The Insidious Inauguration Committee

In previous posts about President Cheeto Fascist, I have talked about how he manages to make almost any kind of charity or fundraising into a moneymaking scheme. And I talked about how he’s much more inclined to listen to donors willing to buy access to him through staying at his resorts and joining his clubs. Anyway, on Thursday, December 13, 2018, prosecutors in the US Attorney’s Office for the Southern District of New York announced they were looking into Donald Trump’s inaugural committee, according to the Wall Street Journal. Apparently, investigators are interested in the committee’s spending and into the potential corruption involving favors for its donors. While the Journal reports that the criminal probe stems at least in part from material during the FBI’s April raid on Michael Cohen’s residence and office.

Even before this, multiple media outlets reported earlier in 2018 that special counsel Robert Mueller was investigating potential Russia-tied donations to Donald Trump’s inaugural committee. Yet, this news is the first confirmation of a broader probe into his inauguration and its money. After all, aside from working as Paul Manafort’s henchmen, Rick Gates also helped run it. Nonetheless, given Trump’s history involving making money off his campaign and presidency, this news shouldn’t come as a surprise. Since there have long been glaring questions behind Trump’s inauguration and where it went. Because his inaugural committee raised a truly astonishing $106.7 million, doubling the previous record Barack Obama‘s 2009 inaugural set. But what they did with it remains unclear. Nonetheless, in a 2018 ProPublica and WNYC report, former chair of George W. Bush’s second inauguration, Greg Jenkins was dumbstruck. He told ProPublica, “They had a third of the staff and a quarter of the events and they raise at least twice as much as we did. So there’s the obvious question: Where did it go? I don’t know.”

After that truly unfortunate night in November when Donald Trump unexpectedly won the 2016 presidential election, he was tasked with setting up an inauguration that would be worthy of his name and “opulent” reputation, which would be a gilded trash heap. Now the federal government pays for the swearing-in ceremony and logistics. But Trump would have to pay for all the before and after parties and events like the pre-inaugural National Mall concert, dinners and events for elite supporters, and the inaugural ball. So he needed a lot of money. Of course, raising money for one’s inauguration isn’t unusual for an incoming president. Rather than fund the festivities himself, the so-called wealthiest not-my-president-elect ever, Trump decided to follow suit raising the cash from billionaires, wealthy financiers, and corporations.

So a week after his horrifying electoral victory, Donald Trump named a murderers’ row of superrich Republicans as “finance vice chairs” for the event. These included:

  • Sheldon Adelson– casino billionaire known for donating to Republican causes and had his wife receive the Presidential Medal of Freedom that she didn’t seem to deserve.
  • Steve Wynn– casino billionaire Donald Trump might’ve screwed over in Atlantic City who was later accused of sexually abusing his employees.
  • Elliot Broidy– a defense contractor and well-known Republican fundraiser who was later involved in hush money payments to a Playboy model and a client to Michael Cohen. In 2009, he pleaded guilty to paying bribes to get investments from the New York state pension fund. His felony conviction was later downgraded to a misdemeanor. He’s also come under scrutiny in special counsel Robert Mueller’s investigation.
  • Anthony Scaramucci– some corporate guy who was Donald Trump’s communications director for 10 days during the summer of 2017 and had to resign over an obscene interview with the New Yorker.

The committee’s treasurer Doug Ammerman was named by prosecutors as an unindicted co-conspirator in a tax shelter fraud during the early 2000s. He was also a partner at accounting firm, KPMG, which later admitted to criminal liability. A Senate investigation at the time include emails from Ammerman suggesting he was aware of the scheme. In addition, he’s currently accused in a shareholder lawsuit of dumping stock in a grilled chicken chain, El Pollo Loco, where he served on the board, ahead of a bad quarterly report.

The chair of the inaugural committee in charge of it all was Tom Barrack, a real estate billionaire investor and close friend of Donald Trump for 4 decades. Anyway, Barrack’s business interests have recently been concentrated in Saudi Arabia, the United Arab Emirates, and Qatar. According to him, his goal was for the inauguration to have a “soft sensuality” and “poetic cadence.” Though I would more or less the event as akin to something between The Hunger Games and Titanic. To assist with planning and fundraising, Barrack turned to Manafort right-hand man, Rick Gates. After all, Barrack had known Paul Manafort since the 1970s and helped convince Trump to bring him on to the campaign. But to no one’s surprise, the choice raised eyebrows since Manafort had been ousted as Trump’s campaign chairman after the release of several scandal-laden stories about his work in for pro-Russian Ukranian politicians. And yet, Gates became instrumental in the committee’s activities as a possible “shadow” inauguration chair and Barrack’s “chief deputy.” As we know both Manafort and Gates have agreed to plea deals with Robert Mueller and promised to cooperate with government investigators. Gates kept his word. Manafort didn’t.

While Donald Trump’s inauguration crowd was nowhere near the largest in history, the inaugural fundraising certainly was. Tom Barrack, Rick Gates, and the team racked in more than $106 million, a jaw-dropping sum doubling the previous record set by Barack Obama’s team in 2009. However, the fundraising scheme went like this: the more you give, the more exclusive events you got access to. According to the Center for Public Integrity, listed perks with each donation target include:

  • $250,000 will get you a Union Station candlelight dinner with the Trumps and Pences.
  • $500,000 will get you a dinner with then Vice President-elect Mike Pence.
  • $1 million will get into the “Leadership Luncheon” at Donald Trump’s Washington DC Hotel.

OpenSecrets.org provided a donor list of those willing to fork over large sums. Among those include:

Finance Industry Big Shots (all donate $1 million each):

  • Robert Mercer– a rich eccentric billionaire who owns Brietbart and Cambridge Analytica that the New Yorker called “the reclusive hedge-fund tycoon behind the Trump presidency.”
  • Paul Singer– another hedge-fund billionaire who funds the Washington Free Beacon website which had ironically paid the opposition firm Fusion GPS to dig up dirt on Donald Trump during the primaries. Their efforts resulted in the infamous Steele Dossier which famously alleged the pee-pee tape situation. Wonder what inspired him to change his mind about the guy.
  • Steve Cohen– a man whose hedge fund group was closed down due to insider trading allegations.

Corporate America:

  • Contributed $2 million: AT&T
  • Contributed $1 million: Bank of America, Boeing, Dow Chemical, Pfizer, and Qualcomm
  • Contributed at least $500,000: JP Morgan Chase, FedEx, Chevron, Exxon, Fidelity, Citgo, and BP America.

Secret Conservative Groups (Donated $1 million each):

  • The American Action Network– a dark money nonprofit that’s spent tens of millions on elections since 2010.
  • “BH Group LLC” – a mysterious shell company whose true source remained unknown for more than a year. Only in 2018 did journalist Robert Maguire trace that contribution to a group tied to the conservative legal movement and Federalist Society executive Leonard Leo who’s found a prominent role advising Donald Trump on judicial nominations.

But these are only samples all of the donors who contributed vast sums from their bottom lists of cash reserves so they can have input in shaping policy that benefits their bottom line. After all, they didn’t just hand over their cash for the inaugural festivities. Nonetheless, they’re not the only kinds of donors who forked over their cash to Donald Trump’s inaugural committee either. For we must not forget those donors with major ties to Russia and other foreign countries who reportedly caught Robert Mueller’s eye. ABC News reported that Mueller questioned “about millions of dollars in donations to President Donald Trump’s inauguration committee” — specifically about “donors with connections to Russia, Saudi Arabia, the United Arab Emirates and Qatar.” As far as the Associated Press is concerned, Mueller’s investigators have interviewed inauguration chair Tom Barrack. But the AP’s sources gave conflicting accounts on what they asked him about. One claimed they only asked him about Paul Manafort and Rick Gates. Another claimed questioning included, “financial matters about the campaign, the transition and Trump’s inauguration in January 2017.” In June 2017, another ABC News report stated that Mueller investigators why several billionaires with “deep ties to Russia” got access to “exclusive, invitation-only receptions” during the inauguration.

Nevertheless, beyond the many questions about the money Donald Trump’s inauguration committee collected, there have long been many questions about money going out of it. Though I highly suspect that much of it went straight to the Trump Organization. In the ProPublica and WNYC piece, several people involved in previous inaugurations were stumped over how Trump’s team could have possibly spent more than $100 million for what they got. Unfortunately, unlike in political campaigns, the inaugural committee isn’t required to disclose very much about its spending. Yet, in its nonprofit tax form, the committee does have to break down its expenses in broad categories. But they need not explain every line item.

In any case, according to the tax form, about half the money (more than $50 million) went to just 2 vendors. $25.8 million went to WIS Media Partners, an event production firm started by a now-former adviser to Melania Trump. Another $25 million went to Hargrove, Inc. for “event production.” What did these firms do with these massive sums? God only knows. But that leaves about $50 million remaining. From that, another $10 million in total went to another 3 vendors, $4.6 million was paid out in salaries, and $5 million was left over and given out as grants. Yet, where tens of millions more went remains a mystery, beyond the broadest categories given on the disclosure forms. For now, whether this was sloppy financial mismanagement or something shadier is unclear. Though given Donald Trump’s propensity for moneymaking schemes, it’s more likely the latter. Not to mention, if there’s anyone who knows where the money went, it’s Rick Gates. And whatever he knows, prosecutors know, too.

But whatever the case, the fundraising involved with Donald Trump‘s inauguration should show us that this unrespectable man is no savior to his white working class supporters. In fact, he just sees them as suckers gullible enough to buy into his fraudulent promises he never intends to keep. He is a man who can be bought and usually is. He may appreciate his supporters’ votes and constant praise they bestow on him at his ego boosting rallies. But if they really want his ear, then they will have to accumulate more wealth than most will ever be able to make in their lifetimes. Maybe even get a membership at his exclusive clubs and resorts that can cost thousands of dollars. If not, then millions. Besides, Trump has a well known history of screwing his employees just to enrich his own coffers. And he’s currently getting rich from the presidency with our taxpayer dollars.

Advertisements

Donald Trump as President Is the Real National Emergency

After weeks of battling over funding for a worthless border wall that won’t do shit, overseeing the longest government shutdown in US history, and finally signing on to a deal to fund the government, Donald Trump has declared a national emergency over a contrived crisis at the US Mexican Border. On Friday, February 15, 2019, Trump invoked this power in a unilateral effort to make progress on the stupid border wall Congress has previously denied him. Initially, he demanded $5 billion for constructing a 200-mile barrier at the border. Naturally, congressional Democrats have repeatedly refused to go anywhere near that number. In the final deal, he got about $1.3 billion for border fencing, far less than the desired amount. So unhappy with the money and not getting his way, Trump went to declare a national emergency to get more.

So where will all this money come from? Well, Donald Trump will try cobbling together from a number of areas and redirect them for border wall construction. According to White House officials, this money would comprise of $600 million from the Treasury Forfeiture Fund or money seized by the US government, $2.5 billion from the Department of Defense’s counter-drug activities, and $3.6 billion from other military construction accounts. Though Trump won’t try to take anything from disaster relief, yet.
Now the fact Donald Trump has declared a national emergency in addition to a spending deal isn’t surprising since he’s been wavering on the idea for weeks. So why declare a national emergency when he’s already got a spending deal? Because Trump doesn’t want to admit he lost. Since he’s already getting less for border fencing than he would’ve gotten in the bill he refused to sign in December and caused a 35-day shutdown over it. So he’s going for executive action instead despite that it’s debatable whether he can since no emergency at the border exists.

Since 1976, many presidents have declared national emergencies since there were 31 before Donald Trump’s declaration. However, the National Emergencies Act of 1976 only allows presidents to declare national emergencies in specific circumstances. So Trump can only use specific powers Congress has already codified in law. And he has to say which power he’s using. Besides, thanks to a little incident called Watergate, the 1976 law was meant to rein in presidential power and how presidents declared national emergencies. But it doesn’t define what counts or doesn’t.

Despite Donald Trump’s fearmongering about an influx of dangerous undocumented immigrants and terrorists at the US Mexican border, no such crisis exists. In fact, there’s no significant shift in the situation in recent days or weeks suddenly rendering such urgent action needed. However, we do have lingering crises with healthcare, opioids, climate change, aging infrastructure, family separations at the border, economic inequality, environmental devastation, right-wing and white supremacist terrorism, and more. But no. Besides, Trump has spent 2 years of an entirely-controlled Republican Congress to do something about immigration. While there’s been no significant shift in the situation that suddenly renders urgent actions unnecessary.

This isn’t the first time that Donald Trump has invented an immigration crisis when it’s convenient. Ahead of the midterms, he warned about a dire threat from a migrant caravan, only to essentially drop the issue after the elections. Sure, asylum seekers in the US have been on the rise, but seeking asylum is legal. But Trump’s not focusing on that. Congress won’t pay for his stupid border wall. And Trump thinks he’ll lose his base if he abandons it. So he’s creating a panic and going to any length possible to get it done.
Essentially, given the context, Donald Trump’s national emergency declaration is illegal and sets a dangerous precedent if it succeeds. Under Article I of the US Constitution clearly states, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” So only Congress can make such laws relating to public funds in non-emergency situations. Thus, no one person can seize control of our nation’s public funds. And even if Trump can declare a national emergency to get the money he wants, that’s not enough to build a wall. He also needs the authority of eminent domain from numerous unwilling owners, which must be expressed by the legislature. And there’s no clear authorization here.

This also puts a test on the Republican Party’s lack of willingness to stand up to Donald Trump. After spending years of complaining about Barack Obama’s overreach, they have so far deferred to Trump and encouraged Americans to do the same. But in this case, Republicans have expressed concern that Trump’s emergency declaration might lead to future Democratic presidents doing the same on issues like healthcare or climate change. Of course, their fears are well founded, since healthcare and climate change are actual national emergencies. The fact Trump basically declared a national emergency at the border before golfing at Mar-a-Lago for the weekend, it’s clear he’s abusing his power. Thus, Trump’s emergency declaration is an obvious fraud since in a real emergency, you act fast.

As usual, Donald Trump will likely face court challenges over this declaration and he’ll probably see it as some vast radical left-wing conspiracy that’s out to get him. While he deserves to lose, it’s possible he could prevail since courts often give presidents undue deference on immigration and national security issues. But should he win, it would set a very dangerous precedents. Again, he can also see pushback from Congress, which can pass a joint resolution to override it with 2/3 majority in both houses. But that’s not going to happen since the Republicans have control of the Senate and will do whatever Trump wants. Nonetheless, the fact Trump basically declared a national emergency at the border before golfing at Mar-a-Lago for the weekend, it’s clear he’s abusing his power. Thus, Trump’s emergency declaration is an obvious fraud since in a real emergency, you act fast. In fake national emergencies, you act when the political timing is right to cover your ass because you need to back down from an ill-advised congressional fight followed from an ill-advised campaign promise.

Of course, US-Mexico border security isn’t perfect. But the world is full of problems that aren’t “emergencies” in the sense of requiring some kind of urgent extralegal repurposing of funds. Nonetheless, by robbing the nation’s drug interdiction and military construction budgets for his stupid border wall, Donald Trump will more likely make the nation’s problems worse than better. Since fencing our southern border has been ongoing for decades and is subject to diminishing returns, with valuable sections already fenced in.

In the past couple of months, the real crisis on display is Donald Trump’s total incompetence you can see from miles away. For he doesn’t understand a policy agenda or get anything done. Without Paul Ryan around to drive a legislative agenda he could rubber stamp, he’s failing. First, it’s shutting down the government and throwing millions of people’s lives into chaos. Second, it’s reopening the government having gotten nothing he could’ve had in December while adopting a “Hail Mary” scheme that will only make things worse. Though it’s better than a real shutdown, we should all be worried that Trump can’t handle a real crisis if it’s staring at him in the face.

