04-10-2018, 06:44 PM
NERMEEN SHAIKH: The New York State Department of Taxation and Finance has opened an investigation of President Trump for fraud and tax evasion, following a major exposé by The New York Times. New York City Mayor Bill de Blasio has also called for a city probe, and Democratic Senator Ron Wyden has urged the IRS to investigate the president.
The Times revealed Trump inherited much of his family's wealth through tax dodges and outright fraud, receiving at least $413 millionin inflation-adjusted dollars, that isfrom his father's real estate empire. The _Times_' 13,000-word investigative report found the late Fred and Mary Trump transferred more than $1 billion in wealth to their children, and much of it to Donald Trump, paying less than 5 percent of the $550 million in taxes they should have under inheritance tax rates. As part of a scheme to reduce taxes, Donald Trump also helped his parents undervalue real estate holdings by hundreds of millions of dollars in IRS tax returns.
AMY GOODMAN: The New York Times also reports Trump earned $200,000 a year in today's dollars from his father's companies beginning at the age of 3, with a salary that increased to $1 million a year after Trump graduated college and to $5 million a year when Trump was in his forties. Over the years, Trump has repeatedly portrayed himself as a self-made billionaire whose only head start was a "small loan of a million dollars," he would say, from his father.
AMY GOODMAN: The Times article was based on public records as well as tens of thousands of confidential documents, including bank statements, financial audits, accounting ledgers, cash disbursement reports, invoices, canceled checks. The documents include more than 200 tax returns of the late Fred Trump, but do include the president's personalthey don't include the president's personal tax returns, which he has refused to release. White House Press Secretary Sarah Huckabee Sanders responded to the article during Wednesday's press briefing.
Welcome to Democracy Now! So, you have been attacked by the White House for what you've done, the piece they call old and boring. Tell us firstI mean, this is a massive piece, which is being reissued on Sunday, is that right, by The New York Times?
DAVID BARSTOW: Yeah.
AMY GOODMAN: Many-page piece headlined "Trump Took Part in Suspect Schemes to Evade Tax Bills." Talk about how you found this information, and what were your key findings, David?
DAVID BARSTOW: Well, first, how we found it was kind of the old-fashioned way. It was going to courthouses, scouring public records, knocking on a lot of doors and, gradually, over many months, piecing together, building this trove of documents, over 100,000 pages, by the time we were ready to publish. And I think, most significantly, in terms of for people to be able to assess this story, it's important to know that this includes literally tens of thousands of pages of never-before-seen documentation of the actual inner workings of Fred Trump's real estate empire.
NERMEEN SHAIKH: But those documentsif I could just interrupt brieflythose were confidential records.
DAVID BARSTOW: Correct.
NERMEEN SHAIKH: So you couldn't have gotten those from the public records.
DAVID BARSTOW: Yeah, you only get those by knocking on a lot of doors.
NERMEEN SHAIKH: What doors did you knock on?
DAVID BARSTOW: I'm not going to talk about that, but good try.
AMY GOODMAN: Talk about your major findings, particularly what you say is this illegal transfer of wealth.
DAVID BARSTOW: So, I think there's two core findings. One is simply that the narrative that Donald Trump has sold to the public for many decades now, the thing that made him famous, that gave him political power and that, ultimately, I think, was the central focus of his presidential campaign, is this narrative that he is a self-made billionaire. And what this story really reveals is the extent to which that just simply doesn't square with the facts that are uncovered and that we show in this story. So that's sort of, I think, point number one.
Point number two is, not only did he receive $413 million from his father, not only did he receive another $140 million in today's dollars in loans from his father, but that that amount, the amount of money, was significantly increased by a series of tax schemes that the tax experts that we consulted with in our reporting, laying this out to them, said these things go way beyond the normal tax avoidance strategies that wealthy, sophisticated people will employ in any event to lower their tax bill. This was a set of maneuvers that were actually intended to deceive the IRS about the value of things that were being given from Fred and Mary Trump to Donald Trump and his siblings.
I think those are the two main points, that there's a huge amount of money flowing, not just when he was a young man, but actually throughout Donald Trump's life, especially when he was in financial difficulties, especially when he was taking on new projects, and that that river of money was fed, very much so, by tax evasion, tax dodges.
AMY GOODMAN: Tax evasion and tax dodges, and we're going to find out just what those were. We're speaking to three-time Pulitzer Prize-winning journalist David Barstow, who has just been attacked by the White House for this massive exposé in The New York Times about how Donald Trump gained his wealth. Stay with us.
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AMY GOODMAN: That's called "Old Man Trump." The song was written, but never recorded, by Woody Guthrie. Again, by Ryan Harvey, Ani DiFranco and Tom Morello. Yes, Woody Guthrie never recorded it, but it's about his landlord, Donald Trump's father, Fred Trump. In the 1950s, Woody Guthrie lived in a Trump-owned apartment building in Brooklyn. This is Democracy Now!, democracynow.org, The War and Peace Report. I'm Amy Goodman, with Nermeen Shaikh.
NERMEEN SHAIKH: In The New York Times exposé on Trump's tax practice, the reporters referenced several reporters who did groundbreaking work on Trump's finances. One of them was the late Wayne Barrett, who wrote the book Trump: The Deals and the Downfall. He appeared on Democracy Now! in June 2016 and said Fred Trump's financial support of Donald Trump was, quote, "unbelievably crucial in Donald's rise to prominence."
DAVID BARSTOW: Yeah. So, how does a 3-year-old end up making $200,000 a year? Right? That's a good question. Here's how it worked. Fred Trumpyou know, Wayne is absolutely right that he was a really great builder in the outer boroughs, but much of his building was actually made possible through federal housing subsidies. He was actually one of the country's biggest recipients of cheap building loans basically made possible by the federal government.
And he used $26 million or so of those cheap loans to build two of his biggest apartment complexes in New York: a place called Beach Haven and another place called Shore Haven, both out in Brooklyn. These are massive, massive apartment complexes, thousands and thousands of units. And so, he was building those in the late '40s. And what he did was something quite clever. He put the land underneath the buildings into a trust and made his children the beneficiaries of that trust. And then he had the companies, his companies, that were actually building the buildings on top of the land, sign 99-year leases to pay rent to the landlordshis young children. And so what that meant was that Donald Trump, starting at age 3, was Fred Trump's landlord. He was collecting rent payments from Fred Trump's companies.
