The New York Times - USA (2020-10-10)

THE NEW YORK TIMES NATIONALSATURDAY, OCTOBER 10, 2020 Y + A21

ing to tax-return information. By year’s
end, he would agree to pay $25 million to
settle a class-action lawsuit involving al-
legations that Trump University was a
fraud.
Whether for his businesses, his cam-
paign or both, Mr. Trump was furiously
moving money, his tax records show.
Since 2012, he had drained a lot of the
cash he had on hand. That year, he took
out a $100 million mortgage on the com-
mercial space in Trump Tower and re-
ceived nearly the entire amount as a
cash payout. The following year, he took
$95.8 million out of a real estate partner-
ship account at Vornado Realty Trust.
After selling $38.6 million in stock in the
first months of 2016, he ended the year
having sold nearly $30 million more.
And there was another maneuver, the
one that experts consulted by The Times
described as highly unusual: the more
than $21 million in one-time payments
that the Trump-Ruffin joint venture paid
out in 2016.
By analyzing the tax-return informa-
tion and public records, The Times was
able to trace the flow of money — first to
companies that Mr. Trump alone con-
trols, and from there to Mr. Trump him-
self.
To understand how out of the ordinary
those payments were, consider the com-
pany that became the destination for the
bulk of the money: Trump Las Vegas
Sales and Marketing.
It was created in 2004, as Mr. Trump
and Mr. Ruffin were drawing up plans
for the Trump International Hotel. Pre-
cisely what it did, though, is obscure. It
had no employees, or at least no payroll.
And while the Trump-Ruffin joint ven-
ture certainly spent several million dol-
lars a year to promote its room rentals
and condominium sales, that money did
not go to Trump Las Vegas Sales and
Marketing. The company’s tax records
show that it had little income over the
years, posting modest profits only
twice: $54,924 in 2007 and $420,756 in
2008.
Then, in 2016, came a payment of
$13,756,623.
Mr. Trump disclosed the payment in
his 2017 federal ethics filings, but only
with the tax records is it possible to see
the entire chain of transactions. On the
ethics filing, he said Trump Las Vegas
Sales and Marketing had a “deal” with a
subsidiary of the joint venture, but no
other details are given.
The second unusual payment was for
$2,685,000, divided between the two
companies that hold Mr. Trump’s share
of the hotel and then paid out directly to
him. He called it one thing for the I.R.S.
(a “loan fee”) and another in his public
filings (a “sponsor fee”).
The Trump-Ruffin hotel company
listed one other large one-time expense
on its 2016 tax return: a $4.8 million “de-
velopment fee.” While The Times was
unable to trace the path of all of this
money through Mr. Trump’s tax records,

his public disclosures say that a com-

pany called Trump Las Vegas Develop-

ment also had a deal to receive develop-

ment fees from a subsidiary of the joint

venture. (That company, according to

the filings, actually had revenue of $8.2

million from January 2016 to April 2017.

It is not clear where the additional $3.4

million came from.)

The I.R.S. lets companies use busi-

ness expenses like sales and marketing

payments to reduce taxable income —

but only if they are “both ordinary and

necessary.” The Trump-Ruffin hotel ven-

ture wrote off at least $21 million in one-

time payments to Mr. Trump.

The tax records do not specify when

the payments were made or where the

joint venture got the money for them.

But taken together with public

records, they may offer some clues.

The Las Vegas hotel had long been a

money loser. Between 2010 and 2012,

each partner put $23 million into the

business. Its losses were narrowing,

though, and it began 2016 with $6.3 mil-

lion in cash reserves.

That might have been a decent cush-

ion, but it was hardly enough to cover the

more than $21 million in payments to Mr.

Trump. In fact, the payments drove the

hotel to its biggest loss ever.

Then, seven weeks before the elec-

tion, something else unusual happened.

The Trump-Ruffin partnership bor-

rowed $30 million from City National

Bank in Los Angeles. Mr. Trump signed

the loan documents in New York City,

but tax records show that Mr. Ruffin per-

sonally guaranteed nearly the entire

amount, should the company ever be un-

able to pay.

The partnership was not required to

disclose on its tax returns how the bor-

rowed money would be spent. But the

timing of the loan, combined with the

partnership’s lack of available cash that

year, strongly suggests that the loan

funded the millions of dollars in pay-

ments to Mr. Trump.

