As has become increasingly clear, one business strategy of Donald Trump is to persuade bankers to lend him money for his projects and then pass on the enormous debt to investors while using the loss to write off his own taxes. I will not even pretend to understand how this is done, even with the expert help of tax reporter David Cay Johnston.
But another of Trump’s strategies is to stiff small businesses who do work for him and then challenge them to take him to court. Matthew Lee Myers, a web developer, whose father worked in construction in Atlantic City and thus was involved with Trump’s casino projects, explains how that worked.
The project started out with a tough, competitive bidding war. This was pretty common for casino projects prior to Trump, and everyone competed to be the cheapest and give a fair price. The contractor selected would then negotiate some specific terms. Typically Trump would try to reduce the price a bit more, and push as much of the payment as possible to the end of the contract.
…Eventually you’d finish and send off that final invoice. At this point, you’re stretched pretty thin. Your payroll and supply costs were higher than expected and all that cost has been out of pocket, so even with the final lump sum you’re doing a little better than breaking even. You pick up the check and it’s for exactly half what he owes you. You obviously ask for the rest and he makes up some reason for knocking off half what he owes (sometimes those delays he caused) and says if you want the rest you’ll have to sue him for it, but that he’s got a very good legal team and it’ll cost more than he owes you just to get it. You know you could win the suit, but financially you can’t afford a long drawn out legal battle.
Plenty of people have taken him to court. And he stalls. That’s his whole strategy. Just wait until you can’t afford to keep the case up. If you can hold out, you know you’ll win, but by then you’re in bad shape and may default on loans or lose your business. And it’s not just you, it’s the guys on your crew. You owe them their paychecks. You can’t just screw them because Trump screwed you. So most people just took what he was willing to give.
Eventually we got smart. We instituted the Trump Tax. Contractors started padding out their bids by quite a bit, so that even if you didn’t get that final payment you’d at least break even. Trump still thought he was being clever and making those “great deals” he’s always talking about, but in truth he was now getting hosed and losing more money over his dishonesty than he ever saved. Every once in a while someone would break ranks and give Trump a fair price. They’d lose their shirt on the job and learn a lesson.
As we see, Trump’s strategy to defeat his opponents is to use the threat of lawsuit. Because he can afford to spend a lot of money to defend himself or attack others, this results in his adversaries having to spend similar amounts. He gets away with cheating small businesses and individuals because he knows that they cannot match his deep pockets and so they walk away and absorb their losses.
But this strategy does not work with groups that have deep pockets too. That is why his threat of a lawsuit against the New York Times if they published stories by two women about his groping have failed to intimidate the newspaper. They have essentially challenged him to go ahead with his threat, saying sarcastically that the law of libel is meant to protect people’s reputations and that, by his own words and actions, he has left himself with no reputation to protect. I seriously doubt that he will sue the paper and in fact it turns out that despite making many such threats, he has not sued any media outfit for libel in three decades.
What is becoming increasingly clear is that Trump is a paper tiger in almost all respects, a failure at business and with women and has only got where he has through cheating and bullying, by exploiting a legal and tax system that favors the wealthy.
After this election is over, one wonders what his future will be since he will be exposed as a con man so that his past tactics will no longer work as easily. His image (or his ‘brand’ as the media like to say) will be so damaged, who will be willing to do business with him or want to be seen as associating with him in any way?
Can you imagine booking a room in one of his hotels if you know, as the owner, has the master key?
You know who else exploits our system against us? Terrorists.
Trump is a terrorist in other ways, too. He spreads fear and lies and hatred.
The “Trump tax” is funny, and not a surprise. Serves him right.
It’s a little surprising that Mr. Myers admitted to the “Trump Tax”, since that could be considered to be illegal collusion between the bidders. At least it would be if it were a government contract; maybe in this case it would be non-criminal but still probably a tort.
But then, for Trump to recover any damages he’d have to sue, and then all the history of his stiffing his contractors would come out.
I suspect he will survive financially. As P T Barnum said “there is a sucker born every minute.”
His ever-hotter volatile temper, delusional world view and view of himself in the world, and his inability to accept defeat make me think he might be insane enough over losing the coming election to do himself in.
@DonDueed, 3:
“Trump Tax” does not require collusion. It’s an emergent property. That’s not to say collusion doesn’t happen -- you just don’t have to have it. Stiff contractor A enough times, they start padding their prices. They accept that, with padding, they’re less competitive, but they calculate it’s worth the risk to not get stiffed. So you go to the cheaper contractor B instead, and stiff them instead. They get wise, you go to C, and so on until you run out companies capable of, e.g., building a casino. In any given locale, this is not a large market. Even if word doesn’t get around -- and the people working for these contractors change jobs often, so it can, even without any nefarious contacts -- within a relatively short time, everyone is padding their bids. Yay the free market.
(Earlier in my career I project managed chemical plant installations. Privately several employees of our preferred contractor admitted that, if a certain member of our staff was on the project team, their bid would be padded to take account of the extra work he’d generate. No collusion required, again -- they’d just been stung more than once, and reacted accordingly.)
I’m guessing he’s a slow pay with his lawyers, but he doesn’t stiff them.
This is odd to me and probably many of your other readers as well, but from what I understand being a con man in Republican politics does not necessarily end poorly. At least not financially. From what I have heard about it the idea is to create a sort of cult of personality along the way and then people seem inclined to believe you even when they very obviously should not. Trump has already had something similar going on with his college and steaks and various other random nonsense.
Bizarrely enough if he can start ripping off the end clients in his businesses instead of the investors he’ll go a long way toward seeming like a more upstanding businessman.