President Donald Trump built his personal brand and presidential candidacy on the claim that he was a self-made billionaire whose only head start was a “small loan of a million dollars” from his father. But a New York Times exposé has revealed that Trump inherited much of his family’s wealth through tax dodging and outright fraud, receiving at least $413 million in inflation-adjusted dollars from his father’s real estate empire.
David Barstow talking:
how we found it was kind of the old-fashioned way. It was going to courthouses, scouring public records, knocking on a lot of doors and, gradually, over many months, piecing together, building this trove of documents, over 100,000 pages, by the time we were ready to publish. And I think, most significantly, in terms of for people to be able to assess this story, it’s important to know that this includes literally tens of thousands of pages of never-before-seen documentation of the actual inner workings of Fred Trump’s real estate empire.
I think there’s two core findings. One is simply that the narrative that Donald Trump has sold to the public for many decades now, the thing that made him famous, that gave him political power and that, ultimately, I think, was the central focus of his presidential campaign, is this narrative that he is a self-made billionaire. And what this story really reveals is the extent to which that just simply doesn’t square with the facts that are uncovered and that we show in this story. So that’s sort of, I think, point number one.
Point number two is, not only did he receive $413 million from his father, not only did he receive another $140 million in today’s dollars in loans from his father, but that that amount, the amount of money, was significantly increased by a series of tax schemes that the tax experts that we consulted with in our reporting, laying this out to them, said these things go way beyond the normal tax avoidance strategies that wealthy, sophisticated people will employ in any event to lower their tax bill. This was a set of maneuvers that were actually intended to deceive the IRS about the value of things that were being given from Fred and Mary Trump to Donald Trump and his siblings.
I think those are the two main points, that there’s a huge amount of money flowing, not just when he was a young man, but actually throughout Donald Trump’s life, especially when he was in financial difficulties, especially when he was taking on new projects, and that that river of money was fed, very much so, by tax evasion, tax dodges.
how does a 3-year-old end up making $200,000 a year? Right? That’s a good question. Here’s how it worked. Fred Trump—you know, Wayne is absolutely right that he was a really great builder in the outer boroughs, but much of his building was actually made possible through federal housing subsidies. He was actually one of the country’s biggest recipients of cheap building loans basically made possible by the federal government.
And he used $26 million or so of those cheap loans to build two of his biggest apartment complexes in New York: a place called Beach Haven and another place called Shore Haven, both out in Brooklyn. These are massive, massive apartment complexes, thousands and thousands of units. And so, he was building those in the late ’40s. And what he did was something quite clever. He put the land underneath the buildings into a trust and made his children the beneficiaries of that trust. And then he had the companies, his companies, that were actually building the buildings on top of the land, sign 99-year leases to pay rent to the landlords—his young children. And so what that meant was that Donald Trump, starting at age 3, was Fred Trump’s landlord. He was collecting rent payments from Fred Trump’s companies.
And it was this kind of maneuver—right?—setting up these sort of mechanisms, these financial mechanisms, that would just kind of create this automatic streams of money that would just sort of, month by month by month, would trickle into trust accounts or into partnerships and find their way, ultimately, into the pockets of his children. Fred Trump was just a genius at coming up with new ways, new revenue streams, to funnel into the pockets of his children. So he didn’t just make his children his landlord, he also made his children his banker. He made Donald Trump not just—didn’t just put him on the salary as a vice president of Fred Trump’s companies. He also then paid him separately to be his consultant. He paid him separately to be a property manager. He paid him separately to be a purchasing agent. And on and on and on it went.
And in the course of all of—as we gathered up all of the records from inside of his—of Fred Trump’s real estate empire, we started counting up: How many different revenue streams has he created for Donald Trump through the years? And we got up to 295, is what we counted, what we were able to document. Some of these things, you know, they weren’t in and of themselves big money. Like, for example, Fred Trump funneled the laundry revenue from his buildings to Donald. That’s not a lot of money, but when you sort of start aggregating it, putting it all together, it’s just this mighty, endless river of money flowing constantly into the bank accounts of Donald Trump.
In that transaction, there’s nothing illegal about that transaction that we’ve uncovered. That’s not what I’m—that’s not the point that I’m trying to make there. That’s an example, though, of one of the many different ways that Fred Trump was enriching Donald Trump, starting from a very early age and continuing on up forward.
Fred Trump had an older son, Fred Trump Jr., who initially was kind of going to be the heir apparent, right? And Fred Trump was interested in—you know, he really wanted to pass this dynasty on to one of his children, and Fred Jr. was sort of the first kind of natural heir apparent as the oldest son. But he didn’t have the passion for the business. He had other interests. He liked to fly airplanes. He loved music. Fred Trump, the father, considered Fred Trump, the son, to be a little too soft, a little too nice. And before long, it became clear that he was not going to be the heir apparent. The heir apparent was going to be Donald Trump.
