Trump’s Dominican partners also struggled to make their luxury resort a reality. “Like most second home real estate developments, our cash situation over the last year and a half can only be described as precarious on the best of days and more akin to bungee-jumping than textbook cash management,” one of the partners wrote to Trump’s son Eric, begging for more time to remit licensing payments. “You are being paid sooner and faster than ANY of our senior secured lenders.” Though Donald Trump had been paid millions for the project, including a $4 million payment when the deal was signed, he sued in 2012, alleging the Dominican project owed him $14 million more. The suit was settled in 2013.
Ultimately, lawsuits proliferated across Trump’s licensing empire. Trump was sued by people who lost down payments at failed projects in Baja, Mexico, and in Tampa. After each failure, Trump and his representatives said the billionaire had merely lent his name to the project and had no responsibility for development. Garten, the attorney, said Trump’s role in such endeavors was clear to anyone who read the legal documents. But several licensing agreements included confidentiality contracts, barring his partners from revealing the details, or even existence, of the licensing deal. At times, Trump and son Eric also said they had made equity investments in projects in which they had not. “This building is largely owned by me and being developed by me,” Trump wrote about the Trump International Hotel & Tower in Waikiki, Hawaii, in a letter to the Wall Street Journal in 2007. Trump did not own the building, largely or otherwise. Nor was he developing it. Asked about the discrepancy, Trump declared in a sworn deposition that he held “such a strong licensing agreement that it’s a form of ownership.”
A few months after his father was confronted with this statement, Eric Trump announced at a news conference in Puerto Rico that his family would make a “very substantial equity contribution” in a golf course and resort project on the north coast of the island. But documents filed when the project went bankrupt in 2015 showed that Trump held no equity in the project. Eric Trump later said the family had planned to buy units at the resort, but “deals can change over time.”
Still, the benefits to the Trumps were enormous. The deals were thick with contract provisions that redounded to Trump’s favor. If the project failed or the developer went bankrupt, Trump could walk away. The same was true if construction lagged or if Trump decided a project was not living up to his high standards. He was allowed to demand changes—higher ceilings, larger windows—to meet these standards, with the partners footing the bill for modifications. Trump typically agreed to attend a handful of marketing events for his branded buildings, but his contracts ensured that the cost of his first-class accommodations would be paid by someone else.
• • •
IN FORT LAUDERDALE, A new Trump-branded condominium building launched in early 2005 would ultimately reveal the full range of the Trump real estate experience. It started with bravado, high hopes, and high prices. But the optimism ultimately fell victim to the real estate recession and seemingly endless claims and counterclaims in multiple courtrooms.
J. Michael Goodson seemed like the kind of person who’d be immune to inflated marketing pitches. A high-powered lawyer and businessman, Goodson decided in 2004 that he wanted to invest in a part-time home in South Florida, where his high-tech, New Jersey–based plastic-welding company, Crest Ultrasonics, had established a rapidly growing Southern base. Late that year, he met one of his classmates from Duke University School of Law for dinner at the Trump International Hotel & Tower in Manhattan, near Columbus Circle. The classmate had bought a condo in the Trump building and was pleased with the investment. As they enjoyed the fine cuisine and impeccable service at a restaurant in the hotel, the friend urged Goodson to take a look at Trump properties.
On his next trip to Florida, Goodson visited the beachside site of the planned 298-room Trump International Hotel & Tower in Fort Lauderdale. The building was designed as a hotel-condominium, in which owners could rent out their units like hotel rooms when they weren’t using them. It seemed perfect for Goodson, who planned to live in Florida a few months of each year. Soon, Goodson, back home in Princeton, New Jersey, began receiving promotional material from the Fort Lauderdale project. An elegantly boxed package of information included a signed letter from Trump calling the planned tower “the finest and most luxurious experience I have created.” Trained as an accountant before going to law school, Goodson had worked on Wall Street deals. He studied the polished sales literature, which touted Trump as the project’s developer. “It is with great pleasure that I present my latest development, Trump International Hotel & Tower, Fort Lauderdale,” read another promotional letter that Trump signed.
