Down Mexico Way

The following is an excellent excerpt from the book “THE MAKING OF DONALD TRUMP” by David Cay Johnston from Chapter 22: “Down Mexico Way” on page 167 and I quote: “The sales pitches urged investors to get in early to reap the biggest profits.  The Trump organization, Donald himself, and two of his grown children announced that, along with a firm called Irongate and some other West Coast partners, they would soon transform a sleepy little spot on the Pacific coast–only a dozen miles from the California border–into the next hot Mexican vacation spot by building the Trump Ocean Resort.

The trump.com website listed Punta Bandera (which means “tip of the flag”) as a “Trump Portfolio” property, one of thirty-three Trump Organization projects in “development” around the globe.  A video and brochures touted the twin waterfront towers that would soon go up.  Two of Trump’s children flew to San Diego to mingle with would-be buyers.

“We are developing a world-class resort befitting of the Trump brand,” Ivanka said in a video, between pictures of the Pacific Ocean, the beach, and renderings of the planned water-front apartments.  “We’re really creating northern Baja as the new Cabo, as the new resort destination.”  She was referring to Cabo San Lucas, the once-quiet Mexican fishing village at the southern tip of the Baja peninsula, which, following the construction of waterfront hotels, now bustled with American tourists.

“This is a deal with my brother and, of course, our father, with the whole strength of the Trump Organization that we are extraordinarily bullish on,” Ivanka continued.  “Proximity to San Diego makes this a tremendous investment.”

Trump himself appeared in the video as an authority on luxury development, saying, “I am very, very proud of the fact that when I build I have investors that follow me all over.  They invest in me, they invest in what I build and that is why I am so excited about Trump Ocean Resort.”

Prospective buyers were given a frequently asked questions sheet.  One question: “Tell me more about the Developers, the Trump Organization and Irongate?”

Ivanka Trump told sales reception attendees that she was so impressed with the project that she was buying one of the apartments herself.  She chitchatted with prospective buyers, saying that once they became neighbors she just might drop in to borrow some sugar.  Her brother Donald Jr. also told prospective buyers he was buying his own pad.

The Donald Trump name and the assurances of his children attracted prospective buyers a plenty.  Many paid a $5,000 deposit for an “Exclusive Priority Reservation Agreement,” required just to hear a sales pitch at a Grand Hyatt in downtown San Diego.  That payment was fully refundable to anyone who decided not to take advantage of the opportunity.

The prospect of getting in early on a transformative project, and one in which buyers might run into next-generation Trumps, was so attractive to some people that they were neither put off by nor dubious of the high-pressure sales tactics.  Much later, three people who had made exclusive priority reservations complained that they were given five minutes to buy or walk.  That didn’t even give them enough time to read the terms of their purchase contract, much less consult a lawyer.  They signed, writing checks totaling more than $200,000.  Some buyers later said they put their life’s savings into their eagerly anticipated new homes by the sea.  They came to regret being so hasty and so trusting.

Nearly two hundred people bought in, putting down more than $22 million in deposits in 2006, confident that the project was about to get underway and that before long they would move into their beachfront property and enjoy the security of a smart investment in a Trump-developed resort.

A June 2007 newsletter notified buyers that construction was underway.  The next month, the Trump Baja News reported, “our new and excited homeowners now are part of an elite group of vacation homeowners who own property developed by one of the most respected names in real estate, Donald J. Trump.”

Three months later, in October, when Wall Street crashed under the weight of toxic mortgages and other Baja real estate projects faltered, the same newsletter carried a message “From the desk of Ivanka Trump.”  Ivanka assured the buyers that their investment was sound.  “Though it may be true that some of Baja’s developments could slow down, these market conditions simply do not apply to Trump Ocean Resort–or any other Trump development,” she wrote.

Two months later, in December 2007, the newsletter advised buyers of newly discovered geological problems afflicting the building site.  A few months later, in March 2008, anxious buyers received calls or letters.  Construction loans had been approved, would be funded shortly, and work would be underway.  This was nine months after buyers had been told in writing that construction had already begun.  Still, construction did not proceed.

All of these promotions, sales pitches, and newsletter updates created the impression that Trump was the builder and the developer, words he used.  The buyers later said they bought in because Trump was the developer or builder.  That understanding then changed abruptly.

The worst news arrived two days before Christmas 2008.  What had previously been described as a partnership between “the Trump Organization, Donald J. Trump,” and the other people and companies involved was described in a new way.  Neither Trump nor the Trump Organization were investment partners in the Trump Ocean Resort.  They were not the developers, either.  They had merely licensed the use of the Trump name.

