Donald Trump’s Business Plan Left a Trail of Unpaid Bills
Hardball tactics from the presumptive Republican nominee’s real-estate career had some suppliers claiming he shortchanged them
Donald Trump sat with then-wife Ivana at Mar-a-Lago, his Florida resort, in 1987. PHOTO: TED THAI/THE LIFE PICTURE COLLECTION/GETTY IMAGES
Donald Trump often boasts on the presidential campaign trail that hardball tactics helped make him a successful businessman, an approach many voters say they admire. Those tactics have also left behind bitter tales among business owners who say he shortchanged them.
A review of court filings from jurisdictions in 33 states, along with interviews with business people, real-estate executives and others, shows a pattern over Mr. Trump’s 40-year career of his sometimes refusing to pay what some business owners said Trump companies owed them.
A chandelier shop, a curtain maker, a lawyer and others have said Mr. Trump’s companies agreed to buy goods and services, then reneged when some or all were delivered.
Larry Walters, whose Las Vegas drapery factory supplied Mr. Trump’s hotel there eight years ago, said the developer, Trump Ruffin, wouldn’t pay for additional work it demanded beyond the original contract. When Mr. Walters then refused to turn over some fabric, sheriff’s deputies burst into his factory after Trump Ruffin sued him. Trucks took the fabric away.
MORE ON TRUMP’S BUSINESSES
Mr. Walters said he never had payment problems with other casino or hotel clients. A review of Las Vegas court records showed no other legal disputes over payments involving him. Mr. Walters agreed to a settlement with Trump Ruffin that was about $380,000 short of what he said he was owed, court records show. He settled, he said, because “they were going to drag it on for many, many years.”
Mr. Trump, in interviews with The Wall Street Journal in May, said “I love to hold back and negotiate when people don’t do good work.” He said of Mr. Walters that the developers “were unhappy with his work.”
“If they do a good job, I won’t cut them at all,” Mr. Trump said of businesses he contracts with, saying “it’s probably 1,000 to one where I pay.” He said he occasionally won’t pay fully when work is simply satisfactory or “an OK to bad job…If it’s OK, then I’ll sometimes cut them.” In dealing with public projects such as bridge-building, he said, “that should be the attitude of the country.”
“I pay thousands of bills on time,” he said, adding that suggesting otherwise is “disgusting.”
Payment disputes aren’t unusual in the construction industry, where aggressive developers sometimes leave behind dissatisfied vendors and contractors. Billionaire casino magnate Sheldon Adelson, chief of Las Vegas Sands Corp., for example, has been involved in payment disputes with contractors concerning his Venetian casino on the Las Vegas Strip. Sands declined to comment.
Yet Mr. Trump’s withholding of payments stood out as particularly aggressive in the industry and in the broader business world, said some vendors who had trouble getting paid.
It is “a strong-arm tactic that is frowned on,” said Wayne Rivers, a small-business consultant in construction. The tactic is more common in Northeast construction than in other regions, he said, and is abnormal in much of American business.
Mr. Trump pushed the approach beyond construction and into day-to-day casino operations, said Jack O’Donnell, president of Mr. Trump’s Plaza casino in Atlantic City in the late 1980s. “Part of how he did business as a philosophy was to negotiate the best price he could. And then when it came time to pay the bills,” he said, Mr. Trump would say that “ ‘I’m going to pay you but I’m going to pay you 75% of what we agreed to.’ ”
Nicolas Jacobson, owner of Classic Chandeliers in West Palm Beach, Fla., here in 2006, was involved in a payment dispute with Donald Trump over chandeliers. PHOTO: GARY CORONADO/PALM BEACH POST
“In our business it’s very difficult to operate that way. You’re dealing with people on an ongoing basis. Every time you order with them you can’t screw them because they won’t be your suppliers anymore,” Mr. O’Donnell said. Executives at the casino paid vendors fully despite Mr. Trump’s directives, he said, and “it used to infuriate him.”
Alan Garten, general counsel of the Trump Organization, said he didn’t know Mr. O’Donnell and that his account “is certainly not a company philosophy.” He said there is “no question that as a company we are demanding, but we are fair.” He declined to discuss specifics of cases the Journal brought to his attention. “To pick these needles out of a haystack, I don’t think is a fair story.”