This whole stupid wall farce began back in 2015 when Donald Trump promised to build a wall across the entire US-Mexican border and make Mexico pay for it. Even anyone with half a brain could see that this was an extremely stupid idea that was wasteful and unworkable in every way. But somehow thanks to racism and xenophobia, Trump transmogrified his opponents‘ mockery into a test of will. According to him, the political establishment didn’t want to secure the border, but Trump did. And the wall was proof. Now that Trump is in office much to our nightmares, he has been confronting the reality that his critics were right in every way. Since Mexico obviously won’t pay for his stupid border wall, he needs congressional appropriations and the cost-benefit analysis is valid. Trump has long ago conceded that he can’t build a wall across the entire border since there are places where It’s infeasible and useless. Not to mention, he’s also conceded that there won’t be a wall at all, but the previous steel bollard anti-pedestrian fencing he had previously mocked is a useful barrier and that Border Patrol prefers its see-through quality.

Thus, on a practical level, this whole dispute is simply about the spending levels and construction pace of a type of border hardening that’s been underway for years. While Republicans think it’s important, Democrats find this border hardening rightfully wasteful. Any halfway competent president would see this as the most banal political controversy imaginable. Since if you want to get money for a pet project, you have to offer something to your opponents in exchange. But Donald Trump’s problem here is that the wall is such a terrible idea that his allies and staff know it. The sort of illicit border crossings that these pedestrian fences are supposed to prevent have already fallen to very low levels and the immigration conversation has moved on to other things like the treatment of asylum-seeking families from Central America. But because the wall is bad, immigration hawks don’t want to make any meaningful concessions to get it. Anytime talks seem to take off about some swap of help for DREAMers in exchange for wall money, the hawks swoop in with a bunch of other demands having nothing to do with the wall. That conservatives don’t want to make concessions on an inherently bad idea is reasonable. But at the same time, if your allies aren’t willing to make concessions on a bad idea, it’s better to let the matter slide, not throw a tantrum. But Trump won’t do that.

First, the shutdown and now the “emergency” both stem from the basic fact that Donald Trump will neither admit the whole spiel was crock nor decide to act like someone who genuinely wants a wall and make a deal to get it. Instead, everyone’s time and money will be wasted on litigation while money will be taken away from duly authorized programs and sent to a useless construction project nobody really wants. This isn’t the worst thing anyone has done in American politics. Hell, it’s not even close to being the worst thing Trump has ever done. But it’s arguably the most absurd. Not to mention, it once again raises the fundamental question about Trump. When you have a president who can’t handle relatively banal problems like a $5 billion appropriation for a pet project, what will happen when a real crisis hits? Oh, wait, he is the crisis.

The Donald J. Trump Foundation: A Self-Dealing Charity for One

crop-640x360-000

When it comes to rich people, there is a lot I have to criticize on how they perpetuate economic inequality through their vast sums of money and power while leaving the poorer masses with little leverage to assert themselves. But when it comes to their philanthropic foundations, I think that they at least put their own money in it and donate the money for a good charitable cause. Even if it’s just to name some sort of building after themselves. After all, many wealthy people usually contribute their money to the arts, college campuses, research facilities, libraries, and public works projects. Hell, though I think Elon Musk and Jeff Bezos treat their workers like shit, the fact they want to contribute some of their vast fortunes for going to Mars seems pretty cool.

However, despite that Donald Trump’s excessive vanity is the stuff of legend, such philanthropic endeavors don’t seem to be the case with the Donald J. Trump Foundation. Trump originally created this foundation in 1988 for his proceeds from his book Trump: The Art of the Deal to charitable causes. However, in since 2008, Trump had stopped contributing personal funds and instead solicited donations from outsiders. Though the foundation was based in New York City’s Trump Organization, with no paid staff or dedicated office space. Until its forced closure in 2017 due to an array of complaints in self-dealing, its board of directors consisted of Trump, his 3 adult children by Ivana, and Trump Organization CFO Allen Weisselberg (though he told investigators he wasn’t aware of being a board member “at least for the last 10 or 15 years.”) In 2015, a Trump Organization spokesperson told The New York Post that Trump made all the decisions regarding the Trump Foundation money grants. Despite calling himself an “ardent philanthropist,” Trump has only donated $3.7 million to his foundation from 1990-2009.

charity-2

Here’s a sheet of David Fahrenthold’s notes he showed on Twitter to prove that what he wrote about the Trump Foundation wasn’t fake news. He ended up winning a well-deserved Pulitzer Prize for his coverage in 2017.

During the 2016 presidential campaign, The Washington Post’s David Fahrenthold initiated an investigation into Donald Trump’s philanthropic activities after Trump held a fundraiser for veterans in January 2016 in lieu of a televised Republican debate appearance. Trump claimed the event raised $6,000,000 for veterans’ causes, including supposedly $1,000,000,000 of his own money. Fahrenthold began his investigation by trying to confirm the receipt and dispersal of that $6 million. All donations should’ve gone to the Trump Foundation which should’ve granted the money to others. Instead, Fahrenthold determined that, several months after the rally, the Trump Foundation had yet to send any funds to veterans-related charities. Though some of the funds went directly to causes without passing the Trump Foundation, Fahrenthold widened his search to a wider investigation.

In June 2016 as a response to this criticism, Donald Trump publicly asserted that he had given approximately $102 million to charitable causes from 2009-2015 and released a 93-page list of the money’s beneficiaries. However, subsequent reporting by the Washington Post and other news organizations found that many of the donations Trump claimed making personally over this 5-year period were made by the Trump Foundation. And by 2009, no longer held any of Trump’s money. While further investigations led to an increasing of abuse inside the foundation since its creation. David Fahrenthold’s investigation into the Trump Foundation and Trump’s history of personal charitable giving involved hundreds of calls to Trump-associated charities. It’s also notable in that Fahrenthold heavily drew support and investigative help from a larger number of his Twitter followers helping him track down leads on specific charities. The accusations against the Trump Foundation are many, including the following (which mostly comes from Wikipedia, by the way And yes, it’s most of the information comes from cited sources, including Fahrenthold).

Failure to maintain proper governance

In June 2018, the New York Attorney General office filed a petition explaining that: “…none of the Foundation’s expenditures or activities were approved by its Board of Directors. The investigation found that the Board existed in name only: it did not meet after 1999; it did not set policy or criteria for choosing grant recipients; and it did not approve of any grants. Mr. Trump alone made all decisions related to the Foundation.” Also, Trump Foundation treasurer Allen Weisselberg claimed he wasn’t even aware of his position on the foundation’s board until investigators approached him. Such signs in a foundation give a bright red flag to a charity scam.

Donation solicitation without a license

Under New York state law, a nonprofit foundation must register as a “7A Charitable Organization” if planning to solicit outside donations over $25,000. Initially, the Trump Foundation was registered as a private foundation set up solely to receive Donald Trump’s own personal donations. As long as it was registered as a private foundation and not soliciting outside funds, it didn’t have to file annual reports with the New York State Charities Bureau. Of course, given Trump’s aversion to transparency in financial matters, this might’ve been the reason why the Trump Foundation didn’t register as a “7A Charitable Organization.” But records show that Trump began soliciting donations at least as early as 2004, maybe even 1989.

Mishandling of funds raised for veterans’ causes

merlin_139555518_ff88b5e9-4822-41c2-ba27-c470d4d0ac38-articleLarge

Here’s that fucking piece of shit Donald Trump bestowing a large check to a veterans’ charity in Iowa in 2016. Still, I wouldn’t cash in that check if I were these ladies. Mostly because the check might bounce.

In April 2016, Fox News reported that more than 2 months after Donald Trump said he raised $6 million for veterans at a pre-Iowa Caucus fundraiser, “most of the organizations targeted to receive the money have gotten less than half of that amount.” At the same time, Trump said he contributed $1 million of his personal funds. In late May, Trump revised the figures, claiming that $5.6 million had been raised at the event and that he contributed his $1 million share only the week before after the media criticized him. He also provided a list of beneficiaries of that $5.6 million. Although a 2018 New York state lawsuit further disputes this, citing $2.8 million.

Coordinating foundation grants with Trump’s presidential campaign

It should surprise nobody that Donald Trump might’ve used Trump foundation grants to advance his presidential campaign. This violates rules barring charities from engaging in political activity. Trump at least distributed some of the funds publicly at “Donald Trump for President” political rallies, displaying large-size checks including his campaign slogan, “Make America Great Again” or a link to a campaign website. In an October 2017 deposition, Trump Organization CFO Allen Weisselberg testified that he witnessed Trump’s campaign staff coordinate with him to use the Iowa fundraiser for the campaign’s benefit. In a larger suit against the foundation in 2018, New York State Attorney General Barbara Underwood alleged that Trump in using the foundation for campaign promotion during and after the Iowa fundraiser, had violated charities laws.

Grants to the National Museum of Catholic Art and Library

In each of 1995 and 1999, the Trump Foundation granted $50,000 to the National Museum of Catholic Art and Library. According to a 2001 Village Voice report, after visiting the East Harlem museum, the facility had “next to no art” and no official connection to the Catholic Church, despite having a 10-year track record of soliciting large-scale donations for its collection. The Voice and later, The Washington Post concluded that Trump may have directed the grants to the museum to curry favor with then museum chairman, Eddie Malloy, who was also head of the Building and Construction Trades Council of Greater New York. The Council had worked on behalf of one of the workers’ unions who worked on Trump construction projects.

Failure to make pledged 9/11 donations

An October 2016 New York City Comptroller office investigation showed that Donald Trump or the Trump Foundation might’ve failed to honor at least one pledge to charities established to provide relief to 9/11 victims. In late September 2001, Trump pledged $10,000 to the Twin Towers Fund on The Howard Stern Show. Created by then-Mayor Rudy Giuliani, the Twin Towers Fund was “to benefit the families of firefighters and police officers who died in the attacks.” During the 2016 Republican National Convention, Giuliani announced that Trump made unspecified “anonymous” donations after the September 11 attacks. Though such donations have never been identified. Ever the sycophant, Giuliani also said in support of Trump’s candidacy, “Every time New York City suffered a tragedy Donald Trump was there to help,…. He’s not going to like my telling you this but he did it anonymously.”

The New York City Comptroller’s office told the New York Daily News it manually reviewed “approximately 1,500 pages of donor records of the Twin Towers Fund and the related entity NYC Public/Private Initiatives Inc., containing the names of more than 110,000 individuals and entities that were collected as part of the audits” through August 2012. According to them, Comptroller Scott Stringer, “found that Trump and [the Trump Foundation] hadn’t donated a dime in the months after 9/11.” However, because the reviewed period only covered one year after the attacks, the Comptroller office was “unable to conclude definitively” that Trump never gave to the fund after August 2002. According to its IRS Form 990 tax filings, the Trump Foundation made no grants to the Twin Towers Fund or to the NYC Public/Private Initiatives, Inc. it’s a part of from 2002-2014. Though Donald Trump might’ve made personal donations after August 2002 that wouldn’t have shown up in the filings.

After the convention in 2016, Donald Trump’s campaign suggested that the Trump Foundation made a grant to the American Red Cross after the attacks. But no record exists in its tax filings from 2002-2014. As with the Twin Towers Fund, a personal donation by Trump wouldn’t have shown up in its filings.

Using Trump Foundation money to settle Trump Organization legal disputes

flagtrumpuntitled-1

Those who read my post about Donald Trump in Mar-a-Lago may remember the outsized flag dispute with Palm Beach. Well, guess where he got the money to pay for that. Yep, his Trump Foundation slush fund.

Donald Trump might’ve used Trump Foundation money to settle his personal or business legal disputes on at least 2 occasions. In 2007, Trump used foundation money to settle his 2006 legal dispute between the town of Palm Beach, Florida and Trump’s Mar-a-Lago country club. This pertained to Trump putting up a gigantic flagpole that was too high and hoisting a flag that was too large as far as the town’s ordinances are concerned. If you read my post on Trump at Mar-a-Lago I published earlier this month, then you probably know how it goes. Anyway, settlement documents show that in return for discharging the club’s obligations to Palm Beach, Trump agreed to personally donate $100,000 to a veterans and military families charity Fischer House. However, Trump made the grant using foundation money, not his.

Donald Trump’s foundation paid $158,000 to the Martin B. Greenberg Foundation as a settlement in a lawsuit Greenberg brought against the Trump National Golf Club Westchester in Briarcliff Manor, New York. Martin Greenberg alleged that he rightfully won a $1 million prize for scoring a hole-in-one during a 2010 charity golf tournament. But the club denied the award on technical grounds, arguing the hole was shorter than the required 150 yards. He sued and both parties reached a settlement according to the Washington Post that, that “on the day that Trump and the other parties told the court that they had settled the case, the Donald J. Trump Foundation made its first and only grant to the Martin B. Greenberg Foundation, for $158,000.” In September 2016, the Post reported that the grant money was directly linked to the legal settlement, likely violating IRS self-dealing rules by using charitable funds to pay Trump’s personal or business obligations. To raise the needed money for the settlement, the Trump Foundation auctioned a prize of a Trump-owned golf course lifetime membership, with a $157,000 donation to the Trump Foundation as the winning bid. The auction winner might’ve believed they were donating to Trump Foundation charitable causes instead of Trump’s tax exempt personal piggy bank. According to the foundation’s available tax returns, Trump National Golf Club Westchester paid over $200,000 to the Trump Foundation in 2016, with $158,000 of the funds for the Martin B. Greenberg settlement.

Donation to Florida Attorney General Pam Bondi

2gettyimages-585727168_wide-3c747c6cc09b1f58e11b8f04e7900645420d733a-s800-c85

This is Florida Attorney General Pam Bondi. In 2013, during her office’s investigation into Trump University, Donald Trump gave her money from his foundation to make it go away. She dropped the case shortly afterwards. And she’s not the only one either.

In 2013, Donald Trump donated $25,000 in support of Florida Attorney General Pam Bondi’s election campaign while her office was reviewing fraud allegations against Trump University, a for-profit real-estate program scam Trump created. At the same time, Trump also hosted a fundraiser for Bondi at his Mar-a-Lago resort at a fee well below his normal market rate. In return, Bondi’s office ended the investigation without bringing charges. According to a Trump Foundation attorney, “the [$25,000] contribution was made in error due to a case of mistaken identity of organizations with the same name.” But Trump personally reimbursed his foundation for the $25,000. It paid a $2,500 fine for violating IRS rules against political contributions by charitable organizations. In 2016, then New York Attorney General Eric Schneiderman publicly stated that the Trump Foundation was now subject to investigation by his office.

Nonprofit watchdog group, Citizens for Responsibility and Ethics in Washington filed a complaint with the IRS. Obtaining a letter from the Trump Foundation’s lawyer to the New York Attorney General’s office also cast doubt on Donald Trump’s story. According to CREW Communications Director Jordan Libowitz, “We’re past the point where a reasonable person could believe this is just a never-ending series of once in a lifetime errors. This may not be anything nefarious, but if it isn’t, that would mean that the Trump operation is completely inept when it comes to running the Trump Foundation.” In October 2016, The Wall Street Journal reported details of how Trump had made campaign contributions to various US state attorneys general while reviewing cases involving the Trump Organization or himself personally, on several occasions since the early 1980s. Though the Bondi case is the only one cited as involving Trump Foundation money.

Grants allegedly made for political purposes

In 2012, Donald Trump paid $100,000 to the Reverend Billy Graham Evangelical Association. NBC News has called Graham “an early ally” of his. In 2011, Graham told ABC News, “The more you listen to him, the more you say to yourself, ‘You know, maybe the guy’s right.’” In October 2016, Graham revealed to the Charlotte Observer that he instructed Trump to make a $100,000 donation which was used for full page ads urging voters to support 2012 presidential candidates who support “biblical values.” The time and tone of the ads indicate they were placed in support of Mitt Romney as the Observer suggested. Graham also headed the Boone, North Carolina-based Samaritan’s Purse, a Christian relief agency that received $25,000 from the Trump Foundation in 2012. Graham credits then-Fox News anchor Greta Van Susteren for soliciting the donation from Trump. Van Susteren had accompanied Graham on Samaritan’s Purse trips to Hawaii and North Korea. The Charlotte Observer quoted Graham saying, “[Trump] was on her show, and [Van Susteren] said, ‘I was just in Haiti and Samaritan’s Purse is doing this down there, and Donald, you need to help.’ He sent a check out.” In 2016, several media outlets alleged that Van Sustreren had been producing overtly pro-Trump reports on her Fox News show On the Record. These donations seem to explain some of Trump’s support with some white evangelicals in the Bible Belt.

