The Making of Donald Trump (19 page)

Nearly two hundred people bought in, putting down more than $22 million in deposits in 2006, confident that the project was about to get underway and that before long they would move into their beachfront property and enjoy the security of a smart investment in a Trump-developed resort.

A June 2007 newsletter notified buyers that construction was underway. The next month, the
Trump Baja News
reported, “our new and excited homeowners now are part of an elite group of vacation homeowners who own property developed by one of the most respected names in real estate, Donald J. Trump.”

Three months later, in October, when Wall Street crashed under the weight of toxic mortgages and other Baja real estate projects faltered, the same newsletter carried a message “
From the desk of Ivanka Trump.” Ivanka assured the buyers that their investment was sound. “Though it may be true that some of Baja’s developments could slow down, these market conditions simply do not apply to Trump Ocean Resort—or any other Trump development,” she wrote.

Two months later, in December 2007, the newsletter advised buyers of newly discovered geological problems afflicting the building site. A few months later, in March 2008, anxious buyers received calls or letters. Construction loans had been approved,
would be funded shortly, and work would be underway. This was nine months after buyers had been told in writing that construction had already begun. Still, construction did not proceed.

All of these promotions, sales pitches, and newsletter updates created the impression that Trump was the builder and the developer, words he used. The buyers later said they bought in because Trump was the developer or builder. That understanding then changed abruptly.

The worst news arrived two days before Christmas 2008. What had previously been described as a partnership between “the Trump Organization, Donald J. Trump,” and the other people and companies involved was described in a new way. Neither Trump nor the Trump Organization were investment partners in the Trump Ocean Resort. They were not the developers, either. They had merely licensed the use of the Trump name.

The actual Baja developers, it came out later, had “obtained authority” from Trump to use his trademarked name in return for an upfront fee. Under that licensing agreement, as testimony and court papers show, Trump gave the actual developer authority to tell prospective buyers that Donald Trump was “developing” the Mexico resort, even though he later testified that he was not. The losing buyers soon filed a host of lawsuits in California, asserting fraud and collectively demanding the return of their $22 million plus lawyers’ fees and other costs.

The three people who faced the five-minute deadline to buy or walk away said in their 2010 court complaint that they went ahead only because Trump was the developer and had his own money in the deal—a belief strengthened by the statements that Ivanka and Donald Jr. were also buyers. Their lawsuit listed the Trump Organization first among the thirteen parties accused of California state securities fraud, simple fraud, negligent misrepresentation, accounting fraud, and unfair business practices.

In time, most of the lawsuits were consolidated in Los Angeles. The suits were revised and revised as new facts emerged until the fourth amended version of the complaint ran to more than 640 pages. It was filed on behalf of well more than one hundred buyers. The lawsuit detailed, by name, date, and event, each specific act of alleged deception used to get people to invest—a tactic that lawyer Daniel King said was meant to make sure there was no doubt about how pervasive the acts of deception had been.

In court papers, Trump distanced himself from the Baja deal. He insisted throughout that he never owed any obligation to the Baja buyers and had done nothing wrong.
He also declared under oath in those cases, “I, personally, do not have any employees in the State of California, own real property in California, or maintain an office in California.”

Trump in fact owned real estate in California, employed people in California, and had offices there. For years he had owned and operated his golf course on the Palos Verdes Peninsula in Los Angeles County. Testifying in a Florida federal case where other buyers had accused him of fraud in a similar waterfront condominium project, Trump was asked to name all the properties he owned. “Trump National Golf Club Los Angeles, I own that,” he testified.

The crucial word in that California sworn statement was “personally.” Trump did not own his California properties personally in the sense that most homeowners have their own names on the deed. Trump owned the golf course and employed people through a corporation, a corporation under his absolute control. Trump’s lawyer at Trump National Golf Club Los Angeles was included on the list of people served with every document in the Baja litigation.

Daniel King, Bart Ring, and other lawyers for more than
one hundred of the buyers eventually made a deal with one of the non-Trump parties to pay back more than $7 million, a third of the buyer deposits. The Trump side objected that the deal was unfair to them and would leave them “holding the bag” for the other $15 million of deposits plus costs.

Trump’s lawyers told the judge that his family and businesses never touched those deposits. The problem, they said, was that the
actual
developers did not have enough capital to complete the project. Trump’s lawyers accused the real developers of misusing the deposits for personal gain by extinguishing personal debt guaranties related to the Trump Ocean Resort project. The license to use the Trump name, the Trump side pointed out, specifically prohibited Trump and his organization from doing any sort of developmental work. It barred them “from even inspecting the property on less than ‘twenty-four hours notice’ and required them to not ‘interfere with the operation of the property.’ ”

“People who gravitate toward luxury brand name products do so because they expected superior quality and design,” Trump’s lawyer wrote. “They do not, however, believe that the designers are doing the ‘dirty work.’ ” Furthermore, the lawyers wrote, while the buyers claimed that they were tricked into believing “that the Trump parties were the developer of the project,” the buyers “could not have believed that Donald Trump would be on-site in Mexico overseeing construction or collecting their deposits …

“
More importantly,” the Trump lawyers continued, the license to use the Trump name “was disclosed to the plaintiffs when they entered into their contracts” and in the statement of how the condominium would be governed.

Trump’s lawyers made no mention of testimony from buyers that they were given just minutes to sign the purchase
and other documents, leaving no time to read them or ask questions about the several pages of arcane legal details.
The only duty the Trump parties had, their lawyers wrote, was “to ensure that the standards of design and quality with the ‘Trump’ name were met, not to grade soil, dig ditches or collect deposits.”

Trump, his organization, and his two children settled with the buyers.
The court sealed the terms of the settlement.

