Part II: Behind The Curtain

D. S. Mitchell

I have talked about Donald Trump and his struggle to overcome his boyhood wealth in the dismal back water of Queens, N.Y. and his four decade effort to impress the only world that mattered at the time., the glittery world of Manhattan real estate. It was only later that he set his sights on the White House. Come with me while we continue that tumultuous journey.

In 1988, Donald bought a profitable shuttle line from the failing Eastern Airlines.  He had assembled a $380,000,000 loan from a consortium of twenty-two banks. Trump decided to go “high-end,” turning the shuttle service  into a very pricey hour trip. By 1992 the Trump Shuttle was in receivership and had ceased operations.

Trump has learned the art of spin.  He tells anyone that will listen, that every major bank in the country is begging him to borrow their bank’s money.  What a crock of crap.  In fact, according to many financial sources, Trump had no choice but to morph his real estate business in to a “licensing, branding company, where other people own the assets, because he couldn’t get bank loans, he had no choice.”

Mike Burnett, a transplanted Brit, was riding high in 2002 with the biggest hit on reality television, Survivor. Burnett wanted to spend more time with his children in New York and Survivor was filmed in far off jungle islands.  Burnett came  up with an idea for a show set in New York and he  needed a bigger than life central character to pull it off.

After seeing Trump’s picture plastered everywhere he looked around New York he decided to pitch the project to Donald Trump.

The show’s premise was that teams of desperate job seekers (the contestants) would compete in a series of business projects.  In the end, the winner would be given the opportunity to run one of Donald Trump’s businesses.  According to the plot line, Trump was the final arbiter of ability.  Trump was the last and absolute judge of talent and future potential of the contestants, because he was deemed to be a good judge of business skills and talent. Trump’s most notable line was saved for the show’s last moments, “You’re fired!”

In 2004 The Apprentice premiered.  The series showcased the glamour of the Trump empire, the Trump Tower penthouse, the casino’s, the yachts, the private jet, personal helicopter, and even Mar-a-Lago.  From what can be gleaned of the situation, Trump saw The Apprentice as a vehicle to reshape his reputation and introduce his ‘brand’ to a new audience.

During this time he was also promoting Trump Vodka, Trump Steaks, a board game, and most famously Trump University.  The reason The Donald paid $25,000,000 to claimants in the Trump University case was because it was a massive scheme to take money from the unwary.

First, Trump University, was by no stretch of the imagination a “university”. Trump, after several states filed suit against him, changed the name to Trump Entrepreneur Initiative.  The scam started out with a free seminar/workshop purporting to teach students how to use Trump techniques to do big real estate deals.  Trump’s image as a giant real estate mogul, as seen on television, was used to effectively bilk thousands of people out of a huge sums of money.

At that first “get to know you,” attendees were pressured into signing up for a worthless training course for $1,500.  After the first course prices went up even more. The ‘Gold Elite’ package cost $35,000 and the Trump crew knew how to use the carrot and the stick to get people signed up.  Many people borrowed money from friends, family and retirement accounts with the promise of learning the ins and outs of big time real estate. The whole scheme imploded, as an increasing number of “students” contacted state attorney generals and private attorneys, complaining they had gotten no special training, or access to lenders, as they had been promised.

Trump made success look so easy on television. However, in life, Trump had failed miserably in almost everything he tried.  A gigantic failure was Trump’s inability to choose honest, and competent people to work with when building hotels that bear his name and that he later manages. His ‘partners’ have gone bankrupt, mismanaged projects, faced legal charges of money laundering and tax fraud. So, much for Trump’s ability to measure people’s abilities.’