HL7Q7GE36WCUBGU2GDLWHBAWUU

Here’s Donald Trump shaking hands with David Bossie, best known for being head of Citizens United. You know the group in that Supreme Court case that ditched a slew of campaign finance laws and allowed rich people to spend as much money they wanted on political candidates. Also Trump gave money to him via Trump Foundation funds.

In 2014, the Trump Foundation made a $100,000 grant to the Citizens United Foundation, a charitable foundation closely related to David Bossie’s conservative group, Citizens United. If that sounds familiar, Citizens United was the group behind the Supreme Court case that allowed unlimited contributions from corporate donors, Super PACs, and dark money in political campaigns. At the time, Citizens United was engaged in a lawsuit against then-New York State Attorney General Eric Schneiderman, whose office was also pursuing a civil lawsuit against Trump University. It was the largest single grant the Trump Foundation made that year. Schneiderman’s office called the grant part of a “vendetta” by Donald Trump. While Citizens United rejected any connection between the grant and its own lawsuit against Schneiderman. The Trump Foundation’s 2014 tax filing misidentified Citizens United as a public charity (501(c)(3)) when it’s actually a social welfare organization (501(c)(4)).

From 2011-2013, the Trump Foundation donated at total of $40,000 to the Drumthwacket Foundation, a charitable organization formed to pay for renovation and historical preservation of the New Jersey governor’s mansion of the same name. In 2011, Donald Trump was trying to get permits for a personal cemetery on the fairway at Trump National Golf Club in New Jersey and may have needed political help in obtaining approval. Keep in mind that Chris Christie was governor at the time.

Donald Trump directed $100,000 in Trump Foundation money toward the National September 11 Memorial Museum days before the 2016 New York State Republican presidential primary, where he was on the ballot, mischaracterizing the foundation grant as a personal donation.

In May 2015, the Trump Foundation granted $100,000 to conservative filmmaker and conspiracy theorist James O’Keefe’s Project Veritas. In October 2016, O’Keefe released videos apparently revealing how Democrats incited violence at Donald Trump’s rallies through dubious means. Except that’s not true. During the third 2016 presidential debate, Trump claimed the new videos O’Keefe produced and released that week proved that Hillary Clinton and Barack Obama “hired people” and “paid them $1,500” to “be violent, cause fights, [and] do bad things” at Trump rallies. Despite the fact such details are utter bullshit. Besides, there are many instances where Trump has incited violence at his rallies. A Democratic National Committee spokesperson noted Trump’s donation after Project Veritas released another video on the 2016 election. A Project Veritas spokesperson responded saying, “We have a multi-million dollar budget and the cost of this video series alone is way up there. The donation Trump provided didn’t impact our actions one way or the other.” Though you have to strongly doubt that.

Then there’s the fact that Donald Trump might’ve directed Trump Foundation money to support his presidential campaign. In one case, the grants were used specifically to pay for newspaper ads. In October 2016, Real Clear Politics reported that Trump directed significant amounts of foundation money to conservative organizations, possibly in return for political support and access. They found that from 2011-2014, Trump had “harnessed his eponymous foundation to send at least $286,000 to influential conservative or policy groups…. In many cases, this flow of money corresponded to prime speaking slots or endorsements that aided Trump as he sought to recast himself as a plausible Republican candidate for president.” At least 2 of the groups are based in Republican-leaning early presidential primary states. In addition to the infamous Citizens United, groups include Iowa’s The Family Leader, the South Carolina Palmetto Family Council, the American Conservative Union, and the American Spectator Foundation. Trump’s foundation money grants could’ve violated the law if it was in return for his personal right to speak and gain access to networking events. Considering that he seemed to be an outsider early in the 2016 campaign, I wouldn’t put it past him.

  • The Trump Foundation’s $10,000 grant in 2013 to The Family Leader might’ve led to a speaking engagement for Donald Trump. The Family Leader is an Iowa-based organization whose stated mission is to “strengthen families, by inspiring Christ-like leadership in the home, the church, and the government.” Following the grant, the group’s leader Vader Plaats invited Trump to speak at its leadership summit. Because The Family Leader is a (501(c)(4)) corporation established “develop, advocate and support legislative agenda at the state level” and not a charity, these grants might’ve been illegal. Though Trump might’ve intended to make a grant to The Family Leader Foundation, which is a 501(c)(3) charitable foundation. Either way, it seems shady.
  • Donald Trump was invited to speak at the American Conservative Union’s Conservative Political Action Conference (CPAC) in 2013 after directing $50,000 of Trump Foundation money to the organization. That same year, Trump was invited to speak at Washington’s Economic Club after the Trump Foundation made a grant there.

Partial payment of an assessment owed by the Plaza Hotel

In 1989, the Trump Foundation paid more than half for a “voluntary assessment” imposed on the Plaza Hotel by the Central Park Conservancy. The Trump Organization owned the hotel at the time and the assessment was for the renovation of the severely dilapidated Pulitzer Fountain at Grand Army Plaza directly facing the place. Toward the $500,000 assessment, the foundation granted $264,631 to the Conservancy while the Trump Organization paid between $100,000 and $250,000. The grant to the Conservancy was the Trump Foundation’s largest single grant since its inception through 2015.

Using foundation money to purchase personal or business goods or services

polaroid-trump-painting

Here’s one of the paintings Donald Trump bought with his fake charity money. This one from Doral was discovered on TripAdvisor and a Univision reporter just had to check it out.

On 2 occasions, Donald Trump used the Trump Foundation’s money to buy portraits of himself.

  • In 2007, Donald Trump spent $10,000 in Trump Foundation funds to purchase a 6ft-tall portrait of himself by artist Michael Israel at a Florida benefit for a charity, the Children’s Place at Hornespace, held at his Mar-a-Lago club after his wife Melania made the highest bid. The painter’s former production manager told The Washington Post that he shipped the painting to the Trump National Golf Club Westchester in Briarcliff Manor, New York, allegedly for display in the country club’s conference room or boardroom, at Melania’s request. The charity paid half the proceeds to the artist for the painting, establishing that it had a fair market value of at least that amount. Tax experts told the Post that if it was displayed at a golf club, it could violate IRS rules prohibiting nonprofits from self-dealing (like using charity funds for noncharitable purposes). In September 2015, President Barack Obama publicly criticized Trump’s painting purchase.
  • In 2014 at a charity benefit for the Unicorn Children’s Foundation at his Mar-a-Lago resort, Donald Trump bought a 4ft tall painting of a 1990s version of himself by Argentine artist Havi Schanz, paying for it with $20,000 Trump Foundation funds. A photo of the portrait was found on a TripAdvisor review of Trump National Doral Miami. Later a Univision reporter went to the club, asked the various staff about the painting, and eventually discovered it hanging on at the golf resort’s Champions Bar & Grill restaurant. Trump campaign spokesman Boris Epshteyn explained on MSNBC that Trump’s use of the painting there was not only proper but beneficial to the foundation based on IRS rules allowing individuals to store items “on behalf of the foundation – in order to help with storage costs” and that its use at the restaurant is “absolutely proper” in that Trump was “doing his foundation a favor.”

During a charity auction at his Mar-a-Lago club in 2012, Donald Trump bid $12,000 for a Tim Tebow autographed NFL football helmet and a Tebow football jersey. Newspaper accounts credited Trump for his generosity. However, the purchase was made with $12,000 in Trump Foundation money, not his own. The helmet and jersey’s current whereabouts are unknown. But according to tax law experts, if Trump kept them, the purchase might’ve violated the self-dealing rule, banning private foundations from “the furnishing of goods” to their own officers.

In 2008, Donald Trump used $107,000 in Trump Foundation funds to purchase luxury trips to Paris, including a meeting with actress Salma Hayek at a charity auction for the Gucci Foundation.

In 2013, the Trump Foundation made a $5,000 grant to the nonprofit D.C. Preservation League. According to The Washington Post, the nonprofit’s support was helpful to the Trump Organization in obtaining the rights to convert Washington D.C.’s historic Old Post Office Pavilion into the Trump International Hotel. In acknowledgement for the donation, the Trump Foundation received ads in the event programs. But the ads promoted the hotel rather than the foundation, in possible violation of IRS self-dealing rules.

The Palm Beach Post has suggested that Donald Trump benefitted personally when the Trump Foundation made grants totaling $20,000 from 2011-2014 in return for band and choir performances held at his resorts.

Diverting business or personal income as donations to the foundation

Donald Trump may have directed income personally owed to him to be sent to the Trump Foundation instead of his bank account, in possible tax rules violation. In September 2016, The Washington Post reported that Trump directed that $2.3 million owed to him by various people and organizations should be paid instead as donations to his foundation. Hell, the Post found old Associated Press coverage showing that Trump may have started directing income to the Trump Foundation as early as 1989. IRS rules prohibit individuals from diverting taxable income owed to them toward charities if they benefit directly from them, unless the person declares the income on their personal tax forms. Since Trump has yet to release his tax returns as of 2018, the Post couldn’t confirm if Trump declared the income for any of the received donations.

The Trump Foundation received at least $1.9 million from ticket broker Richard Ebbers who had bought goods, services, including tickets from “Trump or his businesses.” He was allegedly instructed to pay for them to the Trump Foundation in the form of charitable contributions instead as Trump Organization income.

LDECPBPD

Donald Trump had his money from his WWE appearances directed as donations to the Trump Foundation totaling to $5 million. I guess it was to avoid taxes since he doesn’t like paying them.

In 2007 and 2009, the Trump Foundation received a total of $5 million in donations from World Wrestling Entertainment owner Vince McMahon and his wife Linda. Trump appeared twice for WrestleMania events in those years. The 2007 donation was $1 million while the 2009 one was $4 million. The WWE later told The Huffington Post that, “during this period of time, WWE paid Donald Trump appearance fees separately,” and “separately, [WWE chief executives] Vince and Linda McMahon made personal donations to Donald Trump’s foundation.”

In 2007, the Celebrity Fight Night Foundation hosted a fundraiser to benefit the Muhammad Ali Parkinson’s Center in Phoenix, Arizona. According to a CFNF spokesperson, in return for Donald Trump’s appearance and his offering a New York-based dinner with himself at auction, Trump stipulated that the Parkinson’s charity share the total auction proceeds with the Trump Foundation, which totaled to $150,000 that would’ve otherwise gone to the center benefitted Parkinson’s Disease research.
Other donations made to the Trump Foundation that might’ve been in return for Donald Trump’s personal work include:

  • $400,000 from Comedy Central for Trump’s attendance at a celebrity roast in his honor.
  • $150,000 from People Magazine in return for exclusive photos of Trump’s son, Barron.
  • $500,000 from NBC Universal in 2012 while airing Trump’s show, The Apprentice.
  • $100,000 from the family of Donna Clancy, whose family law office had been renting space at the Trump Organizations 40 Wall Street building.
  • $100,000 in 2005, for Melania Trump’s work for Norwegian Cruise Lines on a segment later included on The Apprentice. A company spokesperson confirmed that Melania’s appearance fee was paid in a Trump Foundation donation

Granting money to charities that rented Trump Organization facilities

231624_1320467.jpg.1500x1000_q95_crop-smart_upscale

These people are protesting the Dana-Farber Cancer Institute for holding events at Trump resorts. Good thing, since Donald Trump earns money from their fundraisers than what his foundation gaves to them.

Donald Trump has been accused of directing money toward several charities that in turn paid the Trump Organization to host charity events at Trump-owned resorts and golf clubs. High-profile charity events at Mar-a-Lago cost as much as $300,000. Notable examples include:

  • In 2010, Donald Trump was personally honored by the Palm Beach Police Foundation after the Trump Foundation donated to the charity $150,000 during the 2009-2010 period. According to the police foundation’s public tax records, the Palm Beach Police Foundation paid the Trump Organization $276,463 in rent in 2014 for it “Police Ball and Auction” held at Trump’s Mar-a-Lago hotel. The 2014 tax filings also lists $44,332 in unattributed “direct expenses” the police foundation paid for the same event along with $36,608 in “direct expenses” for its annual “Golf Classic” it holds yearly at a Trump Organization-owned golf course. For each of the 4 years prior to 2014, the police foundation’s public tax records show significant “direct expenses” incurred for both the Police Ball and Auction and the golf tournament. Though filings don’t list expense categories.
  • In 2013, according to The Washington Post, Donald Trump donated to the V Foundation, a cancer-fighting founded by former basketball coach Jim Valvano, in return for the V Foundation hosting a fundraiser at his Trump Winery in Virginia.
  • The Dana-Farber Cancer Institute paid the Trump Organization substantial fees to hold annual events at Mar-a-Lago. In turn, the Trump Foundation granted a total of $85,000 to the Institute in 2006 and 2007, among other grants in subsequent years.

Donald Trump taking personal credit for donations made using foundation money

whoinvitedhim

Donald Trump often likes to boast about his philanthropy. But in reality, he often donated to charity using other people’s money from his Trump Foundation personal piggy bank. And he’s said to be one of the least charitable billionaires to date.

In 2016, both Fox News and The Washington Post reported that Donald Trump has repeatedly claimed in public to have made over “$102 million” in charitable donations “in the past five years.” The Trump Organization provided journalists with a 93-page donation list. None of the cash donations were confirmed to come from Trump personally while many were grants from the Trump Foundation, which no longer contained any of his own money.

For instance, Donald Trump took personal credit while honored for a Trump Foundation grant to the Palm Beach Police Foundation that actually came from an outside source. Though he pledge money personally before the Trump Foundation solicited $150,000 earmarked for the police foundation from an unrelated philanthropic organization, the Charles Evans Foundation. It took that money and paid it to the Palm Beach charity. The police then personally honored Trump with its annual Palm Tree Award at his Mar-a-Lago hotel during its annual fundraiser. The Washington Post wrote that, Trump had effectively turned the Evans Foundation’s gifts into his own gifts, without adding any money of his own.”

The Dana-Farber Cancer Institute has honored Donald Trump variously as “Grand Benefactor” and “Grand Honorary Chair” at its annual fundraisers held at Trump’s Mar-a-Lago estate. However, Trump may have also earned money from the event fees he received from the Institute than the Trump Foundation paid to them in grants. Since 2010, Trump has directed at least $300,000 in Trump Foundation grants to the Institute.
On his prime-time TV show, The Apprentice, Donald Trump has received highly visible praise for his personal generosity on multiple occasions. He’s frequently offered to make generous donations to his contestants’ charities. But records show that he ultimately directed the Trump Foundation to make a grant or instead had the show’s network, NBC Universal to make the donation instead. Examples include:

  • A 2008 episode where Donald Trump told mixed martial artist Tito Ortiz, “I think you’re so incredible that — personally, out of my own account — I’m going to give you $50,000 for St. Jude’s [children’s hospital].” St. Jude’s is also Eric Trump’s favorite charity. Trump then had the Trump Foundation make a $50,000 grant to the children’s hospital.
  • In 2012, Donald Trump promised at least 6 personal $10,000 donations each to contestants’ chosen charities on a Celebrity Apprentice episode. In another episode from the same season, he pledged $10,000 to contestant Aubrey O’Day’s chosen charity, a gift “that moved [contestant and comedienne Lisa] Lampanelli to tears.” According to The Washington Post’s review of the tax filings, Trump directed all this money to be granted to the charities out of Trump Foundation funds.
  • In 2013, Donald Trump promised personal $20,000 donations each to charities of basketball star Dennis Rodman, singer La Toya Jackson, Playboy Playmate Brande Roderick, and actor Gary Busey. Trump then used Trump Foundation money to make the payments. He told them, Remember, Donald Trump is a very nice person, okay?” According to a Washington Post reporter reviewing the show’s transcripts, by 2013, “contestants had come to expect these gifts — and even to demand them, when Trump didn’t offer money on his own.”
  • For a $14,000 gift to the Starkey Hearing Foundation, a Marliee Matlin’s chosen charity, Donald Trump was credited this this “personal donation” though it actually came from the Trump Foundation.

