The following is an excellent excerpt from the book “THE MAKING OF DONALD TRUMP” by David Cay Johnston from Chapter 10: “Feelings and Net Worth” on page 77 and I quote: “Over more than four decades of promoting himself in public, Donald Trump has declared widely varying figures for his net worth. The numbers sometimes differ by billions of dollars in just a matter of days.
In 1990, when his business empire was on the verge of collapse, Trump told me and many other journalists that he was worth $3 billion. He told others $5 billion. I got my hands on a copy of his personal net worth statement that spring, which revealed a much smaller figure. Two months later, a report commissioned by his bankers and introduced in casino regulatory hearings put Trump in the red by almost $300 million.
In spring 2015, as he prepared to run for the Republican presidential nomination, Trump declared his net worth, on different days, to be $8.7 billion, $10 billion, and in one case $11 billion. Just how does Trump arrive at these fluctuating figures? They do not appear to take into account factors as basic as stock prices, changes in real estate values, and interest rates.
Trump’s net worth is central to his public persona as a kind of modern Midas. It is so important to him that he sued veteran journalist Tim O’Brien over a net worth estimate in his 2005 book, TrumpNation. O’Brien–who has edited my work in The New York Times–estimated Trump’s worth at $150 million to $250 million, based on documents Trump had shown him and statements from three unnamed sources. Trump’s lawsuit said the correct figure was between $5 billion and $6 billion. The lawsuit accused O’Brien of deliberately undervaluing Trump’s net worth so he could sell more books, causing irreparable damage to Trump’s reputation as a billionaire.
In pursuing the lawsuit, Trump testified under oath about his actual net worth. But his answers were not the dry recitations of asset values minus debts usually found in financial investigations. The testimony was quintessentially Trumpian.
“Mr. Trump, have you always been completely truthful in your public statements about your net worth of properties?” O’Brien’s lawyer asked.
“I try” Trump answered.
“Have you ever not been truthful?”
“My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feelings, but I try.”
In that statement, attorney Andrew C. Ceresney of Debevoise & Plimpton–who represented both O’Brien and his publisher–found exactly the opening he was looking for.
“Let me just understand that a little bit,” Ceresney said. “Let’s talk about net worth for a second. You said that the net worth goes up and down based upon your own feelings.”
“Yes,” Trump answered. “Even my own feelings, as to where the world is, where the world is going, and that can change rapidly from day to day. Then you have a September 11th, and you don’t feel so good about yourself and you don’t feel so good about the world and you don’t feel so good about New York City. Then you have a year later, and the city is a hot as a pistol. Even months after that it was a different feeling. So yeah, even my own feelings affect my value to myself.”
“When you publicly state what you’re worth,” the lawyer asked, “what do you base that number on?”
“I would say it’s my general attitude at the time that the question may be asked. And as I say, it varies,” Trump replied.
Trump’s answers were a markably candid explanation of his behavior, which he modulates in public to polish the careful image of his ability to make money though deal artistry. Whether being under oath prompted his candor or he simply felt relaxed after decades of lawsuits is unknowable. A New Jersey state appeals court, in its 2011 decision dismissing Trump’s lawsuit, concluded that Trump’s testimony “failed to provide a reliable measure” of his net worth that could be used to impeach O’Brien’s reporting. In short, the core issue in Trump’s lawsuit was not hard facts and figures, but Trump’s feelings. The lawsuit had no basis in reality.
The decision cited a document that O’Brien said Trump showed him three times, the “Statement of Financial Condition prepared by Weiser L.L.P., Certified Public Accountants,” as a measure of Trump’s fortune. The judge wrote of that problematic document:
“A preface to that statement demonstrates its limited value as an accurate representation of Trump’s net worth. The accountants cautioned that they had “not audited or reviewed the accompanying statement of financial condition and, accordingly, do not express an opinion or any other form of assurance on it.”
Further, the accountants noted significant departures from generally accepted accounting principles, and stated “[t]he effects of the departures from generally accepted accounting principles as described above have not been determined.””
Explaining the lack of audit or review, the judge quoted Gerald Rosenblum, one of the accountants who helped prepare the statement. Rosenblum testified that he did not try to independently assess Trump’s financial condition; “I asked the client to provide me with a list of liabilities as they existed at June 30, 2005,” said Rosenblum. “The client presented me with a list, in essence. I’m not certain to this day that I was aware of all of Mr. Trump’s liabilities at that point in time, and I sought no corroboration.”
The ruling said that Trump’s right to collect income in the future was presented as a certainty without regard for the fact that under the terms of his contracts, the flow of money might be reduced or even stop.
More important, the judge wrote that Trump had not disclosed facts needed to determine his net worth: “The values of Trump’s closely held businesses were not expressed in terms of assets or net of liabilities,” the judge wrote, before adding two crucial insights–insights that speak to how Trump could make his net worth seem to be vastly larger than it is by any standard objective measure. “The ownership percentages of each closely held business held by Trump were not disclosed. Additionally the tax consequences on Trump’s holdings were not set forth.”