And it was this kind of maneuverright?setting up these sort of mechanisms, these financial mechanisms, that would just kind of create this automatic streams of money that would just sort of, month by month by month, would trickle into trust accounts or into partnerships and find their way, ultimately, into the pockets of his children. Fred Trump was just a genius at coming up with new ways, new revenue streams, to funnel into the pockets of his children. So he didn't just make his children his landlord, he also made his children his banker. He made Donald Trump not justdidn't just put him on the salary as a vice president of Fred Trump's companies. He also then paid him separately to be his consultant. He paid him separately to be a property manager. He paid him separately to be a purchasing agent. And on and on and on it went.
And in the course of all ofas we gathered up all of the records from inside of hisof Fred Trump's real estate empire, we started counting up: How many different revenue streams has he created for Donald Trump through the years? And we got up to 295, is what we counted, what we were able to document. Some of these things, you know, they weren't in and of themselves big money. Like, for example, Fred Trump funneled the laundry revenue from his buildings to Donald. That's not a lot of money, but when you sort of start aggregating it, putting it all together, it's just this mighty, endless river of money flowing constantly into the bank accounts of Donald Trump.
NERMEEN SHAIKH: I mean, one of the things that you do in your piece is you give a very strong sense of the extent to which Fred Trump seemed to have a special relationship with Donald Trump, because you explain that so much of the money accrued to Donald Trump as against his other children. So, you know, what did you learn about why that would be the case? And also, the principal illegalityI mean, what you spoke of, of Beach Haven and Shore Haven, the responsibility for that is Fred Trump's, and is it actually technically illegal, what he did?
DAVID BARSTOW: So, in that transaction, there's nothing illegal about that transaction that we've uncovered. That's not what I'mthat's not the point that I'm trying to make there. That's an example, though, of one of the many different ways that Fred Trump was enriching Donald Trump, starting from a very early age and continuing on up forward. I'm sorry, the other point was?
NERMEEN SHAIKH: The question about the relationship between Fred and Donald
DAVID BARSTOW: Yes.
NERMEEN SHAIKH: because why did he give so much money to
DAVID BARSTOW: So, Fred Trump had an older son, Fred Trump Jr., who initially was kind of going to be the heir apparent, right? And Fred Trump was interested inyou know, he really wanted to pass this dynasty on to one of his children, and Fred Jr. was sort of the first kind of natural heir apparent as the oldest son. But he didn't have the passion for the business. He had other interests. He liked to fly airplanes. He loved music. Fred Trump, the father, considered Fred Trump, the son, to be a little too soft, a little too nice. And before long, it became clear that he was not going to be the heir apparent. The heir apparent was going to be Donald Trump.
And Donald Trump was very aware of his father's disapproval of Fred Jr. He witnessed this. Fred Sr. could be quite cruel. And I think what we see in terms ofthis is really from the interviews with people who worked closely with Fred Trumpthey witnessed this young man, Donald Trump, sort of watching what had happened to Fred Jr. and almost forming himself into Fred Jr.'s opposite. If Fred Jr. was soft, too nice, well, Donald was going to be a shark. He was going to be a killer.
So that, I think, is sort of at the core of this father-son relationship, which is very much what this story is about. It is about a father-son relationship. These two men were extraordinarily close. Donald Trump saidwe quote him that he felt that he knew his father better than anybody else in the world. And they talked daily. They spent many a weekend together. They were in constant communication. Donald Trump was a constant presence when Fred Trump would have strategy sessions with his top lawyers, his top accountants, figuring out what his next moves were. Fred Trump was often this sort of silent, lurking presence at Donald Trump's big flashy press conferences. And so, they were thisit was more than just a father-son relationship. It was also a partnership.
AMY GOODMAN: It's interesting you talk about the amount of federal grants that Fred Trump got, and interesting that just as Donald Trump came into the business, they were sued because they were getting federal support and they were discriminating against African Americans. But I wanted to go back to read from your report, David Barstow. You write, "The most overt fraud was All County Building Supply & Maintenance, a company formed by the Trump family in 1992. All County's ostensible purpose was to be the purchasing agent for Fred Trump's buildings, buying everything from boilers to cleaning supplies. It did no such thing, records and interviews show. Instead All County siphoned millions of dollars from Fred Trump's empire by simply marking up purchases already made by his employees. Those millions, effectively untaxed gifts, then flowed to All County's ownersDonald Trump, his siblings and a cousin. Fred Trump then used the padded All County receipts to justify bigger rent increases for thousands of tenants." David?
DAVID BARSTOW: Yeah. This is something where, when Donald Trump says this is old news, I can tell you that no one had ever heard of All County Building Supply & Maintenance. It has never been written about, described anywhere. And this is actually kind of remarkable in a way. When we were peeling back the layers on this, it felt like one of these sort of gritty scams that you might see in The Sopranos, right? It is setting up this company to make basically huge cash gifts from Fred Trump to his children look like legitimate business transactions.
Let me give you just a really simple example. This is one that we describe and we actually show in the story the actual invoices and purchase orders, so you can all see for yourself exactly what I'm talking about. So they set up this company, All County Building Supply & Maintenance. It's not a real company. There's no corporate offices. It's actually headquartered in the basement of Fred Trump's favorite nephew. The owners of All County Building Supply, though, were Fred Trump's four children and his nephew. And all that happened wasso Fredany time Fred Trump was going to improve his buildings, he had to buy stuff, right? And in this case, soon after they formed this company, they bought 60 boilers60 big, expensive boilers from a company in the Bronx. Fred Trump himself personally negotiated the purchase price of these boilers, hundreds of thousands of dollars worth of boilers.
The man who sold Fred Trump these boilers, Leon Eastmond, told me in an interview that one day, he comes back to his office and there is an envelope, and there is a check, a huge check, from this company, All County Building Supply. He's like, "Who the heck are these guys?" Never heard of them, didn't know who they were. And what that was was All County Building Supply was paying him the price that Fred Trump had negotiated, but then All County Building Supply would turn around and would send an invoice to Fred Trump for the very same boilers, but the invoice was padded, marked up 20, 30, 50 percent more. So all it was doing, it was basicallyit was just an invoice-padding operation. It was taking the things that Fred Trump was already buying and adding 20, 30, 40, 50, 100 percent more, and then charging Fred Trump. Fred Trump was effectively overcharging himself; that's what it looked like on paper. But in fact, all of those profits are than flowing directly to his children. That's point number one.