Other alleged examples include:

  • In 2009, Donald Trump appeared on Extra where he promised to pay a struggling viewer’s domestic bills. “This is really a bad time for a lot of people,” he said as the contest was announced. Trump eventually paid the winner with Trump Foundation money. A Trump representative later explained the grant was legal because the winner qualified as an “indigent” individual under Internal Revenue Code section 4945(d)(3), a contention at least one tax expert has disputed.
  • Donald Trump was honored with a chair and a plaque with his name at the Raymond J. Kravis Center of the Performing Arts after the Trump Foundation donated $10,000.
  • In 2014, Donald Trump took personal credit for a $25,000 Trump Foundation grant at a speech honoring slain journalist, James Foley. At the time The New Hampshire Union Leader published an article titled Trump leads tribute for slain journalist James Foley. Foley was posthumously awarded the 12th annual Nackey S. Loeb First Amendment Award, “given annually to New Hampshire organizations or residents who protect or exemplify the liberties listed in the First Amendment to the Constitution.” Trump was the ironic, “featured speaker of the event.” Compare this to how Trump regularly attacks the media for reporting negative stories about him instead of lavishing him with unearned praise like Fox News does. Or how he’s willing to defend Vladimir Putin or the Saudi Arabian Crown Prince despite that these 2 have had journalists murdered.
  • In 2016, Donald Trump received personal praise for a $100,000 Trump Foundation grant to the National September 11 Memorial Museum ahead of the 2016 New York State Republican primary.

Making grants to other private foundations without fulfilling IRS “expenditure responsibility” rules

By law, the Trump Foundation was responsible for ensuring that any grant it takes to another private foundation is strictly used for charitable purposes. To fulfill this IRS “expenditure responsibility” the foundation is required to attach “full and detailed” reports describing the grant money’s uses to its IRS 990 tax return for each year to a private foundation is made. Trump Foundation tax returns show it failing to do this all of the 20 grants it made to private foundations from 2005-2014. Such grants in this period totaling to $488,500 could be subject to significant fines and penalties.

Receiving donation from Ukranian oligarch during 2016 presidential campaign

In 2015, Ukrainian Victor Pichkun donated $150,000 to the Trump Foundation in return for Donald Trump’s video conference link appearance at the Yalta European Strategy Conference. The appearance was broadcast on a large screen and lasted 20 minutes, including translation and technical difficulty delays. Pichkun is the son-in-law of former Ukranian president Lionid Kuchima. In 2018, the New York Times reported that Special Counsel Robert Mueller was investigating this donation as a possible illegal in-kind foreign national campaign contribution intended to curry favor with then-candidate Donald Trump.

From Russia with Donald Trump

flat,550x550,075,f.u7

As of 2018, we don’t know whether the Trump campaign willingly colluded with Russia in its efforts to undermine the 2016 election. But we do know that Russia hacked into DNC emails and spread fake news propaganda on social networks to help Donald Trump. We know the Russians wanted Trump to win and did whatever they could to accomplish that. We know the Trump campaign was at least okay with the Russian hacking and efforts. Hell, one Trump campaign official even drunkenly bragged about the Russians hacking into Hillary Clinton’s emails. And we know that several Trumpworld figures have corresponded with Russian hackers, Russian oligarchs, and people with ties to the Russian government. Furthermore, Trump has praised Russian President Vladimir Putin in his speeches, even when he’s every opportunity to criticize the Kremlin dictator. Though collusion hasn’t been proven, what we do know of Trumpworld’s connections with Russia gives us a reasonable case for Robert Mueller to investigate.

On November 9, 2016, just a minutes after Donald Trump was elected president of the United States, a man named Vyacheslav Nikonov made a very unusual statement in the Russian State Duma. “Dear friends, respected colleagues!” he said. “Three minutes ago, Hillary Clinton admitted her defeat in US presidential elections, and a second ago Trump started his speech as an elected president of the United States of America, and I congratulate you on this.” Since Nikonov is the leader of the pro-Putin United Russia Party, his announcement that day was a clear signal that Trump’s victory was a victory for Putin’s Russia.

Longtime journalist Craig Unger has attempted to gather all the evidence we have of Donald Trump’s connections to the Russian mafia and government and lay it all out in a clear, comprehensive narrative in his book, House of Trump, House of Putin: The Untold Story of Donald Trump and the Russian Mafia. Though the book claims to tell the “untold story,” it’s not entirely unclear of how much is new. Because like a lot of the skeletons in Trump’s gilded closet, one of the hardest things to accept about the Trump-Russia saga is how transparent it is. In fact, so much evidence hides in plain sight, and somehow that’s made it more difficult to accept. In his book, Unger names 59 Russians as Trump business associates and follows the purported financial links between them and the Trump Organization, going back decades. Many of them are quite shady. Although Unger doesn’t provide any evidence that Trump gave Russia anything concrete in return for their help, the case he makes for how much potential leverage the Russians have over Trump is damning. In fact, Unger thinks Russia’s use of Trump constitutes “one of the greatest intelligence operations in history,” as he puts in his book.

As Craig Unger claims. what most Americans don’t understand is that the Russian mafia is different from the American mafia. While American crime syndicates are often targets for FBI investigation, the mafia is essentially a state actor in Russia. When asked about the mafia, former KGB Russian counterintelligence operations Gen. Oleg Kalugin told Unger, “Oh, it’s part of the KGB. It’s part of the Russian government.” In Russia, there’s no Wall Street or anything like Goldman Sachs. After the collapse of the Soviet Union, rich gangsters and government officials were able to privatize and loot state-held assets in coal, oil, minerals, and banking. In Vladmir Putin’s Russia, criminal syndicates have become increasingly intertwined with its intelligence services, blurring the line between mafia dons and spies. In fact, Russia expert Mark Galeotti would agree with Unger since he wrote in his book, The Vory: Russia’s Super Mafia that Putin’s Kremlin consolidated power by “not simply taming, but absorbing, the underworld.” Putin didn’t care what these gangsters did as long as they strengthened his power and personal financial interests. Since the 1990s, its estimated that some $1.3 trillion has flowed out of Russia.

1_TPTcHJWkZQdqEhX7szGQwQ

Semion Mogilevich is one of the richest and most influential gangsters in the world. Known as the ultimate Russian mob boss, he may not have any direct connection to Donald Trump. But many of his associates and underlings do.

One of the key mob bosses is the squat Ukranian Semion Mogilevich. In Russia, he’s a big time Russian crime boss with a multibillion empire and a wide range of crimes that will make Al Capone look like an inept convenience store robber. According to the FBI, Mogilevich started out as the key money-laundering contact for the Solntsevskaya Bratva, or Brotherhood, one of the richest criminal syndicates in the world. Craig Unger believed that he could’ve been the CEO of Goldman Sachs if he was born in America. The FBI considers Mogilevich the “boss of bosses” of the Russian mafia who’s even feared by his fellow gangsters as “the most powerful mobster in the world.” He’s run drug trafficking rings at an international scale. He’s used a jewelry business in Moscow and Budapest as a front for art that Russian gangsters stole from museums, churches, and synagogues all over Europe. He’s even been accused of selling $20 million in stolen weapons to Iran. From what the FBI has on him, Mogilevich has laundered money through more than 100 front companies around the world and held bank accounts in at least 27 countries. Mogilevich is famous for designing elaborate financial schemes that are extremely difficult, even possible to detect. Since the planning and setup can take years and involve a wide range of people in various positions of power whose roles/identities are sometimes never discovered. In Russia, his influence reaches all the way to the top. Ex-Russian spy, Alexander Litvinenko said in an interview with investigators in 2005, “Mogilevich have good relationship with Putin since 1994 or 1993.” A year later Litvinenko was dead, suspiciously poisoned by Kremlin agents. Many of the Russian mobsters who bought units from Donald Trump have ties to this man.

According to Craig Unger, it probably all began as a money-laundering operation with the Russian mafia. After all, anyone who’s known about Donald Trump for a long time knows that he likes doing business with gangsters. Partly because they pay top dollar and loan money when traditional banks won’t. Essentially, for more than 30 years Trump was working with the Russian mafia. He profited from them. They rescued and bailed him out, taking him from being $4 billion in debt to becoming a multibillionaire again. And they fueled his political ambitions. And since Trump had worked with the Russian mafia, he was in bed with the Kremlin as well, whether he knew it or not.

criminals-flock-to-trump-tower

This is a chart of the Russian-linked and notorious criminals who lived and worked at Trump Tower. Since the place has been the HQ for money laundering operations and more. Helps that during the 1980s, it was the only high-rise to accept anonymous buyers.

To Craig Unger’s knowledge, the very first documented episode he could find was in 1984 when a man named David Bogatin met with Donald Trump in Trump Tower right after it opened since it was the only high-rise in New York City at the time to accept anonymous buyers. Now Bogatin is a Russian mobster, convicted gasoline bootlegger, and close ally of major Russian mob boss and king of money launderers Semion Mogilevich. Anyway, Bogatin came to that meeting prepared to spend $6 million which is equivalent to $15 million today. At that meeting, he bought 5 condos, which the Kremlin later seized on claims they were used to launder money for the Russian mob. We don’t exactly know what was in Trump’s head at the time or what he knew. But Unger has documented 1,300 transactions of this kind with Russian mobsters. These real estate transactions were all cash purchases made by anonymous shell companies that were obviously fronts for criminal money-laundering operations. By the early 2000s, 1/3 of the buyers of Trump Tower’s most expensive condos were either Russia-linked shell companies or individuals from the former Soviet Union. In Florida, about 63 Russian buyers spent at least $98 on Trump properties while another 1/3 of the units were bought by shell companies. Since this represents a large chunk of Trump’s real estate activity in the United States, it’s difficult to argue he had no idea what was going on. Aside from Bogatin, there’s his brother Yakov, who was involved in an elaborate stock fraud with Mogilevich. Two of Trump’s Sunny Isles buyers Anatoly Golubchik and Michael Sall were convicted of taking part in a massive international gambling and money laundering syndicate run out of the New York Trump Tower.

Another Trump buyer was an Uzbek mob-connected diamond dealer named Eduard Nektalov. At the time, Nektalov was under investigation by a Treasury Department task force for mob-connected money laundering. He bought a condo in midtown Manhattan’s Trump World Tower on the 79th floor, directly below Kellyanne Conway. A month later, he sold his unit for $500,000 profit. The next year after rumors circulated of him cooperating with federal investigators, Nektalov was gunned down on Sixth Avenue.

In 1991, Semion Mogilevich paid a Russian judge to spring fellow mob boss Vyachelsav Kirillovich Ivankov, from a Siberian gulag. In Russia, Ivankov was infamous for torturing his victims and boasting about murders he arranged. After his release, Ivankov headed to New York City on an illegal business visa. Once there, he bought a Rolls Royce dealership to use “as a front to launder criminal proceeds.” One of Ivankov’s partners in the operation was Felix Komarov, an upscale art dealer who lived in Trump Plaza on Third Avenue. After receiving a briefcase filled with $1.5 million in cash, over the next 3 years, Ivankov oversaw the mob’s growth from a local extortion racket to a multibillion dollar enterprise. According to the FBI, he recruited 2 “combat brigades” of Special Forces veterans from the Soviet war in Afghanistan to run the mafia’s protection racket and kill his enemies. Feds later found out that Ivankov made frequent visit to Trump Taj Mahal in Atlantic City, New Jersey, where Russian gangsters routinely laundered huge sums of money. So much that it was repeatedly cited by the Treasury Department’s Financial Crimes Enforcement Network for having inadequate money-laundering controls. And in 2015, was fined $10 million and admitted for having “willfully violated” anti-money-laundering regulations for years. The also found that he lived in a luxury condo at Trump Tower. Though despite being Donald Trump’s neighbor, there’s no evidence they knew each other personally. But the fact a top Russian mafia boss lived and worked in Trump’s building shows just how much high-level Russian gangsters saw Trump’s properties as a home away from home.

Then there’s Russian mob leader Alimzhan Tokhtakhounov who ran an entire gambling and money-laundering network out of Unit 63A at Trump Tower (which is 3 floors below Donald Trump’s residence). In fact, Tokhtakhounov was a VIP attendee at Trump’s 2013 Miss Universe Pageant in Moscow just 7 months after the FBI busted his gambling rings and rounded up 29 suspects. The operation, which prosecutors called “the world’s largest sports book,” was run out of Trump Tower condos, including the building’s whole 51st floor. In addition, Unit 63A served as “sophisticated money-laundering scheme” moving an estimated $100 million out of the former Soviet Union, through shell companies in Cyprus, and into investments in the United States. According to the federal indictment, the money launderers paid Tokhtakhounov $10 million. A decade earlier, Tokhtakhounov was indicted for conspiring to fix the ice-skating competition at the 2002 Winter Olympics and was the only suspect to avoid arrest.

Russian mobsters and oligarchs also had ties to some of Donald Trump’s other properties outside the United States. In November 2017, NBC News reported Trump’s Panama hotel had ties to organized crime. While a Russian state-owned bank under US sanctions helped finance the construction of the 65-story Trump International Hotel and Tower in Toronto. And in December 2016, Jared Kushner met with that bank’s CEO. Since this represents a large chunk of Trump’s real estate activity in the United States, it’s difficult to argue he had no idea what was going on.

But how did Donald Trump become a “person of interest” to the Russians over 30 years ago, before his ascent to the presidency was even fathomable? It’s actually not as strange as it seems. First of all, Russians have always wanted to align with certain powerful businessman. Nor was Trump the only guy they targeted. For the Russians have a history going back to the American businessman Armand Hammer during the 1970s-80s who they turned into an asset. In fact, Russia had hundreds of agents and assets in the US. According to Gen. Kalugin, the US was a paradise for spies and they had recruited roughly 300 agents and assets in the country. Trump was one of them.

Nor were Russian operations just limited to money laundering for there was a parallel effort to seduce Donald Trump. Sometime in 1986, Russia’s ambassador to the US, Yuri Dubinin visited Trump in Trump Tower, said that his building was “fabulous,” suggested that he should build one in Moscow, and they arranged for a trip to the Russian capital. According to Gen. Kalugin, this was likely the first step in the process to recruit and compromise Trump, which they probably succeed with flying colors. Since Trump is a sucker for flattery. So we shouldn’t be the least surprised if the Russians have compromising materials on Trump’s Moscow activities. Since they’re very good at acquiring compromising stuff on just about anyone. Not that it would be hard for them.

untitled

Here’s a picture of Donald Trump with Tevfik Artif and Felix Sater. Artif would be busted for running a prostitution ring on his boat in Turkey. While Sater served as an informant while doing his Russia-linked dirty deeds to avoid prison time for racketeering.

Though we don’t have evidence whether such compromising material on Donald Trump’s Moscow activities exists and Craig Unger has tried but couldn’t find any corroboration from several people who assured him it does. But that’s all beside the point. Since Unger believes that the real evidence is already out there in the form of the Bayrock Group, a real estate development company located on Trump Tower’s 24th floor. The founder was a Kazakh man named Tevfik Arif while the managing director was Felix Sater. In 2005, Bayrock proceeded to partner with Trump and helped him develop a new business model he desperately needed. Because Trump was $4 billion in debt after his Atlantic City casinos went bankrupt that he couldn’t get a bank loan from anywhere in the West. Bayrock came in with a new business model that says, “You don’t have to raise any money. You don’t have to do any of the real estate development. We just want to franchise your name, we’ll give you 18 to 25 percent royalties, and we’ll effectively do all the work. And if the Trump Organization gets involved in the management of these buildings, they’ll get extra fees for that.” Apparently, Trump found the idea fabulously lucrative. Meanwhile, the Bayrock associates (particularly Sater) operated out of Trump Tower as well as constantly flew back and forth to Russia. In his book, Unger detailed several channels through which various people at Bayrock have close ties to the Kremlin. While he talked about Sater’s trips to Moscow even as late as 2016, hoping to build Trump Tower there.