The actual Baja developers, it came out later, had “obtained authority” from Trump to use his trademarked name in return for an upfront fee.  Under that licensing agreement, as testimony and court papers show, Trump gave the actual developer authority to tell prospective buyers that Donald Trump was “developing” the Mexico resort, even though he later testified that he was not.  The losing buyers soon filed a host of lawsuits in California, asserting fraud and collectively demanding the return of their $22 million plus lawyers’ fees and other costs.

The three people who faced the five-minute deadline to buy or walk away said in their 2010 court complaint that they went ahead only because Trump was the developer and had his own money in the deal–a belief strengthened by the statements that Ivanka and Donald Jr. were also buyers.  Their lawsuit listed the Trump Organization first among the thirteen parties accused of California state securities fraud, simple fraud, negligent misrepresentation, accounting fraud, and unfair business practices.

In time, most of the lawsuits were consolidated in Los Angeles.  The suits were revised and revised as new facts emerged until the fourth amended version of the complaint ran to more than 640 pages.  It was filed on behalf of well more than one hundred buyers.  The lawsuit detailed, by name, date, and event, each specific act of alleged deception used to get people to invest–a tactic that lawyer Daniel King said was meant to make sure there was no doubt about how pervasive the acts of deception had been.

In court papers, Trump distanced himself from the Baja deal.  He insisted throughout that he never owed any obligation to the Baja buyers and had done nothing wrong.  He also declared under oath in those cases, “I, personally, do not have any employees in the State of California, own real property in California, or maintain an office in California.”

Trump in fact owned real estate in California, employed people in California, and had offices there.  For years he had owned and operated his golf course on the Palos Verdes Peninsula in Los Angeles County.  Testifying in a Florida federal case where other buyers had accused him of fraud in a similar waterfront condominium project, Trump was asked to name all the properties he owned.  “Trump National Golf Club Los Angeles, I own that,” he testified.

The crucial word in that California sworn statement was “personally.”  Trump did not own his California properties personally in the sense that most homeowners have their own names on the deed.  Trump owned the golf course and employed people through a corporation, a corporation under his absolute control.  Trump’s lawyer at Trump National Golf Club Los Angeles was included on the list of people served with every document in the Baja litigation.

Daniel King, Bart Ring, and other lawyers for more than one hundred of the buyers eventually made a deal with one of the non-Trump parties to pay back more than $7 million, a third of the buyer deposits.  The Trump side objected that the deal was unfair to them and would leave them “holding the bag” for the other $15 million of deposits plus costs.

Trump’s lawyers told the judge that his family and businesses never touched those deposits.  The problem, they said, was that the actual developers did not have enough capital to complete the project.  Trump’s lawyers accused the real developers of misusing the deposits for personal gain by extinguishing personal debt guaranties related to the Trump Ocean Resort project.  The license to use the Trump name, the Trump side pointed out, specifically prohibited Trump and his organization from doing any sort of developmental work.  It barred them “from even inspecting the property on less than ‘twenty-four hours notice’ and required them to not ‘interfere with the operation of the property.'”

“People who gravitate toward luxury brand name products do so because they expected superior quality and design,” Trump’s lawyer wrote.  ‘They do not, however, believe that the designers are doing the ‘dirty work.'”  Furthermore, the lawyers write, while the buyers claimed that they were tricked into believing “that the Trump parties were the developer of the project,” the buyers “could not have believed that Donald Trump would be on-site in Mexico overseeing construction or collecting their deposits . . .

“More importantly,” the Trump lawyers continued, the license to use the Trump name ‘was disclosed to the plaintiffs when they entered into their contracts” and in the statement of how the condominium would be governed.

Trump’s lawyers made no mention of testimony from buyers that they were given just minutes to sign the purchase and other documents, leaving no time to read them or ask questions about the several pages of arcane legal details.  The only duty the Trump parties had, their lawyers wrote, was “to ensure that the standards of design and quality with the ‘Trump’ name were met, not to grade soil, dig ditches or collect deposits.”

Trump, his organization, and his two children settled with the buyers.  The court sealed the terms of the settlement.

Trump had been through all this before.  A 2006 press release described Trump as “co-developer” of the Trump International Hotel and Tower in Waikiki Beach Walk, and a “partner” in the project.  Reporters were told that the winner on Trump’s television show, The Apprentice, would be “project manager overseeing development for Trump.”  Trump boasted that the combination of his name and Waikiki would be “setting a new standard of luxury.”  In late 2006, he bragged about “the biggest one-day sale in real history in the world” when buyers signed contracts totaling more than $700 million for 464 apartments.