Mr. Trump said the only unusual thing about his approach was that he pays bills faster than normal businesses. He said he sometimes gives bonuses for great work, and he agreed to provide names of such vendors. His spokeswoman, Hope Hicks, gave the Journal a list of 10 companies. Trump Organization Chief Financial Officer Allen Weisselberg later said the list was of satisfied vendors who hadn’t gotten bonuses.
The Journal reached seven companies on the list. All said they had positive dealings with Trump companies but hadn’t gotten bonuses. The other three didn’t respond to requests for comment. Ms. Hicks then provided two other names. Both said they got bonuses. One, Lou Rinaldi, owns a Westchester, N.Y., pavement business and said he has worked on golf courses and other projects for about 15 years for Mr. Trump, who he says is a long-time golfing buddy. Mr. Trump has sometimes given him bonuses and handed cash to job-site workers, he said. “He would throw some money over the top,” Mr. Rinaldi said, and would say, “great job, here you go.”
Hardball career
Mr. Trump has written frequently about playing hardball. “You have to be very rough and very tough with most contractors or they’ll take the shirt right off your back,” he wrote in his 1987 book “The Art of the Deal.” In his 2004 book “Trump: Think Like a Billionaire,” he wrote to “always question invoices.”
Among Mr. Trump’s satisfied suppliers is Bart Halpern Inc., a Manhattan fabric company that sold upholstery, drapery and pillow material to Trump projects including the Las Vegas hotel. Bozena Dziewit, its director of hospitality sales, said it has always collected full payments promptly from Trump companies. “We always have a very good experience.”
Mr. Trump’s best-known payment dispute was in Atlantic City in the early 1990s, when Trump executives told contractors working on his Taj Mahal casino they should agree to accept less than full payment or risk becoming unsecured creditors in bankruptcy court. In 1991, the Taj filed for bankruptcy.
Mr. Trump said in a Journal interview last year that those who lost out in the Taj probably wouldn’t have had jobs or contracts in the first place if it weren’t for him.
Vendors with legal muscle have sometimes had better luck collecting, including several that sued Trump University, the now-defunct real-estate school. The MGM Grand in Las Vegas sued Trump University in Clark County, Nev., court in 2009 for allegedly failing to pay a $12,359.51 fee for a canceled event. The casino was paid and dropped the suit, an MGM spokesman said.
Related Video
Trump University Lawsuit Documents: Three Key Findings
A federal judge unsealed court documents in a fraud lawsuit against Donald Trump's now defunct real estate school, Trump University. WSJ's Shelby Holliday highlights three key findings. Photo: Zuma Press
Mr. Trump said of Trump University’s bills: “Everybody has been paid in full. I didn’t have to do that either. I wouldn’t have to pay anybody if I wanted to be cute.”
Some small businesses, such as Classic Chandeliers in West Palm Beach, Fla., decided they couldn’t afford to fight. In 2004, Mr. Trump chose 5-foot-wide chandeliers with 75 bulbs from the store, said Judith Jacobson, who said she designed the fixture and worked there with her ex-husband, Nicolas Jacobson, the owner.
Mr. Trump’s representatives negotiated to buy three chandeliers for his Mar-a-Lago resort in Florida for $34,000 total with a 50% down payment, according to court records. “The fact that he was Trump,” Ms. Jacobson said, “my ex-husband said ‘OK, we wouldn’t have any problems with someone who has the means.’ ”
Mr. Trump later sued Classic Chandeliers in Palm Beach County, Fla., court saying he shouldn’t have to pay in full because the company didn’t install the chandeliers properly. Mr. Jacobson, whose last name was spelled Jacobsen in the lawsuit, denied the claim.
Court records show the suit was dropped in 2006 after a planned mediation. Ms. Jacobson said Mr. Jacobson agreed not to be paid in full rather than accumulate legal fees. A review of Palm Beach County court records showed no other payment disputes involving Classic Chandeliers. The shop later closed. Mr. Jacobson died in 2015.
Mr. Trump said of Mr. Jacobson: “He was terrible, that guy…He didn’t do the job properly.”
Larry Walters’s drapery factory in Las Vegas became involved in a payment dispute over an agreement to supply Trump International Hotel & Tower, pictured here in 2008. PHOTO: ETHAN MILLER/GETTY IMAGES
A onetime competitor of Mr. Jacobson’s, owner Jack Shea of Reward Lighting said he had a “fabulous relationship” with Mr. Trump, to whom he said he sold chandeliers without payment problems. Mr. Shea occupies Mr. Jacobson’s former storefront and once bought some of his former business assets.
