For the last few weeks the Kavanaugh nomination sucked all the political oxygen out of the room. Today I want to discuss our current president. One of his claims to fame is that in 1987 he told a lot of stories to Tony Schwartz who ended up doing 100% of the actual writing of the “co-authored” (with Donald Trump) book The Art of the Deal. Trump also likes to boast about how he is a self-made multi-billionaire. The reality is more like the commonly heard analysis that Donald Trump is rich because he was born rich. Let’s explore.
Earlier this month the New York Times published an article entitled Trump Engaged In Suspect Tax Schemes as He Reaped Riches From His Father under the by lines of David Barstow, Susan Craig and Russ Buettner. It is a work of about 14,000 words that contains some previously reported information and plenty of original material. Basically it shows that far from a business genius, Donald Trump is a sub-par businessman whose net worth is almost solely inherited and that he cheated on his taxes and defrauded the government, tricks he learned from his late father Fred Trump.
They operated under what I call the Broad Street Bullies Theory. They simply broke so many laws with such frequency that the government couldn’t possibly catch all their transgressions. They looked at the occasional fine as a cost of doing business. They made much more on the apples (crimes) than they lost on the oranges (fines).
I lack the time and space to go into all the details but I highly suggest you read the article which explores many of the gambits in depth. However I lack the self-discipline to refrain from touching on a few.
The senior Trump was obsessed with transferring his wealth to his children (and disproportionately Donald) while evading taxes. Many transactions that should have been subject to the then 55% inheritance tax were taxed at a rate of 5%. Much of this was achieved by “creatively appraisals” of real estate. Many adult Americans have some experience with appraisers because they have bought and sold homes. Appraisals are little more than educated guesses of the market value. Let’s say you own a home that is worth $100,000. An appraisal of $95,000 is just as valid as one of $105,000. They are both in the ballpark. In Trump’s case many assets were appraised at 50% or less of their value. While in the previous example I found both the $95,000 and $105,000 appraisals reasonable I wouldn’t have the same option of a $50,000 or $12,000 appraisal. However if I were paying taxes on the value amount I’d like $50,000 or $12,000 a lot better. You get the idea.
In order to funnel money to his kids Fred Trump set up shell companies that bought things like boilers and appliances for his rental properties. He actually bought them for $X but the shell company invoiced them at 4 or 5 times $X; the difference being shuffled off to Donald and his siblings. Here is the beauty of the scam: in most cases these properties were rent controlled properties and because the value of the improvement was the inflated price Trump could get approval to raise the rent. Joe Lunchbucket got screwed twice. First, he ended up paying more in taxes because Trump evaded his fair share. Second, his rent went up more than it should have.
Trump loves to tell the story of how his father gave him a, “Small $1 million loan,” which he claims he had to repay with interest and then he turned it into a $10 billion company. That entire story is a lie. In today’s dollars Donald Trump was a millionaire by the age of 8. The President complains about the use of future values in the article. We have very similar educations and are of the same generation. Present and future values were taught at quality management schools during our times there. While both were world class when we were there Trump’s alma mater is more prestigious than mine. Of course, I paid for my education; Fred paid for Donald’s and had him on the payroll at nearly $1 million per year. An accurate bottom line is that Donald Trump’s inheritances and unpaid loans from his parents amount to over $400 million.
Trump’s net worth is the source of considerable controversy. A few years back Trump unsuccessfully sued Tim O’Brien when the latter claimed in his 2005 book TrumpNation that Trump wasn’t even a billionaire. This much is certain; while Trump is wealthy he certainly isn’t worth anything approaching the $10 billion he claims he amassed from his father’s $1 million loan.
As to Kavanaugh I think he will replace Samuel Chase as the answer to the trivia question: Who was the last Supreme Court justice to be impeached. In fact Chase is the only Supreme Court justice to be impeached. The House impeached him on March 12, 1804 and the Senate found him innocent on March 1, 1805.
While The Art of the Steal sounds more like a book Hall of Fame baseball player Ricky Henderson could have written; I think it would be a perfect business biography of President Trump.
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