Yet, Bayrock and its deals became quickly mired in controversy. First, Forbes and other publications reported that the company was financed by a notoriously corrupt group known as the Trio. In 2010, Turkish prosecutors arrested Tevfik Arif on charges of setting up a prostitution ring after found aboard his boat with 9 young women, 2 of whom were 16 years old. He was later acquitted since the women refused to talk. That same year, 2 former Bayrock executives filed a lawsuit alleging Artif started a firm “backed by oligarchs and money they stole from the Russian people.” In addition, the suit alleged Bayrock “was substantially and covertly mob-owned and operated.” According to them, the company’s real purpose was to develop expensive properties bearing the Trump brand and use the projects to launder money and evade taxes. Though the suit doesn’t claim that Donald Trump was complicit in the scam, The Financial Times found that Trump SoHo had “multiple ties to an alleged international money-laundering network.” In one case, a former Kazakh energy minister is being sued in federal court for conspiring to “systematically loot hundreds of millions of dollars of public assets” before purchasing three condos in Trump SoHo to launder his “ill-gotten funds.”

bloomberg-trump-associate-felix-sater-allegedly-swindled-holocaust-survivors

Donald Trump has often denied his association with Felix Sater. Yet, in reality, the two have been quite close as this business card shows.

During his collaboration with Bayrock, Donald Trump became close to the man who ran the firm’s daily operations, Felix Sater. Sater had numerous ties to Russian oligarchs and Russian intelligence. His father was a boss for Semion Mogilevich who was convicted for extorting local restaurants, grocery stores, and a medical clinic. Sater tried making it as a stockbroker. But his career came to an end in 1991 when he stabbed a Wall Street foe in the face with a broken margarita glass during a bar fight, opening wounds requiring 110 stitches. He then lost his trading license over the attack and served a year in prison. In 1998, Sater pleaded guilty to racketeering on grounds of operating a “pump and dump” stock fraud partnership with alleged Russian mobsters that bilked investors of at least $40 million. To avoid prison time, Sater turned informer. But according to documents from the lawsuit against Bayrock, he also resumed “his old tricks.” By 2003, the suit alleges, Sater controlled the majority of Bayrock shares and proceeded to use the firm to launder hundreds of millions of dollars while skimming and extorting millions more. In addition, the suit claimed that Sater committed fraud by concealing his racketeering and that he threatened “to kill anyone at the firm he thought knew of the crimes committed there and might report it.”

By Felix Sater’s account in sworn testimony, he was very tight with Donald Trump. He flew to Colorado with him. He accompanied Donald Jr. And Ivanka on a trip to Moscow at Trump’s invitation. And he met with Trump’s inner circle “constantly.” In Trump Tower, he often dropped by Trump’s office to pitch business ideas. Trump and his lawyers claim he wasn’t aware of Sater’s checkered past when he signed on to do business with Bayrock. This is plausible since Sater’s plea deal in the stock fraud was kept secred due to his role as an informant. But even after The New York Times revealed Sater’s criminal record in 2007, Sater kept using office space provided by the Trump Organization. In 2010, he received a Trump Organization business card reading: FELIX H. SATER, SENIOR ADVISOR TO DONALD TRUMP. As of 2017, Sater apparently remains close to Trump’s inner circle. One week before National Security Adviser Michael Flynn was fired for failing to report meetings with Russian officials, Trump’s personal attorney Michael Cohen hand-delivered a “back channel plan” for lifting sanctions on Russia to Flynn’s office. According to the Times, the co-author was Felix Sater.

Nonetheless, like many of Donald Trump’s business projects, his deals with Bayrock didn’t bear fruit. International projects in Russia and Poland never materialized. A Trump Tower being built in Ft. Lauderdale ran out of money before completion, leaving behind a massive concrete shell. Trump SoHo was ultimately foreclosed and resold. But Trump’s Russian investors left him with a high-profile property he could leverage since he and Ivanka are still listed as managers. And it’s said he made $3 million from it in 2015.

But is there any evidence that Donald Trump actively sought out Russian money by making clear that his businesses could be used to hide ill-gotten gains? According to Craig Unger, it’s difficult to say. Because he’s not sure if Trump had to. From how the Russian mob transactions took place, Trump didn’t have to say anything. After all, the Trump Organization was desperate for money and knew the caliber of people they were dealing with. So they were either okay with this or deliberately chose not to do their due diligence. Other real estate developers may do this as well, but they usually don’t become president of the United States.

Donald Trump seems much more motivated by money than political ideology. But was his drift into politics in any way influenced by his financial entanglements? There’s no clear answer. Yet, Craig Unger told Vox one weird anecdote about Trump’s first wife, Ivana, whom he married in 1977. Apparently, Czech secret police had started following her and her family in the late 1980s and one of their files said that Trump was being pressured to run for president. But what does that mean? Who was pressuring him and why? How were they applying the pressure? And did it have anything to do with potentially compromising materials the Russians had on Trump during his 1987 trip to Moscow? What we do know is that when Trump returned from his first Moscow trip, he took out full-page ads in the Washington Post, New York Times, and Boston Globe which pushed anti-European and anti-NATO views that were aligned with the Soviet plan to destroy the Western alliance. Whether he always believed such things or not, it’s worth noting.

Now Craig Unger didn’t go to Russia for obvious reasons given how Vladimir Putin tends to murder critical reporters. But most of what he found out came from public sources, which is stunning. One of his sources tipped him off on the high-ranking Russian mob boss Semion Mogilevich, whom he had never heard of before. He’s even been accused of selling $20 million in stolen weapons to Iran. Anyway, that led Unger to an online database revealing home ownership in the state of New York, along with purchases and sales. So he went to the Trump properties. Every time Unger found a Russian name, he’d research it. He’d take their name and Mogilevich in Google and as he told Vox, “it was like hitting the jackpot on a slot machine, time after time after time.” Among the Russians Unger found on the Trump property listings, there were countless people either indicted on money laundering or gunned down on Sixth Avenue. He also found a huge percentage with criminal histories, which sort of got him started. He also had a research assistant who spoke Russian and helped him break the language barrier for him.

But does Craig Unger’s book about Donald Trump and Russia offer anything new? Well, the insights Unger gained from Gen. Kalugin were completely new. Yet, most of what he did was compile what was out there but haven’t been pieced together. For instance, he found a lot of the Russian-connected stories published in the crime pages of the New York Post and the New York Daily News. These were just straight-up crime stories you’d see in a tabloid. After all, Americans don’t think crime stories involving the Russian mob would have any geopolitical implications or forces behind it. Nevertheless, many of these seemingly random Russian crime stories appearing in the tabloids again and again was connected to a much larger operation ensnaring Trump and the people around him.

Still, even if Donald Trump has no idea how many deals he and his businesses made with Russian investors, he certainly didn’t “stay away” from Russia. After all, he and his organization have aggressively promoted his business there for decades, seeking to entice investors and buyers for some of his most high-profile developments. Whether he knew it or not, Russian mobsters and corrupt oligarchs used his properties not only to launder vast sums of money from extortion, drugs, gambling, and racketeering, but even as a base for their criminal activities. In the process, they propped up Trump’s business and enabled him to reinvent his image. Without the Russian mafia, Trump wouldn’t be president of the United States.

However, if Donald Trump is a Russian asset, he’s not the only one targeted. During the 1980s and 1990s, the US government saw a pattern by which criminals used condos to launder money. As former Clinton official Jonathan Winer told The New Republic, “It didn’t matter that you paid too much, because the real estate values would rise, and it was a way of turning dirty money into clean money. It was done very systematically, and it explained why there are so many high-rises where the units were sold but no one is living in them.” One of the things Craig Unger’s book shows is that there’s a new kind of global war going on in which the weapons are information, data, social media, and financial institutions. The Russian mafia is only one weapon in this global conflict and the Russians have been smartly fighting it since the fall of the Soviet Union. The Russians start businesses and front companies and commodities firms appearing legitimate but essentially work to advance the Russian state’s interests. Many of today’s Russian oligarchs seek to portray themselves as unremarkable businessmen, preferring that their life-and-death struggles for riches in the 1990s fade into history. Yet, as their influence in the west grows, it becomes more important to understand any links to the authoritarians and kleptocrats back home. The Russians are very good at getting people financially entangled and then using that leverage to get what they want. This appears what the Russians have done with Trump and now he’s president. As former top official Elsie Bean told The Financial Times, “Russia has long been associated with dirty money. Anyone getting substantial funds originating in the former Soviet Union should have known that the funds were high risk and required a careful due diligence review to ensure the money was clean.”

Nonetheless, the most troubling part of all this is that the Russians simply exploited our own corrupt system. The studied our pay-to-play culture, found its weak spots, and very carefully manipulated it. As long as our culture remains unchanged, we should expect this kind of exploitation. Sometimes the worst part about a scandal is what’s legal. The Russians studied our campaign system and campaign finance law and masterfully exploited it. They’ve used pharmaceutical companies, energy companies, and financial institutions to pour money into politics. And we really have no idea the extent of their influence. Vladimir Putin may be right in his insistence that American democracy is also corrupt while he’s showing us exactly how screwed up it is. Donald Trump is just the most glaring example. But there are others, most of who we don’t know anything about.

Whether you believe Donald Trump is owned by the Russian mob or not, Craig Unger presents a compelling case in his book. Though some of his statements in issues might read like conspiracy theories, but so much of it makes a lot of sense. Besides, Unger isn’t the only guy who thinks the Russian mafia owns Trump. Nor Trump is the only prominent figure with shady Russian ties as you can see within his administration. Nor is the Trump Organization the only entity. Trump’s longtime personal lawyer Michael Cohen had an uncle who owned a Brooklyn catering hall called El Caribe, which “for decades was the scene of mob weddings and Christmas parties,” and housed offices of “two of New York’s most notorious Russian mobsters.” Then there’s the matter with the NRA receiving money from 23 Russian donors during the 2016 campaign. Not to mention, Rep. Dana Rohrbacher was considered “Putin’s favorite congressman” long before Trump ran for president and was instrumental in killing some critical anti-Russian legislation. Thankfully, he’s lost to a Democrat this year. We may not know whether the Trump campaign colluded with Russia or the full extent of the Trump-Russian relationship. But as with many aspects of Trump’s business practices, what we know is damning. There is no doubt that Trump has taken Russian money. And when Trump receives millions of dollars from someone, he’s more likely to be beholden to them. But that doesn’t mean Trump is loyal to them, because he’s just as likely to drop his Russian backers once they prove no longer useful. Since Trump’s true loyalty is only to himself. So we must be concerned.

Born in a Golden Cradle

We all know full well how Donald Trump repeatedly paints his start in business as an up-by-the bootstraps, riches-to-slightly-more-riches tale. He’s cast himself as a New York real estate Oliver Twist with only his name and a $1 million loan from his dear old dad to keep him company. Only to become a self-made billionaire real estate mogul. Trump not only used this description to promote his image as a skilled businessman, but also portray himself as a “self-made man” during his presidential candidacy.

Despite the image Donald Trump projects to his base at his ego boosting rallies, he has actually spent 5 decades pretending not only that his father never rescued him from financial dire straits, but played a minimal role in his business success. When he said that Fred only gave him a $1 million loan, Trump glossed over how central his dad was to his career. When Trump entered the Manhattan real estate business in the mid-1970s, Fred cosigned bank loans for tens of millions of dollars. These loans made it possible for Trump to develop early projects like the Grand Hyatt hotel. When he targeted Atlantic City’s casino market, Fred loaned him about $7.5 million to get started. When he floundered there during the 1990s, Fred sent a lawyer to a Trump casino to buy $3.5 million in chips so his son can use the funds for a bond payment and avoid filing for corporate bankruptcy. In other words, Trump’s wealth has always been “deeply intertwined with, and dependent on” on his father’s wealth.

On Tuesday, October 2, 2018, the New York Times published investigation results into Donald Trump’s wealth and tax practices. They revealed a pattern of tax evasion and business practices that allowed him to receive at least $413 million in today’s dollars from his father. According to the report, Trump and his siblings got hundreds of millions of dollars in today’s money from their dad’s real estate empire, starting from their childhoods. As they write:

“Much of this money came to Mr. Trump because he helped his parents dodge taxes. He and his siblings set up a sham corporation to disguise millions of dollars in gifts from their parents, records and interviews show. Records indicate that Mr. Trump helped his father take improper tax deductions worth millions more. He also helped formulate a strategy to undervalue his parents’ real estate holdings by hundreds of millions of dollars on tax returns, sharply reducing the tax bill when those properties were transferred to him and his siblings.”

In sum, Donald Trump’s parents transferred more than $1 billion to their children and paid about $52.2 million in taxes. Given the relevant tax rates on gifts and inheritances, they should’ve paid $550 million, which is 10 times more. The IRS didn’t really notice it. While the Times didn’t see Trump’s own tax returns, their reporting was based on documents, records, and interviews pertaining to Fred Trump’s financial empire. These included, “tens of thousands of pages of confidential records — bank statements, financial audits, accounting ledgers, cash disbursement reports, invoices and canceled checks” along with more than 200 tax returns from Fred and various companies and trusts he set up. Even though he can’t be prosecuted for them due to statute of limitations expiration, evidence suggests that Donald’s actions on paying taxes weren’t always above the fray.

When Donald Trump’s finances were “crumbling” during the 1980s and 1990s, Fred Trump’s companies increased distributions to him and his siblings. From 1989-1992, Fred created 4 entities paying Donald $8.3 million in today’s money. When Donald’s finances were at their worst in 1990, Fred’s income shot up $49,638,928 and earned him a $12.2 million tax bill. According to the New York Times report, there are indications Fred, “wanted plenty of cash on hand to bail out his son if need be.” A former Trump Organization told Tim O’Brien in 2005, “We would have literally closed down. The key would have been in the door and there would have been no more Donald Trump. The family saved him.” Of course, it wasn’t really Trump’s family who saved him from personal bankruptcy, it was his dad. On another occasion, Trump allegedly gave his dad a $15.5 million share of the Trump Palace condo skyscraper in New York to square off some debts with his loans. But Fred then sold the shares back to his son for $10,000, making the whole exchange of $15.49 a taxable gift. Fred never declared it as such.
But it wasn’t always rich dad bailing out his son. Fred and Donald Trump worked together. As the elder man aged, his kids had to continue the tax schemes their parents put in place. In 1997, Donald and his siblings gained control of most of their dad’s empire. They significantly undervalued the properties, claiming they were worth $41.4 million and selling them off for 16 times the amount.

Nonetheless, the wealth transfer between Fred Trump and Donald Trump (along with his siblings) was a lifetime affair. As the New York Times notes:

“By age 3, Mr. Trump was earning $200,000 a year in today’s dollars from his father’s empire. He was a millionaire by age 8. By the time he was 17, his father had given him part ownership of a 52-unit apartment building. Soon after Mr. Trump graduated from college, he was receiving the equivalent of $1 million a year from his father. The money increased with the years, to more than $5 million annually in his 40s and 50s.”

As the Times writes, there’s a fine line between tax evasion and tax avoidance. Rich people employ all kinds of tricks to lower their taxes all the time. But since Donald Trump has refused to release his tax returns, these journalistic investigations raise questions of what he’s hiding in his finances. For what the publication doesn’t have is what the American people have become accustomed to getting from their presidents like recent tax returns. Instead, the Times gave close scrutiny Fred Trump’s businesses which reveal the range of apparent illegal activity. Yet, everything the Times has is fairly old since Fred passed nearly 20 years ago while his years in business ended before that. So they no longer reflect the current state of Trump’s financial affairs. Furthermore, any illegal activity the Times sources revealed in this article can’t be prosecuted due to statute of limitations expiration.

