Behind the Seventies-Era Deals That Made Donald Trump
Black-and-white photo by Janie Eisenberg, 1979, for the Village Voice
Editor's Note: This is the second of a two-part series on Donald Trump and the real estate empire he and his father built. In 1979, Wayne Barrett spent two months researching the story. He read thousands of pages of court documents in Philadelphia and New York and campaign contribution filings in Albany. He spent fifteen hours interviewing Donald Trump. The Voice is republishing Barrett's accounts as Trump, now 69, is making news as a candidate for the Republican presidential nomination. Part one of Barrett's series, which originally ran in the January 15 and January 22 issues in 1979, can be found here.
Donald Trump Cuts the Cards: The Deals of a Young Power Broker
By Wayne Barrett
This is the profile of a power broker at work. It is also the deal-by-deal account of how a $400 million convention-center site was acquired and selected. Next to Westway, the convention center has been New York's single largest development issue of this decade. At center stage is Donald Trump, the young man who managed the land deals, profiting by his relationship with a mayor and a governor. He has left a trail of tradeoffs behind him that is — in a city where political brokers learn to cover their tracks — exceptionally clear.
It is a November day in Philadelphia, 1974. On sale in a federal bankruptcy court are the largest undeveloped tracts of land left in Manhattan — the West Side rail yards, stretching along the waterfront from 30th to 39th streets and 59th to 72nd streets. One of these properties — the 30th Street parcel — has since become the designated site for the city's convention center. The other is being promoted as a 5,000-unit housing project surrounded by parks and a shopping area.
The seller is the bankrupt Penn Central Transportation Company (PCTC), which is attempting to reorganize itself by turning it's real-estate portfolio into capital. The buyer is Donald Trump, then 28 years old, the son of Brooklyn's largest apartment builder.
Trump proposes to build up to 30,000 units of partially subsidized housing on the sites. He seeks an exclusive option on the property and offers Penn Central the promise that he will obtain the required zoning changes and taxpayer subsidies to guarantee a minimum land-purchase price of $62 million — the least he expects to obtain in government mortgage funds. Trump's firm advances no cash.
But, of course, without City Hall's cooperation, this remarkable proposal would have remained just that. Trump's father, Fred, had known Abe Beame, then the mayor, for some 30 years — and had been a campaign contributor for 20; the firm is tied to the same Brooklyn Democratic machine which spawned Beame's political career. Trump's attorney Bunny Lindenbaum, seated beside him in the courtroom that morning, is Beame's oldest and closest friend. Penn Central representatives began negotiating with Trump two weeks after Beame became mayor. Trump's option is scheduled to end when Beame's term is up. There can be no misunderstanding: Trump, in that Philadelphia courtroom, was executing a political option.
Edward Eichler, who had represented the railroad in its negotiations with Trump, explained what had led to the acceptance of Trump's proposal. In a 150-page deposition he said the railroad had had lists of real-estate brokers, developers, and attorneys who were interested in the sites. But PCTC chose not to contact any of them. "It seemed self-evident that they would be interested," he said, but Penn Central had to find a developer who was "very, very high in his political position. We proceeded to make a judgment as to which one we thought would be best, and we judged that Trump would." The basis for that judgment — at least in part — could have been a meeting Trump had arranged some months prior to submitting his proposal. Present were Abe Beame, Trump and his father, and Eichler. According to Donald Trump: "I called the mayor because Penn Central wanted to know whether or not the city was interested in developing the land. The mayor said his administration would be..." Eichler told me that Beame had indicated "he'd known the family and that it was a good organization."
Further, Eichler said, Penn Central was looking for the developer "who seemed best positioned in the New York market to get rezoning and government financing." He emphasized that zoning is a "highly political activity in the City of New York," and that there had not been a "rezoning of this magnitude on a piece of property this politically sensitive in the recent history of the city.
"There are going to be opponents from the neighborhood," Eichler continued, "who have already...stated that they are going to oppose anything but very low densities. They are going to oppose very high buildings and view-blocking...and the real swing in value is...to a high density."
Trump was selected to transcend these petty community interests. After all, records on file with the board of standards and appeals show that over a 10-year-period, clients of his attorney, Lindenbaum, have received more zoning variances than clients of any other attorney in the city. With Beame as the new mayor, Lindenbaum's batting average was improving.
