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”

Bloomberg Businessweek (North America) - - Contents - -Zeke Faux and Max Abel­son, with Caleb Melby

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.

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