Crappy Businessman,
Great Con Artist
By
David Cay Johnston, DCReport Editor-in-Chief
For decades Donald
Trump, his parents and siblings cheated on taxes in numerous ways, The New York
Times reported in an extraordinarily thorough and well documented expose
published on Tuesday, Oct. 2.
In a meticulously
reported, 14,000-word article, the paper also demolishes Donald’s claims that
he is a self-made billionaire who started out with a $1 million loan from his
father Fred who Donald paid back with interest.
Donald got at least $413 million, in today’s money, from his father and never fully repaid his loans.
Donald got at least $413 million, in today’s money, from his father and never fully repaid his loans.
The Times obtained
access to more than 100,000 pages of Trump documents including “bank
statements, financial audits, accounting ledgers, cash disbursement reports,
invoices, and canceled checks.
Most notably, the documents include more than 200 tax returns from Fred Trump, his companies and various Trump partnerships and trusts.” It did not get any of the president’s personal tax returns.
Most notably, the documents include more than 200 tax returns from Fred Trump, his companies and various Trump partnerships and trusts.” It did not get any of the president’s personal tax returns.
The arcane and
difficult subjects of both tax and accounting are masterfully explained in
plain English. As the paper’s former tax reporter, and the journalist who has
covered Trump the longest, I’m in a solid position to judge the depth and
quality of this work. It is masterful.
The Times expose shows
in vivid detail how egregious the tax cheating was – not chiseling here and
there, but gigantic lies to escape lawful burdens.
The Times expose is exactly what it purports to be: “unprecedented in scope and precision.” And it shows in vivid detail how egregious the tax cheating was – not chiseling here and there, but gigantic lies to escape lawful burdens. The piece goes far beyond the two civil income tax fraud trials Trump lost, news I broke in The Daily Beast two years ago.
Most if not all of the
transactions detailed in The Times can be pursued as civil tax fraud by both
the federal and New York state governments. Neither the federal or state
governments have statutes of limitations on civil fraud. Generally, criminal
tax cases are limited to returns filed in the past six years.
State tax authorities
said Tuesday night they were looking into the facts reported by The Times.
Since June 15, DCReport has been calling for a criminal investigation of
Trump’s taxes. After our readers flooded N.Y. Gov. Andrew Cuomo with phone
calls he signaled approval of such an inquiry.
The documents and
interviews with former family retainers show the Trumps lied again and again on
documents to enrich themselves and underpay the government.
Here are some of the
most revealing aspects of the main article by reporters David Barstow, Susanne
Craig and Ross Buettner:
In deals to transfer
wealth from Fred Trump to his children, transfers subject to a 55% gift tax, the Trumps
drastically undervalued properties. When more than a thousand apartment units
in eight buildings were transferred from Fred Trump to his children decades ago
no taxes were paid on seven of the buildings and a token sum on the eighth
building.
Purchases and re-sales
within the family were used to evade taxes and create tax losses. In one 1987 scheme, Fred Trump paid
$15.5 million for a stake in Donald’s Trump Palace condos in Manhattan in 1987.
Four years later Fred dumped his holdings, collecting just $10,000. That
created, on paper, a big tax loss while transferring wealth from father Fred to
favored son Donald. This disguised gift allowed the family to evade income and
gift taxes totaling about $8 million. Similarly, the family told tax
authorities were worth only about 6% of their actual value. While discounts on
transfers made by parents with more than one child are common, a 94% discount
is, in a word, egregious. “The Trumps dodged hundreds of millions in gift
taxes,” The Times reported, “by submitting tax returns that grossly undervalued
the properties, claiming they were worth just $41.4 million. The same set of
buildings would be sold off over the next decade for more than 16 times that
amount.”
Donald Trump has
always claimed his fortune grew from a single $1 million loan from his father that was paid back with
interest. The documents show Donald received loans and gifts worth in today’s
money $413 million and failed to pay back many loans. Among the loans was one I
reported on in 1990 – a scheme to evade New Jersey casino rules on capital
invested in gambling halls. Fred Trump’s lawyer deposited $3.5 million cash to
pay for gambling chips, but left without playing. The cash infusion saved Trump
from missing a payment to Trump Castle bondholders. Casino regulators fined
Donald $30,000, a slap on the wrist.
In 1995, the elder
Trump used a tax avoidance device known as a GRAT – grantor-retained annuity trust – to pass
almost all of his wealth to the children while paying no gift taxes. For the
tax dodge to work, the Fred and his wife only had to live for two years, which
they did. Over the years, the paper reported, with Donald’s share of revenue
from the family grew, which meant his three surviving siblings got less.
The Trumps used
invoicing schemes to reduce taxes and transfer wealth. On 78 refrigerator-stove combinations
bought for rental apartments at a cost of $642 each, financial records inflated
the cost by $300 through a company the family-controlled, documents obtained by
The Times showed. That allowed the Trumps to take 46% more in tax deductions
than the law allows. This was not a one-off, either. The newspaper said it
found 295 separate schemes that made money flow to the children using invoicing
schemes. That many schemes suggest that, as I have said many times, the Trump
family is a white-collar criminal enterprise with the added benefit of one
Donald’s siblings being a sitting federal judge.
The Trumps cheated
poor tenants in rent-controlled apartment by fooling housing authorities. Robert Trump,
Donald’s younger brother, also testified under oath to inflating expenses on
rent-controlled apartments, which means the Trumps cheated the poor to add to
their fortunes. “The higher the markup would be, the higher the rent that might
be charged,” Robert testified.
Donald Trump
manipulated the prices of stocks, including Time Inc., the magazine publisher, claiming he
bought big stakes in the firm. In fact, his father bought shares, selling them
two weeks later for a tidy profit after Trump planted his fake news with Don
Dorfman, a financial columnist. There is no indication that Dorfman had any
role in the scheme other than reporting what Donald said. Keep in mind that
there is not a scintilla of verifiable evidence that Trump is or ever was worth
a billion dollars.
While candidate Trump
claimed to worth more than $10 billion, as president he filed a financial
statement showing a net worth of just $1.4 billion. That document used highly
inflated values for many assets. Also, because of loopholes on reporting
requirements that Trump himself cited in 2015, it does not list all of the
debts he owes.
What we need now are
serious investigations by Congress, by the IRS and by New York state and city
tax authorities. Trump’s sister, a senior judge on the federal Third Circuit
Court of Appeals, should remove herself from the bench immediately.
There are no
circumstances under which it is good for America to have a tax cheat in the
White House or on the federal bench.