The New York Times’ investigation is exhaustive and, to some extent, defies summary. But it’s worth recounting the most egregious thing they found as an illustrative example of the scope of crimes that serious forensic accounting can reveal. Basically, this was a 2-scams-for-the-price-of-one-caper, in which Fred Trump formed a shell company his children secretly owned. The company pretended to perform useful services for rent-stabilized buildings Fred owned, allowing to gift money to his children without paying a gift tax. Then, its bogus accounting was used to justify rent increases to regulators. As the Times wrote:

“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 owners — Donald Trump, his siblings and a cousin. Fred Trump then used the padded All County receipts to justify bigger rent increases for thousands of tenants.”
This is a particularly shocking crime because of the way it was used to defraud thousands of tenants as well as tax authorities. But this wasn’t the only time Fred cheated the public. After all, he got his start in profiteering in millions from programs to help returning GIs receive housing, prompting President Dwight D. Eisenhower to throw a fit. In 1954, he was called before the Senate to testify about how he overcharged the federal government by inflating costs associated with a taxpayer-subsidized housing development in Brooklyn. As a result, Fred was banned from bidding on federal housing contracts. So he focused on state-subsidized projects. However, in 1966, Fred was called before a state investigations board to sit through embarrassing public hearings exploring how he overbilled New York State for equipment and other costs. These hearings essentially marked the end of Fred’s career as a major developer in public subsidized housing. Donald Trump would say that the government essentially reached in and took his dad’s business away from him. But this explanation ignores the fact that Fred’s business wouldn’t have gotten off the ground without government subsidies in the first place.

However, in terms of Donald Trump cheating on his taxes, it’s far from unique. In 1983, he’s admitted to sales tax fraud. He’s lost 2 income tax civil fraud trials. Hell, his own tax lawyer testified that Trump’s 1984 tax return was fraudulent. More strikingly, even before the Times’ investigation, we had numerous examples of Trump operating as a habitual criminal. While Trump would like to American people to forget about this, he got his start as a celebrity after the New York Times published an article detailing federal housing discrimination charges brought against him and his father. Ultimately, the charges were settled without admission of fault, which would be a pattern for Trump over the years. Even so, the fact his first foray into the real estate business involved criminal acts didn’t stop him from continuing in that business. When Trump branched out into casinos, he got caught accepting an illegal loan from his dad to stay afloat and got off with a slap on the wrist. He was even allowed to continue with the business as well.

From empty-box tax scam to money laundering at his casinos, racial discrimination in his apartments, Federal Trade Commission violations for his stock purchases, and Securities and Exchange Commission violations for his financial reporting, Donald Trump has spent his entire career breaking various laws, getting caught, and then essentially plowing ahead unharmed. Caught engaging in illegal racial discrimination to please a mob boss? Paid a fine. There was no sense this was a repeated pattern of violating racial discrimination law (despite being caught before in a housing discrimination case by the federal government). Nor there was certainly any desire to take a closer look at Trump’s various personal and professional connections to the Mafia. In New York, Trump Tower’s construction employed hundreds of undocumented Polish immigrants, paid them laughably low wages, and worked them beyond legal limits. Though Trump denied knowledge of the situation, a judge said his testimony wasn’t credible. Court records show that Trump and his children misled investors in failed condo projects in Baja California and Florida. Even as late as the post-election transition, Trump was allowed to settle a lawsuit about defrauding customers at his fake university for $25 million rather than truly face the music like a potential prison term. But he still insisted he did nothing wrong despite evidence to the contrary.

One of Donald Trump’s real insights in life was to see a bug in the system. When it comes to these white-collar crimes, it’s typically the government officials’ interest to agree to a settlement giving them positive headlines, raise some cash, and move on to the next investigation. But while these decisions can make sense individually, they let serial offenders repeat their crimes over and over again. After all, you wouldn’t want police to solve other crimes this way. Meanwhile, throughout the decades of Trump’s rise, the legal climate has only gotten more permissive.

The fact that Donald Trump appears to have been involved in serious financial crimes in the past is the most likely reason for his unprecedented lack of transparency. He didn’t magically stop committing them in the mid-1990s. Rather he’s just been getting away with it in an era of reduced law enforcement and fears his documents wouldn’t stand up to scrutiny. As a candidate, Trump promised to release his tax returns. Now that he’s in office, he has refused to do so. In response to the Times’ investigation, the White House released a statement full of bluster about the “wonderful” things Trump has achieved as president. But it didn’t deny any of the alleged facts. Instead, press secretary Sarah Huckabee Sanders merely observed that “many decades ago the IRS reviewed and signed off on these transactions.”

It’s not entirely clear if the IRS reviewed all of these transactions. But it’s unquestionably true that Donald Trump got away with it. Because lots of people get away with a lot of crimes and that doesn’t make it okay. The IRS is no more perfect in its work than any other law enforcement agency. To make matters worse, the IRS has been starved of resources, making it even harder to catch rich tax cheats. To be clear, this wasn’t caused by austerity by budgetary necessity. Based on macroeconomic estimates, the IRS believes that business owners like Donald Trump underpay their taxes by $125 million a year. Investing more in catching these tax cheats would pay off easily. But congressional Republicans haven’t wanted to do it because they think it’s good that rich business owners can get away with cheating on their taxes. Yet, this also gives tax-cheating businesses a very good reason to fear transparency and disclosure. While the IRS is relatively unlikely to get a hard, rigorous look at any particularly rich person’s complicated tax submissions. But since Trump is president, he’d find Congress and the press heavily scrutinizing his finances. Trump got away with tax evasion during an era of generally more rigorous enforcement. It’s very unlikely that he simply stopped doing it during the more recent years when enforcement got laxer. If he disclosed his tax returns, we’d find out about the scams he’s running. Because that’s why Trump doesn’t want us to see them. And why we absolutely need to. We won’t really know why Donald Trump hides his tax returns until he stops concealing them. But the New York Times’ investigation sends a clear message that he’s got a track record of doing illegal stuff with his taxes.

However, though Donald Trump won’t release his tax returns as president, Congress can make him. But congressional Republicans have steadfastly refused to do so. Nonetheless, the American people have a right to know whether or not the man in the White House is a crook. Though the case for oversight became stronger once Trump became president, Republicans who once distanced themselves from him became uniformly devoted to covering up for him. In addition, Republicans have totally resisted Democratic efforts to force disclosure.

While congressional Republicans may tell themselves these returns are no big deal, they have no idea how serious the crimes are they’re helping Donald Trump hide. Mostly because Republicans decided it’s good when rich people cheat on their taxes despite that it’s not. In fact, cheating on taxes contributes to inequality, higher interest rates, weaker public services, and a range of social news. And despite the Republicans’ best efforts, it’s still illegal. Though the tax code currently has minimal taxes on inheritances and gifts as well as large loopholes for the wealthiest of the wealthy. The New York Times investigation into the Trump family’s wealth demonstrates how wealthy families wiggle out of taxes through licit and illicit means. Thus, starving the government of tax revenue, making the tax code less progressive than it’s designed to be, and effectively increasing the tax burden on low-income families and their businesses. The richer the family, the more likely they engage in tax evasion. In fact, one study shows that the richest .01% were shown to evade 25% of taxes, several times the rate seen among the general public. Because Trump is president, we need to know if he’s been breaking the law. All we need to do is have a congressional committee vote. But to get it, we need a new Congress.

Of course, since I’ve conducted extensive research on Donald Trump since he ran for president, the fact he’s not the self-made man he portrays himself to be doesn’t surprise me. I long knew that he never would’ve become what he is today if he hadn’t been born into wealth and privilege. And I knew about his dad vouching for him on his early projects and helping him out of his financial problems. Yet, millions of Americans still believe Trump as a modern Midas who’d lift them out of hard times as the super-rich flourish while everyone else’s incomes remain mostly flat. But the truth is that the man in the Oval Office isn’t the wealth-building entrepreneur he claims to be. In fact, he’s a financial vampire extracting cash from enterprises while leaving behind unpaid workers, vendors, and governments. And if you want to know what that will lead to, just take a visit to Atlantic City.

How Donald Trump Makes Money Off the Presidency

1_rxHHlDc_io9w16MGYjOnpA

Among the barrage of Donald Trump’s scandals, legislative failings, and Twitter tantrums, that appear in the news with constant regularity, there are plenty that seem to fall through the cracks. One of these concerns Trump’s businesses and his holding power as president. Despite promising to divest himself from his businesses while in office (he hasn’t), Trump is actively profiting from the presidency, which the founders never intended. While we still don’t have his tax returns to shed light on whether his behavior benefits his business’ ledgers, we know taxpayer money has been flowing to some of his businesses like Mar-a-Lago. However, despite the public seeing their tax dollars flow directly to the Trump Organization every time he goes golfing at his resorts and the rules being laid out in the Constitution, nobody has tried to stop this.

Previous presidents have disclosed and divested, so this hasn’t been a problem. After all, the Founding Fathers wrote protections into the US Constitution with emoluments clauses making it illegal for presidents to receive gifts from foreign governments or federal and state governments. Now Donald Trump did promise to release his tax returns during the campaign, and divest himself from his business while in office to avoid conflict of interests. After all, he promised to “drain the swamp” which his supporters think it meant that he’d stop corruption in Washington DC like limiting access to lobbyists, curbing deals with foreign governments, and refusing to profit from the White House. Yet, unlike his predecessors, he’s does nothing more than the legal minimum required.

However, we must understand that corruption and egregious abuses of power makes Donald Trump who he is. In fact, since he came to Washington DC, the United States has seen an unprecedented attack on presidential ethics. Trump campaign donors have gotten cushy White House jobs. Goldman Sacks bankers wrote the GOP tax plan. But most importantly, Trump hasn’t divested and most likely had no intention to in the first place. He doesn’t care about conflicts of interest. So he’s still making money.

First of all, the Trump Organization is huge private company with properties and business interests all over the world. But we don’t have a clear picture of exactly how big and valuable it is. According to a February 2018 Forbes report, Donald Trump rakes in at least $175 million a year from commercial tenants like the state-owned Industrial & Commercial Bank of China. But it’s impossible to say which companies pay him and how much because federal disclosure laws don’t require an accounting of where his businesses get their money. So we don’t know where the money’s coming from and how much he’s getting. Since he hasn’t released his tax returns either. And that’s a big problem since Trump probably has many conflicts of interest that could influence public policy. As Forbes noted, “Take any hot-button issue of the past year, and there’s a good chance Trump’s tenants lobbied the federal government on it, either in support of or in opposition to the administration’s position.” In fact, according to Forbes, at least 3 dozen Trump tenants have “meaningful relationships with the federal government, from contractors to lobbying firms to regulatory targets.”

Trademark-Timeline-2

Here’s a CREW timeline of Trump trademark approval actions by governments overseas. Not the ones coming from China.

In addition, foreign governments have been quick to figure out how to get on Donald Trump’s good side. According to a January McClatchy article, they’ve “donated public land, approved permits and eased environmental regulations for Trump-branded developments, creating a slew of potential conflicts as foreign leaders make investments that can be seen as gifts or attempts to gain access to the American president through his sprawling business empire.” The Chinese government has granted Trump at least 39 trademarks since he took office while his daughter and senior adviser Ivanka has received 7 since she joined the administration.

Then there’s the fact the Trump Organization still sells real estate. Last summer, a USA Today investigation found that during the last year Donald Trump clinched the Republican presidential nomination in 2016, “70% of buyers of Trump properties were limited liability companies – corporate entities that allow people to purchase property without revealing all of the owners’ names. That compares with about 4% of buyers in the two years before.” According to the paper, overall in 2017, Trump’s companies, “sold more than $35 million in real estate … mostly to secretive shell companies that obscure buyers’ identities.” So since Trump became the Republican nominee and later president, mysterious investors have poured millions of dollars into his coffers.

ANY5ZXTUK5BNFCY2QBBC2KI66U

Since Donald Trump became president, the Trump International Hotel has become the go-to place for foreign visitors and anyone else wanting to curry favor with the White House. Not to mention, the GOP holds a lot of activities there. The lighting above the arch is by an anti-Trump protester.

Of course, the most obvious Donald Trump uses his position as president to promote his own business interest is through mixing and matching his presidential activities with his own properties while charging Secret Service and transportation costs to taxpayers. As Washington University professor Kathleen Clark told ProPublica, “Trump appears to be commandeering federal resources in order to maximize revenues at Trump properties, and he does this by visiting properties close to the White House. And when he travels to the golf courses in Florida, Virginia and New Jersey, other agencies that are involved in supporting the president end up spending money.” In fact, he spent 1/3 of his first year in office visiting his own commercial properties. Every Trump appearance at his properties is a marketing event. According to financial disclosures, Trump hotel revenue soared over the past few years. In 2015, records show just $16.7 million in hotel and resort revenues. In 2016, that income more than doubled to $33.8 million. Since Trump moved into the White House, Trump hotel income jumped about 80%, reaching $60.8 million in 2017. Sure in late 2016, Trump opened the Old Post Office Hotel in Washington DC despite the clear guideline that, “No elected official of the Government of the United States…shall be admitted to any share or part of this Lease.” Since then, it’s become the go-to hotel for any foreign visitor looking to win favors from the Trumps as well as headquarters to GOP activity in DC.

hotel-final

TIME magazine has a good cover for Donald Trump’s DC hotel. Funny how they call it “The Swamp Hotel” since Trump promised to “drain the swamp.” Though I think he might’ve meant the Everglades than Washington.

But what the public doesn’t know is that Donald Trump wasn’t the only political and/or business figure to visit his properties. According to a January 2018 report by the Citizens for Responsibility and Ethics in Washington, during Trump’s first year in office, his properties hosted more than 100 executive branch officials, 30 members of Congress, and more than a dozen state officials. Trump’s properties also hosted events held by at least 40 special interest groups. At least 11 foreign governments and 6 foreign officials have appeared on Trump properties since 2017. The Kuwaiti Embassy held a National Day celebration in 2017 and 2018 at Trump’s D.C. hotel. While one Asian diplomat told the Washington Post shortly after Trump’s election that going to his D.C. hotel makes perfect sense, “Why wouldn’t I stay at his hotel blocks from the White House, so I can tell the new president, ‘I love your new hotel!’ Isn’t it rude to come to his city and say, ‘I am staying at your competitor?'” In the business sector, USA Today found that executives from 50 government contractors and 21 lobbyists hold Trump club memberships.

Top-Campaign-Spenders2

This is a CREW graph on top campaign spenders at Trump properties. You can see Trump’s top the list. But Republican governors and politicians aren’t far behind.

The Center of Responsive politics sorted the spending of political committees at Trump properties with Donald Trump’s own campaign events topping the list. In 2017 alone, Trump’s 2020 campaign spent $760,064 at buildings he owns. And since Trump still owns these properties, he and his family make extra money every time he holds a fundraiser. Since Trump’s DC Hotel is only a block away from the Justice Department and close to the White House, anyone who wants to make a contribution to Trump’s pockets simply books events there. Same goes for New York’s Trump Tower and Mar-a-Lago. In 2016, the RNC spent $146,521 at Trump properties and $173,416 in 2017.

untitled

Here’s a CREW map of members of Congress who’ve visited a Trump property. Kind of surprised to see Ted Cruz on there given what Donald Trump put him through. Yet, I don’t see Devin Nunes for some reason since he was on Trump’s transition team.

