While much of the news media remains fixated on Donald trump's "pussy gate" scandal, there remain many who will blindly vote for Trump because they say he is a good businessman. A very long and scathing piece in Newsweek suggests that Trump is akin to vulture capitalist, Mitt Romney, and in fact has left a trail of business busts and victimized people and localities in his wake. He'd have made more money merely investing in the stock market and leaving his investments untouched. And when it comes to putting his name on buildings, the article correctly notes that there are no hospitals, museums or other charitable facilities bearing Trump's name. The one constant in the story line is Trump saving himself while leaving others to crash and burn and face financial hardship or ruin. In short, the myth that Trump could best handle America's economy is a myth and fairy tale. Here are article highlights:
Dust swirled and jackhammers pounded outside the Bonwit Teller building in Manhattan as undocumented immigrants tore apart the façade. It was June 5, 1980, and a sense of bitterness hung over the work site that afternoon; paychecks were often weeks late, but since the Poles didn’t have legal status in the United States, there was little they could do about it.
The exterior they were destroying was an architectural masterpiece—bronze, platinum, hammered aluminum, glazed ceramic and tinted glass that shimmered like jewelry. Many New Yorkers had hoped the grandest portion would survive; curators from the Metropolitan Museum of Art had asked the developer to carefully remove the two bas-relief sculpture panels so they could be restored and put on public display. But that afternoon, the laborers, acting on orders from the developer, smashed the 50-year-old art deco panels into a rubble of stone, pebble and dirt.
The desecration horrified Manhattan’s art community, but the developer, a brash 34-year-old named Donald Trump, dismissed the criticism—pretending to be his own spokesman, “John Barron,” as he talked to reporters by phone. Saving the panels would have cost him $32,000 each, he said, and delayed work for a few days on his $100 million project, Trump Tower. Besides, he declared, he knew more than the curators—the panels had no artistic merit and little financial value.
This incident from long before Trump became a household name is an ideal exemplar for his business career, in which he has repeatedly left bitterness and ruin in his wake. His destructive behavior—spurred by recklessness, arrogance and an unslakable thirst for vengeance—has victimized cities, businesses, investors, partners, even members of his family.
Trump is now completing his biggest and most astonishing demolition: tearing down the Republican Party. . . . . He now speaks of vast conspiracies against him involving bankers, the media and politicians, while raging against Republicans who have pulled away from his toxic campaign, ripping open chasms between his zealous supporters and the GOP. Win or lose on November 8, Trump, whose campaign did not respond to Newsweek requests for comment about this article, will leave the Republican Party as damaged as those art deco panels were 36 years ago.
To anyone who has watched Trump over the past four decades, none of this is a surprise. His presidential campaign is built on the claim that he’s a brilliant businessman worth $10 billion who turns every challenge into success, but Trump is none of those things. Instead, he was born into an exceedingly wealthy family and tried to build upon his father’s success with ever-riskier ventures, and by any rational measure, he failed again and again.
He’d have done better if he’d never gone into business. . . . . . [If] Trump had never done any deals and instead sold all of his assets back in 1982 and invested them in a fund based on the Standard & Poor’s 500 index. With dividends reinvested, he would have increased his wealth to $535 million by 1985. By 2004, his personal wealth would have increased to $5.9 billion. And three years ago, he would have exceeded what he claims to be worth now by more than $1 billion.
In other words, if the Republican nominee had done nothing but mow his lawn for the past 35 years, he would be a dramatically wealthier man than he is today. The huge bonus in that scenario: Thousands of people would not have been ridiculed, ripped off or otherwise have suffered from encounters with Donald J. Trump.
Donald Trump loves to put his name on buildings, but there are no hospital wings named for him. No museums have a piece of artwork with a plaque reading “A Gift of Donald J. Trump.” No buildings at the University of Pennsylvania bear his name, even though he constantly cites his graduation from its Wharton School as a sign of his intelligence. (Contrary to Trump’s suggestion, he attended the school for only two years as an undergraduate and did not obtain a degree from Wharton’s far more prestigious graduate business program.)
Trump bears little resemblance to prominent billionaires such as Warren Buffett, Bill Gates, Mark Zuckerberg, Michael Bloomberg or Charles Francis Feeney, who have dedicated huge sums of their wealth to aiding the less fortunate. There is no evidence that Trump has done much of anything to make the world a better place; what he has left behind is some buildings, along with a lot of wreckage and rancor.
[O]ne of Trump’s greatest skills : bullying, threatening and suing anyone who criticizes him and cowing most of them into silence.
He showed his willingness to harm others for his personal benefit early in his career. Using those undocumented Polish workers in 1980 for the razing of the Bonwit Teller building, for example, was deemed part of a civil conspiracy to defraud a union pension fund, a federal judge in New York later ruled.
