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Donald Trump: The Recession Made Me A Deadbeat

by @ 6:20 am on December 5, 2008. Filed under Business, In The News

The Donald has come up with a rather unique argument to get out of paying his debts:

dtrump1203_DV_20081203104950Guess who is complaining that condominiums in Donald Trump’s latest big project are ridiculously overpriced.

Donald Trump is.

But he isn’t cutting the prices. He says the banks won’t let him.

The project is the Trump International Hotel and Tower in Chicago, which is to be the second-tallest building in that city (after the Sears Tower). By Mr. Trump’s account, sales were going great until “the real estate market in Chicago suffered a severe downturn” and the bankers made it worse by “creating the current financial crisis.”

Those assertions are made in a fascinating lawsuit filed by Mr. Trump, the real estate developer, television personality and best-selling author, in an effort to avoid paying $40 million that he personally guaranteed on a construction loan that Deutsche Bank says is due and payable.

Rather than have to pay the $40 million, Mr. Trump thinks the bank should pay him $3 billion for undermining the project and damaging his reputation.

He points to a “force majeure” clause in the lending agreement that allows the borrower to delay completion of the building if construction is hampered by such things as riots, floods or strikes. That clause has a catch-all section covering “any other event or circumstance not within the reasonable control of the borrower,” and Mr. Trump figures that lets him out, even though construction is continuing.

“Would you consider the biggest depression we have had in this country since 1929 to be such an event? I would,” he said in an interview. “A depression is not within the control of the borrower.”

He wants a state judge in the Queens borough of New York to order the bank to delay efforts to collect the loan until “a reasonable time” after the financial crisis ends.

While we don’t know for sure what the specific language is in the contract between Trum and Deutsche Bank, there is a generally accepted legal understanding of what a force majuere clause is:

Force Majeure literally means “greater force”. These clauses excuse a party from liability if some unforseen event beyond the control of that party prevents it from performing its obligations under the contract. Typically, force majeure clauses cover natural disasters or other “Acts of God”, war, or the failure of third parties–such as suppliers and subcontractors–to perform their obligations to the contracting party. It is important to remember that force majeure clauses are intended to excuse a party only if the failure to perform could not be avoided by the exercise of due care by that party.

An economic downturn, even a severe one, would seem to pretty clearly not be within the traditional definition of events that would be covered by a force majeure clause, especially since economic downturns have happened before and, their consequences, by definition, are not something that “could not be avoided by the exercise of due care by that party.”

Unless your name is Donald Trump, apparently.

And Trump is no stranger to real estate deals that go sour, as Deustche Bank pointed out when it filed for summary judgment last week:

In that filing, the bank quoted from a best-selling book Mr. Trump wrote last year, “Think Big and Kick Ass in Business and Life.” In it, the developer said he loved “to crush the other side and take the benefits” and mocked the banks that had lost money on loans made to him before another real estate downturn, in the 1990s:

“I figured it was the bank’s problem, not mine. What the hell did I care? I actually told one bank, ‘I told you you shouldn’t have loaned me that money. I told you the goddamn deal was no good.’ ”

And yet the bank’s keep loaning the guy money.

One Response to “Donald Trump: The Recession Made Me A Deadbeat”

  1. I wonder if I could do that? Tell the banks they should have given me money in the first place. Do you think they’ll get the bill?

    Recession 2009

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