Just follow the money when voting on Donald Trump probe
MSPs should focus on the myriad inconsistencies surrounding Trump’s Scottish firms, says Martyn Mclaughlin
It is impossible for the upcoming Scottish Parliament debate and vote on whether ministers should pursue an unexplained wealth order (UWO) against Donald Trump to cover every minute detail of his financial circumstances.
That is an inexhaustible and often inscrutable pursuit, and there is no incontrovertible evidence to uphold the allegation that the former US president’s Scottish businesses have been used for money laundering.
But given one of the main grounds for seeking an UWO is a reasonable suspicion that the known sources of the respondent’s lawfully obtained income would have been insufficient for their purchases, MSPS could do worse than focus on the myriad inconsistencies and contradictions surrounding the financing of Mr Trump’s Scottish companies.
Thanks to a brief and opaque paper trail, we know they have assets worth £94m, yet have incurred losses of more than £55m, and owe £157m to Us-based limited liability companies and trusts in Mr Trump’s name. We also know the firms have spent hundreds of millions of pounds, and are planning major expansions that would require hundreds of millions more. As a business strategy, this is perplexing, although it could support nothing more than the oft-levelled charge that Mr Trump is a poor businessman. Key to the UWO debate are the conflicting accounts of how his firms are bankrolled. Mr Trump has repeatedly said his resorts required no external financing. Others have painted a different picture.
In June 2008, Iain Webster, then head of corporate finance at Johnston Carmichael, a leading accountancy firm, made a formal submission to a public local inquiry into Mr Trump’s Aberdeenshire project.
He revealed that Mr Trump planned to invest a potential £12m of his own money, creating the golf course and providing equity. “Once that golf course is up and running,” Mr Webster said, “he will use the equity value to then borrow money to fund further stages of the development. He would gear up or borrow against the security of existing properties.” Borrowing, it was said, would represent 90 per cent of the project’s total funding.
It remains the only detailed account claiming Mr Trump would borrow for the venture. What makes it all the more interesting is the fact Mr Webster was hired by the Trump Organisation to provide his analysis. Johnston Carmichael, it so happens, has audited the Trump development’s accounts every year since 2006.
Of course, Mr Trump may have pivoted on the plan. Yet other snippets of evidence down the years show he has attempted to secure external financing in Scotland.
In October 2008, he wrote to Charles Wighton, an area director at the Bank of Scotland. As I reported a few years back, the correspondence was in aid of a failed attempt to create a luxury hotel in St Andrews. Mr Trump unsuccessfully tried to buy the property for £23m – on the condition the bank gave him £38m.
Intriguingly, his letter concluded: “Also, we would be honoured to use the Bank of Scotland as our primary bank for all of our United Kingdom enterprises, in particular, the Aberdeen development.”
It is a curious statement, especially when you consider the remarks made to this newspaper the following month by George Sorial, a then executive vice-president of the Trump Organisation.
Amid speculation of how the Aberdeenshire development would be impacted by the global recession, Mr Sorial said Mr Trump had recently "increased his cash position" and
had £1bn in the bank. "The money is there, ready to be wired at any time,” Mr Sorial said. “I am not discussing where it is, whether it is in a Scottish bank or what, but it is earmarked for this project. If we needed to put the development up tomorrow, we have the cash to do that.” The wording of that statement is rendered even more fascinating when you remember the same month, Mr Trump defaulted on a £467m loan provided to him by Deutsche Bank, before suing the lender.
The reality is that when Mr Trump incorporated his inaugural Scottish company in October 2005, it coincided with the start of a decade-long £290m cash spending spree, a U-turn on his historic strategy of aggressively using debt. The Trump Organisation’s complement of golf courses increased from four to 15, and its hotel chain quadrupled to 12 locations.
Eric Trump has attributed that growth to the company’s “incredible cash flow”, and there is no doubt his father came into money, such as his £129m cut from the sale of Fred Trump’s property empire in 2004.
But other lucrative revenue streams, such as payments for The Apprentice television show, had dwindled by the time he purchased Turnberry for £35.7m in 2014 and, thanks to the New York Times, we know that in ten of the 15 years prior to entering the White House, Mr Trump paid no income taxes at all, largely because he reported losing more money than he made.
These are not insignificant conundrums, nor fanciful pretexts for any investigation – the New York attorney general is currently investigating potential fraud in Mr Trump’s business dealings before he was elected.
Scottish authorities here have a unique opportunity to throw further light on the issue, and demonstrate they will not turn a blind eye to any risk of the nation being used as a safe haven for the proceeds of crime.
The SNP, of course, has a vexed history with Mr Trump. Senior figures cosied up to him, and he forged partnerships with state-owned companies before the tide turned.
Ever since, First Minister Nicola Sturgeon has played to the gallery, offering pithy barbs signalling her personal dislike of Mr Trump, while stubbornly refusing to engage with the more serious issues at hand or disclose legal advice. Her government has a responsibility to seek clarity where legitimate questions are posed. The debate alone will not solve the mystery of Mr Trump’s finances, but it will determine whether Ms Sturgeon and her ministers choose substance over soundbites.