But there were two other significant actors in the courtroom drama unfolding that morning. One was Herman Getzoff, a Manhattan real estate broker who had previously worked with PCTC and had opposed the Trump transaction for months. The other was David Berger, senior partner of Berger and Montague, a Philadelphia law firm representing the stockholders and unsecured creditors of the Penn Central Company. Berger's clients, whose stock had lost its value with the PCTC collapse, had the strongest interest in maximizing profits from the sale of the railroad's properties. So, Berger, too, was opposing the Trump deal.
Earlier, Herman Getzoff had brought in other potential buyers. Through friends, he'd learned of the Eichler/Trump negotiations — which had been conducted in secret — and, in July, he'd submitted to Eichler a formal offer from the Starrett Brothers and Eken Co., another major New York builder. According to Getzoff, Starrett had offered a $150 million purchase price for the railroad's land, as opposed to Trump's offer of $62 million plus a share of the potential development profits. Though Getzoff had made daily efforts to reach Eichler after the bid's submission, he never did. And, toward the end of July, a week after the Starrett bid had been submitted, Eichler went to court and put forth Trump's bid as the recommended proposal of the trustees. He had not met with Starrett, though he wrote an internal memo conceding that Starrett's 30th Street offer "would generate more money than the Trump deal." But he stuck with Trump because "the rezoning will only be the result of an especially powerful political effort, which Trump is much more likely to pull off..." Then he wrote Starrett a letter, suggesting it apply for "other parcels."
On August 7, Trump and Starrett's chairman, Robert Olnick, met. The same day, Olnick withdrew the Starrett offer. According to Trump: "Starrett and Trump are partners in Starrett City, of which we own 25 percent, and they own 5 percent. Frankly, if we hadn't put in the $7 million equity, the project wouldn't have been built. We have a big relationship with Starrett. Olnick never responded to a half-dozen calls from me.
Getzoff then obtained a second bidder, HRH Construction Company, another housing developer, Richard Ravitch, HRH president, wrote to the court: "We've been interested in developing the yards over a period of almost a decade...However, we were not advised that the trustees were considering selling the yards until after a petition was filed with the bankruptcy court..."
The HRH offer, like Starrett's and Trump's, was dependent on obtaining a government-guaranteed mortgage to finance both the land purchase and the housing construction. The difference between Trump's proposal and the HRH/Starrett offers was that neither Starrett nor HRH sought a percentage of the land profits. Trump required 15 percent, which meant that in fact Penn Central would only get 85 percent of the sale price. Another difference was that neither Starrett nor HRH demanded that Penn Central foot the bill for $750,000 worth of risk capital investment to be used to develop the project. Trump did.
What Trump offered the railroad that Starrett and HRH did not was an option for the company to pay for and obtain an equity interest in the projects eventually built. According to HRH, the primary value of such an interest in a Mitchell-Lama housing project was in a highly speculative tax-loss sale. The return to Penn Central on such an interest depended on the unpredictable state of the tax laws four to 10 years later.
The final, and most important, difference between the Trump and HRH offers was that Trump's attempt to share in the land profits appeared to violate the then-applicable Mitchell-Lama guidelines barring a developer from profiting on land he does not own when he submits the site to government agencies for approval.
The consequence of Trump's ill-conceived sharing plan was that, if the project were approved at all, the government agencies would have to purchase the land at its minimum price in order to eliminate potentially illegal Trump profits. The HRH offer contained a minimum that doubled Trump's.
Getzoff's early ally in opposing the Trump transaction was David Berger, attorney for the Penn Central stockholders. An associate in Berger's firm at the time, Edward Rubenstone, took the deposition from Eichler, stating on the record that "no honest attempt was made" by Eichler to "determine what other persons were willing to pay for these properties."
Rubenstone also grilled the appraiser selected by Eichler in a 235-page deposition that revealed that:
- The Philadelphia appraiser had never estimated a New York residential or industrial property. His appraisal assigned no value to the existing structures on the two sites, which had been previously assessed by the city at $6 million. In arriving at his value for the 30th Street yards (as zoned), the appraiser compared the parcels exclusively with land sales in Queens, Brooklyn and the Bronx.
- The resultant appraisal pegged the 30th Street yards at $4 per square foot — or $8 million — as currently zoned, with the value increasing to $27 million if rezoned for residential use. These depressed values were compared by Rubenstone and Getzoff to two nearby Penn Central sales — at $26 and $32 per square foot. The land under Manhattan Plaza, located in between the two yards on the West Side, had gone for as high as $82 per square foot after rezoning. Even the land for Trump's own Starrett City project in Brooklyn had sold for $11 per square foot.