AMY GOODMAN: And he's not just a child. Donald Trump was like 46 when All County was set up.
DAVID BARSTOW: Yes, absolutely. And this was part of a fairly well-considered and orchestrated strategy that the Trump family came up with when they realized, you know, Fred Trump is getting up there in age, he is starting to suffer some ill effects, dementia, other problems, and they're realizing if he dies, all of his empire, all of the buildings and huge amounts of cash sitting in his accounts, those are going to be subject to a 55 percent tax, inheritance tax.
So the idea was, "Well wait a minute, how do we pull that cash out of the empire before it gets taxed 55 percent? How do we shift all of those buildings into our pockets before they get taxed 55 percent?" In this case, I think one of the things in the All County Building Supply caseand I think it helps you sort of see at least the mindset hereis not only do they come up with this ruse basically to disguise cash gifts as legitimate business transactions, but then they submitted those padded invoices to the state regulators who govern rent increases in New York, and they used those inflated invoices in order to justify rent increases for thousands of the tenants who lived in Fred Trump's apartments. Mostly we're talkingthese are working class, middle class folks who are seeing their rents go up five, $10, $15 a month in part because of these inflated invoices from All County Building Supply & Maintenance.
NERMEEN SHAIKH: And can you speak specifically about the Starrett City development in Brooklyn, which Fred Trump made an investment in, in the 1970s?
DAVID BARSTOW: Yes. So Starrett City is really one of the largest federally subsidized housing developments in the country. It's massive. It's even bigger than Fred Trump's apartment complexes. And in the 1970s when they were trying to build Starrett city, they needed some extra money, so they were looking for private investments. It was basically going to be this investment that would create huge tax losses. That's why rich people wanted to get in on Starrett city; it would create huge tax losses. So Fred Trump could use his losses at Starrett City to shelter all of his profits from his empire.
So he made an investment into Starrett city, but he also made an investment for his kids as well. And so Donald Trump, starting at a very early age, was getting these huge tax breaks from Starrett City. In fact, those tax breaks helped him avoid paying any federal income taxes at all in the late 1970s. And then of course, as time progresses, Starrett City is now worth a heck of a lot of money. It recently sold for nearly $1 billion. In fact, that investment that Fred Trump made way back in the 1970s is going to give Donald Trump a windfall of $16 million this year.
AMY GOODMAN: Before we go to break, how much money would you say Fred Trump avoided in taxes?
DAVID BARSTOW: Hundreds of millions of dollars.
AMY GOODMAN: I think you said $50 million instead of half a billion?
DAVID BARSTOW: So yeah. I mean, it is pretty simple math, right? We see that he transferred well over $1 billion in wealth to his siblings. It's a 55 percent tax rate. So you are talking about a tax bill, an expected tax bill, of around $550 million. The tax records that we obtained show that the Trump family paid $52 million in gift and estate taxes. So rather than paying a 55 percent tax rate, they paid about a 5 percent tax rate. The question then is, how did they avoid the other $500 million? What happened to that?
First of all, just to be clear, we certainly don't say in the story and we don't allege anywhere that every penny of that was evaded money. Some of it was just usual tax avoidance measures that all rich people use. But certainly, a very significant portion of that came through tax schemes and maneuvers that the experts that we consulted with said really crossed the line.
AMY GOODMAN: We're going to go to break and then come back to this discussion. What was illegal, what was improper? David Barstow, three-time Pulitzer prize-winning investigative reporter, lead reporter on this massive 13,000-word piece investigating Donald Trump's wealth and where it came from. The title, Trump Engaged in Suspect Tax Schemes as He Reaped Riches From His Father. This is Democracy Now! Back with David Barstow in a moment.
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AMY GOODMAN: This is Democracy Now! I'm Amy Goodman with Nermeen Shaikh. Our guest for the hour is the three-time Pulitzer Prize-winning journalist David Barstow, did a massive exposé in The New York Times this week that's going to be reissued on Sunday. The New York State Taxation authority responded to the Timesreport on Donald Trump's tax practices with a statement that it is "vigorously pursuing all appropriate avenues of investigation." Meanwhile, New York Mayor Bill de Blasio tweeted, "I've directed NYC's Department of Finance to immediately investigate tax and housing violations and to work with NY State to find out if appropriate taxes were paid." The mayor told reporters he is looking to recoup any money Trump owes New York City.
DAVID BARSTOW: I think that clearly the statute of limitations is the big obstacle to any kind of criminal charges. However, we actually don't know what ended up in Donald Trump's tax returns, and so if there are things that he misreported that have their roots in some of the transactions that were described in this article, and those misrepresentations carried forward into future tax returns from Donald Trump, that could be potentially problematic, because that could maybe take the statute of limitations off the table as an obstacle.
NERMEEN SHAIKH: And then there could be a criminal prosecution?
DAVID BARSTOW: Potentially, although let's be real herethe IRS is a much-weakened agency. It has been quite devastated by budget cuts over the years. And certainly, the IRSnot talking about state authorities now; I'm talking about the federal IRShas said absolutely nothing in response to this article. I think the more realistic accountability that's there is this potential for civil fraud. There is no statute of limitations for civil tax fraud. And so bothin this case, the state tax authorities, that can be a very powerful weapon if they decide to actually use it, to go back and look at these transactions.
NERMEEN SHAIKH: Let's go to some of the mechanisms that you point to in the piece that Trump used in order to avoid paying taxes. Explain what GRATs are, and how they were used. In this video accompanying The New York Times exposé, your co-author Susanne Craig explains how Trump and his siblings came to own nearly all of their father Fred Trump's empire without paying estate taxes.
DAVID BARSTOW: GRATs are a well-established and legal instrument that's used by the wealthy to pass assets on to their children in a way that allows them to avoid estate taxes. In fact, if you watch TV, you'll often see these commercials from BDOthat are actually GRAT commercials. They do not say the word "GRAT," but when you see this
NERMEEN SHAIKH: What is BDO?
DAVID BARSTOW: BDO is this consulting firm that is actually on CNBC, MSNBCand CNN is running commercials that are effectively commercials for GRATs. And so it's a technique that when you talk to tax lawyers, they almost get a little misty-eyed about GRATs. They say, "This is like magic." These things are these incredible devices that assets go in, all kinds of financial gymnastics occur inside of them and then they sort ofassets come out and they're like free of taxes.