Goodson had his eye on a unit on the same level as the planned outdoor pool, overlooking the beach. Goodson believed Trump’s name, associated with high standards, would command top dollar. So in 2005, he wrote a check for $345,000 to reserve his new Trump residence. Trump’s reputation and the Fort Lauderdale tower’s luxury design attracted other high-end investors, including savvy real estate consultants. It drew working-class and middle-class buyers, too. A used-car dealer from Maryland, Michael Leo Rousseaux, made a down payment after bringing home marketing material to show his mother, Sheila, an eighth-grade special education teacher. Rousseaux couldn’t afford an oceanfront condo, but he wanted to own in a Trump building, his mother later said, and thought he could manage a more modest unit, facing the street. When Michael was killed a few months later in a dispute with a former customer, his parents and siblings decided to honor his dream and continue making payments on the Trump condo.
A condo at the Hotel & Tower was also a stretch for Naraine Seecharan, who owned a small Coral Springs, Florida, air-conditioning firm and had previously managed McDonald’s restaurants in the Washington, DC, area. Seecharan dreamed of getting rich through smart real estate investments, just as Trump had done. So he took out a private equity loan against his home and four rental properties he owned to make a $289,000 down payment on a unit in the Fort Lauderdale building. Seecharan said he and his wife were comforted by the letters from Trump, and a silver key ring from Tiffany’s adorned with the Trump name, which they received after making their second payment. “You can’t lose,” Seecharan thought to himself. After all, the sales agent told him repeatedly throughout 2005 that his developer was Donald Trump.
In April 2006, a crowd celebrating the Fort Lauderdale project gathered around Donald Trump and his son Don as they arrived in a black limousine at the historic Bonnet House, a Caribbean-style mansion on the Intracoastal Waterway. The Haitian-born rapper Wyclef Jean entertained the several hundred real estate agents, contractors, and buyers. Jean said he was eager to learn from Trump: “He’s real tough when it comes to business. I’m like a sponge right now. I know I can pick up things from him.” The rapper, who would a decade later denounce Trump’s comments about immigrants, wrote a few desultory lines for the guest of honor and sang them before Trump and his entourage came to the microphone: “I’m at the Trump International, in Fort Lauderdale. Yo! I landed in Fort Lauderdale. I gave Donald Trump a call.” Applause and cheers rippled through the audience as Trump took the stage and said, “We are celebrating tonight with the people that purchased, with the brokers, with everybody who has made the job such a success.”
But the saturated Florida condo market was already showing signs of trouble. A development official took the microphone to announce that the next agent to sell three units in the Trump International Hotel & Tower would receive a special incentive—diamond cuff links just like the ones Trump wore that night.
Within three years, the lavishly promoted project would grind to a halt amid a thicket of lawsuits and recriminations. The actual developers, SB Hotel Associates, had been struggling to pay the $139 million construction loan they had secured in December 2006, just as the market had begun to slide. The lender, Corus Bankshares of Chicago, failed in 2009 in part because the institution had made so many loans in South
Florida, which saw the worst of the nationwide real estate recession. Construction on the partially completed Trump Tower stopped in 2009, after Corus Bankshares went under. A successor company, Corus Construction Venture, bought the unfinished building in 2012 at a foreclosure auction, assuming the project’s $166 million debt. Work on the project resumed, but slowly; it was not scheduled to open to hotel guests until early 2017. Trump’s response was familiar to buyers at projects around the country that had failed during the recession: he distanced himself, saying he had merely licensed his name to the building and held no ownership stake—or responsibility for its failure.
“The world is ending for me,” Seecharan thought when work on the project stalled.
“I panicked,” recalled Sheila Rousseaux.
