Archive for September, 2016

Trump – a Joker, a Welsher, and a Crook

Tuesday, September 20th, 2016

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Donald Trump nearly went personally bankrupt in the early 90’s as his casino empire collapsed.  Bankers forced him to give up his majority holdings in four properties, sell his yacht, and his airline.

He rebuilt his casino/real estate empire only to see it collapse again in 2004 and 2009.  As part of the 2004 bankruptcy, Deutsche Bank revealed that they had loaned Trump’s company $40M backed by his personal guarantee that included his own estimate that he was worth $3.5B.  The bank and the court discovered that he was only worth $788M.  He later defaulted on that loan and sued the bank. They settled in 2010 with Trump getting a 5 year extension to pay back the loan.  It is unclear whether than obligation was satisfied, but the bank has provided Trump other loans since.

What’s important about these timelines is that Trump’s business model changed in 2004 when he started a new business as a celebrity on the long running Apprentice series.  Trump reported that NBC paid him more than $200M over 14 seasons to appear on the show.  NBC said multiple times that those figures were “grossly inaccurate and … significantly overstated”.  But this was only one of the whole host of celebrity endorsements that Trump was making.  The problem is that celebrity endorsements simply don’t bring in the same cash that real estate does, but they also don’t require nearly the same amount of upfront cash.  So it appears that Trump began to suffer from a cash flow short fall between the costs of his lifestyle (needed to support his endorsement business) and the income that lifestyle was generating.

He did the same thing most every other family in the country does when that happens.  He took some money out of the piggy bank.  In this case the piggy bank was his personal foundation.

The Washington Post recently documented that he withdrew roughly $258M from his charitable foundation to pay his own personal bills.

Now you might say that this was his own money, after all, and he should be able to do whatever he wants with it, but that’s not how charitable foundations work.  Trump got a tax deduction for the money that he donated to this charity.  Taking money back out to pay his own expenses constitutes fraud and violates federal rules against “self-dealing”.

To make matters worse, he wasn’t even taking out his own money.  He had pretty much run his foundation dry of his own money by 2006, leaving it with just $4,238 at year’s end, according to tax records.  He made small donations in 2007 and 2008.  Everything after that was other people’s money.  Other people who were making donations to his charity in order to ingratiate themselves to him.

Hillary Clinton has been accused of selling access to the State Department in return for large donations to her family’s charity.  The difference is that the Clinton foundation used those donations to fight AIDs.  The Trump foundation used access to Trump to secure large donations, but then used some of that money to pay Trump’s bills.

Here’s how he used that money.

In 2007, he settled a dispute with Palm Beach over the size of a flagpole at his Mar-a-Lago Club.  The original unpaid fines for the zoning violation totaled $120,000.  Trump settled with the city by offering to make a $100,000 donation to a veteran’s charity.  Rather than write the check, the donation came from his charity.

In another case in 2010, Trump was offering a $1M prize during a charity golf outing at a Trump golf course for anyone who had a hole in one.  Martin Greenberg won the prize.  The small print on the rules said that the golf ball had to travel at least 150 yards.  The hole where this challenge was set up was deliberately less than that.  Greenberg sued Trump’s club, the charity of former NBA star Alonzo Mourning, which was also hosting the tournament, as well as the insurance company that had underwritten the prize.

Eventually, Trump’s club and Greenberg settled the case, with the course agreeing to donate $158,000 to a charity chosen by Greenberg.  Trump paid that bill using foundation money.

In 2013, the foundation purchased $5,000 advertising for his hotels in programs for three events organized by a D.C. preservation group.  In 2014, Trump paid for a portrait of himself purchased at a charity auction with $10,000 of foundation money.  This is reminiscent of a similar $20,000 purchase of a portrait in 2007 that he also made with foundation money.

The bottom line is that this is all illegal.

“I represent 700 nonprofits a year, and I’ve never encountered anything so brazen,” said Jeffrey Tenenbaum, who advises charities at the Venable law firm in Washington. After The Post described the details of these Trump Foundation gifts, Tenenbaum described them as “really shocking.”

“If he’s using other people’s money — run through his foundation — to satisfy his personal obligations, then that’s about as blatant an example of self-dealing [as] I’ve seen in a while,” Tenenbaum said.

 

The real question is if this guy is as wealthy as he said he was and as generous as he said he was, why didn’t he just pay these bills out of his own pocket?  Why would he take the risk of breaking IRS rules for what to him should have been pocket change?

You can ask the same question regarding the $25,000 donation that the foundation made to the Bondi campaign just before the Florida AG dropped her plans to bring legal action against Trump University.  That donation was also illegal.  It should also have been easy from Trump to write the check himself.  He didn’t.

There are only two answers.

  1. He is pathological and this was an obsession that he simply couldn’t control.
  2. He didn’t have the money and this was the only way that he could cover those expenses.

In either case, it is just another example of why this person is uniquely deceptive and wholly unsuited for the office that he is seeking.