- Most important, the appraiser conceded that he had applied a 50 percent discount on the land to cover the time and costs a developer would incur over the years it would take to complete such a large project. The appraiser did not anticipate that under the Trump deal a major portion of these costs were to be assumed by Penn Central. He figured them as the buyer's burden and discounted for them. HRH had indicated a willingness to pay the undiscounted price of $124 million for the 30th Street and 60th Street properties.
Rubenstone told me: "I thought we had the deal broken. The appraiser's deposition was pretty devastating in terms of the fair-market value of the property."
The same day Rubenstone took the appraisal deposition he called Getzoff and asked him to come to Philadelphia to testify at the hearing as a witness for the stockholders. Getzoff was to testify about the Starrett bid and withdrawal as well as the terms of the forthcoming HRH offer.
When Getzoff arrived in Philadelphia on November 11, he learned that Berger, Eichler, and Trump (Rubenstone had been taken off the case a few days before the hearing) had been meeting for several days and Berger no longer wanted him to appear as a witness. In fact, Berger said, he would now speak on behalf of the Trump deal, which had been amended to increase Penn Central's share of the land price as well as the size of its option in the development project. Trump had also amended the contract to provide that if he were not allowed to share in the land profits — as the guidelines indicated he would not — then he could walk away from the deal. The only loser would be Penn Central, which would then forfeit the $750,000 it would have advanced to cover the developer's preliminary expenses.
Getzoff was stunned. But even more indicative of Berger's new attitude was his approach to Getzoff and a housing consultant who had accompanied him to Philadelphia that morning. Getzoff wrote a memorandum to himself immediately after these events. It reads: "Mr. Berger took us aside and suggested that 'instead of fighting,' wouldn't I 'withdraw the HRH proposal so the whole matter could be settled at the hearing.' Mr. Berger stated that he was 'sure that if we played ball, he could work out a very satisfactory brokerage commission' for us...We [Getzoff and his consultant] informed Mr. Berger that 'we don't play that kind of game.'"
Getzoff also recalled that later that day Trump approached him with a similar question: "This arrogant young man patted me on the back in a most patronizing manner and asked me if I might be his broker. I assured him that I was not in the need of having a patron builder. He said that it's rare that you people — meaning brokers — are honest."
"I don't think I said that. If I did, fine," Trump said to me.
I also talked with Edward Rubenstone, now a member of another Philadelphia law firm, who confirmed Getzoff's account of his conversation with Berger. "I do recall being a little distressed at what happened there." Asked if he could explain the Berger shift, he replied: "To tell you the truth, I really can't...The negotiations were really taken over by Berger. What happened was that at some point it was decided that we were not going to continue to oppose the sale to Trump. And there was really no substantial explanation given. I thought I had 'em nailed. I wasn't in a position to argue or make a stink. I thought we had a pretty solid case and suddenly it was decided not to pursue it. That troubles me."
One immediate consequence of the Berger switch was that Getzoff would no longer be able to present the HRH case as a witness for a party to the action. Indeed, Penn Central attorneys tried to prevent him from detailing the offer in court at all by arguing that he had no legal standing. But Judge John Fullam wanted to hear it, complaining that, "I am not at all satisfied...that there has been necessarily adequate consideration given to the competing offers..." Fullam reserved decision and ended the hearing.
The debate continued. Ravitch wrote Fullam in January 1975, enclosing a 20-page comparison of the Trump and HRH bids and requesting that he re-open the hearing. Instead the judge issued an order that March, confirming the Trump deal. His basic reason: "No party to the reorganization proceeding has expressed objections to the present proposal. Berger's switch had been decisive.
Fullam said that it is "the function of the trustees to make business judgments" and that he "should interfere with the trustees' proposed actions only if they are legally impermissible." The Eichler firm's (and thus, the trustees') support of the transaction had also been decisive.
Fullam concluded that the HRH had not "placed itself in a position of litigating." Ravitch had expressly refused to file a motion to reopen the case. His attorney later explained: "He did not want to litigate. He was content to make the bid and not go beyond the bid."
