I start this thread not in defense of Trump, but to put my own mind at ease.
Trump’s sale of a Palm Beach estate for $100 million in 2008 to a Russian businessman has recently come into the news again since some senator wants to get to the bottom of it.
As a headline, it sounds pretty bad – Trump bought a property for $40m, sold it it for $100m, a ratio which has been described as anywhere between 2x and 3x it’s “value.”
However, there are some bullet points that mitigate the impact of the headline:
Trump bought the estate at auction for $41m in 2004
The house itself, billed as the most expensive house in America, must have been a nightmare to upkeep, and was apparently gaudy as hell
After making some repairs, Trump put it back on the market in 2006 for $125m
It sat on the market for 2 years. The Russian (who has a name but I’d have to copy and paste it) initially offered $75m, but settled on $95m after negotations
The house has since been razed, which sounds alarming but was probably the right call given the value of the land and the small market for houses of that expanse.
The lot was divided into 3, the first (and largest) of which sold for $34m.
Real estate analysts seem split on whether or not the Russian guy will break even or lose money, but it doesn’t seem (to me) that it was necessarily a boneheaded purchase. Certainly the potential for profit was there.
Given that this is a decade old real estate deal with a publicly known buyer and seller, and negotiated values that don’t seem all that crazy, I’m inclined to accept this one at face value. However, this is now being trotted out as a clear case of money laundering.
The argument, so it goes, is that the Russian businessman wanted to launder some amount of money, and paid well over market value to Trump for the privilege of doing so. Trump, for accepting the risk of abetting criminal activity and keeping quiet about it, would pocket some $60m.
Doesn’t make any sense to me either. Could you provide example(s) of “this is now being trotted out as a clear case of money laundering”? I imagine we’d have more fun discussing how ignorant / wrong those (presumably left-wing) sources are.
I dug through to the source article, couldn’t get the paywall to go away so I had to read it in html. This is, I believe, guidance for Realtors about how to spot money laundering in south Florida (from the end of the article):
The article does talk somewhat about the phenomenon of overpaying for a property, but not in a manner that describes the Trump sale. Namely, drug dealers are so desperate to launder their money that they won’t negotiate and just pay whatever ridiculous values the developers are asking. The article basically says this is going to be a problem for them because the bubble is going to burst and they’ll only get pennies on their laundered dollars.
But the article doesn’t claim that the drug dealers are paying these inflated prices to benefit the developers, but rather because they’re all competing with each other for a limited supply of properties and it’s blowing up the market. This is a different scenario from a one-off estate.
There’s also several key ways that the Trump sale doesn’t fit this model –
The buyer was known and didn’t obfuscate his identity through an LLC
The buyer has an obvious legal source of ample income
The buyer did negotiate the sale price
The buyer was not in a hurry to flip it, opting instead to put considerable money into overhauling it, dividing it, and selling the pieces.
Some wags have said that the Trump family business is money laundering for the Russian mob through real estate. I will wholeheartedly admit that I am predisposed to agree with that assessment.
That said, the transaction described in the OP doesn’t pass the smell test or laundering, and sounds (mostly) conventional to me.
Mike is one of the big experts in this field, he is mostly retired now, however, health reasons.
Yesyoubetcha, there is lots of Moneylaundering in Real estate, and Fla is one of the hot areas.
I dont see that* this*, however, is nessesarily Money laundering. Those russkis are well known for buying RE at high prices to protect some of their cash in case they get into trouble.
Not saying it is entirely on the up&up, but it does not look to me as a “clear case of money laundering.” Maybe, but more needs to be known first.
I think it’s a red flag only. People make bad deals all the time. It very difficult to set a market value for a unique high end property. Most buyers don’t ,for example, want a poolside aquarium big enough for a shark. So a high maintenance special feature can drag down the price of the property. Then you’ll land multiple prospects that want nothing more than a house with a big-ass outdoor aquarium and the value skyrockets.
But significantly overpaying for a major purchase would be the kind of flag that might spark an investigation. Because the overpayment could be seen as unexplained income. So I imagine investigators would look for any sort of “rebate”, as it were - anything of value that might have flowed back to the purchaser. Maybe another Trump company gave the purchaser’s mistress a small condo in a Trump building. Maybe a Trump company awarded building contracts to a friend of the buyer. Maybe the guy overpaid just to ingratiate himself with Trump so he could milk him for information and slip him disinformation.
Or it could be above board, a good deal for Trump.
But it would bear looking into, even though there may be nothing there. That’s how a lot of financial investigation works.
Timing is a key factor. The Donald bought it for $41M in 2004, when property was definitely in a real estate bubble (which would last until the Great Recession kicked off in 1997 with the Lehman bankruptcy and bail out of the rest of Wall Street. So, in 1998 when the Great Recession was hitting hard with no end in sight, it totally makes sense that a Russian would think he got a *steal *for only paying double.
The Donald probably was leveraged to his eyeballs on the property, got out of a nasty financial liability he would have had to wear until the real estate market in Florida bottomed a few years later, and made a fantastical return on investment in the worst market since the Depression.
I thought about the timing, but we’re talking about the most expensive house in American history, not a McMansion in the Dallas suburbs. The buyer had a net worth of $10b and didn’t need credit to make the purchase. I don’t think you can necessarily extrapolate the real estate market at large in 2008 to the .001%.
The Palm Beach estate aside, there does seem to be a pattern with Trump’s condos – many of the sales involved fit the money laundering pattern I pulled from eschereal’s cite, and per that same cite, real estate agents, mortgage brokers, and developers are all trained to identify signs of money laundering so they can report it. It seems that there’s some nuance to whether or not there’s a legal requirement to report it, and it’s very possible that Trump is staying just on this side of legal. Certainly legal doesn’t necessarily mean moral.
Thanks for doing the research. So three of the four articles say that there is no evidence of money laundering by Trump. And thus we can conclude that money laundering is what he does.
I think it’s safe to say that Trump’s business model is particularly attractive to people who want to launder money, and the money is attractive to Trump. In the same way that hotel owners who rent rooms by the hour aren’t guilty of prostitution, but are very definitely in the prostitution business.
A common tactic of big-time criminals is to call attention to a non-crime to deflect attention from real crimes. I wonder if that’s what’s happening here.
IOW, just because this particular Russian money influx might be legitimate, that doesn’t mean Russian payola hasn’t been sent Donald’s way in the past. There are plenty of suspicious Trump deals with Russian-type mobsters, e.g. the Azerbaijan Trump Tower.
Do you mean that you pressed Ctrl-U (or equivalent) and found the site hadn’t actually hidden the text?
I’m glad to learn I’m not the only nerd that does that!
Trump has bragged about it in the past – I think this was probably a good deal for him, regardless of the risk, because of the publicity associated with being involved in the sale of the most expensive house in America. It was good for his brand. But it’s in the news now because of some senator calling for an investigation. An investigation doesn’t seem warranted, IMHO, based on what we know about the deal, and it will only serve to justify Trump’s claims that he’s the target of a witch hunt.
