Discover more from Contrarian's Notebook, by Dan Rottenberg
Vol. 43: Trump’s gullible enablers
Two key questions that bankers (and journalists) never asked
Donald Trump first crossed my radar screen in 1978, when I was compiling a list of “Wealthiest Americans” for Town & Country magazine. Through much of the ’70s I had developed a rewarding specialty by producing “rich lists” for various magazines: “Wealthiest Philadelphians,” “Wealthiest Chicagoans,” “Wealthiest New Jerseyans,” “Wealthiest Texans,” “Wealthiest New York Women,” “Wealthiest Americans Under 40,” “America’s Wealthiest Jews,” “Wealthiest People in Golf”… Since money is a subject of universal appeal, the possibilities seemed limitless.
In those days, many of the truly super-rich resisted my snooping into their fortunes. A few of them— understandably concerned about kidnappers or aggressive fund-raisers— threatened to sue me for invasion of privacy if their names appeared on my lists. The rare exception was a blatantly ambitious young real estate developer from Queens who lobbied to be included, claiming to be far wealthier than I sensed he really was. In retrospect, I take pride in noting that Donald Trump never wangled his way onto any of my “rich lists.”
Three years later, when Malcolm Forbes aspired to launch an annual list of wealthiest Americans in his eponymous business magazine, I was hired by Forbes to walk its editors and reporters through the process and grant them access to my files. Forbes subsequently refined the art of wealth estimation into a science beyond my primitive methodology. But Forbes proved no match for Trump’s machinations. Many years later, after Trump was installed in the White House, the Forbes writer Jonathan Greenberg realized that in 1984, Trump— posing as a Trump Organization employee named “John Barron”— had phoned Greenberg with an alleged “tip” that Fred Trump had transferred more than 90% of his assets to his son Donald, making Donald almost a billionaire.
That gambit secured Trump’s presence on the subsequent Forbes 400 list, but Forbes editors congratulated themselves for knocking Trump’s estimated net worth down from his claimed $1 billion to $100 million. But as Greenberg subsequently observed, Trump at that time was worth a mere $5 million at most: “Over time, I have learned that he should not have been on the first three Forbes 400 lists at all.”
(Greenberg taped Trump’s two-minute phone call from “John Barron,” so you can listen to it yourself— including Trump’s effort to affect a phony New York accent—by clicking here. The “Barron” pseudonym is another curious piece of this puzzle: It’s the same name Trump conferred on his youngest son, born in 2006.)
The best test
Trump and his real estate company are currently on trial in New York for allegedly overvaluing the company’s real estate assets on its financial statements, the better to secure loans from bankers who may be even more gullible than financial journalists.
Having studied Trump for 45 years, I don’t doubt that Trump is guilty as charged. The lenders he has defrauded are merely the tip of his iceberg. In his three-score-and-seven years, Trump has swindled virtually everyone who has crossed his path: bankers and insurers, yes, but also partners, investors, contractors, creditors, employees, wives, mistresses, relatives, politicians, and voters, not to mention a long line of his own lawyers, from Michael Cohen to Rudolph Giuliani. Victimizing people is Trump’s default approach to human relations. Filing for bankruptcy (his companies have done it six times) is Trump’s default response to accountability. A complete listing of everyone who has benefitted from association with Trump would rank among “The World’s Skinniest Books.”
Here’s a good test of Trump’s net worth: This narcissist has splashed his name over each of his business ventures: hotels, casinos, apartment buildings, golf clubs, an airline, a commercial “university,” most of them now defunct. Yet the Trump name cannot be found on any college building, museum wing, or hospital floor— the preferred method for egotists to announce that they have more money than they know what to do with. Although Trump and two of his children graduated from the University of Pennsylvania, the Trump family hasn’t even purchased a brick on Penn’s “Alumni Bridge,” a de facto register of affluent alumni families (mine among them). The conclusion is inescapable: Trump’s net worth may be less than my own.
What’s Mar-a-Lago worth?
