Early last year, Michael Cohen released a few pages of Trump’s financial statements in advance of his testimony to the House Oversight committee, newly in the hands of a Democratic majority. I noticed something strange in those statements, and wrote a diary about it: In the March 31, 2013 statement of Trump assets, there’s a new asset line for “Brand Value,” listed at a whopping $4 billion, that wasn’t on the previous statement from June 30, 2012. This $4 billion accounted for nearly the entire increase in Trump’s net worth over those 9 months. So I asked:
How was that valuation of the “brand” justified? Who came up with it, and who was involved in the discussions surrounding it? More importantly, why? Why was it so important for Trump’s net worth to nearly double in the course of 9 months? Was it, as Cohen said it might be, a vanity exercise to get high placement on a Forbes list? Or was it, as he also said could be the case, to get a loan or favorable insurance premiums? And why was the 2013 disclosure done in March instead of June like the previous ones? Was there perhaps some immediate financial need that required a loan in Spring 2013?
Well, the diary didn’t get much attention, and understandably: Trump had managed to keep his financial details under wraps up to that point, so there just wasn’t much to go on to answer those questions.
But now, thanks to the New York Times’ bombshell reporting today, we have a whole lot more, and it looks like there’s an answer to these questions.
Everyone should read the full article, but the apparent answers can be found in the Times’ summary of revelations from the tax documents. First, we have:
With “The Apprentice” revenue declining, Mr. Trump has absorbed the losses partly through one-time financial moves that may not be available to him again.
In 2012, he took out a $100 million mortgage on the commercial space in Trump Tower.
So Trump’s TV profits were declining, and he needed cash to cover losses from his golf resorts. And indeed, it appears that this loan was taken out sometime in late 2012, between the 2012 and 2013 financial statements: The 2012 statement lists loans on commercial New York real estate at less than $250 million, but in 2013 that number is $322 million, a jump that the $100 million loan could account for.
But this doesn’t address the $4B “Brand Value”—wouldn’t a mortgage on a property be based on the value of collateral, i.e. the property being mortgaged, not some other “asset”? Usually, but not in this case, since Trump personally guaranteed those loans:
In the 1990s, Mr. Trump nearly ruined himself by personally guaranteeing hundreds of millions of dollars in loans, and he has since said that he regretted doing so. But he has taken the same step again, his tax records show. He appears to be responsible for loans totaling $421 million, most of which is coming due within four years.
Now, you don’t personally guarantee a loan unless you absolutely have to. So it looks like whoever was underwriting this mortgage didn’t believe there was enough equity in the property itself to back the loan. (Trump’s 2013 financial statement has the net equity of New York City commercial real estate at $1.06 billion.) So the lender required a personal guarantee. But Trump needed to show personal assets to back that guarantee, and poof! The $4 billion in “Brand Value” appears.
Wherever that “Brand Value” supposedly came from, apparently it’s not real enough to generate actual cash, since Trump hasn’t paid off a single dime of that loan:
He appears to have paid off none of the principal of the Trump Tower mortgage, and the full $100 million comes due in 2022.
There’s a term for inflating assets, or making them up out of whole cloth, in order to secure a loan: Mortgage fraud. Now, the usual caveats apply: I’m not a financial fraud expert, we can’t draw definitive conclusions from just a few pages of actual documents, etc., etc. But this certainly does smell. It looks like it smells to New York State investigators too, as there’s an ongoing fraud investigation into the Trump real estate business (emphasis mine):
The attorney general, Letitia James, a Democrat, has been conducting a civil investigation into whether President Trump and the Trump Organization committed fraud by overstating assets to get loans and tax benefits.
To summarize (TL;DR):
- In late 2012, Trump’s golf properties are hemorrhaging money, and with his “Apprentice” revenue drying up, he needs a cash infusion to cover the losses.
- He gets a $100 million loan on Trump Tower, but he needs to personally guarantee it.
- At the same time, a new $4 billion “Brand Value” asset appears on his financial statements.
- Whatever personal assets he claimed to the lender would enable him to pay back the loan, he’s not actually making any principal payments. So it’s possible that there aren’t any actual assets that could be used to cover the loan.
Monday, Sep 28, 2020 · 7:47:21 AM +00:00
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monster
Commenters have pointed out that while this new information from the NYT could answer the question about the previously-released financial statements, those answers raise fresh questions. A key question that they brought up is this: Why would a lender give a personal loan on such a flimsy guarantee? There are questions about Deutsche Bank, which became the only lender doing business with Trump after previous loan defaults, and has been found to have violated sanctions against Russia. Commenters asked whether the loan could be part of a money laundering scheme. These are good questions, and hopefully the New York AG’s office is investigating them. Maybe we’ll get more answers before the election ends.