New York state is suing Donald Trump and his business for engaging in financial fraud. Forbes has documents and a recording of Trump talking about 40 Wall Street, the first property cited in the attorney general’s press conference, that seem to back up her claims.
INthe heart of New York City’s Financial District stands a skinny tower with a limestone base and a copper crown, aged green like the Statue of Liberty. Tenants on the top floors can gaze out at Lady Liberty and the rest of New York Harbor. The entrance at ground level, just steps away from another American icon, the New York Stock Exchange, welcomes visitors with big gold letters that spell out “THE TRUMP BUILDING.”
It’s an impressive property, the sort that most landlords would let speak for itself. But that’s not the Trump way. Ever since the real estate mogul acquired a long-term lease on the property in 1995, he has been boasting about the building, saying it is bigger, taller and more valuable than it actually is. On September 11, 2001, the day atrocity turned 40 Wall Street into the second-tallest tower in Lower Manhattan, Trump infamously went on TV and proclaimed: “Now it’s the tallest.” Over the years, the Trump Organization has submitted piles of misleading information about the building to the public, the media and the real estate firm’s lenders. Now the property is wrapped up in a lawsuit from New York’s attorney general, Letitia James, who is accusing Trump and his business of engaging in financial fraud by lying about the value of the Trump Organization’s assets to make it look more creditworthy to financial institutions.
As part of the attorney general’s investigation, Donald Trump received a subpoena last year, requesting eight sets of documents. Most of them fell into categories you might expect to see in a subpoena designed to discover whether someone falsified financial information: balance sheets, debt documents, insurance paperwork and so on. But fraud statutes in New York State require prosecutors to prove intent. One set of requested materials—“all documents and communications with Forbes magazine”—seemed tailored to do just that.
For decades, Trump and his lieutenants lied to Forbes about his finances, as we have duly noted over the years in the annual Forbes 400 issue listing the richest Americans. In the 1982 inaugural edition, the real estate scion appeared alongside his father with a combined estimated net worth of $200 million—and even then insisted on a higher valuation: “Donald claims $500 million,” we noted. By 2000, the boasts were bolder: “In The Donald’s world, worth more than $5 billion—back on Earth, worth considerably less.” When he was running for office, we explained how his net-worth obsession “opens windows into Trump the entrepreneur, the candidate and the person.” Two Forbes journalists received subpoenas last year from the Manhattan district attorney and had to testify before a grand jury to confirm information in two articles detailing Trump’s shenanigans.
BRAGGING RIGHTS | As 40 Wall Street rose during the Great Depression, a race to the skies began between it and the Chrysler Building, under construction some 70 blocks north. 40 Wall was briefly the world’s tallest skyscraper.
Sandra Baker/Alamy
The former president’s lies have suddenly assumed greater significance. They now constitute potential evidence in multiple investigations—the civil case by the state attorney general and a criminal one by the Manhattan D.A.—with the potential to cost Trump millions of dollars and, perhaps, another chance at the White House. He has denied any wrongdoing, calling the attorney general’s investigation a “vindictive and self-serving fishing expedition.” Trump’s lawyers, meanwhile, have done their best to keep documents out of the hands of authorities. But Letitia James’ office has nonetheless amassed a trove of materials and filed hundreds of documents in court. The government still doesn’t have the full picture, though, in part because Donald Trump lives like a man trying to avoid a paper trail—no texts, no emails. Forbes, however, has records those prosecutors do not, including notes from interviews over the years and a 2015 audio recording that places Trump smack in the center of the alleged deceit.
“TRUMP INFLATED HIS NET WORTH BY BILLIONS, WHICH HE TRIED TO VALIDATE BY USING THE MEDIA, INCLUDING FORBES AND OTHER FINANCIAL PERIODICALS.”
Forty Wall Street has always attracted colorful characters. In 1799, Aaron Burr’s Bank of the Manhattan Co. set up shop in a previous building on the site, five years before Burr killed Alexander Hamilton. In the 1980s, Ferdinand Marcos, the former strongman of the Philippines, took a secret ownership interest in the property. By the time Donald Trump showed up, in 1995, the place was practically empty. He signed a 64-year lease on the building, which sits on land long controlled by a German shipping family (the Hinnebergs), for a bargain $1.3 million, he claims. He then invested other people’s money into it.
THE LONG CON | “I’m going to show you cash-flow numbers I’ve never shown anyone,” Donald Trump told Forbes in 1990. A familiar boast—with familiar deceit. For our May 14, 1990, cover story, we documented that Trump had submitted “unrealistically optimistic” financial figures in a sworn statement.
Deutsche Bank handed Trump $125 million to renovate the place in 1998, looking past his troubles in Atlantic City, New Jersey, where three of his casinos had already filed for bankruptcy, and focusing on the potential payoff in Lower Manhattan. “I looked at the financials, and it was, like, this is a no-brainer,” says Mike Offit, who helped make the loan, kick-starting Trump’s decades-long relationship with Deutsche. “I mean, he wanted 125 million bucks. I said, ‘There’s no way that this building is not going to be worth 200 million bucks when he’s finished with it.’”
