Business and politics

Trump and Workplace Safety

trump_soho Like the other Republican candidates, Donald Trump bashes federal regulation of business. He’s called the Environmental Protection Agency “a disgrace,” saying it is “making it impossible” for companies to function. Yet it’s difficult to find any statements by Trump on another favorite regulatory whipping boy for conservatives: the Occupational Safety and Health Administration.

Trump’s silence on the subject is all the more significant given that in his business career he has had personal experience with workplace safety issues. Those dealings have not always put him in the best light.

The biggest controversy he has faced in this area involves the Trump SoHo New York. During construction of the high-rise hotel in January 2008, a portion of the top two floors buckled while concrete was being poured, sending one worker, Yurly Yanchytsky, plummeting 42 stories to his death and injuring three others, one of whom survived only because he fell into protective netting (photo).

All of the workers were employees of DiFama Concrete, a subcontractor which was charged by OSHA with various violations of regulations relating to cast-in-place concrete and fall protection. The agency initially imposed 10 violations with total penalties of $104,000. The company negotiated those down to five violations and penalties of $44,000.

This was not the first blemish on DiFama’s safety record. According to the OSHA inspection database, during the previous four years the company had been cited by OSHA for about a dozen serious violations and initially penalized $97,000 (negotiated down to about $67,000). One of those cases also involved a fatality. DiFama, by the way, was founded by Joseph Fama, who had been identified as an associate of the Lucchese organized crime family. In 2005 he divested his interest in the firm because he was being imprisoned after pleading guilty to federal racketeering and extortion charges.

Trump initially distanced himself from the accident, saying that he had simply licensed his name to the project. Yet the New York Daily News reported last year that a top official at Bovis Lend Lease, the general contractor for the project, stated in a deposition that Trump had personally reviewed the agreements with the subcontractors, including the one with DiFama. The Trump SoHo is currently listed on the Trump Organization website as part of its real estate portfolio and its hotel collection.

The SoHo hotel is not the only Trump-related property to have had problems with workplace safety. The OSHA inspection database lists other violations at places such as the Trump International Hotel & Tower Las Vegas. Undoubtedly, there are many more listed under the names of the contractors and subcontractors hired on the various projects. Inspection records from the 1980s show numerous violations at the Atlantic City casinos Trump owned at the time but subsequently had to sell.

Trump has boasted that he would be “the greatest jobs president that God has ever created.” It remains unclear how important it is to him that those jobs be free from undue safety and health risks.

Trump: The Art of the Tax Deal

Donald Trump is famous for making high-profile deals using other people’s money. Sometimes those other people are not his business partners or lenders but rather the taxpayers. For a figure who is seen to epitomize unfettered entrepreneurship, he has been relentless in his pursuit of government financial assistance.

Trump’s first major project, the transformation of the old Commodore Hotel next to New York’s Grand Central Station into a new 1,400-room Grand Hyatt, established the pattern. Trump arranged to purchase the property from the bankrupt Penn Central railroad and sell it for $1 to the New York State Urban Development Corporation, which agreed to award Trump a 99-year lease under which he would make gradually escalating payments in lieu of property taxes. The resulting $4 million per year tax abatement was criticized as excessive but was approved by the Board of Estimate in 1976. The deal also provided for profit sharing with the city. The total value of the abatement has been estimated from $45 million (Wall Street Journal, January 14, 1982) to $56 million.

In 1981 the New York Department of Housing Preservation and Development denied Trump’s request for a ten-year property tax abatement worth up $20 million on his project that replaced the old Bonwit Teller department store building with the glitzy Trump Tower. The decision came amid an effort by the city to rein in its abatement program, especially with regard to luxury projects. Trump, who in order to qualify had to argue that the property was underutilized as of 1971, filed suit and got a state judge to overrule the city and allow the abatement.

A state appeals court reversed that decision, pointing out that in 1971 the Bonwit Teller store on the site had gross sales exceeding $30 million and thus was not underutilized. Trump did not give up. He appealed to the state’s highest court, which in 1982 ordered the city to reconsider the application. When the city turned him down again, Trump went back to court and got a judge to order the city to grant the abatement.

Trump sought extensive tax breaks for his planned Television City mega-development on the Upper West Side of Manhattan that was designed to provide a new home for the NBC network, but in 1987 the city rejected the request. Mayor Ed Koch said: “Common sense does not allow me to give away the city’s Treasury to Donald Trump.” NBC decided to remain in Rockefeller Center.

Trump kept pushing for subsidies, and in 1993 he began withholding his tax payments to pressure officials to comply with his demands for tax breaks and state-backed financing. “I’ve always informed everyone that until such time that we get zoning and the economic development package together, to pay real-estate taxes would be foolish,” Trump told a New York Times reporter. A day later he said he had changed his mind and would pay the $4.4 million in back taxes he owed.

Trump later sought assistance for the project, renamed Riverside South, from the U.S. Department of Housing and Urban Development in the form of federal mortgage insurance, but he was rebuffed.

After Trump took over Washington’s Old Post Office Pavilion in 2012 to turn it into a luxury hotel, his company asked the DC government to forgo property taxes but it refused.

