referred to is the Trump Castle Casino, an Atlantic City casino, now called the Atlantic City Golden Nugget.

A fool and a liar and a deadbeat Trump may be, but no one can say that he doesn’t have touching, human qualities. Take his solicitude to his aging father. In January, The Wall Street Journal reported that Trump had surreptitiously borrowed $3 million from Fred Trump to help him make an $18.4 million Castle Casino bond payment. A week before Christmas, Trump had Howard Snyder, an attorney for his father, walk into the Castle, go up to the cashier’s window, buy $3 million in chips and leave with those chips. With that $3 million, Trump had the money he needed to make the bond payment.

The CCC requires that all loans be reported. Needless to say, Trump did not advise the Commission of the loan from Fred. “We found out about [the transaction] the next day. We began to look into it right away,” John Sweeney, the new director of the New Jersey Division of Gaming Enforcement, told SPY. “We sent a letter to the Trump Organization saying, ‘We are treating it as a loan.'” This is what things have come to for Donald Trump. The boy from Queens had to go back to Queens for a bailout.

Addendum, added on September 17th, 2013:

While reading Mark Singer’s collection of profiles, Character Studies, I came across the one source of actual, substantial income by which one might label Trump rich, not mega-rich, not the wealth of Midas that he affects, but still very rich. It occurred after his supposed heyday, with the sale of his share of the Grand Hyatt Hotel to the Pritzkers. I give it over to Singer:

Then, last October, Trump came into possession of what a normal prson would regard as real money. For $142 million, he sold his half interest in the Grand Hyatt Hotel, on Forty-second Street, to the Pritzker family, of Chicago, his longtime, and long-estranged, partners in the property. Most of the proceeds weren’t his to keep, but he walked away with more than $25 million. The chief significance of the Grand Hyatt sale was that it enabled Trump to extinguish the remnants of his once monstrous personally guaranteed debt. When Forbes published its annual list of the four hundred richest Americans, he sneaked on (373rd position) with an estimated net worth of $450 million. Trump, meanwhile, had compiled his own unaudited appraisal, one he was willing to share along with the amusing caveat “I’ve never shown this to a reporter before.” According to his calculations, he was actually worth $2.25 billion – Forbes had low-balled him by 80 percent. Still, he had officially rejoined the plutocracy, his first appearance since the blip.

I hand off the ending of this post to the ending of Singer’s own piece, which is as memorable and well-written as anything in the collection. The profile came out shortly after Trump’s first divorce:

Next, we headed north, to Mount Kisco, in Westchester County – specifically to Seven Springs, a fifty-five-room limestone-and-granite Georgian splendor completed in 1917 by Eugene Meyer, the father of Katharine Graham. If things proceeded according to plan, within a year and a half the house would become the centerpiece of the Trump Mansion at Seven Springs, a golf club where anyone willing to part with $250,000 could tee up.

From the rear terrace, Trump mapped out some holes of the golf course: an elevated tee above a par thre, across a ravine filled with laurel and dogwood; a couple of parallel par fours above the slope that led to a reservoir. Then he turned to me and said, “I bought this whole thing for seven and a half million dollars. People ask, ‘How’d you do that?” I said, ‘I don’t know.’ Does that make sense?” Not really, nor did his next utterance: “You know, nobody’s ever seen a granite house before.”

Granite? Nobody? Never? In the history of humankind? Impressive.

In Trump’s office the other morning, I asked whether, in light of his domestic shuffle, he planned to change his living arrangements. He smiled for the first time that day and said, “Where am I going to live? That might be the most difficult question you’ve asked so far. I want to finish the work on my apartment at Trump International. That should take a few months, maybe two, maybe six. And then I think I’ll live there for maybe six months. Let’s just say, for a period of time. The buildings always work better when I’m living there.”

What about the Trump Tower apartment? Would that sit empty?

“Well, I wouldn’t sell that. And, of course, there’s no one who would ever build an apartment like that. The penthouse at Trump International isn’t nearly as big. It’s maybe seven thousand square feet. But it’s got a living room that is the most spectacular residential room in New York. A twenty-five-foot ceiling. I’m telling you, the best room anywhere. Do you understand?”

I think I did: the only apartment with a better view than the best apartment in the world was the same apartment. Except for the one across the park, which had the most spectacular living room in the world. No one had ever seen a granite house before. And, most important, every square inch belonged to Trump, who had aspired to and achieved the ultimate luxury, an existence unmolested by the rumbling of a soul. “Trump” – a fellow with universal recognition but with a suspicion that an interior life was an intolerable inconvenience, a creature everywhere and nowhere, uniquely capable of inhabiting it all at once, all alone.

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