US President Donald Trump was involved in some shady tax practices involving his father’s real estate empire, according to a blockbuster report published in the New York Times, including “instances of outright fraud” and evasion. This could have significant ramifications for US politics and the rest of the free world. Here's what you need to know.
The Times reviewed more than 100,000 documents over the course of the past year involving never-before-seen lawsuits, legal and financial paperwork, tax returns, and depositions from family members and business associates. Here’s the upshot:
Much of [$US413 ($575) million] came to [Donald] Trump because he helped his parents dodge taxes. He and his siblings set up a sham corporation to disguise millions of dollars in gifts from their parents, records and interviews show. Records indicate that Mr. Trump helped his father take improper tax deductions worth millions more. He also helped formulate a strategy to undervalue his parents’ real estate holdings by hundreds of millions of dollars on tax returns, sharply reducing the tax bill when those properties were transferred to him and his siblings.
That $1 million loan was actually $US60.7 million
Trump loves to brag about the “$1 million loan” he got from his dad that helped him become the supposed billionaire he is today, but the Times found he actually received $US60.7 ($85) million for that initial loan, or around $195 million in today’s dollars.
Over the past few weeks, Donald Trump broke protocol with the Queen of England, triggered an emergency meeting at NATO, had a tape leaked where he discusses paying off a Playboy Playmate, began a flame war with the President of Iran and was literally accused of treason.
In other words, it's been a pretty quiet month for the Trump Presidency.
The Trump siblings avoided estate taxes with some ... creative business manoeuvres
The article outlines the extreme lengths the Trumps went to to avoid paying the then-55 per cent estate tax (the ultimate GOP boogeyman), as well as the gift tax on various transfers of property and wealth.
The most damning, at least according to experts quoted in the story, was the creation of a company called All County Building Supply & Maintenance.
On paper, All County was Fred Trump’s purchasing agent, buying everything from boilers to cleaning supplies. But All County was, in fact, a company only on paper, records and interviews show — a vehicle to siphon cash from Fred Trump’s empire by simply marking up purchases already made by his employees. Those millions in markups, effectively untaxed gifts, then flowed to All County’s owners — Donald Trump, his siblings and a cousin.
Essentially, All County would buy various products for the buildings, like boilers, and then “a secretary would bill the items to Fred Trump’s buildings with a 20 to 50 per cent markup.” Trump and his siblings pocketed that difference.
In addition to hiding millions of dollars in this “sham” company, the legality of which one expert called “highly suspicious,” the family transferred much of the ownership of the company from Fred Trump to the president and his siblings before the patriarch passed away. “The vehicle they created to do that was a special kind of trust called a grantor-retained annuity trust, or GRAT.”
This meant that the siblings avoided taxes, and upon Fred Trump’s death, he owned just a fraction of the properties that once made up his real estate empire, according to the estate tax return obtained by the Times.
Still, Donald and two of his siblings drastically undervalued some apartment complexes and shopping centres left to include in the return. Reports the Times, while the Trumps claimed the complexes and strip malls were worth $US15 ($21) million, “in 2004, records show, bankers would put a value of $US176.2 ($245) million on the exact same properties.” Additionally, “Fred Trump’s estate tax return made no mention of either Trump Palace or All County,” all of this meaning they avoided paying tens of millions in estate taxes, per the Times.
Trump became notorious for “greenmailing” in the ‘80s
Here’s a fun detail in the report: in the 1980s, Donald Trump manipulated stock prices by leaking his positions to the press so that he could sell at a mark up or greenmail a company into paying him a premium to get the shares back and, essentially, go away. Turns out Fred Trump was his son’s stock manipulation “wingman:”
On Jan. 26, 1989, Fred Trump bought 8,600 shares of Time Inc. for $US934,854 ($1,301,716), his tax returns show. Seven days later, Dan Dorfman, a financial columnist known to be chatty with Donald Trump, broke the news that the younger Trump had “taken a sizable stake” in Time. Sure enough, Time’s shares jumped, allowing Fred Trump to make a $US41,614 ($57,944) profit in two weeks.
This was apparently a common enough business practice in the ‘80s, and it’s not unheard of today for activist investors to pull a similar stunt.
Trump has received at least $US413 ($575) million in total from his dad’s empire
So no, he’s not self-made. In case that wasn’t clear.
The Times labelled some of the activity as fraudulent
This is a rare move, particularly for the Times, which shows how confident the paper is in its reporting. The fraud and evasion isn’t “alleged,” or written around so as to be implied—it’s just named outright as fraud.
A Google search and boiler room receipt were central to the Times uncovering the story
In a follow-up piece on how the story came together, the Times’ Susanne Craig and Russ Buettner, two of the three reporters who wrote the story along with David Barstow, explain that a Google search about “mortgage receivables” and a boiler receipt from a personal injury lawsuit aided their reporting tremendously.
In 2017, Craig googled “mortgage receivables,” which is how the family described mortgages transferred from Fred Trump to his children in various documents, along with “Trump” and found the following:
She found the disclosure form that the president’s sister Maryanne, a federal judge, had filed related to her Senate confirmation hearing. Unlike the many she filed during her years on the bench, this one was not redacted. In that document, Ms. Craig noticed a $US1 ($1) million contribution from an obscure family-owned company: All County Building Supply & Maintenance.
Craig says “that was the first inkling we had that, hey, there’s something to do with this company that we need to figure out.” Later, Buettner found a receipt that helped them further make sense of the Trump’s All County mark-up scheme:
[T]he team matched a boiler receipt from a personal injury lawsuit Mr. Buettner found that named All County — a man was injured by the boiler in a Trump building — to a boiler receipt they obtained via a FOIA request to New York City. They found two identical purchase-order numbers, with the bill from All County to Fred Trump marking up the boiler price by 20 per cent.
“That’s a rare moment of reporting serendipity, right?” says Buettner.
The reporters note that the reporting indicates there’s much more out there to uncover.
Trump says the allegations of fraud are “defamatory”
Charles Harder, the president’s lawyer, told the Times in a statement that “The New York Times’ allegations of fraud and tax evasion are 100 per cent false, and highly defamatory.”
Trump tweeted this morning,
The Failing New York Times did something I have never seen done before. They used the concept of ‘time value of money’ in doing a very old, boring and often told hit piece on me. Added up, this means that 97% of their stories on me are bad. Never recovered from bad election call!
I leave it to you to decipher what that means.
None of this gets into the familial back-stabbing, the president’s extensive history of poor deal-making or self-made man myth making detailed in the report. But if the whole story really is a “hit” piece, perhaps the president will be enticed to finally release his tax returns and clear his good name.