Separation Anxiety: Seven Degrees of Trump Shearing

How many of degrees of separation are you from someone who got ripped off by Donald Trump?

A friend of my family was a NYC contractor who discovered that Trump was remarkably slow to pay his bills. So that’s one degree of separation. Also, anybody who owned the Vanguard Total Stock Market Portfolio or the Vanguard Small Capitalization Stock Portfolio in 1996 had the dubious pleasure of being fleeced by the Donald.

In that year Trump sold his heavily indebted casino at a hefty premium to a public company he controlled at the time, Trump Hotels and Casino Resorts (THCR). Quite properly, the share price collapsed after that stunt was announced: it never recovered. For that bit of excellent financial engineering Trump paid himself $7 million out of the public stock’s coffers. Taking a casino that you’ve failed to manage properly -Trump Castle- and selling it to a company that you own only 25% of while controlling it entirely was a masterstroke. For the Donald that is, not his smallish investors.

The public company never showed a profit during a single year of its existence and went through bankruptcy four times. Trump has nothing to do with the company today: his supporter Carl Icahn controls it. During the mid 1990s though small shareholders were taken to the cleaners. Until this evening, I wasn’t aware that I may have been one of them via a Vanguard index fund.

Such behavior is not unusual in many countries. But the US has regs that are suppose to curb self-dealing. I guess they didn’t work in this case.