And Donald Trump was very aware of his father’s disapproval of Fred Jr. He witnessed this. Fred Sr. could be quite cruel. And I think what we see in terms of—this is really from the interviews with people who worked closely with Fred Trump—they witnessed this young man, Donald Trump, sort of watching what had happened to Fred Jr. and almost forming himself into Fred Jr.’s opposite. If Fred Jr. was soft, too nice, well, Donald was going to be a shark. He was going to be a killer.
So that, I think, is sort of at the core of this father-son relationship, which is very much what this story is about. It is about a father-son relationship. These two men were extraordinarily close. Donald Trump said—we quote him that he felt that he knew his father better than anybody else in the world. And they talked daily. They spent many a weekend together. They were in constant communication. Donald Trump was a constant presence when Fred Trump would have strategy sessions with his top lawyers, his top accountants, figuring out what his next moves were. Fred Trump was often this sort of silent, lurking presence at Donald Trump’s big flashy press conferences. And so, they were this—it was more than just a father-son relationship. It was also a partnership.
this is something where, when Donald Trump says this is old news, I can tell you that no one had ever heard of All County Building Supply & Maintenance. It’s never been written about, described anywhere. And this is actually kind of remarkable in a way. When we were peeling back the layers on this, it felt like one of these sort of gritty scams that you might see in The Sopranos, right? It’s setting up this company to make basically huge cash gifts from Fred Trump to his children look like legitimate business transactions.
Let me give you just a really simple example. This is one that we describe, and we actually show in the story the actual invoices and purchase orders, so you can all see for yourself exactly what I’m talking about. So, they set up this company, All County Building Supply & Maintenance. It’s not a real company. There’s no corporate offices. It’s actually headquartered in the basement of Fred Trump’s favorite nephew. The owners of All County Building Supply, though, were Fred Trump’s four children and his nephew. And all that happened was—so Fred—any time Fred Trump was going to improve his buildings, he had to buy stuff, right? And in this case, soon after they formed this company, they bought 60 boilers, 60 big expensive boilers, from a company in the Bronx. Fred Trump himself personally negotiated the purchase price of these boilers, hundreds of thousands of dollars’ worth of boilers.
The man who sold Fred Trump these boilers, Leon Eastmond, told me in an interview that one day he comes back to his office and there’s an envelope, and there’s a check, huge check, from this company, All County Building Supply. He’s like, “Who the heck are these guys?” Never heard of them, didn’t know who they were. And what that was, was it was All County Building Supply was paying him the price that Fred Trump had negotiated, but then All County Building Supply would turn around and would send an invoice to Fred Trump for the very same boilers, but the invoice was padded, marked up 20, 30, 50 percent more. So all it was doing, it was basically—it was just an invoice-padding operation. It was taking the things that Fred Trump was already buying, adding 20, 30, 40, 50, 100 percent more, and then charging Fred Trump. Fred Trump was effectively overcharging himself. That’s what it looked like on paper. But, in fact, all of those profits are then flowing directly to his children. That’s point number one.
Donald Trump was like 46 when All County was set up.
And this was part of a fairly well-considered and orchestrated strategy that the Trump family came up with when they realized, you know, Fred Trump is—he’s getting up there in age. He’s starting to suffer some ill effects, dementia, other problems. And they’re realizing, if he dies, all of this empire, all of the buildings and huge amounts of cash sitting in his accounts, those are going to be subject to a 55 percent tax, inheritance tax. And so, the idea was, “Well, wait a minute, how do we get—how do we pull that cash out of the empire before it gets taxed 55 percent? How do we shift all of those buildings into our pockets before they get taxed 55 percent?”
In this case, I think one of the things in the All County Building Supply case—and I think it helps you sort of see at least the mindset here—is not only do they come up with this ruse basically to disguise cash gifts as legitimate business transactions, but then they submitted those padded invoices to the state regulators who govern rent increases in New York, and they used those inflated invoices in order to justify rent increases for thousands of the tenants who lived in Fred Trump’s apartments. Mostly we’re talking—you know, these are working-class, middle-class folks who were seeing their rents go up, you know, $5, $10, $15 a month, in part because of these inflated invoices from All County Building Supply & Maintenance.
Starrett City is really one of the largest federally subsidized housing developments in the country. It’s massive. It’s even bigger than Fred Trump’s apartment complexes. And in the ’70s, when they were trying to build Starrett City, they needed some extra money, so they were looking for private investors. It was basically going to be this investment that would create huge tax losses. That’s why rich people wanted to get in on Starrett City: It would create huge tax losses. So Fred Trump could use his losses at Starrett City to shelter all of his profits from his empire.