Another example emerged the following year. Trump purchased an old hotel and adjacent apartment building for redevelopment on Central Park South, one of the toniest streets in Manhattan. A little more than 100 tenants occupied the rent-controlled apartments, but Trump launched a campaign to drive them out, according to court documents filed by city and state officials. He filed a barrage of what the city called “nuisance suits” against the residents. He cut off their heat and hot water. He tried to move homeless people into empty apartments to annoy or even frighten the residents. He decreased security for the building, and over those 18 months, the number of burglaries in the building skyrocketed.
Trump scoffed at complaints from residents and the government, publicly disparaging occupants of the apartments as pampered millionaires—a claim he made with no information to back it up. Instead, the court proceedings showed that many of the residents were elderly or middle class. In 1986, with the legal proceedings dragging on, Trump finally abandoned his plans to tear down the apartment building, and the residents were allowed to remain.
“I love to have enemies,” Trump once said. “I fight my enemies. I like beating my enemies to the ground.”
He uttered these words in 1989, about the same time he was in a series of pointless battles: with other billionaires, with midlevel executives, with nobodies whose lives he destroyed just because he could.
In 1990, Marvin Roffman was a little-known analyst working at second-tier investment company called Janney Montgomery Scott. He specialized in appraising the financial prospects of the Atlantic City gaming industry. That spring, Trump’s biggest and by far most expensive casino, the Trump Taj Mahal, was set to open, and The Wall Street Journal examined its prospects. It called Roffman, who said the Taj would benefit from the publicity surrounding its opening but predicted it would struggle afterward. “Once the cold winds blow from October to February, it won't make it,” Roffman told the paper. “The market just isn't there.”
Pressured by his company, Roffman faxed Trump a letter of apology the next day, saying the Journal had taken his words out of context. But after thinking about it overnight, he sent another letter retracting his apology. One day later, the investment company fired Roffman.
Not satisfied, Trump continued to publicly berate Roffman. He told the New York Post, The Philadelphia Inquirer, Barron’s, Fortune and others that Roffman was untalented. He also told the Inquirer that he had saved Roffman’s job six months earlier. Trump delivered the worst—and a false—accusation to Vanity Fair, accusing Roffman of blackmail and fraud, claiming the analyst used to beg him to purchase securities through him, “with the implication that if I'd buy stock he'd give me positive comments.”
In the end, however, it was Trump who looked like the fool. Before launching the Taj, he should have consulted Roffman, who later confidentially settled his lawsuit against Trump and won a $750,000 judgment against Janney Montgomery Scott. And Roffman was right about the Taj: In November 1990—one month after Roffman had predicted Trump’s casino would start to struggle—the Taj filed for bankruptcy. And with that collapse, brought about by Trump’s hubris and incompetence, he destroyed the jobs of far more people than just one smart industry analyst.
In November 1988, Trump gave the public a chance to let him wipe out their savings when he offered $675 million in junk bonds sold through Merrill Lynch. He raised the money to buy the Taj from Resorts International and rebuild it; despite his promise to use only bank borrowings, the lenders would not hand over enough cash. Investors wouldn’t either, unless Trump paid a lot of interest. So to sell his bonds, Trump agreed to a rate of 14 percent, far higher than the 9 percent yield at the time on investment-grade corporate bonds.
Even that was not enough to pay for the crazy casino of Trump’s dreams. The bond prospectus estimated the cost of building and operating the Taj over the next 15 months was $805 million, covered with a $75 million cash contribution from Trump; the rest of the money would come from a Trump credit line and other loans. Trump did not disclose in the filing that he was also guaranteeing hundreds of millions of dollars of loans on real estate properties, which might undermine his ability to tap into his credit. And he spent money on a fight with homeowners whose land he wanted so he could build a larger parking lot for the casino.
Trump knew the success of the Taj and the gambling houses he had previously built—the Trump Castle and the Trump Plaza—could mean the difference between Atlantic City’s rebirth or destruction. He also knew that lots of people would suffer along the way. “People will spend a tremendous amount of money in casinos, money that they would normally spend on buying a refrigerator or a new car,” Trump said. “Local businesses will suffer because they’ll lose dollars to the casino.” He was right. As he built his casinos, Atlantic City was ripped apart. Unemployment soared, hundreds of restaurants went out of business, and dry cleaners and specialty shops disappeared.
With the future of the city, its residents and investors at stake—and with Trump’s finances spread perilously thin—the market reasonably believed that he, like any smart businessman, would focus on stabilizing his gaming empire. Instead, Trump dashed headlong into other businesses he knew nothing about, borrowing another $380 million to buy the Eastern Shuttle (renamed the Trump Shuttle), taking a run at purchasing a department store chain and even announcing a $7.5 billion takeover bid for American Airlines.
When his three top casino executives died in a freak helicopter crash in late 1989, Trump took over direct management of that business. A short time later, the value of his junk bonds tanked, and Wall Street firms such as Salomon Brothers put “sell” recommendations on them. The many people who had purchased Trump’s bonds on his breezy assurances were losing fortunes.