Before assuming office, Donald Trump vowed to donate his DC hotel profits from foreign governments to the US Treasury. However, to no one’s surprise months later, the Trump Organization admitted that tracking all foreign government money was “impractical.” But it promised to donate profits from guests self-identifying as foreign government representatives. Yet, in early 2018 the Trump Organization announced that it had donated profits from “foreign government patronage” after all but declined to disclose specifics like as the Washington Post speculated, “How much was donated? Which Trump properties were included in this accounting? Which foreign entities had paid money to Trump’s businesses?”

untitled1

Here’s a CREW map of foreign governments that have paid a Trump-owned entity since the inauguration. Includes China, India, Saudi Arabia, Japan, Turkey, and Malaysia.

Furthermore, neither Donald Trump nor his team have shied away from promoting his brand. After the 2016 election, Trump signaled he’d spend a great deal of time at his Mar-a-Lago in Florida. In turn, the club doubled its membership fees to $200,000 before taxes and charged $175 more to $600-$750 for its New Year’s Eve party. From January to August 2017, 2/3 of the 50 executives and lobbyist club members played golf on days Trump was. White House spokeswoman Kellyanne Conway promoted Ivanka brands on Fox News for God’s sake. During his first year in office, Trump mentioned his private businesses at least 35 times according to CREW estimates. Overall, their report found that political groups spent over $1.2 billion at Trump properties during his first year in office, after never having spent more than $100,000 “in any given year going back to at least 2002.” CREW chair and former Obama ethics czar Noah Eisen tweeted that the group’s report described Trump as “the most unethical presidency,” adding, “Year two has been even worse—& it’s just getting started.” In the fall of 2017, the Trump Organization debuted Trumpstore.com where you can buy all other-than-made-in-the-USA #MAGA gear, which is just another Trump family cash grab.

Nor is Donald Trump the only one in his family profiting from the presidency. In June 2018, the Washington Post reported: “Ivanka Trump and Jared Kushner, the president’s daughter and son-in-law, brought in at least $82 million in outside income while serving as senior White House advisers during 2017, according to new financial disclosure forms released Monday. Ivanka Trump earned $3.9 million from her stake in the Trump International Hotel in Washington, while Kushner reported over $5 million in income from Quail Ridge, a Kushner Cos. apartment complex acquired last year in Plainsboro, New Jersey. The filings show how the couple are collecting immense sums from other enterprises while serving in the White House, an extraordinary income flow that ethics experts have warned could create potential conflicts of interests.” Allowing Ivanka and Kushner retain their outside income sources is remarkable since Cabinet officials are required to divest themselves from their holdings or abide by strict rules imposed by a blind trust. Shortly after the inauguration, the State Department’s web page promoted Melania’s jewelry line. The Secret Service has even provided protection for Trump’s family as they go on business trips as well, with their expenses being paid on the taxpayer dime.

w7bqgrzngqdhuka2rioj

Here’s a small snapshot of Donald Trump’s and his administration’s over 500 conflicts of interest. You many not be able to read everything on here. But it’s truly staggering.

So why is all this a problem? Because it’s against the rules at a constitutional scale. The presidency shouldn’t be a get-rich-quick scheme. No president or First Family member should use the Oval Office to enhance their wealth. With his business interests on his mind, Donald Trump is making decisions as a country’s leader and under the guise of what’s best for the nation. But since he won’t be in office forever, he’s possibly putting Trump Organization interest before public interest. As CREW Executive Director Noah Bookbinder put it, “Every decision President Trump makes in the course of his job is followed by the specter of corruption. Because of his steady stream of conflicts, we have to question whether each decision he makes was made in the best interest of the American people or the best interest of his bottom line.” CREW estimates that Trump has over 500 conflicts of interest, which a clear picture of a presidency being used to turn a profit and his businesses serving as access points to corridors of power. Bookbinder adds, “Just as we feared, President Trump is not only making money in spite of his official position, in many cases, he’s making money because of it.”

Of course, the courts need to hash out this though with Brett Kavanaugh’s confirmation to the Supreme Court almost a done deal, does this harm the public? (Absolutely). Is there any proof Trump’s violating the Constitution? (Yes, the Emoluments Clause which forbids the president from accepting money from foreign governments). Fortunately, the apparent Emoluments Clause violations haven’t gone unnoticed as several lawsuits work their way through the courts. It appears quite serious as Trump businesses are subpoenaed and ordered to preserve documents. 3-4 suits have been filed so far. Naturally, the Trump administration asked that they’d be thrown out. Again, a judge will decide if Donald Trump’s broken the law. As of March 2018, one suit has been thrown out in December while the others endure and may be gaining traction.

187965_600

Donald Trump doesn’t see anything wrong with profiting from the presidency. Since he sees himself having the right to the spoils. Nonetheless, making the presidency for sale greatly undermines our democracy.

So how is Donald Trump’s legal team defending profiting off the presidency? For one, despite how rich he is, we taxpayers are paying for lawyers to argue that Trump has a right to profit from his presidency. And according to a USA Today article, it all boils down to this: “The taxpayer-funded lawyers are making the case that it is not unconstitutional for the president’s private companies to earn profits from foreign governments and officials while he’s in office.” Further, “The government lawyers and Trump’s private attorneys are making the same arguments — that the Constitution’s ban on a president taking gifts from foreign interests in exchange for official actions does not apply to foreign government customers buying things from Trump’s companies. The plaintiffs, including ethics groups and competing businesses, argue the payments pose an unconstitutional conflict of interest.” Or to quote Trump before he took office, “The president can’t have a conflict of interest.” However, we must keep in mind that Donald Trump doesn’t see himself as constrained to any norm, rules, or even laws. He was born into wealth and privilege and sees himself exempt from certain restraints that get in his way that would land the average person in jail. Profiting off the presidency is political corruption at its finest and not at all normal. Yet, like any con artist businessman, Trump sees profit as natural and immediate spoils of office.

COIThumb2

This is a map of where Donald Trump owns property outside the United States. You can see that Russia is in bright yellow since it interfered in the 2016 election on Trump’s behalf.

Whether you can agree or disagree with Donald Trump’s actions, it’s very obvious he’s at least violating the spirit of the law. After all, he promised to step away from his interests but didn’t, implying he knew he should’ve before taking office. But it’s still hard to say whether or not a court will throw the book at him since there’s not much legal precedent here. However, since presidential ethics laws never foresaw a businessman president who wouldn’t follow political norms of divesting himself from his businesses, disclosing his taxes, and generally trying to avoid conflicts of interests, much of this may be legal.

Nonetheless, it’s more than just making sure that a president acts in good faith while in office. The real issue here is establishing precedent moving forward. While Capitol Hill seems fine letting Donald Trump get away with anything he wants including Emoluments violations, what can we expect from future presidents? While it’s a test for the courts, it’s also one for how much the public is willing to put up with from our elected officials. If we don’t put our foot down now, what happens when another more competent president goes out of bounds?

But what’s certain is that each day he occupies the White House, Donald Trump continues to profit from the presidency and possibly because he’s the man in the Oval Office. By promoting his business in an official capacity without shame and by offering access and influence to his businesses’ patrons, Trump sends a message to special interests and foreign government that his administration is for sale. This is no message an American president should send to the world since it shows that Trump’s support can be bought with patronage. While most Americans can’t even afford to stay at any of his resorts or visit his golf courses. This isn’t how American democracy should function. Nonetheless, the remaining years of the Trump administration are unlikely to be any different unless the American people and their Congressional representatives demand better.

20161126_LDD002_0

The Strange Matter of Stock Buybacks

buyhighselllow.jpg

Within the last 40 years as economic power shifted from workers to owners, corporate profits take of the US economy has more than doubled. Yet, despite corporate profits at an all-time high, job growth remains anemic, wages are flat, and the country can’t even afford its basic needs. A $3.6 trillion budget shortfall has left many roads, bridges, dams, and other public infrastructure in disrepair. Federal spending on economically crucial research has plummeted by 40%. Public college tuition has more than doubled since the 1980s, burying recent graduates under $1.2 trillion in student debt. Not to mention, many public schools along with police and fire departments are dangerously underfunded. So where did all the money go? After all, public companies have nearly $2 trillion in cash just sitting on their balance sheets. So Corporate America has the resources to deploy a lot of money, invest in new technologies to draw growth, give workers a much-needed raise across the board, hire and train employees, build new facilities, pay off loans, pay shareholders, and pay taxes to the government.

untitled1

Since the 1980s, stock buybacks have grown in popularity on Wall Street as this graph shows. As Sen. Elizabeth Warren told The Boston Globe, “stock buybacks create a sugar high for the corporations. It boosts prices in the short run, but the real way to boost the value of a corporation is to invest in the future, and they are not doing that.”

But no. Instead, companies keep spending more and more money on stock buybacks. Once illegal and considered insider trading until 1982, stock buybacks have become increasingly popular especially since the 2008 recession. Today, these buybacks have become one of the biggest trends in the post-financial-crisis stock market and the largest source of net demand since 2009. Since 2010, 1,900 companies have spent money on buybacks and dividends with a combined return of capital to shareholders for them equaling 113% of capital spending. So much that a growing number of companies are borrowing money to fund the buybacks. Thanks to Donald Trump’s massive corporate tax cuts, American companies have lavished Wall Street with $171 billion of stock buyback announcements this year, a record high. All in all, Corporate America has pledged 30 times more buying back its own stock than investing in its workforces. Thus, the money these companies make through their financial manipulations drives record-level profits.

Proponents say they reward these long-term shareholders by effectively increasing their company ownership and help boost a stock’s value by raising its earnings per share. When there’s no other compelling use for a company’s cash, this is a better alternative than risky spending or other big investments. But its critics think that buybacks only make things look better than they seem. Indeed, the EPS rise but not because earnings are growing. In other words, they just exist to make shareholders feel better but nothing really changes. Even some of their fiercest proponents claim they’re overused. And in recent years, evidence shows that buybacks haven’t helped boost stock values at all. Other critics argue that buybacks result in companies acting more like banks that hold assets and earn interests and less like a business making money off selling goods and services. Or invest their profits in their workforce and other productive ventures. According to the Academic-Industry Network’s William Lazonick, “Buybacks are not beneficial or necessary to household savers with diversified investments. The only ones who benefit are those who dump shares and are strictly in the business of timing.”

What are stock buybacks?

Also known as a “share repurchase,” is a company’s buying back its shares from the marketplace. Think of it as a company investing it itself or using its cash to buy its own shares. The concept is simple: because a company can’t be its own shareholder, it absorbs repurchased shares and reduces the number of outstanding shares on the market. When this happens, each investor’s relative ownership stake increases on the company’s earnings.

How are stock buybacks carried out?

They’re made in 2 ways:

1. Tender Offer– company may present shareholders with a portion of all their shares within a certain time frame. This will stipulate both the share number the company wants to repurchase and the price range they’re willing to pay (almost always at a premium to a market price). When investors take up the offer, they’ll state how many shares they want to tender along with the price they’re willing to accept. Once the company has received all the offers, it’ll find the right mix to buy the shares at the lowest cost. Tender offers can be a way for executives with substantial ownership stakes and care about a company’s long-term competitiveness to take advantage of the low stock price and concentrate ownership in their own hands. This can free them from Wall Street’s pressure to maximize short-term profits and allow them to invest in the business. But they should only be made when the share price is below the company’s intrinsic value of its productive capabilities and the company is profitable enough to repurchase the shares without impeding its real investment plans.

2. Open Market– company buys shares on the open market just like an individual investor would at market price. It’s important to know that when a company announces a buyback, the market usually perceives it as a positive thing, causing the stock price to shoot up. 95% of buybacks are these. Yet, they often come at the expense of investment in productive capabilities and aren’t good for long-term shareholders. When I discuss stock buybacks, I’m usually referring to the open market variety which used to be illegal and considered insider trading until 1982.

3. Dutch Auction– an alternative form of tender offer which specifies a price range within which the shares will be bought. Shareholders are invited to tender their stock if they wish at any price within it. The firm then compiles the responses, creating a demand curve for the stock. The purchase price is the lowest price allowing the firm to buy shares sought in the offer. And the firm pays that price to all investors who tendered at or below that price. If the share number exceeds the number sought, the company buys less than all shares at or below the purchase price on a pro rata basis to all tendering at these rates. If too few shares are tendered, the firm either cancels the offer or buys back all the tendered shares at the maximum price.

Why would a company want to use buybacks?

A firm’s management may tell you that a buyback is the best use of capital at a time since their goal is to maximize returns for shareholders. Buybacks generally increase shareholder value, at least on the surface. The prototypical line in a buyback press release is “we don’t see any better investment than in ourselves.” This can sometimes be the case but it’s not always true. Nonetheless, there are still sound motives driving companies to buy back shares. Management might think the market has discounted its share price too deeply due to weaker-than-expected-earning results, an accounting scandal, or a poor overall economic climate. Thus, when a company spends millions of dollars buying up its own shares, it means management believes the market has gone too far discounting its shares. More importantly, share buybacks can be a fairly low-risk approach to use extra cash since reinvesting money into R&D or a new product can be very risky. If these hard-earned investments don’t pay off, then that hard-earned cash goes down the drain. Using cash to pay for acquisitions can also be perilous. Mergers hardly live up to their expectations.

Another reason is that companies don’t want to just sit on money, much for the same reason that investors don’t like holding piles of cash either: inflation erodes cash value, so putting it to work makes sense. During periods of economic growth, it’s better to allocate profits to capital (like a factory) or labor as an investment to the firm’s future. But it’s also risky because the economy could worsen. Though I’m not sure if I actually agree with this since I think stagnant wages are part of why the economy isn’t getting any better. So in periods of economic uncertainty, companies choose to give the cash to their shareholders, which should’ve went to their workers. As the head of S&P Investment Services Mike Thompson told Business Insider in 2016, “In an environment like this return cash to shareholders keeps them pleased with the short-term gains while not committing to large investments that could hurt performance.”

Increased Shareholder Value– there are many ways to value a profitable company but the most common measurements is Earnings Per Share (EPS). If earnings are flat but the number of outstanding shares decreases.

Increased Float– as the number of outstanding shares decreases, the remaining shares represent the float’s largest percentage. Increased demand and less supply means a potentially higher stock price.

Excess Cash– buybacks are usually financed with a company’s excess cash, demonstrating that it doesn’t have a cash flow problem. More importantly, it signals that executives feel that cash re-invested will get a better return than alternative investments.

Improving Financial Ratios– or improving metrics upon which the market seems heavily focused on, which is questionable. If reducing shares isn’t done to create more value for shareholders but rather make financial ratios look better, the management likely has a problem. However, if a company’s motive for initiating a buyback program is sound, its financial ratio improvement in the process might be the result of a good corporate decision. For one, share buybacks reduce outstanding shares. Once a company buys these, it often cancels them or keeps them as treasury shares. They also reduce assets on the balance sheet and increase return on assets and equity. They also improve a company’s price-earnings ratio as the market often thinks lower is better.

Dilution– another reason for a buyback may be a company’s wish to reduce the dilution often caused by generous employee stock option plans. Bull markets and strong economies often create a very competitive labor market. So companies have to compete to retain personnel and ESOPs which comprise of many compensation packages. Stock options increase the share number when exercised, which weakens a company’s financial disposition.

Price Support– companies with buyback programs in place use market weakness to buy back shares more aggressively during market pullbacks. This reflects confidence that a company has and alerts investors that it believes the stock is cheap. Often a company will buy back its stock after taking a hit, which is an overt action to take advantage of discount prices on its shares. This lends support to the stock’s price and ultimately provides security for long-term investors for rough times.

Higher Stock Prices– an increased in EPS will often alert investors that a stock is undervalued or has the potential for increasing in value. The most common result is an increase in demand and an upward movement in the stock’s price.

Tax Benefit– while a buyback is similar to a dividend in many ways, it has a major advantage over dividends of a lower capital gains tax rate. Whereas dividends are taxed at ordinary income tax rates.

Does that mean stock buybacks are good?

Not necessarily. Sometimes buybacks can be a great thing if a stock truly is undervalued and represents the best possible investment for a company. But a company must meet certain specific conditions:

1. The stock should be trading at price to economic book value below 1, meaning that the company is buying back shares for cents on the dollar.