This curious reluctance might have been prompted by the relationship both Ravitch and Trump enjoyed with the new governor, Hugh Carey. Trump h ad been Carey's largest post-primary contributor in 1974, having donated a total of $35,000. Both he and Ravitch had just been named by Carey as the only developers on the statewide housing task force. Ravitch had also just been asked by Carey to take over the fiscally troubled state Urban Development Corporation. A public court fight between Ravitch and Trump over two prime Manhattan housing sites would have been unseemly and time consuming. Ravitch told me that his failure to press his bid legally had nothing to do with his and Trump's relation with Carey. He said that his appointment at UDC had left him "with no time to pursue new business ventures." In the end, Trump got his land, investing nothing but his time and effort, and squeezing every ounce of potential profit out of the deal.
The Berger Connection
On January 19, 1977, Fred and Donald Trump filed a $100 million antitrust suit in Brooklyn federal court against nine major oil companies for fixing the price of heating oil. The suit was not a class action; only those landlords listed as plaintiffs will benefit from a favorable settlement. It seeks damages, to be divided between Trump and the law firm that had originated the case in 1974 and is listed on all court records as attorney for the Trumps: David Berger of Philadelphia. It should be remembered that in 1974 David Berger was also the attorney representing the Penn Central stockholders.
The suit began in July, 1974, with a single plaintiff — the Lefrak organization. Richard Lefrak says that "Berger felt that more than one plaintiff should be involved." Berger's reason for having additional clients was not just to raise the total amount of damages from which Berger takes one-third. Each plaintiff landlord also paid an advance to Berger, a former Philadelphia corporation counsel and unsuccessful candidate for D.A. Berger was experienced in oil-company conspiracy cases, having won a $29 million settlement in a gas-price-fixing case in New Jersey in 1973. "Berger is running the case," Lefrak said. "He's the bandleader."
The record of the heating-oil case revolves around the issue — raised by the oil companies — that in 1974 and early '75 Berger actively engaged in the recruitment of potential plaintiffs for it — a violation of the legal canons and grounds for disqualifying Berger from the suit. As evidence of this allegation, the oil companies introduced blank law-firm retainer forms on Berger letterhead, describing the terms of the agreement between Berger and the plaintiffs. The forms were being widely distributed to co-ops and apartment owners by a New York real-estate firm.
Berger denied that he'd had any knowledge of the real estate firm's activities through an associate in his law firm stated in court in January 1975: "We are going to have to have a substantial number of additional plaintiffs, some of whom fall into the commercial relationship as Lefrak, others who may be cooperatives and the like."
The judge dismissed the issue, commenting that "The distribution of the law-firm retainer forms...was regrettable, since one not privy to the intricate chain of events could misinterpret the distribution as involving improper solicitation."
Eight plaintiffs joined Lefrak, bringing the damages sought to almost a billion dollars. Berger's advance fees were based upon the number of apartment units each plaintiff brought into the case. Trump's number of apartments was among the largest.
I asked Trump how he'd gotten involved in the suit and first he described himself as one of the "original instigators" of the case. "Though I was involved in the case from its inception," he said, "I didn't file as a plaintiff until later."
When I raised the subject again, noting Berger's roles in the Penn Central case at the same time, Trump began to emphasize that his suit had occurred two years after the Penn Central sale. He also contended that it was another attorney, Eugene Morris of Demov and Morris, who contacted him about the case, not David Berger. But Richard Lefrak, who'd started the suit with Berger in 1974 recalled that "Trump was involved in the beginning. He joined the case within 90 days of the filing of the complaint." Lefrak said that Trump had attended meetings at the office of realtor George Mehlman "three or four years ago." Mehlman confirmed Trump's attendance at an early meeting: "He went along right away. This was in 1974, and may have been prior to the filing of the case. Berger came up and attended the meeting, too." Lefrak said, however, that Trump "may not have filed his complaint until 1977," because there were different categories of complaints, and the case was broken into separate parts...."
Last month Trump made a deposition in this case. While he would not pinpoint just when he began his involvement with it, he said it was " a very substantial number of months" before the January 1977 filing. Whenever the oil company attorney attempted to question him about how he'd entered the case, Berger's associate instructed Trump not to answer. At one point he said, "There will be no questions about the nature of why the Trump organization is or is not a plaintiff in this lawsuit...."