With the financial condition of his casinos getting steadily worse, Trump launched a purge of executives, replacing some of them with people who were clearly unqualified for their new jobs. Trump then publicly ripped the top officers he’d axed and refused to honor some of their severance agreements. Other executives decided to quit; they were no longer willing to tolerate Trump’s erratic leadership. The chief financial officer of the Taj, Donald Wood, was taken from the building in a stretcher after suffering from exhaustion and dehydration in April 1990; Trump fired him two days later.
In June 1990, the firings continued. Trump turned over the assets of the airline to his banks, putting more than 500 people out of work, according to court records. The banks also forced Trump to sell his yacht and put him on a budget. The Queens-born mogul stiffed contractors for the Taj whom he owed $35 million but insisted the disaster would only make the public love his brand more. “I think it has greatly enhanced it,” he said.
In November 1990, the Taj went bankrupt. The bondholders who had been promised high interest were forced to swap a large portion of their investment for half of the equity in the casino—a far riskier holding. Trump, however, walked away relatively unscathed. Banks let him borrow another $65 million and forgave his personal guarantees on loans, all to avoid a complete implosion of the Trump empire, one that would have taken many of his lenders down with him.
The entire Trump casino empire then tumbled into bankruptcy court. Trump slashed more jobs, investors lost more money, and the economy in Atlantic City worsened as unemployment surged.
By 1992, enough of the wreckage had been cleared away that some of the outstanding bonds began to recover, climbing to about 70 percent of their original value. Delighted, Trump telephoned financial reporters to brag that his investors’ losses weren’t as terrible as they had seemed. “These prices just prove people love me,” he told The New York Times . “People love Donald Trump.”
Three years later, Trump sold stock in his newly formed Trump Hotel and Casino Resorts, which owned all three of his Atlantic City casinos and another casino he had started in Indiana. He insisted the stock trade under the ticker DJT—his initials. As chairman of the company, Trump maintained a 41 percent stake, which was worth about $400 million when the stock hit its all-time high of $29.25 a share—less than a year after going public.
Under Trump’s leadership, however, the company was unprofitable every year, and by the end of his time as chairman, it had lost more than $1 billion. By 2004, the stock was selling for 65 cents a share, and the company fell into bankruptcy; people who had put their faith in the Trump name lost more than 90 percent of their investment. During the same time, those who owned funds based on the Standard & Poor’s 500 index more than doubled their money. Even in the greatest stock market ever, and in a business regularly described as a license to print money, Trump left only wreckage in his wake. And investors in Trump hotels saw nothing but losses.
On the other hand, Trump did just fine for himself. Even as his company’s stock price was collapsing and annual losses were piling up, filings with the Securities and Exchange Commission show that during his years as chairman, more than $60 million poured from the public company into Trump’s pockets.
This is the dirty secret behind Trump’s allegedly miraculous financial recovery. What he told the public was a fable: that he had fought his way back with perseverance and skill. In truth, he did it by snatching huge fistfuls of cash from a company that was wiping out the savings of millions of people.
By then, most of the smart money had given up on Trump. To get a new personal credit line, he could no longer rely on handshake deals or personal guarantees with Chase Manhattan, as he once had. Instead, financial records obtained by Newsweek show, in 2003 he turned to the Cayman Islands’ branch of UBS, the Swiss bank. For that loan, however, he had to put up a large number of assets as security, including a portion of his interest in Trump World Tower, all of his investments in a Paine Webber brokerage account, mortgage notes and numerous other securities and property.
Soon almost all financial institutions were passing on his deals, other than Deutsche Bank—and in a few years, he would default on a $640 million construction loan from it. The stock and bond markets, where every investor who had ever placed faith in Trump lost money, were closed to him. A fund financed by the billionaire George Soros agreed to invest in a Trump development once — but only once. A private equity firm, Colony Capital, backed out of a Trump project, forcing the Trump Organization to self-finance. Wall Street and financial institutions worldwide all knew that, as a businessman, Trump was a disaster.
So Trump went in another direction , rebuilding his reputation on television. Beginning in 2004, around when his public company fell into bankruptcy, Trump began playing the role of a successful businessman on the NBC reality show The Apprentice. Unless it read the financial news religiously, the public could not know that this portrayal of Trump was a farce.
The success of The Apprentice gave new credibility to Trump, which appealed to people looking to buy apartments and even products. That’s why Trump got into the business of selling his brand, letting other companies and developers use his name on their products for a substantial fee. The Trump steaks, the Trump water, the vodka, the chocolates, the mortgage company—all were attempts by Trump to make money off his name because he had few other financial options. In 2004, he also decided to launch Trump University, a for-profit education company that collapsed amid allegations it had defrauded thousands of people. Two class actions by former Trump University students are proceeding in California; a third case has been brought in New York by the state’s attorney general, Eric Schneiderman.
Trump’s career has been much of the same kind of scam. He demands applause and annihilates those who refuse to give it. He preens about successes he obtained only by destroying the wealth, careers and reputations of other people. He takes credit for the victories of others and denies any blame for his many failures. In his impulsive pursuit of self-aggrandizement, his victims are legion.
And now he vows to do to America what he did to them.
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