Trump strong-armed lenders to forgive Chicago tower debt: NY Times

Investigation into president’s taxes show how he wiggled out of obligations

National /
Oct.October 28, 2020 04:00 PM
Donald Trump and the Trump Tower in Chicago (Getty, Trump Org.)
Donald Trump and the Trump Tower in Chicago (Getty, Trump Org.)

When the Great Financial Crisis threatened the biggest thing he had ever built, Donald Trump strong-armed his lenders into letting him off the hook on $270 million in loans, according to the New York Times.

The tactic was indicative of how, over the course of his real estate career, the president has been able to maneuver out from under significant debts and to use losses to reduce his tax bills.

In September 2008 Trump was nearing completion on the 92-story Trump International Hotel & Tower in Chicago, a project he hoped would reestablish the Trump Organization as a top developer.

But as the financial crisis worsened, Trump fell behind on payments to his lenders: Deutsche Bank, which had provided the bulk of the project’s $700 million in construction debt, and Fortress Investment Group. (Fortress chopped up the loan and sold a piece to Dune Capital Management, the firm founded by Trump’s Treasury secretary, Steven Mnuchin.)

With the loans coming due in a matter of weeks, and the project not providing enough cash to pay the debts, Trump sued Deutsche and Fortress in November, accusing the former of predatory lending practices. He demanded $3 billion in damages.

But instead of foreclosing on the property, Trump’s lenders in 2010 told the court they had reached a settlement.

According to the Times, Fortress forgave a large portion of the money Trump owed. And even though the newspaper reported that Deutsche Bank executives vowed never to work with the developer again, his son-in-law Jared Kushner persuaded an arm of the bank to lend to Trump so he could pay off another arm.

Tax law requires borrowers to count debt forgiveness as income. New York State Attorney General Letitia James is investigating whether Trump followed the law with regard to the Chicago loan.

Trump Organization legal officer Alan Garten told the Times that the company accounted appropriately for all of the forgiven debt.

“These were all arm’s-length transactions that were voluntarily entered into between sophisticated parties many years ago in the aftermath of the 2008 global financial crisis and the resulting collapse of the real estate markets,” he said. [NYT] — Rich Bockmann


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