The experts consulted by The Times

said that in assessing the legitimacy of

the payments, the central question was

whether they were compensation for ac-

tual work done.

To that end, Mr. Shaviro, the N.Y.U. tax

law professor, said it would be especially

important to examine the deals cited by

the president’s financial disclosures to

justify some of the payments.

Nathaniel Persily, an election law ex-

pert at Stanford Law School, said that if

the payments were not legitimate, and

were then directed to Mr. Trump’s cam-

paign, they would likely be considered il-

legal campaign contributions.

“If it turns out a corporation gave the

campaign any money, that is illegal,” he

said. “If an individual contributed any

money exceeding the legal limits, that is

illegal.”

The White House spokesman, Mr.

Deere, did not answer The Times’s spe-

cific questions about the payments and

any deals underlying them.

The subject of the Trump-Ruffin finan-

cial relationship came up, albeit ob-

liquely, when the president’s estranged

personal lawyer, Michael D. Cohen, tes-

tified before Congress in 2019. Had a

businessman from Kansas given Mr.

Trump the $25 million to settle the

Trump University lawsuit? “I am not fa-

miliar with that, no,” he said.

Shortly after that, Mr. Ruffin told The

Kansas City Star that he was the Kansas

businessman in question. He offered a

muddled explanation about some

money that had been sent to Mr. Trump

in 2016.

“He had $28 million in back fees that

he never collected,” Mr. Ruffin said.

“The hotel paid him [what] was owed to

him. I don’t know what he did.... It was

his money.”

Finally, a Train

After being lobbied for years, the Trump

administration did what Mr. Obama’s

wouldn’t.

The dream shimmered at the edge of vi-

sion in the desert heat.

Ever since Amtrak had shut down the

last train in 1997 — the Desert Wind,

which wound its way north from Los An-

geles — Mr. Ruffin and the other moguls

who control the Las Vegas Strip had

planned, waited, hoped.

Train schemes had risen and, inevita-

bly, fallen — among them a proposal for

a maglev, a train levitated and propelled

by magnets. But in 2009, with the sup-

port of Harry Reid, the Nevada Demo-

crat who was then Senate majority

leader, the federal government had tak-

en a crucial step, approving a rail corri-

dor between Las Vegas and Victorville,

in the California high desert.

Four years later, a proposed $5.5 bil-

lion federal loan for a bullet train had

come before the Obama Transportation

Department, to furious opposition from

two powerful Republican lawmakers —

Paul Ryan, who was chairman of the

House Budget Committee, and Jeff Ses-

sions, then the ranking member of the

Senate Budget Committee — who con-

sidered it an untenable taxpayer risk.

Ultimately the loan had been rejected, in

part because the project could not com-

ply with buy-American rules.

“We tried and tried and couldn’t get it

done,” Mr. Reid said in a recent inter-

view. Along the Strip, though, he joked

that the only dissension was over whose

casino would be closest to where the

train would stop. “They know it would be

a godsend to their businesses,” he said.

In 2017, Mr. Ruffin glimpsed a way for-

ward in his friend, the new president.

Mr. Ruffin’s loyalty has brought ac-

cess. He was with Mr. Trump on election

night in 2016. He has met with the Treas-

ury secretary, Steven Mnuchin, and the

commerce secretary, Wilbur Ross. He

and the president speak frequently. Mr.

Trump has even sought Mr. Ruffin’s

counsel on releasing his tax returns.

“I advised him not to,” Mr. Ruffin said

in a 2017 interview with The Associated

Press. “It’s a waste of time, and he’ll

spend years explaining them and never

get to accomplishing any of his goals.”

It was after the inauguration that he

mentioned the predicament of his neigh-

bor Anthony Marnell II. Mr. Marnell is

an architect and oversaw the building of

casinos like the Mirage, the Bellagio and

Wynn Las Vegas. He also controlled the

company trying to build the high-speed

train.

So, a friendly favor for a friend.

“I mentioned it to Donald. And that

would be something below his pay

grade, so it would have to go to the Labor

Department or the Transportation De-

partment,” Mr. Ruffin told Forbes. “He

said it sounds like a good deal, especially

if it employs 80,000 people.”