AMY GOODMAN: I wanted to go to another of your former colleagues, and that is David Cay Johnston, also a fellow Pulitzer Prize winner and now editor in chief at dcreport.org. He noted on MSNBC that Trump's sister, who is a federal judge, is heavily implicated in these charges of tax fraud.
DAVID BARSTOW: I think the important thing to say about this is that Fred Trump's estate tax return is a very important document. There were three executors. There were three people who signed off on that estate tax return. One was Judge Barry, one was President Trump and the third was Robert Trump, the president's younger brother. When you sign an estate tax return, you're responsible for the accuracy of that tax return, you are responsible for accurately describing the assets and you're also responsible for describing all of the gifts that were given by the person in that estate.
So what we describe in our story is that the estate tax return that the three of them signed, that the three of them vouched forthat that tax return is grossly inaccurate. It used all of the same kind techniques that we described in other parts of the story, and it did so in order to make what was left of Fred Trump's empire look miniscule. So I think that actually the fact that she put her John Hancock on that estate tax returnI think that is an area that is potentially problematic.
AMY GOODMAN: What most surprised you in what you found, David, as we begin to wrap up?
DAVID BARSTOW: The thing that I think continues to surprise me about Donald Trump is that this is this guy who has been so much in the firmament of our culture and our media for so long, and yet there is so little that we actually know about him and his finances. There's this mountain of books and interviewsit is daunting to look atbut when you put all of that aside and just try to get to ground truths with this guy, every time we have done that, we feel like, "Oh, my gosh." Whatever the idea was that we thought we had about him, it is quite different when you pull some more layers back.
AMY GOODMAN: "After Fred Trump's death," you write, "His empire's most valuable asset was an IOU from Donald Trump." And you say he betrayed his father and what he wanted with his Empire.
DAVID BARSTOW: Yeah. Fred Trump really wanted the empire to stay in the family. Donald Trump was in some financial difficulty again in 2004, and he was the one who came into a family meeting and said, "It's time to sell dad's buildings." And so they did. And the irony is the price that they got for all of those buildings was actually hundreds of millions of dollars less than what the actual property was worth, according to banking records that we have uncovered.
AMY GOODMAN: Do you think this will force, somehow lead to seeing Donald Trump's tax returns? This exposé and the political blowback from it?
DAVID BARSTOW: It's hard to say. It depends so much on who is actually in control of the subpoenas in Congress, on the basis of what happens in the midterm elections.
AMY GOODMAN: But they can subpoena them?
DAVID BARSTOW: Sure. Absolutely.
AMY GOODMAN: And so if the Democrats came to power.
DAVID BARSTOW: And every DemocratI mean everythere's a long line of Democrats who have said this story is all the more reason to exercise that subpoena power should they win control of the House.
AMY GOODMAN: And your piece is coming out again on Sunday?
DAVID BARSTOW: It is, as a special section.
The Times revealed Trump inherited much of his family's wealth through tax dodges and outright fraud, receiving at least $413 millionin inflation-adjusted dollars, that isfrom his father's real estate empire. The _Times_' 13,000-word investigative report found the late Fred and Mary Trump transferred more than $1 billion in wealth to their children, and much of it to Donald Trump, paying less than 5 percent of the $550 million in taxes they should have under inheritance tax rates. As part of a scheme to reduce taxes, Donald Trump also helped his parents undervalue real estate holdings by hundreds of millions of dollars in IRS tax returns.
AMY GOODMAN: The New York Times also reports Trump earned $200,000 a year in today's dollars from his father's companies beginning at the age of 3, with a salary that increased to $1 million a year after Trump graduated college and to $5 million a year when Trump was in his forties. Over the years, Trump has repeatedly portrayed himself as a self-made billionaire whose only head start was a "small loan of a million dollars," he would say, from his father.
DONALD TRUMP: It has not been easy for me. It has not been easy for me. And, you know, I started off in Brooklyn. My father gave me a small loan of a million dollars. I came into Manhattan. And I had to pay him back, and I had to pay him back with interest. … He used to say, "Donald, don't go into Manhattan. That's the big leagues. We don't know anything about that. Don't do it." I said, "Dad, I gotta go into Manhattan. I gotta build those big buildings." … I built what I built myself, and I did it by working long hours and working hard and working smart. More importantly than anything else is by using my own brain. And there was a point where I was making so much so fast, and it was so easy, that I almost got bored. And it's true. … I got a very, very small loan from my father many years ago. I built that into a massive empire. And I paid my father back that loan.
NERMEEN SHAIKH: On Wednesday, President Trump attacked The New York Times. He tweeted, quote, "The Failing New York Times did something I have never seen done before. They used the concept of 'time value of money' in doing a very old, boring and often told hit piece on me. Added up, this means that 97% of their stories on me are bad. Never recovered from bad election call!" he tweeted.AMY GOODMAN: The Times article was based on public records as well as tens of thousands of confidential documents, including bank statements, financial audits, accounting ledgers, cash disbursement reports, invoices, canceled checks. The documents include more than 200 tax returns of the late Fred Trump, but do include the president's personalthey don't include the president's personal tax returns, which he has refused to release. White House Press Secretary Sarah Huckabee Sanders responded to the article during Wednesday's press briefing.
PRESS SECRETARY SARAH HUCKABEE SANDERS: I'm not going to sit and go through every single line of a very boring 14,000-word story. The only thingI will say one thing the article did get right was that it showed that the president's father actually had a great deal of confidence in him. In fact, the president brought his father into a lot of deals, and they made a lot of money together, so much so that his father went on to say that everything he touched turned to gold. The president's lawyer addressed some of the specific claims and walked through how the allegations of fraud and tax evasion are 100 percent false and highly defamatory. There was no fraud or tax evasion by anyone. He went on much further, and I would encourage you to read every word of his statement, which completely undercuts the accusations made by The New York Times.
AMY GOODMAN: We're joined right now by David Barstow, the three-time Pulitzer Prize-winning investigative reporter for The New York Times, lead author on this new investigation revealing the original source of President Trump's wealth. David Barstow shares a byline with Susanne Craig and Russ Buettner on The New York Times exclusive, "Trump Engaged in Suspect Tax Schemes as He Reaped Riches from His Father."Welcome to Democracy Now! So, you have been attacked by the White House for what you've done, the piece they call old and boring. Tell us firstI mean, this is a massive piece, which is being reissued on Sunday, is that right, by The New York Times?