Nearly three years after this successful one-day sale, when buyers were due to make the final deposits on their apartments, they received a brochure titled Trump Waikiki Life, Owners Edition 2009.   On page twenty-three of the brochure, in what a lawsuit later described as “micro-script that can barely be read without a magnifying glass,” people who had already signed sales contracts received troubling news; the Waikiki tower bearing the Trump name, in which many had invested their life savings, “is not owned, operated, developed or sold by Donald J. Trump, the Trump Organization,” or any affiliated business.  Trump had merely licensed his name.

Hawaii state law (like California and federal securities laws) protects buyers from false and misleading sales pitches.  Hawaii law requires disclosure of all material facts to buyers.  Trump’s status as a mere licensor was obviously material to making an investment decision based on the supposed value the Trump name would add to the building.

But the licensing was not the most disconcerting fact that had been hidden.  Long after they had made their deposits and signed contracts, the buyers discovered provisions in the Trump naming license that could jeopardize the future value of their apartments.   Trump had reserved the right to take his name off the building.  According to Trump’s own statements, it was his name on the building that made the apartments so valuable; without it, the apartments would be worth much less.   Furthermore, if Trump ever withdrew his name, he was free to put it on another building–even one right next door.  This was crucial information to buyers looking to make a smart investment.

The lawsuit called this conduct unconscionable, citing more than twenty material facts that it said were improperly hidden from buyers.  As with the Baja fraud suit, a settlement was reached and then sealed by a judge.

And in another Florida case (filed over a never-built Tampa high rise), buyers finally obtained a copy of the licensing agreement under court order.  The licensing agreement stipulated that its very existence was to be kept secret–not just the specific terms of the agreement, but the existence of a licensing agreement in general.  The agreement indicated that a Trump business was paid a $2 million upfront fee for the use of the name.

In testimonies, Trump has named fourteen properties that are straight licensing deals and three others in which he also gets some profits or is a partial owner.  In the Tampa case, Trump was asked about disclosures in other licensing deals:

“Do you, sir, or your company disclose to those buyers that you’re merely licensing your name?” a lawyer asked.

“I think in some cases we do,” Trump responded.  “I am just not sure.”

Another lawsuit was filed over a Fort Lauderdale hotel-and-apartment project that, at fifty-two stories, was to be the highest tower on the Florida Atlantic coast.  Those buyers received a sales brochure with Trump’s picture and the statement “It is with great pleasure that I present my latest development, Trump International Hotel and Tower Fort Lauderdale.”  Buyers also got hardcover books that announced on the first page: “A Signature Development by Donald J. Trump.”  The project failed and buyers wanted their deposits back.  At trial in 2014, Trump testified that he never claimed to be the developer and had no liability.  “The word developing doesn’t mean we’re the developer,” Trump said.  The civil jury agreed.  One of the buyers was still pursuing an appeal when this book was completed.”

(DONALD TRUMP WAS MORE OF A GAMBLER THAN AN INVESTOR EVEN THOUGH HE DID APPEAR TO BE ONE ON “THE APPRENTICE” ON NBC WHERE HE WAS MORE INTERESTED IN LOOKING AT THE WOMEN THAN HE WAS IN RUNNING A REAL PROFITABLE BUSINESS LIKE HIS FATHER, FRED SR, DID.  DONALD WAS CLOSER TO ACTING LIKE BERNARD MADOFF, WHO EXPLOITED HIS CUSTOMERS AND EVENTIALLY WENT TO JAIL.  DONALD JUST HATED TO PAY FEDERAL INCOME TAX AND HE DID EVERYTHING HUMANLY POSSIBLE TO GET AWAY FROM PAYING IT AND STILL HE ACTED LIKE A SO-CALLED GREAT BUSINESSMAN, WHO IS NOW RUNNING FOR PRESIDENT.  IN HIS FIRST DEBATE WITH HILLARY CLINTON, SHE TOLD HIM, “YOU WENT BANKRUPT SIX TIMES, NOT FOUR LIKE THE MEDIA WAS SAYING” AND DONALD TRUMP DIDN’T DENY IT.  HE SAID “IT WAS ONLY GOOD BUSINESS.”  AND BRAGGED ABOUT THE FACT THAT HE MADE MONEY ON EVERY ONE OF THEM.  TO ME, THAT MAKES HIM LOOK LIKE A LOSER.

LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran

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About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog (my.barackobama.com) and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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