Sure enough. Trump loaded the lobby with marble, added speedy elevators and offered cheap rent. By 2000, the place was 96% occupied, with American Express serving as an anchor tenant. Business was so good that in 2008 someone showed a Forbes reporter a $525 million offer for the building. Trump should have grabbed it. The global economy soon collapsed, and tenants fled 40 Wall Street, leaving more than a third of the property empty.
In August 2009, Capital One, by then the lender on the building, allegedly raised cash-flow concerns. It’s easy to understand why. The bank had extended $160 million of debt. Assuming Trump was paying 5.7% (what he later claimed was the loan’s interest rate) on that amount, he would have theoretically owed $9 million in 2009. Yet tax records suggest the building produced only $8 million of profit that year. According to the attorney general, Capital One met with Trump, and Cushman & Wakefield came in to appraise the asset, determining it was worth $200 million as of August 1, 2010.
Trump listed his own number on his 2011 balance sheet. “The estimated current value of $524,700,000 is based upon a successful renegotiation of the ground lease and an evaluation made by Mr. Trump in conjunction with his associates and outside professionals,” the document explained, according to court papers. To support such a high figure, the Trump Organization looked to a rosy future, using projected income instead of actual income and thereby juicing profits from less than $10 million to $26 million.
Efforts to mislead banks and Forbes appear to have proceeded in lockstep. “Trump inflated his net worth by billions, which he tried to validate by using the media, including Forbes and other financial periodicals,” says Michael Cohen, Trump’s former lawyer, who participated in the ruse before turning against his old boss. “In essence, every news story or reference to the misstated valuation would be attached to his bogus personal financial statement as proof of accuracy.”
Forbes dug into our archives to see just how far the Trump Organization was willing to go. In 2013, a Forbes reporter noted that he had seen evidence that the Trump Organization was generating massive profits at 40 Wall Street. “Allen”—presumably chief financial officer Allen Weisselberg—“showed me total rent of $48.39M and expenses of $20.68M, with [a net operating income] of $27.7128M,” the reporter wrote in his notes. Other documents that Forbes now has, but did not possess at the time, suggest operating income was closer to $10 million. “Hi,” someone named Jeff—likely Trump Organization controller Jeffrey McConney—wrote the next year. “Our stabilized [net operating income] for 40 Wall Street is approximately $24mil.” The actual net operating income that year was $11 million, according to a bond prospectus.
We weren’t the only ones duped. Deutsche Bank, insurance company Zurich and another financial institution also relied on puffed-up numbers, according to Letitia James’ office, which is now seeking to permanently bar Weisselberg and McConney from working in financial-control roles in New York corporations. Capital One, to its credit, remained skeptical of the Trump Organization. The business had a $5 million principal payment coming due in November 2015. As the date was approaching, Weisselberg reached out with an audacious proposal: Would Capital One waive the $5 million, since 40 Wall Street was doing so well, having reached a valuation of $550 million? Capital One, which had determined the property was worth $257 million a couple months earlier, declined.
The Trump Organization found a different lender. Weisselberg connected with his son Jack, who worked at Ladder Capital, a real estate investment trust that both owns property and doles out money to other property owners. Ladder Capital’s CEO, Brian Harris, says the younger Weisselberg works in sales and “has zero capital commitment authority at my company.” The lender went ahead and issued the loan, structuring it in a way that included safeguards. Trump put in $9.5 million, offered a personal guarantee and agreed to pay down a portion of the principal over time. For him, everything turned out well: The new loan reduced his mortgage rate from 5.71% to 3.665%, enough to save him roughly $3 million of annual interest expenses. As part of the transaction, Cushman & Wakefield returned to the property, this time valuing it at a suspiciously high $540 million, $320 million more than the firm had said it was worth three years earlier. (Cushman declined to comment.) Ladder packaged the debt with other loans and sold it all off to investors as commercial mortgage-backed securities, touting 40 Wall Street as a $540 million property.
Acouple months after securing the loan, Donald Trump was feeling good, sitting at his desk in Trump Tower, speaking openly to Forbes about his years-long quest to vault himself higher on the list of America’s richest people. An audio recording of that conversation, which took place on September 21, 2015, makes it clear that Trump was not only involved in the effort to misinform the world about the value of his assets—he was willing to take the ruse further than anyone else, and even admit his motivation for doing so: “It was good for financing,” he said.
Even though he had just reworked his mortgage at 40 Wall Street, Trump couldn’t resist another chance to boast about it. “It’s a 78-story building,” Trump said, even though his firm had previously marketed it as a 72-story building—and it’s actually just 63 stories, according to documents filed with the city. “It’s going to throw off, would you say, $50 million maybe this year?” he asked, turning to Allen Weisselberg. “Fifty million at least,” Trump concluded, faster than his CFO could get out the words, “Yeah, by the end of the year.”