In my brief interview with Berger, he was just as evasive. He began by contending that he hadn't represented Trump on the case; that Demov and Morris did. I countered by pointing out that Demov and Morris's name didn't appear in any case records until November 1978. He replied that he couldn't explain that. I pointed out that his name had, again and again. In fact, Berger had been present at Trump's deposition.
What seems clear is that Trump's association with this case — one of Berger's most important and potentially profitable legal actions — dates back to the same time frame of his sudden switch on the Penn Central transaction.
The Palmieri Connection
In September 1973, prior to the Trump negotiations in the sale of the Penn Central railyards, a small Los Angeles-based investment-and-management firm, Victor Palmieri and Co., had been retained by the PCTC trustees as an outside contractor "to develop, sell or lease" PCTC properties. Edward Eichler was then Palmieri's vice-president. The Company's profits were, in part, pegged to a percentage of sales negotiated. Palmieri and Co. would negotiate a sale, propose it to the trustees, and, with their approval, petition the court for acceptance. That is how Trump obtained not only the 30th and 60th street yards, but the Commodore Hotel, which he is now transforming into a government-aided $80 million Hyatt Hotel. All of Trump's historic Manhattan ventures, and the extraordinary terms he negotiated for these purchases are rooted in his relationship with Palimieri.
Victor Palmieri, 49, is the founder of VPCO, a company that has made a fortune out or the collapse of Penn Central. In addition to the fees he has received managing Penn Central real estate, he's already made in excess of $21 million in incentive fees alone — on top of salaries, expenses, and a flat annual fee — for handling the assets of other Penn Central subsidiaries. In a profile last year, the Wall Street Journal cited Palmieri critics who claimed that he'd gotten his lucrative court assignments "due to his influence with the important people he knows." The Journal said he is described by these critics as "an active Democratic Party member." Other critics have gone even further. They say that Palmieri's contracts create a momentum to dump properties simply to accumulate fees.
There is no question but that Palmieri's political connections are national in scope. In 1967, he was named deputy executive director of the Kerner Commission on Civil Disorder by President Lyndon Johnson. In that position, he made contact with a host of national political figures — including commission member John Lindsay. His aide at the commission, John Koskinen, wound up working for Lindsay and Connecticut Senator Abraham Ribicoff, before rejoining Palmieri as a principal of VPCO in 1973. Palmieri was active in John Tunney's 1970 Senate campaign in California and through Tunney, is said to have entered the Kennedy political circle.
Last year Palmieri was selected by the scandal-ridden Teamsters' Central States Pension Fund to manage its $600 million worth of real estate west of the Mississippi River. The selection was made by the Teamsters themselves, though approved by the Department of Labor.
Palmieri and Trump were drawn together. It is clear from the Eichler affidavit in the Penn Central case that the Palmieri strategy is to identify political entrepreneurs not merely to develop sites, but to develop relationships. Palmieri and Trump operated in the same way — Palmieri was a national broker in search of a local broker and ally. One sign of the relationship was that in 1976 Trump located an office for himself next door to Palmieri's. Recently a note on the door indicated that packages for Trump could be delivered to Palmieri's office. The business relationship between Trump and Palmieri soon extended beyond the Penn Central Properties. In July 1975, Palmieri was named by a Connecticut federal judge to manage Levitt and Sons, Inc., a home-building company that International Telephone and Telegraph was being forced to divest as part of a government antitrust action.
The judge told me h e'd picked Palmieri in part on the reference of another federal judge who'd known Koskinen when both had worked for Ribicoff. A bonus was built into the contract with Palmieri. The quicker they sold Levitt, the larger Palmieri's take. But that was no simple task: For four years there'd been no takers.
In early 1977, Palmieri suddenly had an interested potential buyer, Starrett Housing Company. The leadership and name of Starrett had changed since the 1974 bid on the Penn Central sites: Olnick was gone, but Donald Trump was still a principal equity owner of Starrett City and had just selected Starrett to build his Hyatt Hotel (Starrett's largest domestic contract that year). Starrett studied Levitt and its potential market for what it described in its annual report as "many months." In February 1978, Starrett purchased the company for $30 million. Although Trump admitted to being the broker for the deal, he refused to say what his commission was.
Neither Palmieri nor the judge was too clear on just what Palmieri's profit on the sale was either — though the judge was certain that part of the healthy fee was due to his speedy disposition of the company.