Trump had been through all this before. A 2006 press release described Trump as “co-developer” of the Trump International Hotel and Tower at Waikiki Beach Walk, and a “partner” in the project. Reporters were told that the winner on Trump’s television show,
The Apprentice
, would be “project manager overseeing development for Trump.”
Trump boasted that the combination of his name and Waikiki would be “setting a new standard of luxury.” In late 2006, he bragged about “the biggest one-day sale in real history in the world” when buyers signed contracts totaling more than $700 million for 464 apartments.

Nearly three years after this successful one-day sale, when buyers were due to make the final deposits on their apartments, they received a brochure titled
Trump Waikiki Life, Owners Edition 2009
.
On page twenty-three of the brochure, in what a lawsuit later described as “micro-script that can barely be read without a magnifying glass,” people who had already signed sales contracts received troubling news: the Waikiki tower bearing the Trump name, in which many had invested their life savings, “is not owned, operated, developed or sold by Donald J. Trump, the Trump Organization,” or any affiliated business. Trump had merely licensed his name.

Hawaii state law (like California and federal securities laws) protects buyers from false and misleading sales pitches. Hawaii law requires disclosure of all material facts to buyers. Trump’s status as a mere licensor was obviously material to making an investment decision based on the supposed value the Trump name would add to the building.

But the licensing was not the most disconcerting fact that had been hidden. Long after they had made their deposits and signed contracts, the buyers discovered provisions in the Trump naming license that could jeopardize the future value of their apartments. Trump had reserved the right to take his name off the building. According to Trump’s own statements, it was his name on the building that made the apartments so valuable; without it, the apartments would be worth much less. Furthermore, if Trump ever withdrew his name, he was free to put it on another building—even one right next door. This was crucial information to buyers looking to make a smart investment.

The lawsuit called this conduct unconscionable, citing more than twenty material facts that it said were improperly hidden from buyers. As with the Baja fraud suit, a settlement was reached and then sealed by a judge.

And in another Florida case (filed over a never-built Tampa high rise), buyers finally obtained a copy of the licensing agreement under court order. The licensing agreement stipulated that its very existence was to be kept secret—not just the specific terms of the agreement, but the existence of a licensing agreement in general. The agreement indicated that a Trump business was paid a $2 million upfront fee for use of the name.

In testimonies, Trump has named fourteen properties that are straight licensing deals and three others in which he also gets some profits or is a partial owner.
In the Tampa case, Trump was asked about disclosures in other licensing deals:

“Do you, sir, or your company disclose to those buyers that you’re merely licensing your name?” a lawyer asked.

“I think in some cases we do,” Trump responded. “I am just not sure.”

Another lawsuit was filed over a Fort Lauderdale hotel-and-apartment project that, at fifty-two stories, was to be the highest tower on the Florida Atlantic coast.
Those buyers received a sales brochure with Trump’s picture and the statement “It is with great pleasure that I present my latest development, Trump International Hotel and Tower Fort Lauderdale.” Buyers also got hardcover books that announced on the first page: “A Signature Development by Donald J. Trump.”
The project failed and buyers wanted their deposits back. At trial in 2014, Trump testified that he had never claimed to be the developer and had no liability. “The word
developing
doesn’t mean we’re the developer,” Trump said. The civil jury agreed. One of the buyers was still pursuing an appeal when this book was completed.

I
t was almost four o’clock in the morning and Donald Trump couldn’t sleep. For hours he had nervously paced the floor of his Trump Tower apartment, insisting on a call every thirty minutes with updates on the progress of a baccarat game in his first Atlantic City casino.

What kept Trump up all night was a Japanese gambler with a serene smile, a white shirt open at the collar, and gray wool slacks with pockets as big as bank vaults. Akio Kashiwagi was one of the world’s five biggest gamblers, literally a one-in-a-billion customer, who at that late hour in May 1990 was sitting at a green-felt table at Trump Plaza Hotel & Casino calmly wagering $14 million an hour. He had been there for nearly a week.

Al Glasgow—a gravel-voiced concrete contractor who used to drink mob lawyers under the table in the days before he became one of Trump’s closest advisers—called Kashiwagi “The Warrior.” As the long hand on Glasgow’s wristwatch approached
the top of another hour, he stepped from behind the low black marble wall that separated the high-roller tables from the rest of the gambling floor and rang the boss in New York.

“He’s up four point two,” Glasgow said, not needing to add the word
million
.

Trump’s anxiety would have been no surprise to those in the gaming world. Competitors (and even executives who worked for Trump) loved to swap stories about what he didn’t know about the gambling business, from the odds of specific bets to the internal controls required to make sure no cash was skimmed off the top when the day’s winnings were counted. And they loved to dish on Trump’s awkward and uninviting behavior around gamblers.

The contrast between Trump and his rival, Steve Wynn of the Mirage resorts empire, was the sharpest. Wynn, a man of ego as monumental as Trump’s, built a fortune as an expert card player possessed of a deep understanding of every casino game. His finely polished social skills matched his status as a world-renowned casino impresario.

Wynn would stroll through his casinos and restaurants with a small but informed entourage that fed him specific details about the next player they would encounter. He would approach a gambler, address him or her by name, and with a subtle flourish personally hand over the keys to a complimentary suite. Those few graceful moments gave the Indiana businessman or Georgia housewife who had come to a Wynn casino a valuable gift—bragging rights back home:
Steve Wynn personally gave me the key to my suite
. Wynn had perfected the art of efficiently making good customers feel special, building customer loyalty and attracting new players at far less cost than television advertising or paying junket organizers, though he used those too.

In contrast, Trump was often awkward with big customers. His germophobia kept him from shaking hands, and instead of flattering the customer, Trump typically turned conversations from the gambler to his own greatness.