DAVID BARSTOW: Yeah.
AMY GOODMAN: Many-page piece headlined "Trump Took Part in Suspect Schemes to Evade Tax Bills." Talk about how you found this information, and what were your key findings, David?
DAVID BARSTOW: Well, first, how we found it was kind of the old-fashioned way. It was going to courthouses, scouring public records, knocking on a lot of doors and, gradually, over many months, piecing together, building this trove of documents, over 100,000 pages, by the time we were ready to publish. And I think, most significantly, in terms of for people to be able to assess this story, it's important to know that this includes literally tens of thousands of pages of never-before-seen documentation of the actual inner workings of Fred Trump's real estate empire.
NERMEEN SHAIKH: But those documentsif I could just interrupt brieflythose were confidential records.
DAVID BARSTOW: Correct.
NERMEEN SHAIKH: So you couldn't have gotten those from the public records.
DAVID BARSTOW: Yeah, you only get those by knocking on a lot of doors.
NERMEEN SHAIKH: What doors did you knock on?
DAVID BARSTOW: I'm not going to talk about that, but good try.
AMY GOODMAN: Talk about your major findings, particularly what you say is this illegal transfer of wealth.
DAVID BARSTOW: So, I think there's two core findings. One is simply that the narrative that Donald Trump has sold to the public for many decades now, the thing that made him famous, that gave him political power and that, ultimately, I think, was the central focus of his presidential campaign, is this narrative that he is a self-made billionaire. And what this story really reveals is the extent to which that just simply doesn't square with the facts that are uncovered and that we show in this story. So that's sort of, I think, point number one.
Point number two is, not only did he receive $413 million from his father, not only did he receive another $140 million in today's dollars in loans from his father, but that that amount, the amount of money, was significantly increased by a series of tax schemes that the tax experts that we consulted with in our reporting, laying this out to them, said these things go way beyond the normal tax avoidance strategies that wealthy, sophisticated people will employ in any event to lower their tax bill. This was a set of maneuvers that were actually intended to deceive the IRS about the value of things that were being given from Fred and Mary Trump to Donald Trump and his siblings.
I think those are the two main points, that there's a huge amount of money flowing, not just when he was a young man, but actually throughout Donald Trump's life, especially when he was in financial difficulties, especially when he was taking on new projects, and that that river of money was fed, very much so, by tax evasion, tax dodges.
AMY GOODMAN: Tax evasion and tax dodges, and we're going to find out just what those were. We're speaking to three-time Pulitzer Prize-winning journalist David Barstow, who has just been attacked by the White House for this massive exposé in The New York Times about how Donald Trump gained his wealth. Stay with us.
[break]
AMY GOODMAN: That's called "Old Man Trump." The song was written, but never recorded, by Woody Guthrie. Again, by Ryan Harvey, Ani DiFranco and Tom Morello. Yes, Woody Guthrie never recorded it, but it's about his landlord, Donald Trump's father, Fred Trump. In the 1950s, Woody Guthrie lived in a Trump-owned apartment building in Brooklyn. This is Democracy Now!, democracynow.org, The War and Peace Report. I'm Amy Goodman, with Nermeen Shaikh.
NERMEEN SHAIKH: In The New York Times exposé on Trump's tax practice, the reporters referenced several reporters who did groundbreaking work on Trump's finances. One of them was the late Wayne Barrett, who wrote the book Trump: The Deals and the Downfall. He appeared on Democracy Now! in June 2016 and said Fred Trump's financial support of Donald Trump was, quote, "unbelievably crucial in Donald's rise to prominence."
WAYNE BARRETT: When he opened his first office in Manhattan, the rent was paid by his father's company out here on Avenue Z in Brooklyn. And everything that he did, whether it be the Grand Hyattthe Grand Hyatt, for example, to get the financing, he got the financing from two banks that his father had used, used his father's relationship banker. And the father had to sign the financing agreements. I mean, they're not going to give a 30-year-old kid $35 million in 1978 to build a hotel. It has to be done with Fred's resources. And Fred Trump was a great outer borough builder and really built good housing, 20,000 units totally, all over Queens, all over Brooklyn, some of them towers, like Trump Village, many of them single-family homes, that he had a great reputation as a builder. He was politically wired, as his son was. I mean, they played the political game, both of them, expertly, but Fred Trump was indispensable. I mean, even Trump Tower, which comes along later in Donald's career, could not have been done without Fred coming in and supporting the financing of it. When he opened his first casino in Atlantic City, when he bought the first properties, the lease holds for the first properties for Trump Plaza, his casino in Atlantic City, Fred rode down in the limo with him and signed all the lease hold documents. Nobody was going to be financing this kid developer, kid casino operator. It was Fred who was the key to all of it.
It's so ridiculous for him to call himself a self-made guy, when Fred was critical at the political end, too. I mean, everything that came to Donald came through political connections. And they were political connections forged by his father over decades with Brooklyn politicians. He came from the same political club as the then-mayor of New York, Abe Beame. And when theyhe had to get an option for the Grand Hyatt and for the West Side Yards from a bankrupt railroad in Philadelphia, Penn Central, and the people who were selling the assets of the bankrupt railroad wanted to make sure that the option that they gave, they were giving it to a developer who would actually develop, because that's when the real payment comes to the railroad. And so, they came up from Philadelphia, and Fred Trump greets them. And Fred and Donald get them in a limo and take them down to City Hall, and there's Abe Beame standing on the steps of City Hall. "Anything you want, we'll give you." So this totally a byproduct of Fred's relationships.
AMY GOODMAN: So, that's the great reporter Wayne Barrett, who dogged President Trump, Donald Trump, long before he was president, for decades, and, of course, wrote a book about him. Juan González and I went to his house to interview him just before he died. David Barstow, you're a three-time Pulitzer Prize-winning journalist. Wayne, of course, one of your colleagues over the decades. You cite him in your piece. He's giving us some sense of who Fred Trump was. But go back to the beginning and talk about baby Trumpthat's baby Donald Trumpand how he started to accrue this wealth, something very different than he has told.DAVID BARSTOW: Yeah. So, how does a 3-year-old end up making $200,000 a year? Right? That's a good question. Here's how it worked. Fred Trumpyou know, Wayne is absolutely right that he was a really great builder in the outer boroughs, but much of his building was actually made possible through federal housing subsidies. He was actually one of the country's biggest recipients of cheap building loans basically made possible by the federal government.