As part of the acquisition package arranged by Trump, Starrett gave a five-year employment contract to Levitt's top executive, who had been installed by Palmieri. Levitt's president — now operating on a lucrative Starrett contract — is none other than Trump's old friend, Edward Eichler, who'd handled the Penn Central deal with Trump.
Birth of a Convention Center
Even before Trump's deal on the 30th Street yards had been confirmed by the court, he had dropped any pretense of developing it as a housing site: "I envisioned it as a convention center prior to the final court decision," he said. Despite the clear terms of his agreement with penn Central, which called for housing on 30th Street and foreclosed a role for him in any government purchase, he began to promote the site. The problem was that Abe Beame and City Planning commissioner John Zuccotti, both of whom had aided him in the acquisition of the yards, were committed to another convention-center site, on the waterfront at 44th Street. Even Bunny Lindenbaum, his son Sandy, and publicist Howard Rubenstein — the brokers closest to Beame — were under retainer to the 44th Street convention center corporation formed by the state legislature.
In 1974 some Clinton opponents of 44th Street had actually advocated the 34th Street site as a possible alternative. However, after the Board of Estimate voted to fund a rehabilitation plan for Clinton around the 44th Street site, neighborhood groups became persuaded that the only way the city would deliver on its promised rehabilitation was to accept the convention center.
But, just as community opponents were becoming resigned to the center, its political supporters were pulling back. Tom Galvin, then executive vice-president of the Convention Center Corporation , said he quit in May 1975, because: "With Beame as mayor, i could see the death knell of the project coming." Though the city continued to pour money into the site, paying $1,500 a month for Rubenstein and $36,000 to the Lindenbaum firm —ultimately wasting up to $17 million on it — the project was going nowhere.
Neither Beame nor Trump can recall when they first discussed the 30th Street yards as a convention-center site. But Trump told me that when he conceived the idea, his "initial approach was to Beame directly." Since he had been spending money on the site, Beame, clearly, had not discouraged him, although Trump remembers the mayor as "skeptical."
A Palmieri affidavit filed in Philadelphia dates the beginning of Trump's negotiations with the city as October 1975, around the same time as Beame, citing fiscal problems, announced that the city would pull out of the 44th Street convention-center project.
A few weeks after the Beame announcement Trump retained Howard Rubenstein, quickly ending three years of Rubenstein's promotional efforts on behalf of of the 44th Street site. The same week Trump brought in Sandy Lindenbaum, who had handled zoning on 44th Street. Bunny Lindenbaum, who also left the 44th Street project, told me he began working with Trump "more in the role of an informal family adviser than as a lawyer."
Trump's proposal of a privately financed state-guaranteed center was, on the face of it, dubious. If attainable at all, it was as applicable to 44th Street as it was to 34th. He now concedes that this proposal — made primarily to counterbalance a sudden Battery Park City proposal — was not serious. "I never wanted to be the developer of the convention center," he said. "I wanted the site to be chosen ... there was no way a profit could be made as a developer." But Battery Park City emerged with its own financing. Tom Galvin recalls that the Port Authority had been quietly trying to strike a deal with Beame, offering to finance the center. The Port Authority's willingness to take the expected operating losses on the center could have been counterbalanced by the city's willingness to waive other Port Authority payments. Beame balked. He and the Port Authority did announce, however, that the authority would do a $100,000 feasibility study of the Battery Park City site for the city.
The Sun Shines on 34th Street
For this new enemy — which Trump characterized as the "Rockefeller interests" — Trump needed new, up-front, allies. Trump says that "in the middle of 1975" he had begun discussing his convention-center idea with Carey fundraiser Louise Sunshine at a dinner to pay off the governor's campaign debts. Sunshine, who was the finance director of Carey's 1974 and 1978 campaigns, was the right person to talk to. In addition to her role with Carey, she was treasurer of the State Democratic Party and national Democratic commiteewoman from New York. She had been a fundraiser for former assemblyman Albert Blumenthal and had important political relationships on the West Side, where Trump needed allies to counter 44th Street. One significant contact was with State Senator Manfred Ohrenstein who, as minority leader, had named her to the Advisory Council to the Democrats of the New York State Senate.
"I told her I was looking for someone to take the burden of the convention center off my back," Trump told me. "and asked who she'd suggest I hire. She called me the next day and said she'd driven to the site herself. She said it was the greatest site for the convention center. She worked on it a long time without pay. Finally she came on staff."