An abbreviated list of controversies arising through partnerships with the wrong people, include, 1) Rio de Janeiro: under investigation by the Brazilian government for financial improprieties 2) Baku Azerbaijan: long delays caused by the developer who is linked to government corruption 3) Fort Lauderdale, FL: In 2010, Bayrock Group, Trump’s partner and owner of the Trump International Hotel defaulted on a $139,000,000 loan costing them control of the hotel 4) Manhattan,  NY: In 2014, Bayrock, partner and developer of Trump SoHo, a 46 story hotel and condominium project in Lower Manhattan was forced out by a lender 5) Trump Toronto Hotel and Tower partners Russian-Canadian Alex Shnaider and Val Levitan defaulted on a $260,000,000 loan.  Subsequently, JFC Capital bought the debt and the Toronto hotel is on the market for less than the $300,000,000 that is still owed on the mortgage.

Moving on, Trump’s Washington D.C. hotel is a lightening rod for heated criticism and controversy.  The General Services Administration, in 2011 offered a lease on the iconic 1899 landmark Washington, D.C., Post Office building.  Several groups were interested in pursuing a lease on the property, including Hilton Hotels.

Trump because of his past bankruptcies and other controversies was considered an underdog in the lease process. Trump had made many promises to strengthen his application, 1) to use Arthur Cotton Moore as chief architect.  (The GSA favored Moore because of his commitment to the restoration of the Post Office building), 2) Trump sweetened his application with a commitment to bring the highly respected Colony Capital in as his partner. Colony is owned by Trump friend, Tony Barrack. (Barrack would later head Trump’s Inauguration Committee), 3) additionally the Trump Organization offered the GSA a very lucrative $250,000 a month rent for an annual revenue of $3,000,000, 4) Lastly, Trump  promised the GSA a $200,000,000 renovation, which was at least a 1/3 more than Hilton Hotels had suggested for the project.

When Trump was announced as the winner of the lease, Hilton Hotels filed an angry 120 page complaint with the GSA.  In their complaint Hilton called Trump “an unreliable business partner” and the GSA decision would result in a “devastating failure for this historical landmark , with a business partner whose history of repeated failure demonstrates that it cannot be counted upon to deliver what it promises.”

It was only a few months before the predictions made in Hilton’s complaint began to manifest. First, it was announced that the favored architect would not be involved in the project. Next came the report from the Trump Team that they would not be financing the project with Colony Capital. In 2014, Deutsche Bank provided a $170,000,000 construction loan to the Trump Organization using the Old Post Office lease as collateral.

GSA came to the quick realization that they had made a deal with the devil.  Trump had essentially done the bait and switch routine on the US government and they were unable, or unwilling to bring Trump to court to challenge the growing list of broken promises. All the while, Trump attorney’s were busy suing the Washington tax commission to cut the evaluation of the property from close to $100,000,000 down to $28,000,000.

All the while the GSA has sat speechless, and appears to be as helpless as a bowl of Jello.  We can’t forget that the head of the GSA is a political appointee and probably has his eye on his paycheck instead of the Democratic officials and ethics groups that are screaming bloody murder over what appears to be a blatant case of conflict of interest running amuck. The position of Trump opponents is pretty straight forward, they argue that because Federal officials are barred from holding a lease on the building, Trump must divest himself of the property. Simply put, the argument boils down to, Trump cannot be both landlord and tenant.

As many had expected, the hotel opened in a blood bath of red ink. After the hotel’s September opening reservations were slim to poor.  The GSA released income information on the hotel after demands from congressional Democrats.  The profit and loss figures from the Trump Washington DC hotel show that in both September and October of 2016 the Trump Organization lost $1.1 million dollars.

Since Trump’s election, the hotel’s fortunes have risen significantly, and the hotel is making big bucks on overpriced rooms and meals, causing increasingly loud protests against Trump’s continued participation in the hotel operations by ethics watchdogs. Delegations and officials from all over the world are clamoring for reservations at the hotel. Some countries have cancelled long standing reservations at other Washington hotels to stay with the president.  Concerning, to say the least.

Please come back for Part III of this series on Donald Trump and what lies behind the curtain.

Calamity Politics offers analysis and commentary primarily examining U.S. national political scene. While on site please join us for games, contests, cartoons and Resistance items.

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**Special thanks to US Today, Bloomberg News, Vanity Fair, MSNBC and NY Times for facts and figures for this post.**