And he used $26 million or so of those cheap loans to build two of his biggest apartment complexes in New York: a place called Beach Haven and another place called Shore Haven, both out in Brooklyn. These are massive, massive apartment complexes, thousands and thousands of units. And so, he was building those in the late '40s. And what he did was something quite clever. He put the land underneath the buildings into a trust and made his children the beneficiaries of that trust. And then he had the companies, his companies, that were actually building the buildings on top of the land, sign 99-year leases to pay rent to the landlordshis young children. And so what that meant was that Donald Trump, starting at age 3, was Fred Trump's landlord. He was collecting rent payments from Fred Trump's companies.
And it was this kind of maneuverright?setting up these sort of mechanisms, these financial mechanisms, that would just kind of create this automatic streams of money that would just sort of, month by month by month, would trickle into trust accounts or into partnerships and find their way, ultimately, into the pockets of his children. Fred Trump was just a genius at coming up with new ways, new revenue streams, to funnel into the pockets of his children. So he didn't just make his children his landlord, he also made his children his banker. He made Donald Trump not justdidn't just put him on the salary as a vice president of Fred Trump's companies. He also then paid him separately to be his consultant. He paid him separately to be a property manager. He paid him separately to be a purchasing agent. And on and on and on it went.
And in the course of all ofas we gathered up all of the records from inside of hisof Fred Trump's real estate empire, we started counting up: How many different revenue streams has he created for Donald Trump through the years? And we got up to 295, is what we counted, what we were able to document. Some of these things, you know, they weren't in and of themselves big money. Like, for example, Fred Trump funneled the laundry revenue from his buildings to Donald. That's not a lot of money, but when you sort of start aggregating it, putting it all together, it's just this mighty, endless river of money flowing constantly into the bank accounts of Donald Trump.
NERMEEN SHAIKH: I mean, one of the things that you do in your piece is you give a very strong sense of the extent to which Fred Trump seemed to have a special relationship with Donald Trump, because you explain that so much of the money accrued to Donald Trump as against his other children. So, you know, what did you learn about why that would be the case? And also, the principal illegalityI mean, what you spoke of, of Beach Haven and Shore Haven, the responsibility for that is Fred Trump's, and is it actually technically illegal, what he did?
DAVID BARSTOW: So, in that transaction, there's nothing illegal about that transaction that we've uncovered. That's not what I'mthat's not the point that I'm trying to make there. That's an example, though, of one of the many different ways that Fred Trump was enriching Donald Trump, starting from a very early age and continuing on up forward. I'm sorry, the other point was?
NERMEEN SHAIKH: The question about the relationship between Fred and Donald
DAVID BARSTOW: Yes.
NERMEEN SHAIKH: because why did he give so much money to
DAVID BARSTOW: So, Fred Trump had an older son, Fred Trump Jr., who initially was kind of going to be the heir apparent, right? And Fred Trump was interested inyou know, he really wanted to pass this dynasty on to one of his children, and Fred Jr. was sort of the first kind of natural heir apparent as the oldest son. But he didn't have the passion for the business. He had other interests. He liked to fly airplanes. He loved music. Fred Trump, the father, considered Fred Trump, the son, to be a little too soft, a little too nice. And before long, it became clear that he was not going to be the heir apparent. The heir apparent was going to be Donald Trump.
And Donald Trump was very aware of his father's disapproval of Fred Jr. He witnessed this. Fred Sr. could be quite cruel. And I think what we see in terms ofthis is really from the interviews with people who worked closely with Fred Trumpthey witnessed this young man, Donald Trump, sort of watching what had happened to Fred Jr. and almost forming himself into Fred Jr.'s opposite. If Fred Jr. was soft, too nice, well, Donald was going to be a shark. He was going to be a killer.
So that, I think, is sort of at the core of this father-son relationship, which is very much what this story is about. It is about a father-son relationship. These two men were extraordinarily close. Donald Trump saidwe quote him that he felt that he knew his father better than anybody else in the world. And they talked daily. They spent many a weekend together. They were in constant communication. Donald Trump was a constant presence when Fred Trump would have strategy sessions with his top lawyers, his top accountants, figuring out what his next moves were. Fred Trump was often this sort of silent, lurking presence at Donald Trump's big flashy press conferences. And so, they were thisit was more than just a father-son relationship. It was also a partnership.
AMY GOODMAN: It's interesting you talk about the amount of federal grants that Fred Trump got, and interesting that just as Donald Trump came into the business, they were sued because they were getting federal support and they were discriminating against African Americans. But I wanted to go back to read from your report, David Barstow. You write, "The most overt fraud was All County Building Supply & Maintenance, a company formed by the Trump family in 1992. All County's ostensible purpose was to be the purchasing agent for Fred Trump's buildings, buying everything from boilers to cleaning supplies. It did no such thing, records and interviews show. Instead All County siphoned millions of dollars from Fred Trump's empire by simply marking up purchases already made by his employees. Those millions, effectively untaxed gifts, then flowed to All County's ownersDonald Trump, his siblings and a cousin. Fred Trump then used the padded All County receipts to justify bigger rent increases for thousands of tenants." David?
DAVID BARSTOW: Yeah. This is something where, when Donald Trump says this is old news, I can tell you that no one had ever heard of All County Building Supply & Maintenance. It has never been written about, described anywhere. And this is actually kind of remarkable in a way. When we were peeling back the layers on this, it felt like one of these sort of gritty scams that you might see in The Sopranos, right? It is setting up this company to make basically huge cash gifts from Fred Trump to his children look like legitimate business transactions.
Let me give you just a really simple example. This is one that we describe and we actually show in the story the actual invoices and purchase orders, so you can all see for yourself exactly what I'm talking about. So they set up this company, All County Building Supply & Maintenance. It's not a real company. There's no corporate offices. It's actually headquartered in the basement of Fred Trump's favorite nephew. The owners of All County Building Supply, though, were Fred Trump's four children and his nephew. And all that happened wasso Fredany time Fred Trump was going to improve his buildings, he had to buy stuff, right? And in this case, soon after they formed this company, they bought 60 boilers60 big, expensive boilers from a company in the Bronx. Fred Trump himself personally negotiated the purchase price of these boilers, hundreds of thousands of dollars worth of boilers.