Garten, Trump’s lawyer, advised complainers to contact the developers. After all, he explained, that was the entity from which buyers had agreed to purchase their units. Formal documents never indicated they were buying from Trump. Condo buyers learned all kinds of details about their investment that hadn’t arrived with their Tiffany key chains. Not only was Trump not the project’s developer, but a local ordinance prevented condo owners in hotel buildings from using their units for more than ninety days a year. And one of Trump’s partners—a member of the building’s actual development team—had pleaded guilty in a major Wall Street fraud case involving Mafia crime families. That partner, Felix Sater, was a Russian immigrant who was once convicted of stabbing a man in the face with the stem of a broken margarita glass. In 1998, he pleaded guilty to involvement in a penny-stock fraud scheme orchestrated by the mob. But Sater was spared prison time in recognition of “extraordinary cooperation” he provided to the FBI in a series of secret operations. Sater was a top executive in the New York development firm Bayrock Group, which had first pitched the Fort Lauderdale project to Trump. But his criminal past was not revealed to partners and condo buyers. Trump said he, too, had no idea Sater had been convicted in the mob scheme; the conviction had been kept under seal by federal authorities to protect Sater’s status as a cooperating witness. Trump said he barely knew Sater when he agreed to join forces. “If he were sitting in the room right now, I really wouldn’t know what he looked like,” Trump said.
But in a 2008 deposition in a libel suit, Sater claimed he and Trump were “friendly” and that he frequently went to the tycoon’s office, located two floors above Bayrock’s in Trump Tower, to discuss possible development projects from Los Angeles to China. “Anybody can come in and build a tower,” Sater remembered explaining to potential investors. “[But] I can build a Trump Tower because of my relationship with Trump.” Sater said Bayrock had a one-year exclusive deal to get a Trump Tower project going in Moscow, where he worked with Trump on a proposal to build on the site of a shuttered pencil factory. Sater said the relationship was so close that Trump asked him to accompany Donald Jr. and Ivanka around Moscow on their 2006 trip to the Russian capital. (Garten, the Trump lawyer, said Sater met up with the adult Trump children simply because they were both traveling to Moscow, and that Trump only had a business relationship with Bayrock. He was adamant that Trump did not have a relationship with Sater, only with his company, Bayrock.)
More than a hundred buyers at the Fort Lauderdale hotel filed suit, arguing that Trump had defrauded them by failing to disclose key information about the project. Many investors were angry that Trump could walk away, pocketing millions in fees while never having invested his money in the deal. “We were all screwed in this deal, but he made out,” Seecharan said.
The litigation revealed Trump’s aggressive style with critics, complainers, and even former collaborators. When the Fort Lauderdale case began, Trump signed an agreement with the developers, SB Hotel Associates, to jointly defend the project if it became the target of lawsuits. In late 2012, SB Hotel Associates, representing the two firms that developed the project, negotiated a settlement with buyers, reimbursing a portion of their initial down payments, minus legal fees. Trump refused to join the settlement, filing suit to block it and to penalize the SB Hotel group for breach of contract. In one Broward County, Florida, case, a circuit court jury found in 2014 that Trump had not defrauded the buyers, and most other cases were settled by 2016, as Trump shrugged off the last remnants of the historic real estate crash.
• • •
IN 2006, TRUMP HAD been filled with optimism about the housing market. Residential real estate prices had been soaring across the country for years, as properties were flipped and reflipped, many snatched by buyers with mortgages they should never have been granted. Many borrowers had taken subprime loans with low teaser rates designed to escalate after a few years—a disaster in the making for borrowers with stagnant incomes. So, on April 6, 2006, Trump announced at a press conference that he was betting on a real estate boom. He had created a lending company he believed would transform the industry and sweep the country: Trump Mortgage.
