(Bloomberg Opinion) -- “I had zero borrowings from the estate,” Donald Trump told me back in 2004. “I give you my word.”
The estate the future president was referring to was the lucrative collection of housing and commercial properties his father Fred had assembled over decades, making the Trump family wealthy. Based on reporting I had done for a biography, “TrumpNation,” it was my understanding that Trump had turned to his siblings for a pair of loans totaling $30 million so he could avoid plunging into personal bankruptcy in the early 1990s.
Trump’s siblings doubted their brother could repay them because his collection of condominium buildings, casinos, hotels and other assorted properties was collapsing under the weight of billions of dollars in bank loans he couldn’t repay. So they made him pledge his future share of his father’s estate as collateral and loaned him the money. Trump gave me his “word” that none of that had happened, but I wrote about it anyway. When he later unsuccessfully sued me for libel he was forced to acknowledge under oath during the litigation that he had, indeed, borrowed from his family.
“We would have literally closed down,” a former Trump Organization employee with direct knowledge of Trump’s attempts to keep his company and himself afloat told me in 2005. “The key would have been in the door and there would have been no more Donald Trump. The family saved him.”
It wasn’t really the entire family that saved Trump, of course. It was Fred, the man who held the purse strings. And the president, who is 72, has spent about five decades pretending not only that his father never rescued him from bankruptcy but that he played a minimal role in his business successes.
“It has not been easy for me,” Trump said in 2015 during the presidential race. “My father gave me a small loan of a million dollars.”
As I noted in a column in 2016, Trump was lying when he said that — allowing him to also gloss over how central his father was to his career.
When Trump entered the Manhattan real estate business in the mid-1970s, Fred cosigned bank loans for tens of millions of dollars, making it possible for Trump to develop early projects like the Grand Hyatt hotel. When he targeted Atlantic City’s casino market, Fred loaned him about $7.5 million to get started. When he floundered there in the ’90s, Fred sent a lawyer into a Trump casino to buy $3.5 million in chips so his son could use the funds for a bond payment and avoid filing for corporate bankruptcy. There are many other examples like these.
But don’t take my word for it. Just read a deeply reported and devastating account of the Trump family’s finances and tax maneuvers that The New York Times published late Tuesday afternoon. The Times’s reporting indicates that Fred ultimately loaned Donald about $60.7 million, significantly more than I had reported. The Times reporting also goes well beyond that topic.
Fred and his wife, Mary, structured their estate holdings and the income they generated in ways both legal and dubious so that they transferred “over $1 billion in wealth to their children, which could have produced a tax bill of at least $550 million under the 55 percent tax rate then imposed on gifts and inheritances,” the Times reported. Instead, the Trumps paid $52.2 million in taxes, a rate of about 5 percent.
The Times also reported that Trump “received the equivalent today of at least $413 million from his father’s real estate empire.” It added that those riches flowed more fully due to “dubious tax schemes [Trump] participated in during the 1990s, including instances of outright fraud.” The Trumps did this, in part, by “grossly undervaluing” the properties they intended to pass on to their children. (A lawyer for Trump told the Times that the president, his parents and his siblings relied on outside advisers for tax planning purposes and that nothing they did was fraudulent.)
New York state tax authorities said that they plan to investigate the Trump family’s tax filings in response to the Times article, though given the amount of time that has passed since the Trumps used the techniques the article highlights it may be difficult for authorities to find wrongdoing.
One person who might be able to enlighten them is Allen Weisselberg, who was Fred Trump’s accountant and is now the Trump Organization’s chief financial officer. He recently entered into an immunity agreement to cooperate with federal prosecutors in Manhattan who have been investigating a Trump lawyer, Michael Cohen.
For its part, the Times said that its “investigation makes clear that in every era of Mr. Trump’s life, his finances were deeply entwined with, and dependent on, his father’s wealth.”
Trump also reportedly tried to make stealth changes in his father’s will to give himself greater control over the family fortune, but Fred caught on and stopped the move. (Fred died in 1999.) Despite interfamilial greed, Fred kept finding questionable ways to pass income from his businesses to his children.
In one instance, Fred set up a shell company called All County Building Supply & Maintenance to ostensibly purchase equipment, appliances and supplies for Trump-owned properties. But the Trumps just marked up the cost of purchases the company already made and channeled the excess money — unreported and thus untaxed as gifts — to Fred’s children and one of their cousins, the Times reported. Fred also used the bogus increase in expenses to ask the government for rate hikes in his rent-controlled apartments.
Although the Times article doesn’t discuss this, the All County hi-jinks weren’t the first time Fred had padded expenses to cheat the government. In 1954, he was called before the Senate to testify about how he overcharged the federal government millions of dollars by inflating costs associated with a taxpayer-subsidized housing development in Brooklyn. That led to Fred being banned from bidding on federal housing contracts. He then focused on state-subsidized developments. But in 1966 he was called before a state investigations board to sit through embarrassing public hearings that explored how he had overbilled New York State for equipment and other costs. Those hearings essentially marked the end of Fred’s career as a major developer of publicly subsidized housing.
Within the Trump family, those episodes were recast to allow Fred and his children to explain away the legal and ethical quagmires in which Fred placed himself. The government had reached in and taken Fred’s business away, is how Trump once told me the family conceived of it. That explanation ignored the fact that Fred’s business wouldn’t have taken flight without government subsidies in the first place. Still, Fred’s mythologizing would be something Trump would later adopt in his adult years, allowing him to say that his wealth and his standing in the world had nothing to do with his father — even when they had everything to do with his father.
To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Timothy L. O’Brien is the executive editor of Bloomberg Opinion. He has been an editor and writer for the New York Times, the Wall Street Journal, HuffPost and Talk magazine. His books include “TrumpNation: The Art of Being The Donald.”
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