Rubenstein issued a press release announcing Sunshine's position in February 1976, at the peak of the enthusiasm for Battery Park. She registered as a Trump lobbyist with the secretary of state. In November, Trump filed the obligatory, end-of-session, corporate statements, detailing $13,058 worth of salary and expenses associated with Sunshine's lobbying efforts.
[Sunshine failed to file her pre-session lobbyist statements in 1977 until she was reminded by the secretary of state's office at the end of the session. She didn't file at all in 1978, nor did Trump file his corporate report. Since Trump refers to her continuing efforts on behalf of the convention-center site, it appears that she is currently an unlicensed lobbyist, having failed to file her 1979 pre-session statement. The last record of Sunshine's lobbying activity is Trump's report of her $25,000 salary in August 1977. Failure to file annually constitutes a class "A" misdemeanor for both employer and lobbyist under the existing disclosure laws.]
In her 1976 filing, Sunshine had stated that she "intended to appear before the legislative committees and the governor upon all measures affecting the proposed 34th Street convention-center site." While she lobbied, she would retain here position as an advisor to Senate Democrats and fundraiser to the governor. Carey has since appointed Sunshine to the Thruway Authority and the Job Development Authority.
Her alliance with Trump was widely perceived as the tangible sign of Carey's commitment to Trump's site. That is how Trump intended it, to counter any movement toward Battery Park.
Working simultaneously for Trump and Carey, Sunshine's functions as Carey appointee, lobbyist, and fundraiser had blended together. The largest individual Carey campaign contributor (exceeded only by the governor's brother) was none other than Donald Trump's companies — $125,000 since 1974.
Howard Rubenstein says that Sunshine made the great bulk of the contacts that produced lists of 34th Street supporters. Not surprisingly, those lists read like a Carey campaign financial statement. Many of the new corporate and real estate boosters were quickly shifting allegiance from the 44th Street site, which had become the site championed by the Clinton groups and Community Planning Board 4, whose area included both the 44th and 34th Street sites.
Trump eventually forced the Port Authority to add his site to its study. By the time the Port Authority reported in June, the political impetus and financial feasibility of the Battery Park City idea had already receded. The report gave the Port Authority's evenhanded blessing to either site. It also put to rest Trump's ruse of private financing and concluded that a bond-issuing authority would have to develop the center.
Trump started manufacturing reports. In November 1976, a group of graduate students at the New School for Social Research did a class study of the available sites and favored 34th Street. Then-City Councilman Robert Wagner, Jr., who taught at the school, served as an adviser on the study, which was never released. He and the school agree: "The study did not, in any way, represent Wagner's views." But Trump wound up with a copy and started touting it as the Wagner report. Wagner says that he later told Trump and Sunshine to stop using it. Nonetheless, Trump described it to me as "a professionally done report" and said: Bob Wagner Jr. came out with a very strong statement that 34th Street was the best site."
Then Trump parlayed Sunshine's relationship with Manfred Ohrenstein into a stunning blow against the 44th Street site. In 1973-74, Ohrenstein had refused community pleas that he support 34th Street. But, by 1976, after the special zoning district had been created and Clinton had been promised rehabilitation, there was a near-unanimous community consensus around 44th Street. Beame's decision to forego building the center was seen as merely a temporary setback.
Suddenly, according to neighborhood activists, Ohrenstein released a report favoring 34th Street. "He consulted no one in the neighborhood," said one. In 1976, Trump began contributing to Ohrenstein's personal and Senate-majority campaign committees. He's given $10,000 since.
But the Ohrenstein — and implicit Carey — support did not move the defenses now formed around 44th Street, headed by Deputy Mayor John Zuccotti. Around the time of Ohrenstein's report, Zuccotti had formed the State/City Working Committee and stacked it with proponents of 44th Street. Beame told me: "I didn't name anybody to the thing. Zuccotti sparked that. I had no objection." The working committee had a staff component and a quasi-board of high-level officials. The staff favored 34th Street, with various caveats. The board leaned toward 44th, with some advocates of the Battery. So, in April 1977, the committee disbanded without reaching any public conclusion. Zuccotti later left the city and Beame moved into his mayoral primary campaign, promising that after the election he'd final settle this thing.
Beame had, in effect, killed the 44th Street site in 1975. He'd killed Battery Park City in 1976, when he'd turned a cold ear to those Port Authority officials who had wanted to finance and operate a center, but only at the Battery.