As tourists snapped photos from Trump Tower’s atrium escalators, Trump declared that his new company had “what a lot of people are saying is the hottest brand in the country—in the world.” Trump’s son Donald Jr. had arranged for an acquaintance, E. J. Ridings, to be chief executive. Ridings boasted that the new company would “own New York” and expand to all fifty states. Trump said he expected business to be great. “If it’s not, E.J., you’re fired,” he said, echoing his famous line from The Apprentice. It all sounded great to Jan Scheck, the company’s national sales director. As Scheck stood onstage alongside Trump, he felt lucky to be working with “somebody who is a god in the real estate industry,” he recalled years later. “Everybody wanted to be Donald Trump. Donald was putting his name on buildings all over the country.”
Trump appeared on CNBC to hawk his new product, and anchorwoman Maria Bartiromo sounded skeptical. During the interview, the network showed graphics illustrating uncertainties in the market that Trump was entering. The first graphic showed good news: “Existing Home Sales Rose 5.2 Percent in February.” The second was downright alarming: “New Home Sales Fell 10.5 Percent in February; Biggest Drop in 9 Years.” Trump scoffed at the numbers: “I always get a kick when I watch the great economists talking about where rates will be in a year from now and two years from now. And they have no idea what’s going to happen. . . . Assuming rates stay where they are and even go just a little bit higher as opposed to a lot higher, we’re in very good shape. . . . It’s a great time to start a mortgage company.”
Trump Mortgage offered residential loans with promises of quick approvals. It recruited aggressive salesmen and set up several satellite offices. Trump gave the business a floor of his building at 40 Wall Street, part of which was a boiler room where salesmen hawked subprime loans; another wing was dedicated to what were known internally as “boutique” sales, targeted at better-qualified, high-income borrowers. A photo of Trump appeared atop the company website with the instruction “Talk to My Mortgage Professionals Now!” Seeking synergy across his business empire, Trump wrote language into the deal for at least one of his licensed properties—a vacation complex in the Dominican Republic—requiring the project’s developers to urge buyers to try to get a Trump-related mortgage.
Trump could not have been more wrong about the housing market. He had created his mortgage company just as the market was starting to crash. Within eighteen months of Bartiromo’s warnings, the experts’ worst fears came true and home prices plummeted. Trump Mortgage closed, leaving some bills unpaid. In its first year, the venture brought in less than a third of the $3 billion that the company’s CEO initially had predicted.
Seven million Americans would lose their homes during the Great Recession, which overlapped the presidencies of George W. Bush and Barack Obama. The financial crisis reverberated for years, resulting in an economic dislocation that would become a major issue in the 2016 presidential campaign. (Trump said years later that he had known that the housing market “was a bubble that was waiting to explode. . . . I told a lot of people
. And I was right. You know, I’m pretty good at that stuff.”) The blame for Trump Mortgage’s failings lay elsewhere, Trump insisted at the time. “The mortgage business is not a business I particularly liked or wanted to be part of in a very big way,” he said, explaining that he had put his name on a mortgage operation managed by others.
His handpicked CEO, Ridings, had inflated his résumé, overstating his Wall Street experience, according to a 2006 story in Money magazine. Ridings had described himself as a “top professional” in one of Wall Street’s most prestigious investment banks, but the magazine reported that he had actually worked in the brokerage division of Morgan Stanley for just a few months.
Trump wasn’t done with the lending industry, but his next move signaled a shift in his financial vision. When a company named Meridian Mortgage asked for his backing in 2007, he agreed to let it be renamed Trump Financial. “We think [Meridian] will do a better job,” he said at the time. The deal gave Trump a licensing fee without risking his money. The company, like Trump Mortgage, soon ceased operations. But, thanks to the fees he collected, it was not a failure for Trump.
• • •
IN 2009, TRUMP LICENSED his name to a program he said would let other people “opt out” of the recession, too. In that year, he launched Trump Network, bringing a new name to an ambitious multilevel marketing organization previously called Ideal Health, which specialized in selling a vitamin-supplement regimen based on a purchaser’s urine test. Many employees at Trump Network thought Trump would play a significant role in the organization, but in fact he again received a large fee for use of his name and occasional promotional activities.
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