Rents in Brooklyn and Queens were artificially increased by a 1990s scheme to inflate building improvement costs, the New York Times found.
A Trump family tax scheme that boosted rents on Trump-owned apartment buildings across New York in the 1990s has left rents artificially inflated to the tune of millions, the New York Times has found.
In a follow up to their major October investigation with David Barstow into the Trump family’s suspect tax schemes, Russ Buettner and Susanne Craig reveal that the effects of those schemes are still being felt by tenants today (and, of course, by the Trumps who enriched themselves greatly along the way).
In 1992, the Trump children created a phony company, All County Building Supply & Maintenance, to pad the cost of their father’s building purchases. The company did nothing but pay vendors, and was reimbursed by Fred Trump at a higher rate, with the extra money split by the kids. This allowed the Trumps to both dodge taxes and over-inflate the prices on Fred’s rent-regulated apartments through marked-up “improvement costs.” As Trump’s brother Robert once admitted in a sworn deposition, “the higher the markup would be, the higher the rent that might be charged.” (Trump did not respond to a request for comment from the Times, but his lawyer Charles J. Harder said in response to the original report that “there was no fraud or tax evasion by anyone.”)
But those inflated rents didn’t just affect tenants at the time. Because increases carry forward, the padded costs are now baked into the system, and have been compounded by years of annual rent increases, Craig and Buettner write:
The sum total of the rent overcharges cannot be calculated from available records. As a way to appreciate the scope of the impact, a onetime $10 increase in 1995 on all the 8,000 apartments involved would put the total overpaid by tenants at more than $33 million to date, an analysis of approved rent increases shows.
While Donald Trump is these days associated with luxury real estate and dodgy Moscow deals, the family empire once included thousands of regular apartment buildings across Brooklyn, Queens, and Staten Island. The tenants interviewed for the story include a 69-year-old retired computer programmer and a 73-year-old woman living in her Coney Island apartment since 1964 — each of whom, the Times alleges, has been charged thousands based off unjustified increases they didn’t understand.
While the statute of limitations on criminal charges relating to the padded invoices has now expired, there may still be a window for tenants to roll back their rents and receive damages, according to tenancy legal experts:
Regulations generally allow tenants to challenge rent for the past four years. But the state’s highest court has held that tenants can look back further to show their landlord increased rent through fraud (though damages are still limited).
“If they are making false statements about how much it costs, that would be pretty much dead center of the definition of fraud,” [said Michael] Grinthal, [supervising lawyer with the Community Development Project at the Urban Justice Center].
While this example is particularly egregious, this issue goes far beyond the Trumps. Legislators have recently argued to put an end to programs such as the Major Capital Improvements, that landlords often abuse to raise rents beyond the regulated increase amounts, based on “improvements” they’ve made to the buildings. As state senator Michael N. Gianaris of Queens told the Times, “The M.C.I. program has been subject to abuse by landlords for years — the fact the Trump family did it just highlights that.”
This is just one of the Trump’s many dubious tax practices
This scheme doesn’t just fit within a pattern of misbehavior within the real estate community — it also fits within a pattern of sketchy practices by the Trump family more broadly. And, like his father before him, Trump keeps it all in the family.
A 2017 ProPublica investigation revealed that two of the president’s children, Ivanka and Don Jr., were close to being charged in 2012 over Trump Soho, a project in which they had inflated sales figures to lure investors (the DA overruled staff after a visit from a top donor). Meanwhile a recent ProPublica summary listed 14 other projects on which Ivanka and her father had misled investors over sales or involvement, from Baja to Waikiki.
Other details revealed in the New York Times October report included the fact that the Trump parents avoided paying appropriate taxes on more than 1 billion dollars of gifts to their children and that Fred Trump-owned entities repeatedly bailed Donald out in the 1980s and ’90s. And just before Fred’s death, Trump and his siblings significantly undervalued the properties they gained control over, only to go on to sell them off over the next 10 years for 16 times the amount they stated.
As Vox’s Gaby Del Valle wrote when the Times’ initial investigation came out, that doesn’t mean everything the paper reported was against the law:
There’s a fine line between legal tax avoidance and illegal tax evasion. Some of Fred and Donald Trump’s actions, such as the casino debacle, are clearly illegal. Other things that sound illegal — like avoiding inheritance taxes through a network of trusts — may not be.
But taken together, they paint a very different picture of the “self-made” billionaire: a man who actually inherited his wealth largely through creative, and possibly illegal, accounting done alongside his father and siblings.