Trump broke but stayed on top
Lenders could have crushed Trump and taken the property after missing $41 million in payments. But bringing Trump down costs more than bankrupting him.
Much of the discussion in the June 1991 conference call concerned Trump’s fear of being stuck in bankruptcy court for years if pushed out. At one point, creditors reportedly paid Trump more than $1 million in annual management fees even though they thought he did a “terrible” job running the casino.
“What is he paying for half a million?” A bondholder asked, prompting laughter from the others on the call.
“We expect as little as possible,” said an adviser to the bondholders, causing even louder laughter. “We expect it to be characterized as a mismanagement fee.”
When I interviewed Trump, he claimed that he was financially successful because his bankers and supporters trusted and respected him. “They love me because I’m good and I’m honest,” he said.
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New York Attorney General Leticia James is trying to do what Trump’s financial backers have long failed to accomplish, which is to hold him accountable for his failures and lies as a businessman.
James is suing the former president for falsely inflating his net worth by billions. He alleged that Trump used fraudulent accounting statements to obtain loans and tax breaks. He also wants Trump to pay back $250 million he claims he received illegally.
The latest case against Trump illustrates how extremely wealthy people often get away with lousy jobs and poor business management with millions.
When F. Scott Fitzgerald could not have been more accurate in his short story “The Rich Boy,” he wrote: “Let me tell you about a very rich man. They are different from you and me.”
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From platinum pensions to eye-popping salaries, history favors rich and powerful company executives, even when they fail miserably at their jobs.
Former Equifax CEO Richard Smith, who “retired” after a major data breach at the credit bureaus was revealed, left the company with a pension worth more than $18 million.
Many of the executives who oversaw the financial companies that led us into the Great Recession have left or resigned — but earned obscene bonuses, stock options and multimillion-dollar paychecks. Lehman Brothers collapsed in 2008, yet its former CEO Dick Fuld earned an estimated $34.38 million a year before the company filed for bankruptcy.
The House Oversight and Reform Committee held a hearing on the collapse of Lehman Brothers in October 2008. The chairman of the committee at the time, Rep. Henry Waxman, said: “While Mr. Fuld and other Lehman executives were getting rich, they were driving Lehman Brothers and our economy into deficit.”
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Waxman said Fuld topped Lehman’s capital reserves by $10 billion through year-end bonuses, stock buybacks and dividend payments.
“What’s fundamentally unfair about Lehman’s collapse is its impact on the economy and taxpayers,” Waxman said. “Mr. Fuld will do well. He can walk away from Lehman a rich man who made more than $500 million, but taxpayers are left with a $700 billion bill to bail out Wall Street and the economy.”
As I read the accusations against Trump, I kept thinking: What is wrong with the financial institutions? Given Trump’s history of corporate bankruptcies, why didn’t they double-check his math and triple-check assessments?
The suit claims that Trump, his three children (Donald Trump, Jr., Ivanka Trump and Eric Trump) and senior Trump Organization executives, armed with super-hyped-up valuations of various New York properties, got banks to make loans. Finance on more favorable terms than would otherwise have been available to the company.
Trump and his family, through an attorney, have denied any wrongdoing.
How Donald Trump inflated his net worth to lenders and investors
James’ lawsuit alleges that from 2011 to 2021, Trump and the Trump Organization intentionally created more than 200 false and misleading valuations to defraud financial institutions.
Opinion Letitia James used Trump’s arrogance against her. It was devastating.
I’m still shocked at how Trump has been allowed to get rich despite the massive losses investors and financial institutions have suffered. Banks have repeatedly renegotiated his loans to bail him out or preserve the value of assets that served as collateral for loans to Trump.
Trump survived and thrived because of the willingness of bankers and bondholders to support him.
But let struggling consumers default on their mortgage, student loan or credit card debt, and they face financial ruin.
I’ve often heard different versions of a comedy bit that says you won’t sleep if you owe the bank $10,000. But if you owe the bank $10 million, the banker doesn’t sleep. The dollar amount varies depending on who’s telling the joke, but the underlying sentiment is that the uber-rich often get favorable treatment when they’re financially vulnerable.
“For too long, powerful, wealthy people in this country have acted as if the rules don’t apply to them,” James said in a statement. “Donald Trump stands as the most egregious example of this misconduct.”
Thirty years ago, my colleagues and I wrote the following in our Post investigation into his failed casino, “What is clear is that Trump has not faced the ultimate financial reckoning.”
That day may have finally arrived.