[Special] Editorial: Donald Trump's Tax Scandal

You may have seen that the New York Times dropped a bombshell on Saturday. If you missed it, allow me to share. In an article called Trump Tax Records Obtained by The Times Reveal He Could Have Avoided Paying Taxes for Nearly Two Decades, written by David Barstow, Susanne Craig and Megan Twohey, the Times leads off with this:

Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years, records obtained by The New York Times show.

The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.

Tax experts hired by The Times to analyze Mr. Trump’s 1995 records said that tax rules especially advantageous to wealthy filers would have allowed Mr. Trump to use his $916 million loss to cancel out an equivalent amount of taxable income over an 18-year period.

While the idea of a millionaire or billionaire going nearly two decades without paying taxes would leave a bad taste in the mouth of anyone but the most strident Libertarian or Trump supporter, it may be more than just gaming the system ("that makes me smart," Trump quipped in response to Hillary Clinton's speculation that maybe Trump "didn't pay any federal income tax"). In fact, there might be something inherently dishonest, and possibly fraudulent, about what Trump has done.

NBC News: Trump Bankruptcy Math Doesn't Add Up

By Tom Winter:

Over the course of 18 years, Trump's companies went into reorganization six times — five times in New Jersey, where he had his casino holdings, and once in New York:

• Trump Taj Mahal Associates, Atlantic City casino — 1991 
• Trump Castle Hotel & Casino, Atlantic City casino — 1992 
• Trump Plaza Associates, Atlantic City casino — 1992 
• Plaza Operating Partners, Manhattan hotel — 1992 
• Trump Casino Holdings, Atlantic City casinos — 2004 
• Trump Entertainment Resorts, Atlantic City casinos — 2009 

"It would be six separate bankruptcies," said bankruptcy lawyer Ted Connolly, author of "The Road Out of Debt: Bankruptcy and Other Solution to Your Financial Problems."

* * *

During an August debate, he defended his record by saying, "Out of hundreds of deals that I've done — hundreds — on four occasions, I've taken advantage of the laws of this country, like other people.

"Hundreds and hundreds of deals. Four times, I've taken advantage of the laws," he continued.

In an October debate, his math memory got a little fuzzier.

"Hundreds of companies I've opened," he said. "I've used it [bankruptcy] three, maybe four times. Came out great."

The Full Story (June 24, 2016)

The Star-Ledger: Trump's Atlantic City Windfall Left Others Broke

By Star-Ledger Editorial Board

Their consensus: Trump is a master grifter, who uses bullying and arrogance as negotiating methods, before ending the relationship by withholding payments and making contractors settle for far less by threatening them with litigation – knowing the cost of litigation would eat up most of the money in the dispute.

And frequently, these exploited contractors were left ruined after the Taj went bankrupt in 1991, the AP found.

One contractor whose company did $1.3 million in paving work ended up with one-third that amount.  Atlantic Plate Glass installed walls of glass and was screwed out of $1.1 million. Molded Fiber Glass sued Trump for the $3 million it took to install the Taj's famous onion domes, and ultimately settled for $1 million. A marble supplier was owed $3.9 million, and after he settled for 30 cents on the dollar, he went bankrupt.

Even the guy who was owed $232,000 for putting up the bathroom partitions had to lay off his brother after Trump reneged.

In hindsight, it seems so predictable: By the time the Taj opened in April 1990, Trump owed $70 million to 253 contractors. Within months, he was already missing debt payments to his investors, who had bought $675 million in junk bonds (at 14 percent interest) to finance the $1 billion Taj disaster.

Many of the contractors sued, but time ran out on collections in July 1991, when the casino went bankrupt.

The Full Story (July 4, 2016)

The Atlantic: The Many Scandals of Donald Trump

By David A. Graham:

The Four Bankruptcies   

Where and when: 1991, 1992, 2004, 2009

The dirt: Four times in his career, Trump’s companies have entered bankruptcy.

• In the late 1980s, after insisting that his major qualification to build a new casino in Atlantic City was that he wouldn’t need to use junk bonds, Trump used junk bonds to build Trump Taj Mahal. He built the casino, but couldn’t keep up with interest payments, so his company declared bankruptcy in 1991. He had to sell his yacht, his airline, and half his ownership in the casino.
• A year later, another of Trump’s Atlantic City casinos, the Trump Plaza, went bust after losing more than $550 million. Trump gave up his stake but otherwise insulated himself personally from losses, and managed to keep his CEO title, even though he surrendered any salary or role in day-to-day operations. By the time all was said and done, he had some $900 million in personal debt.
• Trump bounced back over the following decade, but by 2004, Trump Hotels and Casino Resorts was $1.8 billion in debt. The company filed for bankruptcy and emerged as Trump Entertainment Resorts. Trump himself was the chairman of the new company, but he no longer had a controlling stake in it.
• Five years later, after the real-estate collapse, Trump Entertainment Resorts once again went bankrupt. Trump resigned from the board, but the company retained his name. In 2014, he successfully sued to take his name off the company and its casinos—one of which had already closed, and the other of which was near closing.

The Full Article (April 19, 2016)

Mother Jones: Here's How Donald Trump Treats the Little People

By Kevin Drum:

He would have been personally bankrupt, too, but his creditors decided to put him on a leash and let him try to work his way out. He made steady progress, but the casinos continued to be a millstone around his neck. By the mid-'90s, however, the stock market was getting hot and lots of small investors, then as now, were mesmerized by the Trump name. So Trump decided that as long as there were lots of rubes who still thought he was a great businessman, he might as well take advantage of them. Timothy O'Brien tells the story in TrumpNation:

In a masterstroke of financial maneuvering, and in a tribute to the sucker-born-every-minute theorem, [Trump] managed to take two of the Trump casinos—the Plaza and the Taj Mahal—public in 1995 and 1996, at a time when Donald was unable to make his bank payments and was heading toward personal bankruptcy. The stock sales allowed Donald to buy the casinos back from the banks and unload huge amounts of debt. The offering yanked Donald out of the financial graveyard and left him with a 25 percent stake in a company he once owned entirely. 

…In one fell swoop someone else became responsible for the debts that almost sank Donald…Exactly what investors thought they might get for their Trump Hotels investment wasn't entirely clear. Donald had already demonstrated that casinos weren't his forte, and investors were buying stock in a company that was immediately larded with debts that made it difficult, if not impossible, to upgrade the operations.

…Allan Sloan, the financial writer who had opined with great accuracy on many things Trump, offered a fair warning to Trump Hotels' investors: "Shareholders and bondholders have to be total fools ever to think that Donald Trump will put their interests ahead of his own."…Donald spent several years proving Sloan correct.

…Just a few months after Trump Hotels absorbed the Taj, Donald sold his last Atlantic City casino, the Castle, to the public company. That is, Donald sold his own casino, with all of its heavy debts, to a public company he controlled. The $490 million price tag for the Castle was about $100 million more than analysts thought it was worth…sending the company's stock into a nosedive from which it never recovered.

…Although Trump Hotels' shares were sinking and there were no earnings to be seen, Donald paid himself $7 million for his handiwork at the company in 1996…Jerry Useem at Fortune took note in 2000 of Donald's "disquieting” tendency to "use the casino company as his own personal piggy bank." In addition to the multimillion-dollar bonuses Donald was lifting out of Trump Hotels, Useem pointed out that "the pilots of his personal 727 are on the casino company's payroll" and that in 1998 Donald "had the already cash-strapped company lend him $26 million to pay off a personal loan."

The Full Story (March 14, 2016)