Photograph by Mandel Ngan — AFP/Getty Images

The public businessman avoids 'transparency.

By Daniel Gross
March 12, 2016

In a rambling, bizarre press conference/product placement monologue earlier this week, Donald Trump boasted about a range of ventures and business: golf clubs, the Trump Shuttle, real estate, Trump Water, Trump Steaks, Trump Magazine, you name it. Each one supposedly more spectacular than the next.

But it is difficult to tell whether this tidal wave of business triumphs is actually just a river of nothing. And in that regard, Trump, the Republican frontrunner, is a highly unusual presidential candidate—and businessman.

When it comes to personal finances, business, and public life, Americans live in an age in which transparency and openness are the rule. It’s easy to find out a great deal about the stock holdings of CEOs and CFOs of publicly held companies, the valuation of privately held venture-backed companies, and where moguls’ private planes are flying. Voters can easily find out the net worth of Bernie Sanders , where former candidate Chris Christie lives (and how much the house is worth), and the fees Hillary Clinton got for speaking to Goldman Sachs gs (though not the contents).

Not Trump.

As the businessman does with so many other norms, he flouts the ones governing full disclosure of wealth, income, and business activities. There’s no doubt that Trump is rich. But precisely how rich is hard to say. He hasn’t released tax returns, and his lengthy disclosure offers estimates and ranges—not a pinpoint number. And there’s really no good way to verify the many claims he makes about his business.

Public, yet hidden

All of which highlights a paradox surrounding Trump: Here’s a highly public businessman whose political career relies largely on his public image and his ability to plaster his name and persona on products, shows, and books. But he conducts virtually all of his business in private. The Trump Organization is very much a family operation. And the public has the same level of visibility into his operations as it does into, say, a local Italian restaurant.

Most—but not all—wealthy, big-money transaction-oriented businesspeople have dealings with the investing public. They stage IPOs, take positions in publicly held firms, or have entities they control issue publicly traded bonds. Private companies sell shares to mutual funds, who in turns disclose their values. Hedge funds disclose their positions and holdings quarterly. And many private equity firms and hedge funds share their performance data with investors, like public employee pension funds, who in turn make it public.

But Trump doesn’t fish in these waters.

A financier who doesn’t do much financing

In 1995, he took Trump Hotels & Casino Resorts public in an IPO. But it wound up in Chapter 11 in 2004, and its successor company, in which Trump owned a stake, filed for Chapter 11 in 2009 — even as he managed to extract tons of personal compensation. You will search databases in vain for Trump bonds that are publicly traded.

Indeed, public investors, bondholders, and many banks that have dealt with Trump over the years have often been burned. As a result, Trump is a financier who doesn’t do a ton of financing. In many of the developments with which he is associated, Trump licenses his name while others raise the construction and development funds.

This helps explain why ‘The Donald’ doesn’t appear to be that highly leveraged. His candidate financial disclosure form, which catalogues hundreds of partnerships, LLCS, and corporations, lists just 14 mortgages, plus an issue of secured lease bonds, adding up to a few hundred million dollars. In addition to listing holdings in private companies, Trump’s disclosure forms provide ranges of his assets and income from a wide variety of sources: stocks, mutual funds, hedge funds.

So how wealthy is he?

Now, as a private businessman who avoids the public markets, playing his cards close to the vest is Trump’s right and prerogative. But it is compounded by his lack of transparency. Without him releasing his tax return, as Hillary Clinton, Bernie Sanders, Ted Cruz, John Kasich and Marco Rubio all have done, it is difficult to assess the veracity of the claims he makes about his wealth, and about any single claims he makes about his business.

If the former CEO of a publicly held company were to stand up and say that the stock rose 500% on her watch, the claim could be instantly verified or debunked with a few clicks at Yahoo! Finance. But the US Securities and Exchange Commission isn’t requiring Trump to disclose the revenues of Trump Water, how many pounds of Trump Steaks were sold in 2015, and the EBITDA of Trump University.

Combine the lack of forced disclosure with a willingness to bluster and political journalists’ general ignorance of business matters, and it’s not surprising we get spectacles like we did this week.

 

 

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