2. The company’s balance sheet and free cash flow should be strong enough to support a buyback without jeopardizing future liquidity or investment opportunities.

3. The company should have more cash than it does profitable investment opportunities.

One company meeting all three criteria is Oracle who bought back $8.1 billion in stock (5% of its market cap), reducing outstanding shares by 120 million. Its shares currently trade at a PEBV of 0.9, meaning it’s buying back shares at a 10% discount rate to their zero-growth value. With $50 billion in excess cash on its balance sheet and $9 billion in annual free cash flow, Oracle has more than enough cash on hand to support its buyback program, and more than it could reasonably hope to profitably invest in the near term as of 2016. Oracle’s buybacks don’t just serve their shareholders’ interests, they also benefit the overall economy. When a company with excess cash and few investment opportunities buys back its stock, it puts that cash back in the marketplace for individual investors to distribute to companies needing capital. In buying back billions of dollars in its own stock, Oracle cheaply retired its shares without comprising its ability to invest in future growth.

While there are buybacks that make sense from a capital allocation standpoint and serve the investors’ best interests like in Oracle’s case, these are normally the exception rather than the rule. In fact most companies buying back stock aren’t in Oracle’s situation. If a company merely uses buybacks to prop up ratios, provide short-term relief to an ailing stock price, or get out from under excess dilution, watch out. Oftentimes, they can be a downright bad idea and can hurt shareholders. This can happen when buybacks are done in the following situations:

1. When Shares Are Overvalued– companies should only pursue buybacks when their shares are undervalued. A company that buys overvalued stock destroys shareholder value and would be better off paying that cash out as a dividend, so that investors can more effectively invest it. As Warren Buffett said to Berkshire Hathaway shareholders in 1999, “Buying dollar bills for $1.10 is not good business for those who stick around.”

2. To Boost Earnings Per Share– since buybacks can boost EPS, a company stock buyback in the market reduces outstanding share count. This means earnings are distributed among fewer shares, raising EPS. Thus, many investors applaud share buybacks since they see increasing EPS as a surefire approach to raising share value. However, contrary to popular belief, increasing EPS doesn’t raise fundamental value. Companies must spend cash to buy these shares. In turn, investors must adjust their valuations to reflect reductions in both cash and shares. Sooner or later this cancels out any EPS impact. In other words, lowering cash earnings divided between fewer shares won’t produce any net change to EPS. Of course, a major buyback announcement generates plenty of excitement since a prospect of even short-term EPS can give share prices a pop-up. But unless the buyback is wise, the only gains go to those investors selling their shares on the news. There’s little if any benefit for long-term shareholders.

3. To Benefit Executives– many executives get the bulk of their compensations from stock options. As a result, buybacks can serve a goal: while stock options are exercised, buyback programs absorb the excess stock and offset dilution of existing share values and any potential reduction in EPS. By mopping up extra stock and keeping EPS, buybacks are a convenient way for executives to maximize their own wealth as well as maintain share value and options. Some executives may even be tempted to pursue share buybacks to boost share buybacks to boost the share price in the short-term and sell their shares. In addition, big bonuses that CEOs receive are often linked to share price gains and increased EPS. Thus, they have an incentive to pursue buybacks even when there are many ways to spend the cash or when their shares are overvalued.

4. Buybacks Using Borrowed Money– the temptation using debt to finance EPS can be hard to resist for executives. The company might believe that the cash flow it uses to pay off the debt will keep growing, bringing shareholder funds back into line with borrowings in due course. If they’re right, they’ll look smart. If they’re wrong, investors will get hurt. Moreover, managers assume that their companies’ shares are undervalued regardless of the price. When done with borrowing, share buybacks can hurt credit ratings, since they drain cash reserves that can serve as a cushion when times get tough. One of the reasons given for taking on increased debt to fund a share buyback is that it’s more efficient since the debt’s interest is tax deductible. However, all debts must be repaid at some time. Because what gets a company into financial difficulties isn’t lack of profits but lack of cash. With debt, buybacks become more complicated which doubles the risk since a firm’s leverage levels may cause financial distress in the future and harm shareholders in the long-term.

5. To Fend Off an Aquirer– in some cases, a leveraged buyback can be used as a means to fend off a hostile bidder. The company takes on significant additional to repurchases stocks through a buyback program. Such leveraged buybacks can be successful in thwarting hostile bids by both raising the share value and adding a great deal of unwanted debt to the company’s balance sheet.

6. There Is Nowhere Else to Put the Money– it’s very hard to imagine a scenario where buybacks are a good idea, except when a company feels like its share price is far too low. But if the company’s right about undervalued shares, they’ll probably recover anyway. Thus, companies buying back shares are, in effect, admitting that they can’t invest their spare cash flow effectively. Even the most generous buyback program is worth little for shareholder if it’s done in the midst of poor financial performance, a difficult business environment, or a decline in the company’s profitability. By giving EPS a temporary lift, share buybacks can soften the blow. But they can’t reverse things when a company is in trouble.

Why do companies actually use buybacks?

In theory, corporations should have a distinct advantage over the rest of the market when buying back shares. After all, executives know their industry, the company’s challenges, and their strategic plans better than anyone else. This should enable them to buy their stock when it’s cheap and not when it’s overvalued.

But most companies carry out buybacks for reasons that have nothing to do with maximizing shareholder value. Pressure to hit short-term earnings targets and executive compensation plans often incentivize the wrong metrics which often push companies to buy back stock when it’s most expensive and the money could be better used elsewhere. This is what the Harvard Business Review calls “The Overvaluation Trap.” Data shows that companies buy back more stock during booms and sell them during market crashes. In this way, less like the knowledgeable executives and more like panicky and underperforming investors.

untitled

This 2016 Forbes graph of GE stock buybacks and its valuation. You can see that instead taking the traditional investor advice of “buy low, sell high,” they actually have bought high and sold low. As a result, their stock has lost value.

A graph from Forbes shows this value-destroying behavior for General Electric by comparing between the amount of money spent buying back shares and the price to economic book value, a measure of growth expectations embedded in the stock price. As this graph illustrates, GE bought back an incredible $12.3 billion worth of stock in 2007, just before the market crashed. At the start of the bull market in 2009, the company sold off $600 million worth of its own stock. Throughout the last decade, you can see a high correlation between how expensive GE’s stock is versus current cash flows and how much stock the company buys back. Overall, in the last decade, GE bought back $44 billion of its own shares (17% of its market cap). Yet, its stock fell by 15% over that same time. By inefficiently utilizing valuable capital to buy back stock at inflated prices, GE destroyed value for long-term shareholders. When a company’s equity is overvalued, its executives have to scramble to justify that expensive price. One way to do that is by artificially boosting the EPS through share buybacks. As this Forbes graph above shows, GE does this effectively as the company managed to hit or beat EPS in 15 out of past 16 quarters.

575f22fe910584145c8c891c-960-1150

Business Insider’s graph on IBM also shows how buybacks might make the EPS look good as the number of outstanding shares drops. Despite that the net income has fallen, which isn’t a good sign in most businesses.

Another case is IBM who spent $4.6 billion in 2015 and $125 billion in the decade prior as of 2016. According to a Business Insider graph, from 2010 to 2015, its total share count was down by about a fifth while earnings per share rose 15%. Yet, in that same period, IBM’s actual income went down 11% as sales fell, too. As a result, IBM has lost about $50 billion in market value since 2013, or about 30%.

ceo-pay

Since executive pay is often tied to stock compensation, top Wall Street execs have often been pressured to do buybacks to increase their coffers. Even if it makes no strategic financial sense. It’s part of a phenomenon called greed. This is a Bloomberg graph of IBM’s CEO compensation.

Also, many companies have executive compensation packages incentivizing excessive share buybacks, either directly or indirectly. In GE’s case, a percentage of its bonuses depends on the company returning a certain amount of cash to shareholders. In 2014, executives had to make sure combined dividends and buybacks hit at least $10 billion to get their full bonus, even if that decision made no strategic sense. But it makes perfect sense in regards to greed. Because when share prices go up, CEOs reap a bonanza so the value of their pay also rises in what amounts to a retroactive and off the books pay increase on top of their already humongous compensation packages. As a result, the very people we rely on to make investments in the productive capabilities that will increase our shared prosperity are squandering most of their companies’ profits for their own prosperity. The Academic-Industry Network’s William Lazonick told The American Prospect, “All of those trillions of dollars flowing out of companies are being used to build the war chests of hedge-fund activists for further buybacks or [giving them more] money to play around with on derivatives. When you connect the dots, it’s part of bigger process. This is really a long-run problem that helps to explain concentration of income at top because it’s getting made off the stock market.

Other companies incentivize share buybacks through emphasizing metrics that can be easily manipulated and have little impact on shareholder value. For example, Cisco executives are judge in part on their ability to grow adjusting operating income, adjusted EPS, and operating cash flow. That term “adjusted” is crucial since Cisco uses metrics for judging executive performance exclude share-based compensation. Meaning that executives can pay employees (and themselves) with stock instead of cash, buy back shares to offset dilution, and increase these adjusted metrics to improve real operating performance. In 2015, Cisco bought back 155 million shares. But after effects of employee stock compensation, it only reduced the total outstanding shares by 38 million. So all those buybacks are just trickery executives use to boost their own bonuses.

And it’s not just GE, IBM, and Cisco. According to FactSet data by Andrew Birstingal, the performance of companies engaging in buybacks has been disappointing. “In the past year, companies repurchasing shares saw an excess weighted cumulative return of -1.9% relative to the benchmark, while companies not repurchasing shares saw a return of 9.8% relative to the benchmark,” he said in 2016. On a three-year horizon, those companies buying back shares ended up with a -2.9% return against 11.5% gain for those not buying back stock. A study found that companies completing buybacks outperformed their benchmark before 2001. Yet, those who completed buybacks between 2002 and 2006 didn’t generate better returns since that time than those who didn’t. Based on this research, buybacks aren’t helping share prices in either short- or long-term.

However, the cost of buybacks doesn’t just come from overpriced stock losses, but also from missed opportunities to invest growth and innovation. Over the past decade, AT&T bought back $50 billion in stock which could’ve been used to improve its wireless network quality and catch up with Verizon which doesn’t buy back stock. All those buybacks didn’t keep AT&T from underperforming versus Verizon and the broader market. We tend to think of buybacks as a sign of success proving a company has plenty of cash to throw around. In reality, they amount to admission of failure for a company buying back stock signals the market that it lacks profitable investment opportunities.

So what’s the deal with stock buybacks and the economy?

StockTax4

Stock buybacks don’t give any incentives for companies to use profits in improving their enterprise and raising workers’ wages. The frequency of buybacks have led to increased economic inequality and more money going to the 1%.

Before the Security and Exchange Commission loosened regulations that gave companies an ability to repurchase stock without facing charges of stock manipulation and a shift toward stock-based compensation toward top executives, corporate money flowed through the broader economy in the form of higher wages or increased investments in plants and equipment. But today, these stock buybacks drain millions of dollars of windfall profits out of the real economy and into a paper-asset bubble. This inflates share prices while producing nothing of tangible value. Corporate managers have always been pressured to grow earnings per share, but where once the only option was the hard work of actually growing earnings by selling better products and services, they can now simply manipulate their EPS by reducing the number of outstanding shares. As a result, it has become a gigantic game of “keep away” with CEOs and shareholders tossing a $700 billion ball back and forth over American workers, whose wages as a share of GDP have fallen in almost exact proportion to profits’ raise. Since buybacks give firms no incentives to share their profits with the workers who truly invest in these companies, pouring their lives into them each day for pay increases and stable opportunities. Or the taxpayers who have an interest in whether a corporation that uses government funding can turn a profit that allow it to pay taxes. As the Academic-Industry Network’s William Lazonick told The American Prospect, “The issue is what are they not doing when they do stock buybacks. What they’re not doing is keeping people employed longer, paying them more, and giving them more benefits. There’s a direct connection between the decline of those norms and the rise of buybacks and the legitimized ideology of ‘Shareholder First.’” Over the last decade, 94% of company profits have gone to shareholders through buybacks and dividends.

This practice isn’t just unfair to Americans, but also to individual harmful to both companies and the American economy. A 40-year obsession with “shareholder value maximization” stock buybacks and excessive dividends have reduced business investment and boosted inequality. Now almost all firms carry out investment through retained earnings. Thus, diverting cash flow to stock buybacks has inevitably resulted in lower rates of business investment. And since the 1980s, corporations have bought back more equity than they’ve issued, representing a net negative equity flow. In other words, shareholders aren’t providing capital to the corporate sector like they should. They’re extracting it. Meanwhile the shift to stock-based compensation helped drive the 1%’s rise by inflating the ratio of CEO-to-worker compensation from 20 to 1 in 1965 to 300 to 1 today. Labor’s steady falling share of GDP has depressed consumer demand, resulting in slower economic growth. It’s mathematically impossible to make the public- and private- sector investments necessary to sustain America’s global economic competitiveness while flushing away 4% of its GDP year after year. If the US is to achieve growth distributing income equitably and providing stable employment, government and business must take steps bringing stock buybacks and executive pay under control. The nation’s economic health depends on it.

What should be done about stock buybacks?

The federal government must reorient its policies from promoting personal enrichment to enhancing national growth. Such policies should limit stock buybacks and raise the marginal rate on dividends while providing real incentives to boost R&D investment, worker training, and business expansion.

According to a 2014 Harvard Business Review, a good first step would be an extensive SEC study of the possible damage that open market buybacks have done to capital formation, industrial corporations, and the US economy over the past 3 decades. For instance, during the amount of stock taken out of the market has exceeded the amount issued in almost every year. From 2004-2013, this net withdrawal averaged $316 billion a year. Overall, the stock market isn’t functioning as a funding source for corporate investment.

Another measure we need to do is reining in stock-based pay which should be very limited. Many studies have shown that large companies usually use the same set of consultants to benchmark executive compensation and that each consultant recommends that the client pay its CEO well above average (which is what CEOs want to hear). Thus, compensation inevitably ratchets up over time. They also show that even declines in stock price increase executive pay. So when a company’s stock price falls, the board stuff even more options and stock awards into top executives’ packages, claiming that it must ensure they won’t jump ship and will do whatever necessary to get the stock price up. A 1991 SEC decision allowing top executives to keep gains from immediately selling stock acquired from options only reinforces their overriding personal interest to boost stock prices. Because corporations aren’t required to disclose daily buyback activity, it gives executives the opportunity to trade to trade undetected on inside information about when buybacks are in progress. The SEC at least should stop allowing executives to sell stock immediately after options are exercised. And incentive compensation should be subject to performance criteria reflecting investment in innovative capabilities, not stock performance.

But more importantly, we must transform boards determining other executive compensation. Boards are currently dominated by other CEOs with strong bias toward ratifying higher pay packages for years. When approving enormous distributions to shareholders and stock-based pay for top executives, these executives believe they’re acting in shareholders’ interests. And that’s a big part of the problem. The vast majority of shareholders are simply investors in outstanding shares who can easily sell their stock when they want to lock up gains or minimize losses. Since taxpayers and workers are the people truly investing in the productive capabilities of corporations, they need to have seats on boards of directors. Their representatives would have the insights and incentives to ensure that executives allocate resources to investments in capabilities most likely to generate innovations and value.

If business leaders want to maintain broad support for business, they must acknowledge that a corporation’s purpose isn’t to enrich the few, but to benefit many. Once America’s CEOs refocus on growing their companies over their share prices, shareholder value will take care of itself and all Americans will share in the economy’s benefits. The corporate allocation process is America’s source of economic security or insecurity whether its people like it or not. If Americans want an economy in which corporate profits result in its shared prosperity, the buyback and executive compensation binges will have to end. Sure executives will complain like whiny babies. But the best executives might actual get satisfaction being paid a reasonable salary allocating resources in ways sustaining the enterprise, providing higher standards of living to the workers who make it succeed, and produce tax revenues for the governments providing it with crucial perks.