The man who sold Fred Trump these boilers, Leon Eastmond, told me in an interview that one day, he comes back to his office and there is an envelope, and there is a check, a huge check, from this company, All County Building Supply. He's like, "Who the heck are these guys?" Never heard of them, didn't know who they were. And what that was was All County Building Supply was paying him the price that Fred Trump had negotiated, but then All County Building Supply would turn around and would send an invoice to Fred Trump for the very same boilers, but the invoice was padded, marked up 20, 30, 50 percent more. So all it was doing, it was basicallyit was just an invoice-padding operation. It was taking the things that Fred Trump was already buying and adding 20, 30, 40, 50, 100 percent more, and then charging Fred Trump. Fred Trump was effectively overcharging himself; that's what it looked like on paper. But in fact, all of those profits are than flowing directly to his children. That's point number one.
AMY GOODMAN: And he's not just a child. Donald Trump was like 46 when All County was set up.
DAVID BARSTOW: Yes, absolutely. And this was part of a fairly well-considered and orchestrated strategy that the Trump family came up with when they realized, you know, Fred Trump is getting up there in age, he is starting to suffer some ill effects, dementia, other problems, and they're realizing if he dies, all of his empire, all of the buildings and huge amounts of cash sitting in his accounts, those are going to be subject to a 55 percent tax, inheritance tax.
So the idea was, "Well wait a minute, how do we pull that cash out of the empire before it gets taxed 55 percent? How do we shift all of those buildings into our pockets before they get taxed 55 percent?" In this case, I think one of the things in the All County Building Supply caseand I think it helps you sort of see at least the mindset hereis not only do they come up with this ruse basically to disguise cash gifts as legitimate business transactions, but then they submitted those padded invoices to the state regulators who govern rent increases in New York, and they used those inflated invoices in order to justify rent increases for thousands of the tenants who lived in Fred Trump's apartments. Mostly we're talkingthese are working class, middle class folks who are seeing their rents go up five, $10, $15 a month in part because of these inflated invoices from All County Building Supply & Maintenance.
NERMEEN SHAIKH: And can you speak specifically about the Starrett City development in Brooklyn, which Fred Trump made an investment in, in the 1970s?
DAVID BARSTOW: Yes. So Starrett City is really one of the largest federally subsidized housing developments in the country. It's massive. It's even bigger than Fred Trump's apartment complexes. And in the 1970s when they were trying to build Starrett city, they needed some extra money, so they were looking for private investments. It was basically going to be this investment that would create huge tax losses. That's why rich people wanted to get in on Starrett city; it would create huge tax losses. So Fred Trump could use his losses at Starrett City to shelter all of his profits from his empire.
So he made an investment into Starrett city, but he also made an investment for his kids as well. And so Donald Trump, starting at a very early age, was getting these huge tax breaks from Starrett City. In fact, those tax breaks helped him avoid paying any federal income taxes at all in the late 1970s. And then of course, as time progresses, Starrett City is now worth a heck of a lot of money. It recently sold for nearly $1 billion. In fact, that investment that Fred Trump made way back in the 1970s is going to give Donald Trump a windfall of $16 million this year.
AMY GOODMAN: Before we go to break, how much money would you say Fred Trump avoided in taxes?
DAVID BARSTOW: Hundreds of millions of dollars.
AMY GOODMAN: I think you said $50 million instead of half a billion?
DAVID BARSTOW: So yeah. I mean, it is pretty simple math, right? We see that he transferred well over $1 billion in wealth to his siblings. It's a 55 percent tax rate. So you are talking about a tax bill, an expected tax bill, of around $550 million. The tax records that we obtained show that the Trump family paid $52 million in gift and estate taxes. So rather than paying a 55 percent tax rate, they paid about a 5 percent tax rate. The question then is, how did they avoid the other $500 million? What happened to that?
First of all, just to be clear, we certainly don't say in the story and we don't allege anywhere that every penny of that was evaded money. Some of it was just usual tax avoidance measures that all rich people use. But certainly, a very significant portion of that came through tax schemes and maneuvers that the experts that we consulted with said really crossed the line.
AMY GOODMAN: We're going to go to break and then come back to this discussion. What was illegal, what was improper? David Barstow, three-time Pulitzer prize-winning investigative reporter, lead reporter on this massive 13,000-word piece investigating Donald Trump's wealth and where it came from. The title, Trump Engaged in Suspect Tax Schemes as He Reaped Riches From His Father. This is Democracy Now! Back with David Barstow in a moment.
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AMY GOODMAN: This is Democracy Now! I'm Amy Goodman with Nermeen Shaikh. Our guest for the hour is the three-time Pulitzer Prize-winning journalist David Barstow, did a massive exposé in The New York Times this week that's going to be reissued on Sunday. The New York State Taxation authority responded to the Timesreport on Donald Trump's tax practices with a statement that it is "vigorously pursuing all appropriate avenues of investigation." Meanwhile, New York Mayor Bill de Blasio tweeted, "I've directed NYC's Department of Finance to immediately investigate tax and housing violations and to work with NY State to find out if appropriate taxes were paid." The mayor told reporters he is looking to recoup any money Trump owes New York City.
MAYOR BILL DE BLASIO: There was a good old boy network that obviously Donald Trump played like a fiddle and evaded the kind of regulation and investigation and prosecution he should have received many times over. He finagled and paid his way to being somehow able to escape the kind of scrutiny and prosecution he deserved. And honestly, if a lot of people in New York State had done their jobs, he would never have been president of the United States. It's clear to me that there are real ramifications right now to what has been disclosed. That there is either potential violations of the law, or in the cases where the statute of limitations has ended, that there may be very serious civil penalties that can be applied by both the state in the city.
AMY GOODMAN: So that's Mayor Bill de Blasio responding to your investigation. What can New York recoup? New York City, New York State? And are there criminal charges at all here? Grounds for charges?DAVID BARSTOW: I think that clearly the statute of limitations is the big obstacle to any kind of criminal charges. However, we actually don't know what ended up in Donald Trump's tax returns, and so if there are things that he misreported that have their roots in some of the transactions that were described in this article, and those misrepresentations carried forward into future tax returns from Donald Trump, that could be potentially problematic, because that could maybe take the statute of limitations off the table as an obstacle.
NERMEEN SHAIKH: And then there could be a criminal prosecution?
