Lucky Loser: How Donald Trump Squandered His Father's Fortune and Created the Illusion of Success

by Russ Buettner

The family fortune that launched Donald Trump was built on government programs designed to ease the pain caused by the Great Depression and World War II, and to assist the veterans returning from that war. His father wrung millions of additional dollars from those programs by twisting the rules. When caught, he obsessed about his reputation, concerned that public mention of him making millions of dollars would damage his reputation as an honorable businessman.

The founder of United Housing Foundation, Abraham E. Kazan, had also known Cashmore for years. In some ways, Kazan’s career had unfolded on a parallel track to Fred Trump’s. Both entered the field in the 1920s and considered themselves masters of containing costs. Both would oversee the construction of about twenty-five thousand housing units in their lifetimes. Where they diverged was on the final destination of the money. The money Fred Trump saved on expenses went to Fred Trump. The money United Housing saved on expenses went toward lowering costs for tenants.

The other program, known as Mitchell-Lama, would award Fred a low-interest state mortgage, greatly cutting his costs and eliminating the need to convince a bank. But in exchange, he would be compelled to cap his profits at a little more than 7 percent of construction costs.

Fred solved that dilemma by picking the same path he had chosen with federal programs fifteen years earlier: deception. He took the government loan, agreed to limit his profits, and immediately began doing everything he could to get around that commitment.

He got started with the formation of a company called Boro Equipment Corporation. It would be owned, indirectly, by one man, Fred Trump. And it would have only one customer, Fred Trump. Fred Trump would charge Fred Trump a fee for renting bulldozers and backhoes with a steep markup added for the benefit of one person. Fred Trump...

Black applicants were told there were no vacancies or were steered to one specific Trump apartment project, Patio Gardens in the heart of Brooklyn; white applicants arriving moments later were told apartments were available. They reported the findings to federal prosecutors, who, along with FBI agents, began tracking down employees of the Trumps, some of whom said the company frowned upon leasing to Black tenants almost everywhere except Patio Gardens.

He accepted Trump’s dinner invitation. But that night at Maxwell’s Plum he saw a new and different side of Donald Trump in full bloom, talking nonstop about himself and all his amazing accomplishments. When the tab arrived, Donald waved around a thick roll of cash. As they left, Walker’s wife told him, “I don’t ever want to go out with him again.”

She would later say that when she told her husband the boy’s name would be Donald J. Trump Jr., his response was, “What if he’s a loser?” Ivana told him that the name was her decision because she had carried the baby.

Unknown for decades, we discovered that Donald would never repay at least $15 million of the money he borrowed from his father in those years. In essence, his father had given him the capital to launch a business and not received equity in those businesses. In the language of the tax code, Fred had given his son taxable gifts masquerading as loans, a likely tax fraud that went unnoticed.

The letter did encapsulate what became Donald Trump’s three-step rhetorical style, a pattern so predictable and unique it could be branded “Trump Logic.” First, he confidently makes an assertion that often oversimplifies or ignores the truth of the matter. He builds upon that soft foundation with an act of clairvoyance, claiming to know what large groups of people fear, or at whom they laugh, as proof that his original assertion was true. Finally, he closes the deal by making clear that disagreeing with his un-facts or his psychic vision is prima facie evidence of stupidity.

Because his businesses were organized as partnerships, the results all flowed directly to his personal tax return. For 1986, Trump reported income from his core businesses of negative $68.7 million. It was not an anomaly. He carried over another $42.4 million in losses from the prior year. He reported $2.7 million in wages, a salary he had paid himself.

When we asked Trump about those staggering losses, he attributed the red ink to depreciation, a provision in the tax code that can allow owners of real estate to reduce their taxable income over time by the amount they spent on a building, excluding the cost of the land. But Trump had not spent enough on buildings he owned to generate that much of a deduction for depreciation. The truth was that Trump was hemorrhaging cash, largely from massive interest payments. But it was all other people’s cash. His entire operation, and his lifestyle, was a float. He was living, and creating a phony image, on borrowed money. And he was only warming up.

He called a reporter for the Reno Gazette Journal, the paper he had delivered as a boy, and raised the possibility that Donald Trump, a bigshot from New York City, was a greenmailer. “Greenmailer” is a term for a suit-and-tie version of a blackmailer, someone who buys a large chunk of a company’s stock and holds it hostage, implicitly or explicitly threatening a hostile takeover, until the company’s executives pay a ransom to ward off the attack, buying back the stock at inflated prices. Bible told the reporter that Trump had hobbled Holiday with a bluff and now looked to be heading in the same direction with Bally.

While the page-one article was framed around “Mr. Trump’s rise as a raider,” it mentioned his penchant for causing a stock price to rise by threatening a takeover and then selling to pocket the easy money.

By then, Trump’s lack of due diligence in major transactions, his belief that his instinct triumphed over in-depth analysis by anyone else, had become a defining characteristic. It was what stood out to Holiday executives when they partnered with him on the Plaza casino. It was what determined the fate of the USFL. It was why his plan to nearly triple the size of the previously approved project at the West Side rail yards had stalled and become increasingly costly.

Then, in one room, his eye turned toward a table with a telephone, a particularly dated European model, with an ornate receiver sitting in a fussy cradle. Walker watched as Trump turned red. Here it comes, he thought. Trump began raging, cursing, and screaming about how much he hated those phones and wanted them gone. Then he picked up the phone and, swisssshhhh, threw it across the room. It zipped past Walker and smashed into a wall. With the yacht crew sheepishly looking on, Ivana stepped in to calm him down.

Walker knew less about jets that he did about giant yachts, but he had advised Trump not to buy the airline.

Lots of typos like this in the book.

In about a year, Trump had taken on almost $1.7 billion in new debt between the Taj Mahal, the Plaza Hotel, Trump Shuttle, and Trump Palace, and none of them were producing enough profit to cover his interest payments. He was paying more than $20 million a year in carrying costs on the fallow West Side rail yards. He had performed little due diligence on the profit potential of anything he bought. He increasingly substituted his lenders’ judgment for his own.