When Trump does not receive tax breaks he sometimes creates do-it-yourself subsidies by challenging the assessed value of his real estate holdings in order to lower his property tax bill. He has used this practice, which is employed by many other large corporations and property owners, in places such as Palm Beach. Trumped bragged that he got a great deal when he bought the 118-room Mar-a-Lago mansion in 1986 for $10 million (but only $2,812 of his own money, according to a June 22, 1989 article in the Miami Herald), implying it was worth much more. But when Palm Beach County assessed the property at $11.5 million, Trump appealed, seeking an $81,000 reduction in his taxes. A judge ruled against him (UPI, September 28, 1989). Trump later challenged an increased assessment and got a $118,000 reduction for one year but not for the next (Palm Beach Post, December 9, 1992).

In 1990 Trump won an assessment fight with New York City concerning his then-undeveloped waterfront property on the Upper West Side. He gained a $1.2 million savings in his 1989 taxes (Newsday, July 6, 1990).

More recently, Trump has been seeking a 90 percent reduction in property taxes on his Trump National Golf Club in Westchester County, New York. Trump listed the club as having a value of more than $50 million in the financial disclosure document he released as part of his presidential bid, yet his assessment appeal claims it is worth only $1.4 million.

It’s not hard to guess which figure is used when Trump wants to justify his claim of being worth $10 billion.

Donald Trump Corporate Raider

“We’re not interested in being taken over by Donald Trump.” That message, which sounds like a pronouncement by today’s Republican Party establishment, was expressed three decades ago by the board of directors of Bally Manufacturing as it sought to thwart an unwanted bid by the developer. Bally managed to escape the clutches of Trump but it had to pay a significant price.

During his recent endorsement statement, Dr. Ben Carson declared that there are two Donald Trumps running for president, one of them “cerebral.” Whether that’s true or not, there’s evidence of two Donald Trumps in the business world.

The first Trump is the one constantly promoted by the candidate — the owner and operator (or at least licensor) of a string of supposedly wildly successful business all adorned with his name. Whether Trump University or Trump Steaks, these are also the focus of his critics.

Yet Trump has another track record that involves not the running of companies but rather that of profiting by launching takeover bids that do not lead to completed transactions. During the 1980s Trump was a junior member of a fraternity of wheeler dealers known as corporate raiders. (One of the more notable members of that group, Carl Icahn, has endorsed Trump’s presidential campaign).

Among Trump’s main forays was the one involving Bally. In November 1986 Trump disclosed that he had acquired a nearly 10 percent stake in the company, then the world’s largest producer of electronic games and an operator of casinos and health clubs. Right from the beginning, analysts thought Trump was simply looking to profit from a stock price increase resulting from the bid. They pointed to an earlier investment in Holiday Corp., which Trump sold for a $30 million profit after the disclosure of his 4.9 percent stake.

Bally took poison-pill evasive action and sued Trump for what it called an “unfair and coercive” takeover attempt that could jeopardize the company’s gaming licenses in Nevada and New Jersey (Businesswire, December 5, 1986 and Chicago Sun-Times, December 6, 1986). Trump countersued for $1 billion. The war of words and court filings ended in February 1987, when Trump agreed to sell his shares back to Bally at a premium and netted a profit of more than $31 million.

Both Trump and Bally denied that the deal constituted “greenmail,” and the company prevailed in a shareholder lawsuit challenging the arrangement, but as Gwenda Blair wrote in her book on Trump, the stock transaction was “extremely close to greenmail.”

The Bally and Holiday Corp. bids were far from unique. Trump frequently bought stakes in companies — sometimes large enough to trigger an SEC reporting requirement, sometimes not — and ended up selling at a profit after short-lived takeover moves. On October 6, 1989 the Associated Press ran a story headlined TRUMP HAS A HISTORY OF TAKEOVER FEINTS that stated: “Like a high-stakes baccarat player at one of his Atlantic City casinos, real estate tycoon Donald Trump has made some profitable bluffs to help bankroll his ambitious and splashy acquisitions.” The piece noted several examples in which he “accumulated shares in the company – sometimes indicating he might be interested in mounting a buyout – and later sold all or some of his shares at a profit after the price rose on the ensuing takeover speculation or when another bidder emerged.”

In 1988 Trump had to pay a $750,000 civil penalty to settle allegations by the Federal Trade Commission and the Justice Department that he failed to comply with pre-merger notification requirements in some of these situations.

Given this track record, one has to ask which Donald Trump is mounting the current challenge to the Republican Party — the one who takes things over and runs them (sometimes well, sometimes not) or the one who engages in takeovers just to make a profit.

Trump’s behavior in the presidential race often leans toward the latter. His incessant bragging about business acumen has become routine, but the press conference in which he displayed an array of Trump-branded products reinforced the impression that he may view his campaign not so much as a political revolution as an open-ended marketing opportunity for his ventures.

One cannot help but wonder how things would be different if the Republican elite had responded to Trump the way Bally did — by buying him off rather than fighting him. It’s not clear what form greenmail would take in a presidential campaign, but Trump is always saying he is open to a good deal.