DAVID BARSTOW: Potentially, although let's be real herethe IRS is a much-weakened agency. It has been quite devastated by budget cuts over the years. And certainly, the IRSnot talking about state authorities now; I'm talking about the federal IRShas said absolutely nothing in response to this article. I think the more realistic accountability that's there is this potential for civil fraud. There is no statute of limitations for civil tax fraud. And so bothin this case, the state tax authorities, that can be a very powerful weapon if they decide to actually use it, to go back and look at these transactions.
NERMEEN SHAIKH: Let's go to some of the mechanisms that you point to in the piece that Trump used in order to avoid paying taxes. Explain what GRATs are, and how they were used. In this video accompanying The New York Times exposé, your co-author Susanne Craig explains how Trump and his siblings came to own nearly all of their father Fred Trump's empire without paying estate taxes.
SUSANNE CRAIG: GRAT. A trust designed to pass wealth between generations. In 1995, Donald Trump and his siblings began to take ownership of most of their father's real estate empire while avoiding hundreds of millions of dollars in taxes. They did so by creating two grantor retained annuity trusts, also known as GRATs, one for dad and one for mom. Taxes are based on the final value of the GRAT, and this gave the Trumps every incentive to lowball the value of the assets. That's exactly what they did. Take for instance the Fontainebleau Apartments. In 1982, the Trumps valued the 164-unit complex at $15.3 million. But for the purposes of the GRAT, they said it was worth just $2.9 million. They then broke up the ownership of the apartments, giving almost half to Mary Trump, Fred Trump's wife. This allowed them to tell the IRS that Fred Trump, who had exercised iron-fisted control over every brick of his empire for 70 years, was a minority owner with no real say over his buildings.
NERMEEN SHAIKH: So David, that's your co-author Susanne Craig talking about GRATs. Could you just comment on whether this instrument is what essentially gave legal cover to Trump's transactions?DAVID BARSTOW: GRATs are a well-established and legal instrument that's used by the wealthy to pass assets on to their children in a way that allows them to avoid estate taxes. In fact, if you watch TV, you'll often see these commercials from BDOthat are actually GRAT commercials. They do not say the word "GRAT," but when you see this
NERMEEN SHAIKH: What is BDO?
DAVID BARSTOW: BDO is this consulting firm that is actually on CNBC, MSNBCand CNN is running commercials that are effectively commercials for GRATs. And so it's a technique that when you talk to tax lawyers, they almost get a little misty-eyed about GRATs. They say, "This is like magic." These things are these incredible devices that assets go in, all kinds of financial gymnastics occur inside of them and then they sort ofassets come out and they're like free of taxes.
AMY GOODMAN: I wanted to go to another of your former colleagues, and that is David Cay Johnston, also a fellow Pulitzer Prize winner and now editor in chief at dcreport.org. He noted on MSNBC that Trump's sister, who is a federal judge, is heavily implicated in these charges of tax fraud.
DAVID CAY JOHNSTON: Let's keep in mind, Donald's sister, Maryanne Trump Barry, is a sitting judge on the Third Circuit Court of Appeals. She's a senior judge. I tweeted today that I think she should immediately remove herself from the bench. We should not have a tax cheat in the White House or on the federal bench.
AMY GOODMAN: What you think of this? That's David Cay Johnston.DAVID BARSTOW: I think the important thing to say about this is that Fred Trump's estate tax return is a very important document. There were three executors. There were three people who signed off on that estate tax return. One was Judge Barry, one was President Trump and the third was Robert Trump, the president's younger brother. When you sign an estate tax return, you're responsible for the accuracy of that tax return, you are responsible for accurately describing the assets and you're also responsible for describing all of the gifts that were given by the person in that estate.
So what we describe in our story is that the estate tax return that the three of them signed, that the three of them vouched forthat that tax return is grossly inaccurate. It used all of the same kind techniques that we described in other parts of the story, and it did so in order to make what was left of Fred Trump's empire look miniscule. So I think that actually the fact that she put her John Hancock on that estate tax returnI think that is an area that is potentially problematic.
AMY GOODMAN: What most surprised you in what you found, David, as we begin to wrap up?
DAVID BARSTOW: The thing that I think continues to surprise me about Donald Trump is that this is this guy who has been so much in the firmament of our culture and our media for so long, and yet there is so little that we actually know about him and his finances. There's this mountain of books and interviewsit is daunting to look atbut when you put all of that aside and just try to get to ground truths with this guy, every time we have done that, we feel like, "Oh, my gosh." Whatever the idea was that we thought we had about him, it is quite different when you pull some more layers back.
AMY GOODMAN: "After Fred Trump's death," you write, "His empire's most valuable asset was an IOU from Donald Trump." And you say he betrayed his father and what he wanted with his Empire.
DAVID BARSTOW: Yeah. Fred Trump really wanted the empire to stay in the family. Donald Trump was in some financial difficulty again in 2004, and he was the one who came into a family meeting and said, "It's time to sell dad's buildings." And so they did. And the irony is the price that they got for all of those buildings was actually hundreds of millions of dollars less than what the actual property was worth, according to banking records that we have uncovered.
AMY GOODMAN: Do you think this will force, somehow lead to seeing Donald Trump's tax returns? This exposé and the political blowback from it?
DAVID BARSTOW: It's hard to say. It depends so much on who is actually in control of the subpoenas in Congress, on the basis of what happens in the midterm elections.
AMY GOODMAN: But they can subpoena them?
DAVID BARSTOW: Sure. Absolutely.
AMY GOODMAN: And so if the Democrats came to power.
DAVID BARSTOW: And every DemocratI mean everythere's a long line of Democrats who have said this story is all the more reason to exercise that subpoena power should they win control of the House.
AMY GOODMAN: And your piece is coming out again on Sunday?
DAVID BARSTOW: It is, as a special section.
"Let me issue and control a nation's money and I care not who writes the laws. - Mayer Rothschild
"Civil disobedience is not our problem. Our problem is civil obedience! People are obedient in the face of poverty, starvation, stupidity, war, and cruelty. Our problem is that grand thieves are running the country. That's our problem!" - Howard Zinn
"If there is no struggle there is no progress. Power concedes nothing without a demand. It never did and never will" - Frederick Douglass
"Civil disobedience is not our problem. Our problem is civil obedience! People are obedient in the face of poverty, starvation, stupidity, war, and cruelty. Our problem is that grand thieves are running the country. That's our problem!" - Howard Zinn
"If there is no struggle there is no progress. Power concedes nothing without a demand. It never did and never will" - Frederick Douglass