Not long after, Mr. Marnell told The

Review-Journal that he was considering

approaching the Trump administration

about a federal loan, like the one the

Obama administration had rejected. Las

Vegas needed the train more than ever,

he argued, now that the Oakland Raiders

football team was moving to town.

People in Las Vegas had reason to

hope the Trump administration might be

more receptive than its predecessor had

been. After all, Mr. Trump’s hotel made

him one of their own. He had cam-

paigned on investing in infrastructure,

even riffing at one rally about America’s

lag in high-speed rail.

“You go to China, they have trains that

go 300 miles an hour. We have trains that

go ‘chug, chug, chug.’ And then they

have to stop because the tracks split,

right?” Mr. Trump said. “We are like

third world.”

For all that, Mr. Marnell’s long-sought

federal loan remained elusive, and in the

fall of 2018, he sold the business, re-

named XpressWest, to a company

owned by Fortress Investment Group

L.L.C., a big New York financial firm.

(Mr. Marnell, who declined to comment

for this article, kept an equity stake in

XpressWest.) Fortress owns a company

named Brightline, which operates a pri-

vate rail service in Florida. Ben Porritt,

senior vice president for corporate af-

fairs at Brightline, said its trains had

previously received several allocations

of federal tax-exempt bonds.

These bonds, earning interest free of

taxes, help companies attract private in-

vestors to often higher-risk projects.

While they are distinct from the kind of

federal loan Mr. Marnell sought, they

nonetheless require government ap-

proval.

In March of this year, the Transporta-

tion Department’s Credit Council ap-

proved the sale of $1 billion in tax-free

bonds, the final tranche of a $15 billion

program begun during the Obama

years. The credit panel, made up of

heads of the agency’s various branches,

is led by Steven Bradbury, the depart-

ment’s general counsel and acting depu-

ty secretary, who came under fire during

his confirmation for his role in providing

legal sanction for torture techniques

during the George W. Bush administra-

tion. Overseeing the panel is Mr.

Trump’s transportation secretary,

Elaine Chao.

Terry Reynolds, director of the Neva-

da Department of Business and Indus-

try, said that while many complicated

variables had to align, Mr. Ruffin’s lob-

bying was always seen as a “positive fac-

tor.”

A Transportation Department spokes-

man said Mr. Ruffin’s conversation with

the president had had no impact on the

review process, which was conducted by

career staff members.

As for Mr. Ruffin, his spokeswoman

said Mr. Ruffin and the president “are

friends and talk about numerous sub-

jects.” She added Mr. Ruffin does not

have a financial stake in the train.

Officials in California and Nevada

were watching. Less than a year earlier,

Mr. Trump, feuding with California’s lib-

eral leadership, had pulled federal funds

for a separate high-speed rail project

there. Now, with federal approval as-

sured, California and Nevada voted to al-

low the issuing of an additional $3.2 bil-

lion in bonds.

The train company says it hopes to

start construction later this year. For

now, the route will start in Victorville, 90

miles from Los Angeles, though there

are plans to extend it considerably

closer, to Rancho Cucamonga. One day,

the company hopes, it will run all the

way to Los Angeles.

The Las Vegas terminal will be on the

Strip, a short bus ride from the Trump

International Hotel.

“We would benefit some,” Mr. Ruffin

told Forbes. “But there are a lot of hotel

rooms here. A lot of places they can go.”

EXPANSIONMr. Trump and Phil Ruffin at the 2005 groundbreaking for their Las Vegas hotel.

JOE CAVARETTA/ASSOCIATED PRESS

2015 Mr. Trump returned to Treasure Island to hold a rally as a presidential candidate.

ISAAC BREKKEN/GETTY IMAGES

2011 A Trump event at Treasure Island Hotel and Casino, for which Mr. Ruffin offered the space.

DAVID BECKER/GETTY IMAGES

THE V.I.P.Mr. Ruffin and his wife, Oleksandra Nikolayenko, flew on Air Force One in 2018.

AL DRAGO FOR THE NEW YORK TIMES

THE MEGADONORSheldon Adelson, a

titan of Las Vegas, was suddenly Mr.

Trump’s biggest contributor.

DAMON WINTER/THE NEW YORK TIMES

The 45th PresidentThe Tax Returns