Indeed, court records suggest that Beame had quietly acquiesced to the 34th Street site as early as April 1976, when Palmieri and Co. had asked Judge Fullam to change 34th Street from a housing-use to a convention-center site. The new terms anticipated approximately a $17 million increase in the cost of the land to the city and built into the agreement a Trump fee of up to $2 million. (Not surprisingly, David Berger, who was only months away form formally representing Trump in the oil-company case, raised no objection to the new deal — even though Trump's fee would come out of whatever amount the city or state would pay Berger's clients, the Penn Central stockholders.)
Since the Penn Central appraisal had valued the convention-center portion of the site (roughly half of the 30th Street property) at $4 million, the city could have probably acquired it by condemnation for that amount and avoided the payment of any fees to Trump.
Under the amendment, Trump was cut into a condemnation sale and guaranteed a flat fee of $500,000. He was also given a third sales price if he could drive the city's price past a minimum of $13.5 million. Trump is now seeking $21 million for land the city or state might have got for roughly $4 million 3-and-a-half years ago. Ironically, Palmieri and Co. had described the site as a "wasting asset," declining in value, in order to get court approval of the original sale in 1975.
These amendments — plus the affidavit stating that Beame had "abandoned" 44th Street and indicating that the Port Authority was the only obstacle to the 34th Street site — were formally served on the city. The court awaited any comments or objections. Finally, Judge Fullam approved the amendments in late May, 1976. By an act of omission, the city had permitted approval of the terms that had made Trump's search for convention center-support so potentially profitable to begin with.
Shortly after his primary defeat, Beame appointed another committee. Richard Ravitch — who'd lost the site to Trump in Philadelphia and whose firm had subsequently been retained by Trump to cost out his convention center — chaired it. Ravitch's report, while favoring 34th Street, concluded that the differences among the three sites were marginal.
Ravitch reported and Beame endorsed the site right before he left office. Last April, Koch, Carey, Ohrenstein, and Trump confirmed Beame's selection and jointly announced agreement on 34th Street. Since then, Ohrenstein has been introducing legislation and the Republicans have been blocking it. After last month's special legislative session, Carey and Majority Leader Warren Anderson indicated that they'd agreed on a plan of state funding.
But word out of Albany is that State Senator John Marchi, angered by what he regards as the Ohrenstein-organized and Trump-financed electoral challenge he just went through in November (a product of Ohrenstein's drive to elect a Democratic majority in the Senate) says he will block any convention center built on Trump-owned land. No one is quite sure how serious Marchi is. But in Trump's world, there is something fitting about Marchi's strange reasoning. It is a kind of ultimate quid-pro-quo in a transaction plagued, in every detail for half a decade, by quid-pro-quos. There is bound to be at least one deal too many in this chronology.
There is nothing terrible about Trump's convention center site. It is, I am sure, as good as the others. In hours of interviews Trump almost sold me on it and he's clearly prevailed with some government officials — like City Planning Commissioner Robert Wagner — despite, rather than because of, his brand of political intrigue. My quarrel is that $400 million of state funds could salvage entire neighborhoods; that New York City already is the top convention city in America and has an exhibition hall that is turning a profit for the city; and that Trump's site will never pass any fair environmental test, precisely because it sees midtown as the city and will concentrate thousands of people — with their cars and their sewage — right where the city can't cope with them. Trump's answer to this kind of pro-neighborhood argument was contained in a New York Times piece about him two years ago: "I think the city will get better," he said. "I'm not talking about the South Bronx. I don't know anything about the South Bronx."
What he doesn't understand is that the South Bronx is this city. Its problems were created by someone else's deals. And the problems remain, at least partially because of deals that ignore them. Deals like his own.
There is one final twist to this story. State laws provide that no one can get a broker's commission on a transaction unless he was a licensed broker throughout the negotiations of the deal. Trump and the City Planning Commission have described Trump's services on 34th Street as those of "a broker." The problem is that young Donald Trump didn't become a licensed broker until after his contract with Penn Central had been completely negotiated and approved by Judge Fullam. But brokerage licenses are merely pesky requirements of the law.
In this two-part history we've been looking into a world where only the greed is magnified. The actors are pretty small and venal. Their ideas are small, never transcending profit. In it, however, are the men elected to lead us and those who buy them. And in it, unhappily, are the processes and decisions that shape our city and our lives.
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