So he made an investment into Starrett City, but he also made an investment for his kids, as well. And so, Donald Trump, starting at a very early age, was getting these huge tax breaks from Starrett City. In fact, those tax breaks helped him avoid paying any federal income taxes at all in the late 1970s. And then, of course, as time progresses, Starrett City is now worth a heck of a lot of money. It recently sold for nearly a billion dollars. And, in fact, that investment that Fred Trump made way back in the ’70s is going to give Donald Trump a windfall of $16 million this year.
We see that he transferred well over a billion dollars in wealth to his siblings. It’s a 55 percent tax rate. So you’re talking about a tax bill, an expected tax bill, of around $550 million. The tax records that we obtained show that the Trump family paid $52 million in gift and estate taxes. So, rather than paying a 55 percent tax rate, they paid about a 5 percent tax rate. The question then is: How did they avoid the other $500 million? What happened to that?
First of all, just to be clear, not all of that—we certainly don’t say in the story, and we don’t allege anywhere, that every penny of that was evaded money. Some of it was just usual tax avoidance measures that all rich people use. But certainly, a very significant portion of that came through tax schemes and maneuvers that the experts that we consulted with said really crossed the line.
the statute of limitations is the big obstacle to any kind of criminal charges. However, we actually don’t know what ended up in Donald Trump’s tax returns. And so, if there are things that he misreported that have their roots in some of the transactions that we’re describing in this article, and those misrepresentations carried forward into future tax returns from Donald Trump, that could be potentially problematic, because that could maybe take the statute of limitations off the table as an obstacle.
I mean, the IRS is a much-weakened agency. I mean, it’s been quite devastated by budget cuts over the years. And certainly, the IRS—I’m not talking about state authorities now, I’m talking about the federal IRS—has said absolutely nothing in response to this article. I think the more realistic accountability that’s there is this potential for civil fraud. There’s no statute of limitations for civil tax fraud. And so, both—you know, in this case, the state tax authorities, that can be a very powerful weapon if they decide to actually use it, to go back and look at these transactions.
GRATs are, you know, a well-established and legal instrument that’s used by the wealthy to pass assets on to their children in a way that allows them to avoid estate taxes. In fact, if you watch TV, you’ll often see these commercials from BDO that are actually GRAT commercials. They don’t say the word ”GRAT,”
BDO is this tax—or, this consulting firm that is actually on CNBC, MSNBC and CNN, is running commercials that are effectively commercials for GRATs. And so, it’s a technique that when you talk to tax lawyers, you know, they kind of—they almost get a little misty-eyed about GRATs. They say, “This is like magic.” These things are these incredible devices that assets go in, all kinds of financial gymnastics occur inside of them, and then they sort of—assets come out, and they’re like free of taxes.
– DAVID CAY JOHNSTON: Let’s keep in mind, Donald’s sister, Maryanne Trump Barry, is a sitting judge on the 3rd Circuit Court of Appeals. She’s a senior judge. I tweeted today that I think she should immediately remove herself from the bench. We should not have a tax cheat in the White House or on the federal bench.
I think the important thing to say about this is that Fred Trump’s estate tax return is a very important document. And there were three executors. There were three people who signed off on that estate tax return. One was Judge Barry, one was President Trump, and the third was Robert Trump, the president’s younger brother. When you sign an estate tax return, you’re responsible for the accuracy of that tax return. You’re responsible for accurately describing the assets. And you’re also responsible for describing all of the gifts that were given by the person in that estate.
So, what we describe in our story is that the estate tax return that the three of them signed, that the three of them vouched for, that that tax return is grossly inaccurate. It used all of the same kind techniques that we described in other parts of the story, and it did so in order to make what was left of Fred Trump’s empire look like minuscule. And so, I think that, actually, the fact that she put her John Hancock on that estate tax return, I think that’s an area that is potentially problematic.
The thing that I think continues to surprise me about Donald Trump is that this is this guy who has been so much in the firmament of our culture and our media for so long, and yet there’s so little that we actually know about him and his finances. You know, there’s this mountain—right?—mountain of books and interviews, and, you know, it’s daunting to look at. But when you kind of put all of that aside and just try to get to ground truths with this guy, every time we’ve done that, we feel like, “Oh, my gosh.” The idea—whatever the idea was that we thought we had about him, it’s quite different when you pull some more layers back.
Fred Trump really wanted the empire to stay in the family. Donald Trump was in some financial difficulty again in 2004, and he was the one who came into a family meeting and said, “It’s time to sell dad’s buildings.” And so they did. And the irony is, the price that they got for all those buildings was actually hundreds of millions of dollars less than what the actual property was worth, according to banking records that we have uncovered.
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David Barstow
three-time Pulitzer Prize-winning investigative reporter for The New York Times. He is the lead author on a new investigation, “Trump Engaged in Suspect Tax Schemes as He Reaped Riches from His Father.”
— source democracynow.org | 2018/10/4