Still, suing Trump for inflating his assets is sort of like hauling Jack the Ripper into court for unpaid parking tickets. New York State’s current civil fraud case against the Trump Organization strikes me as an exercise in misplaced energy, for three reasons:
First, Trump is a real estate developer, for goodness’ sake. And real estate developers, almost by definition, are characterized by their ability to envision what the rest of us can’t. Where you and I see a garbage-strewn abandoned lot, a developer sees a future glittering high-rise tower full of chic apartments, tony offices, and glitzy boutiques and restaurants. The developer is, in effect, an orchestra conductor whose disparate ensemble includes investors, architects, lenders, marketing experts, property managers, and lawyers. Since a building can take years to finish and no one can predict the rental market with certainty, development is no job for the fainthearted. That’s why most developers are known for their self-confidence, outgoing personalities, and massive egos— traits necessary to persuade people that the developer can control the multitude of factors that lie beyond any individual’s control. Are you really shocked that Trump possesses all these traits?
Second, there’s no easy way to value real estate. At his trial this month, Trump claimed his Mar-a-Lago estate in Florida is worth at least $422 million and possibly $1.5 billion, which would make him a billionaire all by itself. On the other hand, the Palm Beach County assessor has valued the same property at between $18 million and $37 million, which led the presiding judge this month to rule that Trump had exaggerated its value. But ultimately, any piece of real estate is worth whatever a buyer is willing to pay for it at any given time.
Third, the Trump Organization is accused of defrauding sophisticated lenders who should have known better than to accept his inflated figures. Due diligence is a banker’s job, for goodness’ sake. In the ‘80s, having finagled his way onto the Forbes 400 list, Trump finagled Chase Manhattan Bank and Citibank into lending him $290 million and $990 million, respectively, without ever conducting an audit of his finances. I ask you: Who is to blame for that failure to exercise due diligence?
After U.S. banks belatedly wised up to Trump’s con game, Trump found a new chump in Deutsche Bank, a troubled German house that perceived Trump as its entrée into the U.S. market. Over the course of two decades, Deutsche’s investment-banking division loaned Trump more than $2 billion; and when these loans came due, Trump paid them off by borrowing from Deutsche’s private-banking division. Apparently these two divisions within the same bank didn’t talk to each other. Amid this shell game, nobody at Deutsche Bank seems to have asked a simple basic question: “Why are we lending money to this man?” I would pose an even simpler basic question: What good are bankers if they can’t or won’t judge the trustworthiness of their borrowers?
‘Mushroom approach’ to management
In their testimony this month, Trump’s sons Donald Jr. and Eric, and his daughter Ivanka— all present or former top executives of the Trump Organization— claimed ignorance of the company’s real estate valuations, or they blamed the company’s accountants. Those excuses, at least, strike me as credible. Trump has always run his company as a one-man band— and even he, for all his boasting, often doesn’t know what’s going on there. He treats his children as figureheads and his executives (like his longtime chief financial officer Allen Weisselberg) as errand boys. To the extent that Trump embraces a business strategy, it's the “mushroom approach” to management, i.e., keep everyone in the dark and feed them bullshit.
When Trump first met with Deutsche Bank in 1998, the bankers expected him to arrive with an entourage; to their astonishment, he arrived alone. That should have set off alarm bells at Deutsche Bank, but the bankers— like so many others who have encountered Trump over the past half-century— closed their eyes and trusted an eminently untrustworthy man.
What’s the old adage? “Fool me once, shame on you; fool me twice, shame on me.” Trump has made several careers by fooling people who ought to know better. But is that his fault or theirs?
I write as someone who is not averse to risk. I have twice quit secure and prestigious jobs to venture into the wilderness of free-lance writing. As an editor, I have cheerfully accepted boycotts, death threats, slashed tires, and protest demonstrations as the price of sticking my neck out. And I tend to agree with my late friend Renee Zuritsky of Philadelphia: “Most people are good. There are very few who aren’t.” But if you run into someone who repeatedly demonstrates that he is not good, shouldn’t you keep your distance? Do you really need the attorney general of New York State to protect you from a flagrant charlatan, when you can do the job yourself by just saying “No”?
To browse the complete archive of Dan’s past columns: Click Here!
Enjoy Dan Rottenberg’s new memoir, The Education of a Journalist: My Seventy Years on the Frontiers of Free Speech. You can also visit his website at www.danrottenberg.com
Thanks for reading Contrarian's Notebook, by Dan Rottenberg! Subscribe for free to receive new posts and support my work.