New York real-estate broker Barbara Corcoran, a frequent guest on the show “Shark Tank,” wrote in a 2003 book that Mr. Trump refused to pay her and associates a commission on a $100 million investment in a New York City real-estate project she helped secure in 1994. Of monthly payments he agreed to make over three years, she wrote, he paid two.
Mr. Trump sued in New York County to cancel remaining payments and recover alleged damages after Ms. Corcoran’s associates were quoted in a profile of him in New York magazine, court records show. The judge ruled against him.
Ms. Corcoran’s then-lawyer, Richard Seltzer, said: “He took advantage of the legal system to try to avoid debts.” Mr. Seltzer, former chairman of real-estate litigation at law firm Kaye Scholer LLP, said Mr. Trump’s approach to business agreements is common only among a small subset of privately-held New York development companies he has encountered but rare in the broader world of real estate and business.
Mr. Trump said he sued Ms. Corcoran because her firm violated a confidentiality agreement and “it wasn’t a big deal.”
Lawyer David Hopper, who worked for Trump Organization and other Trump companies, sued in Virginia federal court claiming that in 2011 they owed him $94,511.35 in legal fees. After invoices from Mr. Hopper went unfilled for more than 60 days, Trump representatives had told his firm the bills were “too high” and it should agree to cap its fees or reduce them by 70%, according to court filings. In response, Mr. Hopper withdrew from representing a Trump company in a federal case.
After a Trump lawyer called Mr. Hopper’s work “shoddy” in a local publication, Mr. Hopper filed his suit, alleging defamation and breach of contract. Trump lawyers responded that the business didn’t owe the money and denied defaming him. The parties settled, drafting a statement that the Trump Organization “appreciated” Mr. Hopper’s services. Mr. Hopper declined to comment.
Mr. Trump said: “We thought he was charging too much.”
Some vendors who did collect said Trump companies delayed payments beyond reason. Ted Sargetakis finally got paid 61 days late after many phone calls to collect a balance of more than $50,000 on fabric his Utah company, Silver State, sold to Mr. Trump’s Las Vegas hotel. “Typically for the larger customers, plus or minus a few days is not unusual,” he said, “but to be 30, 60, 70 days late, that’s out of the norm.”
Mr. Trump said he hadn’t heard of Silver State. “Is that a long time?” he asked of a 70-day delay, adding that “I pay thousands of bills on time.”
Mr. Walters’s drapes
In Las Vegas, Mr. Walters’s drapery dispute took a bizarre turn when the sheriff’s deputies presented a court order demanding he hand over fabric his company, Catalina Draperies, was using to make curtains, bedspreads and pillow covers for Trump International Hotel & Tower, being built on the Strip.
The original order in 2007 had been for $702,958, court records show. Trump Ruffin, managed by Mr. Trump, pressed Mr. Walters to hurry, repeatedly asking for extra work, Mr. Walters said in court testimony and other court records.
With the project mostly finished, the company paid Mr. Walters around $553,000 for a job he said had grown to $1.2 million with extra orders and with material he provided, according to court documents. In March 2008, Trump Ruffin rejected his invoices for the extras, Mr. Walters told the Journal this year. He stopped the work and kept the fabrics as collateral.
The company sued him to obtain the fabrics. Trump lawyers said in legal filings Mr. Walters didn’t have proper paperwork to prove he was owed much of the money and had agreed to provide the material.
Mr. Walters told the Journal he had complied with demands for extras, even without formal documentation, because he trusted the Trump company and hoped for more of its business.
Bill Langmade, CEO of Purchasing Management International, the agent that worked on behalf of Trump Ruffin on Mr. Walters’s billing, said the onus is on vendors to have proper paperwork.
Mr. Walters settled in 2008 for $185,000, court records show, collecting $823,000 in total before legal fees. In 2011, he closed the business, blaming the economic slump and Mr. Trump. “We had been fighting the economy,” he said. “We thought Trump was our salvation.”
—James Oberman, Melissa Korn, Peter Grant and Brody Mullins contributed to this article.
Write to Alexandra Berzon at alexandra.berzon@wsj.com
Appeared in the June 10, 2016, print edition as 'Trump’s Business Plan Left Unpaid Bills.'