Stock scams, Ponzi schemes, faked suicides: Business as usual at the Trump Building
▶ Scammers love the candidate’s lower Manhattan building ▶ “They want that Wall Street address”
Donald Trump told a Maine crowd in March that critics of his business acumen should focus on an 86-year-old Manhattan skyscraper that’s one of his most treasured real estate assets. “They don’t want to talk about 40 Wall St.,” he said. “Iconic and wonderful,” the presumptive Republican nominee said at a town hall event in South Carolina last year in praise of the art deco tower known as the Trump Building.
So what’s going on at 40 Wall St.? A hedge fund manager on the 28th floor, who ducked investors by pretending to be dead, reported to prison in January. A few weeks later an investment adviser on the 17th floor was accused of running a Ponzi-type scheme. On June 3 a lawyer 13 floors above pleaded guilty to stealing millions of dollars from victims who included a schizophrenic woman.
No single property in Trump’s portfolio is worth more, according to a 2015 Bloomberg valuation of his assets. But the 72-story building has housed frauds, thieves, boiler rooms, and penny-stock schemers since Trump took it over in 1995. According to the U.S. Securities and Exchange Commission’s current public alert list, no U.S. address has been home to more unregistered brokerages that investors have complained about. The tower, around the corner from the New York Stock Exchange, also houses a Girl Scouts office and a private school.
Rents exceed the market standard for comparable buildings, says Donald Trump Jr., who’s in charge of leasing for the Trump Organization. “Forty Wall’s average annual rent continues to achieve a record of immense success with 97 percent occupancy, a vacancy rate virtually unheard of in downtown Manhattan,” he said in an e-mail.
Part of the building’s appeal is that it offers a relatively cheap way to establish a company’s credibility. The building’s average annual rent per square foot is $36, mortgage filings show, about $20 cheaper than average in the area, according to Cushman & Wakefield, whose brokers help lease the building. “They want that Wall Street address,” Trump Jr. told trade publication Commercial Property Executive in 2010. Eleven new tenants were cited in that interview. Since then, the heads of four have been charged with fraud.
The hedge fund manager who played dead, Mark Malik, wasn’t the first tenant to try that excuse. In 2003 one of the executives at Evergreen International Spot Trading on the 37th floor faked his suicide to dodge prison, say federal prosecutors, who called another executive there “the Michael Jordan of investment fraud.” The scam came to light when customers asked about their money after the Sept. 11 attacks. In 2010, according to regulators, brokers on the 34th floor were helping a financier on the 38th with a penny-stock scam; a brokerage on the 17th floor was involved in an unrelated fraud; and a bond-trading firm on the 42nd floor was bribing a Venezuelan official to win business. At the time, the 32nd floor was the headquarters of Trump University, the billionaire’s school.
Trump, whose short-lived Trump Mortgage venture was on the 25th floor before it closed in 2007, wrote in his 2008 book Trump Never Give Up that the building houses “many of the top-notch businesses in the world.” That was once the case. After founding the Manhattan Co., a forerunner of Jpmorgan Chase, in 1799, Aaron Burr established an office on the site. Work began there in 1929 for the bank’s tower, which was supposed to be the world’s tallest—but it lost to the Chrysler Building uptown.
The tower opened in 1930, just as the economy slid toward depression following the 1929 stock market crash. Lenders foreclosed in 1940. The building passed through numerous hands, including partners from the investment bank Loeb, Rhoades. They sold the tower in 1982 to an entity that was concealing the wealth of Ferdinand and Imelda Marcos of the Philippines. After the couple was exiled in 1986, the tower was auctioned off and foreclosed on again. Saudi arms dealer Adnan Khashoggi was later charged with helping the Marcoses cover up their stake; he was ultimately acquitted.
In 1993, 40 Wall St. was acquired by Kinson Properties, an arm of a footwear and real estate company in Hong Kong. Trump pounced when Kinson had trouble turning the building around, he wrote. He’s said he paid $1 million for the right to lease the building through 2059. Trump currently pays $1.65 million a year to the group that owns the land underneath the building, which includes heirs to a German shipping fortune. “They realized that after a string of losers who had owned the building, I had the integrity of their spectacular property first and foremost in my mind,” Trump wrote in his book.
Trump wrote that he was collecting about $20 million a year in rent by 2008. The tower is worth $550 million, based on rental income and what buyers typically spend on similar leaseholds. In July, public records show, Trump refinanced $160 million of debt on the building.
One of the cheapest ways in is to rent on the 28th floor, which is broken up into small offices. Companies listed in the lobby directory for that floor
include Your Trading Room, a foreign exchange operation ordered liquidated by an Australian court in 2012; Stilas International Law, whose founder was banned from practicing law in Virginia; and Ero Capital, run by a man previously convicted of credit card fraud. Higher up, the New York panoramas are overwhelming. Says Earl David, a lawyer who worked on the 60th floor in the 1990s and was later convicted of running an immigration-fraud mill: “You will die for that view.”
The bottom line Trump’s most valuable single asset is his tower on Wall Street, where low rents attract a mixed bag of tenants.
40 Wall St.