After hyping some of his other assets, Trump shifted his attention back to his Financial District skyscraper. “If I wanted to sell 40 Wall Street, I’d get $750 [million] for it tomorrow,” he said, going with a figure $15 million higher than the $735 million allegedly listed on his personal balance sheet and $210 million higher than the $540 million that Cushman & Wakefield determined in its already questionable appraisal.
A Forbes reporter noted that the building was 1.2 million square feet, rounding up from its actual square footage of 1,165,207. “It’s actually 1.3,” Trump said. “By the way, it’s 1.3, to be honest with you.” The same reporter then said Forbes was estimating its net operating income at $24 million, the inflated figure that “Jeff”—apparently McConney—had shared the previous year.
“Where did you get that from? We’re going to make $64 million net, net after debt service this year—at least,” Trump declared, sensing an opportunity to boost the $24 million figure as well as the $50 million one offered just minutes earlier. Lending and tax documents suggest the true amount Trump earned from the building that year, after debt service, was around $1 million.
“You still do have the $160 million mortgage?” the reporter asked.
“Yeah, we have the mortgage,” Trump conceded. “The mortgage is paying, what, 2.5%?” he said, again turning to Weisselberg.
“Yeah, that’s what we get,” Weisselberg responded. The interest rate was actually 3.665%, according to bond reports and financial disclosures. Trump then returned to its profitability, using an even higher number. “That building’s going to make close to $70 million this year,” he said, again adding millions in minutes. “Remember, it’s 1.3 million square feet.”
“These are the kinds of things that it’s great to go through,” said a different reporter.
“But the point is you’re so far off,” Trump countered, adding, “You’re going to look bad. And look, all I can say is Forbes is a bankrupt magazine that doesn’t know what they’re talking about, okay? That’s all I’m going to say. Because it’s embarrassing to me.”
DONALD TRUMP LIVES LIKE A MAN TRYING TO AVOID A PAPER TRAIL—NO TEXTS, NO EMAILS. FORBES HAS RECORDS THAT PROSECUTORS DO NOT.
Forty Wall Street never hit the numbers on which the loan was based. Annual net operating income peaked at $20.7 million in 2018, a couple million shy of what underwriters predicted. Then things started to go south. Occupancy dropped to 89% in January 2020. By the end of the year, with New York City shut down, 40 Wall Street’s operating profits slipped to $14 million. The next year got off to a rough start, with the January 6 riot at the Capitol. Two tenants publicly announced they wanted to leave the building shortly thereafter. Operating income dipped to $12.7 million by the end of 2021, and records show occupancy fell to 84% this year, which appears to be its lowest level in a decade.
From a strictly financial standpoint, Trump should be okay in the short term. The building is generating enough money to pay the $10 million of interest and principal he owes on his loan every year, though after covering capital expenses, there’s probably not much left over. Even so, the former president is flush with cash, having received an estimated $162 million from refinancing a San Francisco building and another $135 million or so from selling his Washington, D.C., hotel.
Longer term, however, Trump may have problems. He currently pays $2.3 million in annual rent to the owners of the ground on which 40 Wall Street sits, according to a bond prospectus. But in 2033, that rent is scheduled to reset. Cushman & Wakefield, when valuing the building on behalf of Capital One, estimated the ground rent would shoot up to more than $15.5 million at that point, according to court records. For some reason, the appraisers allegedly changed the way they accounted for the ground lease when they boosted the valuation in 2015. Assuming the ground rent increases to $15.5 million in 2033, it will crush Trump’s profits, perhaps leaving him with none at all.
Given those complications, it was hard to imagine, even before the attorney general announced her lawsuit, that the former president will be able to secure another ten-year loan when the Ladder one expires in 2025. Now the attorney general is seeking to bar Trump from applying for loans from institutions registered with the New York Department of Financial Services for five years.
Trump, however, has shown himself to be remarkably adept at breaking free of thorny situations. Mazars, the accounting firm that for years helped Trump compile his financial paperwork, cut ties earlier this year and disavowed ten years of past statements. A Texas firm called Whitley Penn has already picked up some of the work, according to court records. Cushman & Wakefield decided to stop working with Trump, but several of its appraisers have moved on to Newmark, which helped the Trump family sell the D.C. hotel. Meanwhile, the Trump Organization has reworked $700 million in debt over the last year, despite being under indictment for fraud related to an alleged compensation scheme. (It has pleaded not guilty.)
It all prompts an obvious question: Will Donald Trump personally face any consequences for years of lying about the size of his fortune? The New York attorney general certainly hopes so. “Everyday people cannot lie to a bank about how much money they have in order to get a favorable loan to buy a home or to send their kid to college,” she said in her press conference Wednesday. “And if they did, the government would throw the book at them. Why should this be any different?”