Donald Trump wants to run the American government. He has no prior experience in politics or government service, pointing instead to his career in business. But as the operator of mostly privately owned companies, Trump has primarily been in it just to enrich himself. A more illuminating aspect of Trump the businessperson was his stint as chair of a public traded company — a scenario in which he was supposed to be the steward of not just his own interests but those of the company’s shareholders.

What happened over the course of his decade at the helm of Trump Hotels & Casino Resorts is that he ran the company into the ground, immiserating shareholders while walking away with enormous bags of cash for himself.

Thanks to a leaked copy of his 1995 tax return, the basic story fact that Donald Trump built a mini empire of Atlantic City casinos that crashed and burned in the early 1990s is now well-known. What’s not yet well-understood by the public is the even more important story of what happened next. As Russ Buettner and Charles Bagli write in Wednesday’s New York Times, 1995 was also the year in which “Trump began the transaction that would eventually free him from his financial travails.”

Mom-and-pop investors who had the misfortune to put their confidence in Trump lost nearly everything. But as a performance of low cunning, his stewardship of THCR really did verge on genius. The company itself was a dumpster fire, losing money every year Trump served as chair. But he managed to personally pocket $44 million in salary and bonuses. Even more egregiously, he offloaded personal debts onto the corporate balance sheet and had the public company purchase services ranging from bottled water to plane flights from Trump’s privately held enterprises.

Along the way, he bankrupted the company and all but completely wiped out the value of its stock. If you want to be generous to Trump, the saga shows that he really does have some impressive business skills. He spun gold out of worthless casinos in a declining resort town with a dazzling efficacy.

If you want to be less generous, you see that the one time Trump’s leadership skills were put to the test as an agent of middle-class people’s economic well-being, he ripped those people off ruthlessly and unapologetically. As president, Trump would be a custodian of the American people’s interests — just as he was of THCR shareholders’ interests as chair. And unless he’s had a drastic change of heart, he’d be an incredibly ineffective one.

Donald Trump’s stock market con

Stocks were to the 1990s what junk bonds were to the 1980s and single-family homes to the 2000s — the hot asset class that got so hot it increasingly attracted naive middle-class investors hoping to make a quick buck, and unscrupulous financial actors hoping to make a quick buck off the naive investors.

In Trump’s case, stock mania was a golden opportunity to get out from under the legacy of his disastrous performance as an investor in the early 1990s.

Trump emerged from his companies’ bankruptcy still in possession of his key assets but saddled with debts that he had personally guaranteed. What's more, as David Cay Johnston writes, in order to carry forward the tax value of his billion-dollar loss after receiving relief from some of his debts through bankruptcy, Trump would have had to agree to give up certain valuable commercial real estate tax breaks that are typically central to CRE deals.

Under the circumstances, to maximize the value of his holdings Trump needed to find a way to sell casinos to people who didn't know anything about the nuances of real estate tax law. The mom-and-pop stock investors of the mid-’90s were the perfect suckers, and they bought into the Trump Casino & Hotel Resorts IPO to the tune of $140 million.

The company’s sole asset at the time was the Trump Plaza Hotel and Casino, and the IPO money was supposed to be reinvested in the company. But Trump Plaza was already indebted, so one of the first moves made with the new equity was to pay down the debts — debts that Trump had personally guaranteed, meaning that company money was used to relieve not just a company debt but a personal debt owed by Trump himself.

Trump tunneled money out of the public company

Having hooked a parade of marks, Trump’s next move was to tunnel as much money as possible out of the public company and into his pockets. One easy way to do that was for Trump to have the company he controlled buy things he owned personally.

The public company bought the Trump Castle casino from Trump, for example, for $490 million, a price that James Sterngold reported at the time “was based on optimistic profit projections and was about $100 million too high.” Trump also paid himself $880,000 for brokering the deal.

Christina Binkley reported on April 11, 1997, on Trump’s obscene pay package for himself:

Donald J. Trump received a $7 million pay package in 1996, including a $5 million bonus and a 71% salary increase, despite a more than 70% drop in the shares of Trump Hotels & Casino Resorts Inc. from their high last year. In addition to his bonus, Mr. Trump, the company's chairman, received a salary of $1 million and another $1 million to cover services rendered by Mr. Trump's privately held companies to Trump Hotels, according to the company's recent filing with the Securities and Exchange Commission.

The company’s share price dropped because it was unprofitable. And it was unprofitable because it ended up assuming $1.7 billion in debt as part of its acquisition of formerly Trump-owned enterprises. Trump was, in essence, paying himself a high salary for the trouble of running a company whose main purpose was to take enormous bad debts off his personal balance sheet and shift them over to the company.

“Other than the stock price, we're doing great," he told Binkley.

But Drew Harwell’s analysis of the company’s financial records this June shows that the tunneling took on a more extreme scope. In addition to assuming Trump’s personal debts and paying him an exorbitant salary, Trump’s public company was a heavy purchaser of services from Trump’s privately held companies:

As the company spiraled downward, it continued to pay for Trump’s luxuries. Between 1998 and 2005, it spent more than $6 million to “entertain high-end customers” on Trump’s plane and golf courses and about $2 million to maintain his personal jet and have it piloted, a Post analysis of company filings shows. Trump also steered the company toward deals with the rest of the Trump-brand empire. Between 2006 and 2009, the company bought $1.7 million of Trump-brand merchandise, including $1.2 million of Trump Ice bottled water, the analysis shows.

“A shareholder who bought $100 of DJT shares in 1995 could sell them for about $4 in 2005,” Harwell concluded. “The same investment in MGM Resorts would have increased in value to about $600.”

The company went bankrupt, and shareholders saw the value of their remaining stake further reduced as creditors seized a large share of the equity. Trump himself was a major shareholder, so he lost out in the bankruptcy. But since the unsustainable debts had previously been owed by him personally, it was a huge net win for Trump even as his investors took further losses.

The art of the deal

The basic facts of this story have been widely reported over the years and revisited as part of the 2016 campaign. They haven’t managed to worm their way into the main campaign narrative, however, because they paint a somewhat complicated picture.

Trump himself is obviously not eager to call attention to his huckster history. For the Clinton campaign, it probably makes more sense to focus on the idea of Trump as an incompetent rich kid losing daddy’s money than on his shrewd and complicated swindle. What’s more, Clinton’s husband was president at the time of Trump’s most egregious offenses, and revisiting the way he bilked investors is a reminder that Clinton-era financial regulators were not nearly as protective of middle-class investors as they should have been.

The fact of the matter is, however, that whatever mistakes Trump has made in his career, the Trump Hotels & Casino Resorts episode was a tour de force. The total sum Trump netted — not just in terms of salary and fees but in terms of cash paid to his other businesses, personal debts canceled, and overpriced assets bought — is incalculable. And while it would be a mistake to say it was all perfectly legal (there were money laundering fines, securities law violations, campaign finance fines, etc.), it was legal enough to work.

For voters, of course, the question is what side of the table you’re sitting on. Trump now says he’s going to put his skills and shrewdness to work on behalf of the American people, striking great bargains for us vis-à-vis China, Mexico, Japan, and our NATO allies. But of course Trump’s investors thought the same thing. Any casino enterprise is inherently a con; it’s just that they thought the gamblers were the marks and they were in on the con. In the end, the joke was on them. But Trump says it’s different this time.

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