Yesterday, the NY Times published a bombshell story describing in great detail how much of Il Trumpe’s fortune was built on his father’s wealth and tax fraud. This part makes you think (boldface mine):
One of the first steps came on Aug. 13, 1992, when the Trumps incorporated a company named All County Building Supply and Maintenance.
All County had no corporate offices. Its address was the Manhasset, N.Y., home of John Walter, a favorite nephew of Fred Trump’s. Mr. Walter, who died in January, spent decades working for Fred Trump, primarily helping computerize his payroll and billing systems. He also was the unofficial keeper of Fred Trump’s personal and business papers, his basement crowded with boxes of old Trump financial records. John Walter and the four Trump children each owned 20 percent of All County, records show.
All County’s main purpose, The Times found, was to enable Fred Trump to make large cash gifts to his children and disguise them as legitimate business transactions, thus evading the 55 percent tax.
The way it worked was remarkably simple.
Each year Fred Trump spent millions of dollars maintaining and improving his properties. Some of the vendors who supplied his building superintendents and maintenance crews had been cashing Fred Trump’s checks for decades. Starting in August 1992, though, a different name began to appear on their checks — All County Building Supply & Maintenance.
Mr. Walter’s computer systems, meanwhile, churned out All County invoices that billed Fred Trump’s empire for those same services and supplies, with one difference: All County’s invoices were padded, marked up by 20 percent, or 50 percent, or even more, records show.
The Trump siblings split the markup, along with Mr. Walter…
While All County was all upside for Donald Trump and his siblings, it had an insidious downside for Fred Trump’s tenants.
As an owner of rent-stabilized buildings in New York, Fred Trump needed state approval to raise rents beyond the annual increases set by a government board. One way to justify a rent increase was to make a major capital improvement. It did not take much to get approval; an invoice or canceled check would do if the expense seemed reasonable.
The Trumps used the padded All County invoices to justify higher rent increases in Fred Trump’s rent-regulated buildings. Fred Trump, according to Mr. Walter, saw All County as a way to have his cake and eat it, too. If he used his “expert negotiating ability” to buy a $350 refrigerator for $200, he could raise the rent based only on that $200, not on the $350 sticker price “a normal person” would pay, Mr. Walter explained. All County was the way around this problem. “You have to understand the thinking that went behind this,” he said.
As Robert Trump acknowledged in his deposition, “The higher the markup would be, the higher the rent that might be charged.”
State records show that after All County’s creation, the Trumps got approval to raise rents on thousands of apartments by claiming more than $30 million in major capital improvements. Tenants repeatedly protested the increases, almost always to no avail, the records show.
One of the improvements most often cited by the Trumps: new boilers.
“All of this smells like a crime,” said Adam S. Kaufmann, a former chief of investigations for the Manhattan district attorney’s office who is now a partner at the law firm Lewis Baach Kaufmann Middlemiss. While the statute of limitations has long since lapsed, Mr. Kaufmann said the Trumps’ use of All County would have warranted investigation for defrauding tenants, tax fraud and filing false documents.
Don’t think Il Trumpe is the only large scale landlord doing this. Even without overt fraud, subcontracting in a variety of areas is a potential problem:
And it’s not just a single subcontract: sometimes these things end up looking like those Matryoshka dolls. One contractor hires contractors, who hires contractors. Leaving aside whether the work itself is shoddier under this system, every subcontractor gets a profit markup (they’re not doing this at cost). I’ve never dived into large infrastructure contracts (and have no desire to do so), but I suspect this plays a big role in why infrastructure costs are so high in the U.S.
Throw tax evasion, fraud, and so on into the mix, and it’s really easy to commit white collar crime. Whenever we don’t prosecute white collar crime, it always ends up hurting people, not just in the short term, but in the long run. A Democratic president (hoping for 2021!) along with Democratic attorneys general need to make this a top political priority.