The court also took renewed interest in Trump’s stake in the West Side Yards in Manhattan, which more than three decades earlier had been the focus of a federal grand jury investigation in which Trump was a target. No charges were filed. The New Jersey judge’s dismissal order held that the West Side Yards, the largest single piece of land available for development in Manhattan, was not “owned” by Trump, as he often claimed. Rather, as TrumpNation reported, Trump was subject to a partnership agreement with terms that might not be worth a dollar to him. Under oath, Trump admitted that, in the judge’s words, “under the partnership agreement, the general partners would have to recover their entire investment before Trump would see any return. As a consequence, his future profits remained speculative.” Any possible future profits are uncertain “because encumbrances on the property were not disclosed by Trump.”
As often as Trump overstates his properties’ worth, the judge’s decision also points to how he also understates or even hides debts and other liabilities or encumbrances, like mortgages. In 1985, Trump made a show of buying Mar-a-Lago, the Palm Beach, Florida, estate of Marjorie Merriweather Post, the cereal heiress who went on to run her own cereal company and became arguably the wealthiest woman in America. Post left the property to the federal government in 1973 as a winter home for the president, but Washington decided the upkeep of more than 110,000 square feet with 126 rooms and lavish grounds was more than taxpayers should bear. They put it on the market.
Trump said he paid cash for the property, which he described as run-down and in need of the Trump touch to restore its grandeur. No mortgage was involved, he said, just cash. “I put in a cash offer of five million, plus another three million for the furnishings in the house,” Trump wrote in his first book.
That was not quite true. In testimony five years later, Trump confirmed that his primary bank, Chase Manhattan, had loaned him the entire purchase price.
“They put up the eight million dollars, I believe it was eight million purchase price,” Trump testified.
“Was there any security given to Chase Manhattan for that?” the lawyer asked, inquiring as to whether a mortgage had been taken out to finance the purchase and secure the bank’s interest.
“It’s a mortgage, a non-recorded mortgage,” said Trump. “And because it’s non-recorded, I personally guaranteed it.”
In December 1985, Trump had written to Janet VB Pena, a second vice president of Chase Manhattan, seeking several modifications to the mortgage commitment the bank had made two weeks earlier. The mortgage “will not be recorded” unless Trump failed to make timely payments, a condition the bank accepted.
The bank loaned Trump $2 million more than the purchase price, a total of $10 million, on his personal guarantee. Trump put up only $2,800 cash. He boasted that he got Mar-a-Lago for a song, a bargain that showed his extraordinary negotiating skills. “I’ve been told the furnishings in Mar-a-Lago alone are worth more than what I paid for the house,” he said in his book.
To local property tax authorities, Trump represented the situation differently. They put a value of $11.5 million on the land and buildings. Trump countered, saying that was far too much. Keeping up the estate would cost him $2 million or $2.5 million a year, he said, so he might have to subdivide and develop the land. He proposed to build ten small mansions on the grounds. The town council turned him down. Then he proposed seven mansions. Turned down again. He would have to settle for building some condos nearby.
Five years after Trump acquired Mar-a-Lago with the unrecorded mortgage, casino regulatory hearings revealed that he had personally guaranteed more than a fourth of his more than $3 billion of debt. Many banks complained that they were unaware other banks had loaned money to Trump on his personal guarantee with no public record of the obligation.
Taking widely different positions on the value of assets and using his emotional state to justify those valuations helps explain something else Trump has done repeatedly. Congress requires all presidential candidates to file a financial disclosure statement listing their assets, liabilities, and income. Trump’s ninety-two-page disclosure report valued one of his best-known properties at more than $50 million. But he told tax authorities the same property was worth only about $1 million. He valued another signature Trump property at zero–and demanded the return of the property taxes he had already paid.”
(DONALD TRUMP IN SAYING THAT HE DOESN’T LIE BUT HE JUST FEELS IN A CERTAIN MOOD WHEN HE MAKES STATEMENTS. THE PROBLEM IS THOUGH, A LOT OF TIMES THEY ARE WRONG OTHERWISE, HE WOULDN’T HAVE GONE BANKRUPT SO MANY TIMES AND THE WORST ONE BEING WHEN HE BUILT THE TAJ MAHAL HOTEL AND CASINO AND HE WENT BANKRUPT THREE TIMES ON IT. HE WAS GETTING HIS FRIENDS TO INVEST IN IT AND THEN GOING BANKRUPT ON THEM. AFTER THE THIRD BANKRUPTCY, NO BANK WOULD LOAN HIM MONEY. THEY SAID HE WAS BANKRUPT BUT THEY THOUGHT HIS NAME MIGHT BE WORTH SOMETHING YET. SO THE BIG BANKS USED HIS NAME AND PAID HIM FOR THE USE OF THAT AND THAT WAS MORE SUCCESSFUL FOR HIS BANK ACCOUNT THAN DONALD TRUMP’S ABILITY TO HANDLE HIS FINANCES. CAN YOU IMAGINE HIM BEING PRESIDENT? TRYING TO KEEP THE COUNTRY’S BUDGET BALANCED WHEN HE TALKS AT THE STATE OF THE UNION, PARTICULARLY WHEN HE WANTS TO LOWER THE FEDERAL INCOME TAX ON HIS WEALTHY FRIENDS FROM A TOP BRACKET OF 39.6 PERCENT DOWN TO 25 PERCENT.
LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran