The Trump Secrets Hiding Inside Deutsche Bank
The president’s longtime lender has extensive documents
 related to Mr. Trump’s personal and business finances.
 

By David Enrich for the New York Times Sept 2019

Deutsche Bank’s disclosure that it has tax returns related to President Trump’s family or business set off a frenzy of speculation about what those materials might reveal.

But a trove of other data and documents that his longtime lender is sitting on might prove more revelatory to investigators digging into Mr. Trump’s finances. That includes records of how Mr. Trump made his money, whom he has partnered with, the terms of his extensive borrowings and what transactions he has engaged in with Russians or other foreign nationals.

For nearly two decades, Deutsche Bank was the only mainstream financial institution consistently willing to do business with Mr. Trump, who had a long record of defaulting on loans. The bank over the years collected reams of his personal and corporate information.

Two congressional committees have subpoenaed Deutsche Bank for a vast array of records related to Mr. Trump — including any tax returns since 2010. The investigators are hoping the materials will shed light not only on the president’s finances but also on any links he has had to foreign governments and whether he or his companies were involved in any illegal activity, such as money laundering for people overseas.


Here is what might be lurking in Deutsche Bank’s electronic vaults about the president, his family and his businesses.

Deutsche Bank has a lot of detailed information.
After the two House committees subpoenaed the bank, Mr. Trump sued to block it from complying. The case is pending with a federal appeals court.

In a court filing on Tuesday, Deutsche Bank confirmed that it has at least some of the tax returns that were demanded by the congressional committees. The filing didn’t disclose whose tax returns the bank possesses, or for what years, but current and former bank officials have told The New York Times that Deutsche Bank has the first several pages of Mr. Trump’s returns for multiple years.

Beyond that, congressional investigators are seeking dozens of other items (the list on the subpoena is six pages of single-spaced type). The request would cover most, if not all, of the extensive documentation Deutsche Bank has amassed about Mr. Trump’s businesses and personal finances. That includes information about his corporate balance sheet, his income from various assets and documents that map out how his businesses are set up.

While Deutsche Bank has been lending to Mr. Trump since 1998, the most detailed information would cover the period since 2011, when the company’s private-banking division struck up a relationship with the future president and his family. Those documents can tell us a lot, but in pieces.
For a president who has kept his business affairs largely hidden from public view, the materials would together provide the most complete picture yet of Mr. Trump’s finances.

Mr. Trump broke with decades of precedent in refusing to release his federal tax returns, and for more than three years Democrats and journalists have been trying to get their hands on them.

The summary pages of the returns alone would not illuminate Mr. Trump’s income sources or his business partners. On the other hand, the tax-return summaries likely would show whether Mr. Trump has paid any taxes in recent years. (We already know that Mr. Trump for years may have avoided paying federal income taxes.)

But the tax documents, coupled with the other financial materials that the bank has, would likely fill in some of the gaps about the true extent of Mr. Trump’s fortune, which he has described as being in the billions of dollars.

In addition, materials that the congressional committees have subpoenaed — including anything relating to the due diligence the bank conducted before agreeing to lend him money — could contain new information about where and with whom Mr. Trump, his companies and his family have been earning money.

The files may shed light on any dealings with Russia by Mr. Trump or his family.
Since before Mr. Trump was elected president, critics of the president have speculated that Russian companies or individuals were secretly providing him with financial assistance, possibly via Deutsche Bank.


It isn’t hard to understand how such speculation got started. Deutsche Bank has a long history of operating in Russia, working with Kremlin-linked companies and laundering money for wealthy Russians.

Mr. Trump has a history in Russia. He once staged the Miss Universe pageant there, and he also sold a mansion to a Russian billionaire for $95 million. During the 2016 campaign, Mr. Trump’s company was looking to build a tower in Moscow — with the help of a Russian bank, VTB, that has long-running ties to Deutsche Bank. (A VTB spokeswoman said the bank never  had any dealings with Mr. Trump’s company.)

And, of course, Russia interfered in the presidential election, seeking to tilt it in Mr. Trump’s favor.

So far, though, no evidence has emerged that shows Deutsche Bank’s extensive lending to Mr. Trump — a total of well over $2.5 billion worth since 1998 — was connected to the Russian government, companies or individuals.

Numerous current and former Deutsche Bank executives, including those with direct knowledge of the loans, have said the loans made since 2011 were financially attractive to the bank because Mr. Trump agreed to personally guarantee much of them — in other words, if he were to default, Deutsche Bank would be able to seize his personal assets, including tens of millions of dollars that he kept in accounts at the bank.

Still, Deutsche Bank’s internal files will most likely contain additional information about at least some dealings with Russia — although not necessarily involving Mr. Trump himself.

Congressional investigators subpoenaed any materials about suspicious activity that the bank detected in the accounts of Mr. Trump, his company or his family members, including Jared Kushner, Mr. Trump’s son-in-law and adviser. In 2016, Tammy McFadden, a former anti-money-laundering compliance officer at the bank, flagged transactions connected to Mr. Kushner as potentially suspicious.

Those transactions involved money flowing to Russian individuals, and Deutsche Bank’s files almost certainly include more information.

SIX MONTHS LATER  THE OTHER SHOE DROPS:

https://www.nytimes.com/2020/02/04/magazine/deutsche-bank-trump.html
By David Enrich
Published Feb. 4, 2020
In October 2016, Offit tried to return the favor. Democrats were pillorying Trump’s shaky — not to mention murky — personal finances, including his companies’ chronic bankruptcies. Offit thought he might dispense a little advice to his erstwhile client. On a Friday evening, he emailed Trump a lengthy message, explaining that the defense Trump was offering at the time — that he was simply using the bankruptcy law in an advantageous way — wasn’t resonating with voters. “I believe there is a much better answer, that may help defuse this issue, and am just arrogant enough to suggest it,” Offit wrote.

He advised Trump to claim that his companies had been forced to declare bankruptcy, the victims of greedy hedge funds so obsessed with wringing every last dollar out of him that they refused to let him renegotiate his crushing debts. Was this true? Not really. But it sounded good, and the line of attack meshed with Trump’s populist rhetoric on the campaign trail.


Offit got no response. He wasn’t even sure that Trump had read the email. But here, months later, was Trump’s unmistakable black Sharpie scrawl across the top of the message he had sent: “Mike — Such a cool letter. Best wishes, Donald.”

“Look at this!” Offit exclaimed to the officer. “I just got a note from the president!”

“What do you mean, you got a note from the president?”

Offit handed him the iPhone so he could see for himself. The man’s eyes widened. “Wow,” he said. “That’s more of a response than we can get out of him.”
The officer asked what Offit’s connection was to the president. Offit replied, “I loaned him half a billion dollars.”

The roughly $425 million that Offit helped arrange for Trump back in 1998 was the start of a very long, very complicated relationship between ­Deutsche Bank and the future president. Over the course of two decades, the bank lent him more than $2 billion — so much that by the time he was elected, ­Deutsche Bank was by far his biggest creditor. Against all odds, Trump paid back most of what he owed the bank. But the relationship cemented ­Deutsche Bank’s reputation as a reckless institution willing to do business with clients nobody else would touch. And it has made the company a magnet for prosecutors, regulators and lawmakers hoping to penetrate the president’s opaque financial affairs.

Last April, congressional Democrats subpoenaed ­Deutsche Bank for its records on Trump, his family members and his businesses. The Trump family sued to block the bank from complying; after two federal courts ruled against the Trumps, the Supreme Court has agreed to hear the case, with oral arguments expected in the spring. State prosecutors, meanwhile, are investigating the bank’s ties with Trump, too. The F.B.I. has been conducting its own wide­ranging investigation of ­Deutsche Bank, and people connected to the bank told me they have been interviewed by special agents about aspects of the Trump relationship.

If they ever become public, the bank’s Trump records could serve as a Rosetta Stone to decode the president’s finances. Executives told me that the bank has, or at one point had, portions of Trump’s personal federal income tax returns going back to around 2011. (Deutsche Bank lawyers told a federal court last year that the bank does not have those returns; it is unclear what happened to them. The Trump Organization did not respond to multiple requests for comment.) The bank has documents detailing the finances and operations of his businesses. And it has records about internal deliberations over whether and how to do business with Trump — a paper trail that most likely reflects some bank employees’ concerns about potentially suspicious transactions that they detected in the family’s accounts.

One reason all these files could be so illuminating is that the bank’s relationship with Trump extended well beyond making simple loans. ­Deutsche Bank managed tens of millions of dollars of Trump’s personal assets. The bank also furnished him with other services that have not previously been reported: providing sophisticated financial instruments that shielded him from risks and outside scrutiny, and making introductions to wealthy Russians who were interested in investing in Western real estate. If Trump cheated on his taxes, ­Deutsche Bank would probably know. If his net worth is measured in millions, not billions, ­Deutsche Bank would probably know. If he secretly got money from the Kremlin, ­Deutsche Bank would probably know.

Until the 1990s, ­Deutsche Bank was a provincial German company with a limited presence outside Europe. Today it is a $1.5 trillion colossus, one of the world’s largest banks, with offices in 59 countries — and, thanks to its well­documented pattern of violating laws, an international symbol of greed, recklessness and hubris. Its rap sheet includes manipulating international currency markets; playing a central role in rigging a crucial benchmark interest rate known as Libor; whisking billions of dollars in and out of Iran, Syria, Myanmar and other countries in violation of sanctions; laundering billions of dollars on behalf of Russian oligarchs, among many others; and misleading customers, investors and American, German and British regulators.


­Deutsche Bank’s envelope-­pushing helped it become the global power player it is today, but it also left the company dangerously frail. Its books remain stuffed with trillions of dollars of risky derivatives — the sort of instruments that many other banks have disposed of since the 2008 financial crisis but that persist as a kind of unexploded ordnance in ­Deutsche Bank’s accounts, threatening to inflict severe damage on the bank and the broader financial system if something were to cause them to detonate. Its financial cushions to absorb future shocks are threadbare. Its core businesses are not performing well; the bank lost $5.8 billion last year. Because of Deutsche Bank’s size and its connections with hundreds of other major banks around the world, serious problems could spread, virus­like, to other financial institutions. The International Monetary Fund a few years ago branded ­Deutsche Bank “the most important net contributor to systemic risks” in the global banking system.

­Deutsche Bank’s relationship with Trump, rather than being an odd outlier, is a kind of object lesson in how the bank lost its way. The company was hungry for growth, especially in the United States, and it was happy to cozy up to clients that better-­established players viewed as too damaged or dangerous. Along the way, it missed one opportunity after another to extricate itself from the Trump relationship or at least slow its expansion. With hindsight, the procession of miscues and bad decisions appears almost comical.

I have spent the past two years interviewing dozens of ­Deutsche Bank executives about the Trump relationship, among other subjects. Quite a few look back at the relationship with a mixture of anger and regret. They blame a small group of bad bankers for blundering into a trap that would further damage ­Deutsche Bank’s name and guarantee years of political and prosecutorial scrutiny. But that isn’t quite right; in fact, the Trump relationship was repeatedly blessed by executives up and down the bank’s organizational ladder. The cumulative effect of those decisions is that a German company — one that most Americans have probably never heard of — played a large role in positioning a strapped businessman to become president of the United States.


Founded in 1870, ­Deutsche Bank spent most of its first 12 decades helping mighty German companies like Siemens expand internationally, as well as bankrolling infrastructure projects — primarily railroads — in Europe, Asia and North America. (Before and during World War II, the bank was a leading financier of the Nazis, helping to pay for projects including the construction of Auschwitz.) As the Iron Curtain fell, ­Deutsche Bank executives saw an opportunity to surf the tide of globalization and become a truly global institution.

The modern multinational corporation — operating in dozens of countries; buying and selling products and raw materials in a slew of different currencies; seeking to protect itself from volatile prices, fluctuating foreign-­exchange rates and sundry unforeseeable risks — needed banks that would provide much more than run-of-the-mill loans. Now financial institutions were expected to underwrite stock and bond offerings, enable seamless transactions across international borders and in multiple currencies and create financial instruments known as derivatives that customers could use to insulate themselves from big swings in interest rates, dairy prices, the weather and the like. Top Wall Street banks were beginning to offer these services to German companies and even the German government. To defend its turf, ­Deutsche Bank needed to learn to compete with the Americans.

In 1989, the bank took its first small step into this new financial world by acquiring a venerable British investment bank, Morgan Grenfell. Then, in 1995, ­Deutsche Bank hired a small crew of traders from Merrill Lynch — at the time one of Wall Street’s leading firms — led by a charismatic and impulsive salesman named Edson Mitchell. The American and British governments were rolling back regulations on the banking industry, and the giants of Wall Street were getting bigger, fast. ­Deutsche Bank needed to act quickly to have any chance of catching up. Over the next couple of years, Mitchell’s team spent billions of dollars hiring thousands of bankers and traders from just about every major investment bank — perhaps the greatest mass migration in Wall Street’s history. One recruit was Mike Offit; another was Justin Kennedy, a son of the Supreme Court justice Anthony Kennedy.


Offit and Kennedy were traders at Goldman Sachs together, creating and selling mortgage bonds and working for Steven Mnuchin, now the Treasury secretary. By the time ­Deutsche Bank came knocking in the late 1990s, both men were ready for a change. (Plus, Offit claims, Mnuchin stiffed him when it came to compensation.) The German bank lured them, as it had others, by promising them the freedom, budget and entrepreneurial culture to help establish the bank as a formidable player on Wall Street — a euphemistic way of saying that the bank had a higher tolerance for risk than many rivals. Come to ­Deutsche Bank, and you could do bigger trades. Offer larger loans. Make bolder acquisitions. Earn more money.

Offit and Kennedy were hired to build, essentially from scratch, a machine to package giant loans — for skyscrapers, hotels and other commercial real estate projects — into salable securities. At the time, selling and trading these mortgage-­backed bonds was one of the hottest businesses on Wall Street. Success would not only be remunerative; it would help burnish ­Deutsche Bank’s credentials as a serious challenger to the Wall Street elite.

Among the first steps was finding recipients for the loans — and that is how Donald Trump became a customer of ­Deutsche Bank. Two decades after striking out on his own in real estate, Trump was then at a low point of his career. He had recently defaulted on his debts to a number of large Wall Street banks — the consequence of many hundreds of millions of dollars of unwise, overleveraged investments in the casino and hotel industries — and was eager to find a financier willing to look past these sins. In 1998, Offit arranged to lend hundreds of millions of dollars to finance Trump’s gut renovations of an Art Deco tower at 40 Wall Street and his construction of a skyscraper next to the United Nations.

Shortly thereafter, Offit was let go — he says he fell victim to internal politics — and Kennedy soon climbed toward the top of the commercial mortgage bonds business. His specific role was finding customers to buy parts of that debt — a key component of Deutsche Bank’s ability to make the loans in the first place. He continued cultivating the relationship with Trump, helping to line up hundreds of millions of dollars in borrowings.

Kennedy became friendly with Trump, sometimes joining him in his luxury box at the U.S. Open tennis tournament or saying hello to him at Manhattan nightclubs, where Trump would park himself at a table in the corner, holding court. For ­Deutsche Bank, the relationship offered both money and prestige. Trump owed interest on the loans and also had to pay millions of dollars in fees each time the bank arranged a new one. Trump’s recent history notwithstanding, the bank believed that the risks were minimal — the loans were earmarked for projects that appeared financially sound — and its executives were eager to build their brand recognition in the United States. One way to do that was to publicly align itself with a flashy businessman who, for all his recent screw-ups, was nothing if not recognizable. Trump soon became a regular at ­Deutsche Bank’s annual pro-am golf tournament.

Trump, however, had a nasty tendency to stiff his business partners and associates. There was an extensive list of Trump contractors, vendors and lawyers who had to settle for a fraction of what they were owed after Trump threatened to pay nothing at all. Banks, from Wall Street powerhouses like JPMorgan to foreign lenders like Britain’s NatWest, had fared little better. Time after time, Trump’s casino companies defaulted on their debts, filed for bankruptcy and ultimately agreed to pay back their creditors pennies on the dollar.

The officer asked what Offit’s connection was to the president. Offit replied, “I loaned him half a billion dollars.”

The roughly $425 million that Offit helped arrange for Trump back in 1998 was the start of a very long, very complicated relationship between ­Deutsche Bank and the future president. Over the course of two decades, the bank lent him more than $2 billion — so much that by the time he was elected, ­Deutsche Bank was by far his biggest creditor. Against all odds, Trump paid back most of what he owed the bank. But the relationship cemented ­Deutsche Bank’s reputation as a reckless institution willing to do business with clients nobody else would touch. And it has made the company a magnet for prosecutors, regulators and lawmakers hoping to penetrate the president’s opaque financial affairs.

Last April, congressional Democrats subpoenaed ­Deutsche Bank for its records on Trump, his family members and his businesses. The Trump family sued to block the bank from complying; after two federal courts ruled against the Trumps, the Supreme Court has agreed to hear the case, with oral arguments expected in the spring. State prosecutors, meanwhile, are investigating the bank’s ties with Trump, too. The F.B.I. has been conducting its own wide­ranging investigation of ­Deutsche Bank, and people connected to the bank told me they have been interviewed by special agents about aspects of the Trump relationship.

If they ever become public, the bank’s Trump records could serve as a Rosetta Stone to decode the president’s finances. Executives told me that the bank has, or at one point had, portions of Trump’s personal federal income tax returns going back to around 2011. (Deutsche Bank lawyers told a federal court last year that the bank does not have those returns; it is unclear what happened to them. The Trump Organization did not respond to multiple requests for comment.) The bank has documents detailing the finances and operations of his businesses. And it has records about internal deliberations over whether and how to do business with Trump — a paper trail that most likely reflects some bank employees’ concerns about potentially suspicious transactions that they detected in the family’s accounts.

One reason all these files could be so illuminating is that the bank’s relationship with Trump extended well beyond making simple loans. ­Deutsche Bank managed tens of millions of dollars of Trump’s personal assets. The bank also furnished him with other services that have not previously been reported: providing sophisticated financial instruments that shielded him from risks and outside scrutiny, and making introductions to wealthy Russians who were interested in investing in Western real estate. If Trump cheated on his taxes, ­Deutsche Bank would probably know. If his net worth is measured in millions, not billions, ­Deutsche Bank would probably know. If he secretly got money from the Kremlin, ­Deutsche Bank would probably know.

Until the 1990s, ­Deutsche Bank was a provincial German company with a limited presence outside Europe. Today it is a $1.5 trillion colossus, one of the world’s largest banks, with offices in 59 countries — and, thanks to its well­documented pattern of violating laws, an international symbol of greed, recklessness and hubris. Its rap sheet includes manipulating international currency markets; playing a central role in rigging a crucial benchmark interest rate known as Libor; whisking billions of dollars in and out of Iran, Syria, Myanmar and other countries in violation of sanctions; laundering billions of dollars on behalf of Russian oligarchs, among many others; and misleading customers, investors and American, German and British regulators.

­Deutsche Bank’s envelope-­pushing helped it become the global power player it is today, but it also left the company dangerously frail. Its books remain stuffed with trillions of dollars of risky derivatives — the sort of instruments that many other banks have disposed of since the 2008 financial crisis but that persist as a kind of unexploded ordnance in ­Deutsche Bank’s accounts, threatening to inflict severe damage on the bank and the broader financial system if something were to cause them to detonate. Its financial cushions to absorb future shocks are threadbare. Its core businesses are not performing well; the bank lost $5.8 billion last year. Because of Deutsche Bank’s size and its connections with hundreds of other major banks around the world, serious problems could spread, virus­like, to other financial institutions. The International Monetary Fund a few years ago branded ­Deutsche Bank “the most important net contributor to systemic risks” in the global banking system.

­Deutsche Bank’s relationship with Trump, rather than being an odd outlier, is a kind of object lesson in how the bank lost its way. The company was hungry for growth, especially in the United States, and it was happy to cozy up to clients that better-­established players viewed as too damaged or dangerous. Along the way, it missed one opportunity after another to extricate itself from the Trump relationship or at least slow its expansion. With hindsight, the procession of miscues and bad decisions appears almost comical.

I have spent the past two years interviewing dozens of ­Deutsche Bank executives about the Trump relationship, among other subjects. Quite a few look back at the relationship with a mixture of anger and regret. They blame a small group of bad bankers for blundering into a trap that would further damage ­Deutsche Bank’s name and guarantee years of political and prosecutorial scrutiny. But that isn’t quite right; in fact, the Trump relationship was repeatedly blessed by executives up and down the bank’s organizational ladder. The cumulative effect of those decisions is that a German company — one that most Americans have probably never heard of — played a large role in positioning a strapped businessman to become president of the United States.

Founded in 1870, ­Deutsche Bank spent most of its first 12 decades helping mighty German companies like Siemens expand internationally, as well as bankrolling infrastructure projects — primarily railroads — in Europe, Asia and North America. (Before and during World War II, the bank was a leading financier of the Nazis, helping to pay for projects including the construction of Auschwitz.) As the Iron Curtain fell, ­Deutsche Bank executives saw an opportunity to surf the tide of globalization and become a truly global institution.

The modern multinational corporation — operating in dozens of countries; buying and selling products and raw materials in a slew of different currencies; seeking to protect itself from volatile prices, fluctuating foreign-­exchange rates and sundry unforeseeable risks — needed banks that would provide much more than run-of-the-mill loans. Now financial institutions were expected to underwrite stock and bond offerings, enable seamless transactions across international borders and in multiple currencies and create financial instruments known as derivatives that customers could use to insulate themselves from big swings in interest rates, dairy prices, the weather and the like. Top Wall Street banks were beginning to offer these services to German companies and even the German government. To defend its turf, ­Deutsche Bank needed to learn to compete with the Americans.

In 1989, the bank took its first small step into this new financial world by acquiring a venerable British investment bank, Morgan Grenfell. Then, in 1995, ­Deutsche Bank hired a small crew of traders from Merrill Lynch — at the time one of Wall Street’s leading firms — led by a charismatic and impulsive salesman named Edson Mitchell. The American and British governments were rolling back regulations on the banking industry, and the giants of Wall Street were getting bigger, fast. ­Deutsche Bank needed to act quickly to have any chance of catching up. Over the next couple of years, Mitchell’s team spent billions of dollars hiring thousands of bankers and traders from just about every major investment bank — perhaps the greatest mass migration in Wall Street’s history. One recruit was Mike Offit; another was Justin Kennedy, a son of the Supreme Court justice Anthony Kennedy.

Offit and Kennedy were traders at Goldman Sachs together, creating and selling mortgage bonds and working for Steven Mnuchin, now the Treasury secretary. By the time ­Deutsche Bank came knocking in the late 1990s, both men were ready for a change. (Plus, Offit claims, Mnuchin stiffed him when it came to compensation.) The German bank lured them, as it had others, by promising them the freedom, budget and entrepreneurial culture to help establish the bank as a formidable player on Wall Street — a euphemistic way of saying that the bank had a higher tolerance for risk than many rivals. Come to ­Deutsche Bank, and you could do bigger trades. Offer larger loans. Make bolder acquisitions. Earn more money.

Offit and Kennedy were hired to build, essentially from scratch, a machine to package giant loans — for skyscrapers, hotels and other commercial real estate projects — into salable securities. At the time, selling and trading these mortgage-­backed bonds was one of the hottest businesses on Wall Street. Success would not only be remunerative; it would help burnish ­Deutsche Bank’s credentials as a serious challenger to the Wall Street elite.

Among the first steps was finding recipients for the loans — and that is how Donald Trump became a customer of ­Deutsche Bank. Two decades after striking out on his own in real estate, Trump was then at a low point of his career. He had recently defaulted on his debts to a number of large Wall Street banks — the consequence of many hundreds of millions of dollars of unwise, overleveraged investments in the casino and hotel industries — and was eager to find a financier willing to look past these sins. In 1998, Offit arranged to lend hundreds of millions of dollars to finance Trump’s gut renovations of an Art Deco tower at 40 Wall Street and his construction of a skyscraper next to the United Nations.

Shortly thereafter, Offit was let go — he says he fell victim to internal politics — and Kennedy soon climbed toward the top of the commercial mortgage bonds business. His specific role was finding customers to buy parts of that debt — a key component of Deutsche Bank’s ability to make the loans in the first place. He continued cultivating the relationship with Trump, helping to line up hundreds of millions of dollars in borrowings.

Kennedy became friendly with Trump, sometimes joining him in his luxury box at the U.S. Open tennis tournament or saying hello to him at Manhattan nightclubs, where Trump would park himself at a table in the corner, holding court. For ­Deutsche Bank, the relationship offered both money and prestige. Trump owed interest on the loans and also had to pay millions of dollars in fees each time the bank arranged a new one. Trump’s recent history notwithstanding, the bank believed that the risks were minimal — the loans were earmarked for projects that appeared financially sound — and its executives were eager to build their brand recognition in the United States. One way to do that was to publicly align itself with a flashy businessman who, for all his recent screw-ups, was nothing if not recognizable. Trump soon became a regular at ­Deutsche Bank’s annual pro-am golf tournament.

Trump, however, had a nasty tendency to stiff his business partners and associates. There was an extensive list of Trump contractors, vendors and lawyers who had to settle for a fraction of what they were owed after Trump threatened to pay nothing at all. Banks, from Wall Street powerhouses like JPMorgan to foreign lenders like Britain’s NatWest, had fared little better. Time after time, Trump’s casino companies defaulted on their debts, filed for bankruptcy and ultimately agreed to pay back their creditors pennies on the dollar.
Merrill Lynch learned this lesson the hard way when it helped Trump sell $675 million of bonds to pay for work on his Taj Mahal casino on the Atlantic City boardwalk in 1988. The gaudy casino — the world’s largest — opened its doors two years later, bedecked with bright-­colored onion domes and laden with debt. Within months, it defaulted on the bonds. The unpleasant task of mopping up this mess fell to a Merrill executive named Seth Waugh. Trump threatened to tie his lenders up in years of bankruptcy-­court litigation if they didn’t agree to let him largely off the hook for what he owed. Nobody doubted Trump’s litigiousness, and Waugh and his Merrill colleagues ultimately accepted what amounted to deep losses on the bonds.In 2000, Waugh joined ­Deutsche Bank. Perma-­tanned and with long, floppy hair, Waugh developed a reputation among some ­Deutsche Bank colleagues for being a bit of a lightweight. They derided him for spending more time on the golf course than he did in the office. (Today Waugh is the chief executive of the Professional Golfers’ Association of America.) But he enjoyed the confidence of one of ­Deutsche Bank’s highest-­ranking executives, Josef Ackermann, who helped recruit him from Merrill Lynch. In 2001, Waugh learned that ­Deutsche Bank was planning to lend Trump about $500 million to use as he wished — basically an unrestricted cash infusion to stabilize his flagging finances. Having witnessed up close the carnage that Trump could inflict on imprudent financial institutions, Waugh was in no hurry to repeat the experience.

The loan that was being offered now wouldn’t have required Trump to put up any hard assets as collateral; he was requesting to borrow $500 million against the $1 billion of “good will” that Trump claimed was associated with his name. That made the transaction even riskier: If Trump stopped repaying, ­Deutsche Bank would have no easy way to get its money back. Waugh voiced strong objections to the loan, and the deal died.

Waugh would soon be named the head of Deutsche Bank’s American businesses, and he had the power to put a stop to the bank’s broader Trump relationship. He didn’t. And in 2003, yet another division of ­Deutsche Bank, one that focused on helping companies raise money by selling stocks and bonds to investors, agreed to work with Trump. The point man on this venture was Richard Byrne — another Merrill veteran who had also been involved in the Taj Mahal debacle. (Byrne helped sell the ill-­fated Taj bonds to investors.) Now Trump hired Byrne’s group at ­Deutsche Bank to issue bonds for his Trump Hotels & Casino Resorts company.

It would have been reasonable to expect that Waugh would have warned Byrne about the recently rejected $500 million loan, but that never happened. So Byrne pressed on, organizing a “road show” for Trump to meet with and try to win over big institutional investors. When that didn’t drum up the desired money, Byrne’s salesmen worked the phones, casting a wider net for more clients and managing to sell more than $400 million of junk bonds (albeit at a high interest rate that reflected investors’ fears that Trump might default). Trump repaid the ­Deutsche Bank team with a weekend trip to his Mar-­a-­Lago resort in Palm Beach, Fla.

The following year, with his casinos on the rocks, Trump’s company stopped paying interest on the bonds and filed for bankruptcy protection. (“I don’t think it’s a failure,” Trump said. “It’s a success.”) ­Deutsche Bank’s clients, the ones who had recently bought the junk bonds, suffered painful losses. In the future, Trump would effectively be off-­limits for Byrne’s division.

But that still didn’t render Trump persona non grata for the entire bank. This was a product, at least in part, of ­Deutsche Bank’s internal dysfunction. Many big companies are compartmentalized, but ­Deutsche Bank took it to an extreme. It wasn’t just that rival divisions of the bank didn’t communicate well; they often battled against one another to win clients and amass power for their leaders within the organization — a poisonous atmosphere that Trump, perhaps inadvertently, managed to exploit.


Trump soon went back to the commercial real estate group, asking for a loan to build a 92-­story skyscraper in Chicago. He reportedly seduced the ­Deutsche bankers with flights on the same 727 that had recently taken Byrne’s salesmen to Florida. He invited Kennedy and his colleagues to Trump Tower and lavished them with praise. He explained that his daughter Ivanka would be in charge of the Chicago development — that’s how important this project was to the Trump Organization.

Just as Waugh hadn’t warned Byrne about the rejected Trump loan, now Byrne didn’t warn Kennedy and the other commercial real estate bankers about his own recent Trump experience. “We just looked the other way,” a former executive explains. “That was the ­Deutsche Bank culture.”


In 2002, Joe Ackermann was named chief executive of ­Deutsche Bank. A reserve officer in the Swiss military and a number cruncher with a nearly photographic memory, Ackermann also had a notoriously short fuse. His staff was terrified of disappointing him.

Shortly after taking charge, he made a bold and fateful public promise: The bank would become roughly six times as profitable within a couple of years. Senior executives from that era say that in order to achieve Ackermann’s objective, they quickly shifted the priorities inside the bank. The overriding mission became to make as much money as possible, as quickly as possible, with scant attention to the long-term consequences. A saying took hold among the bank’s leaders: “The current quarter is the most important quarter we’re ever going to have.” Shareholders now became the bank’s most important constituency.

On the surface, Ackermann’s strategy seemed successful. The bank met his lofty profitability targets on schedule, in part by increasingly using its own money — as opposed to customers’ — to shoot for the moon with speculative market bets, a strategy known as proprietary trading. The bank’s shares climbed higher. The company was showered with industry awards.

Years later, it would become clear how ­Deutsche Bank pulled this off: by taking dangerous shortcuts and, at times, breaking the law. In its zeal to goose its profitability metrics, the bank neglected to invest enough in internal technology systems or top-tier compliance and risk-­management staffs. When employees cooked up schemes to launder money, violate sanctions, manipulate markets, avoid taxes or mislead customers, there were few internal checks and balances to detect or stop such behavior. In the rare instances when employees voiced concerns, they were often ignored and were sometimes punished for getting in the way of the boss’s all-­important profitability directive.Trump was among the beneficiaries of these shortcuts. Before making the Chicago loan, ­Deutsche Bank conducted an informal audit of his ­finances. Trump had declared to the bank that he was worth more than $3 billion, but ­Deutsche Bank concluded that the real number was closer to $788 million — a quarter of what Trump said it was. For most banks, this would have been disqualifying, but ­Deutsche Bank was undeterred. Executives were so eager for growth and big deals that they managed to look past the obvious red flags. In February 2005, ­Deutsche Bank agreed to lend him $640 million for the Chicago project.

Around this time, and out of public view, ­Deutsche Bank provided a series of other services to Trump that haven’t been previously reported. It created numerous “special purpose vehicles” to make it easier for him quietly and inexpensively to acquire international properties for himself and his companies. Trump at the time was trying to diversify his portfolio of assets outside the United States, striking deals to buy properties outright and simply slapping his name on other people’s buildings. Thanks to the magic of financial engineering, the vehicles ­Deutsche Bank created enabled Trump to do real estate deals in places like Eastern Europe and South America without putting any of his own money on the line. Not only was he taking out loans to finance the acquisitions, but he was also using other people’s money to cover the small “equity” portion of the purchases. ­Deutsche Bank would sell investors the rights to whatever revenue the projects generated in the future in exchange for the investors’ — or the bank’s — covering the money Trump owed upfront for the acquisitions. As a result, ­Deutsche Bank and investors bore the risk, over many years, that the Trump projects would not bring in as much money as expected.

This sort of structure was hardly unheard-­of for real estate developers. “It’s a well-­seasoned financing technique,” Mark Ritter, a ­Deutsche Bank executive who was familiar with the transactions at the time, told me. It was an easy way for the bank to generate a steady stream of fees from deep-­pocketed customers. But it increased the bank’s already heavy exposure to Trump — and helped the mogul strike under-­the-­radar deals in far-flung locales, including some that were popular destinations for people looking to hide assets.

­Deutsche Bank also helped Trump find buyers for condos in his properties, according to people familiar with the arrangements. When he partnered in 2006 with a Los Angeles developer to build a Trump-­branded resort in Hawaii, ­Deutsche Bank organized get-­togethers in London and elsewhere to connect Trump and his partners with wealthy clients — including some from Russia — who used anonymous shell companies to buy units in the Waikiki hotel complex.

Some senior executives discussed the potential pitfalls of the Trump relationship. It wasn’t only the not-­insignificant risk that Trump would default on loans. The bankers also talked about Trump’s well-­documented ties to the organized-­crime world — he had done business with people in or affiliated with the mob in Atlantic City and New York — and the possibility that his real estate projects were laundromats for illicit funds from countries like Russia, where oligarchs were trying to get money out of the country. “Everyone in the real estate business was involved in ‘flight capital,’ ” a top executive told me. But the loans looked profitable, the relationship felt valuable and the concerns went unheeded.

When the 2008 financial crisis arrived, Trump still owed $334 million on ­Deutsche Bank’s loan for his Chicago skyscraper. With the economy sinking, nobody was buying the luxury apartments in the building. As the loan’s due date approached that November, Trump filed a lawsuit, trying to void the loan because of the financial crisis, which he accused ­Deutsche Bank of having helped ignite. He sought damages of $3 billion. Deutsche Bank filed its own suit, seeking to recoup the $40 million portion of the loan that Trump had personally guaranteed back in 2005. Shortly after the suit was filed, Trump bumped into Justin Kennedy. “Nothing personal,” Trump said. Kennedy replied that there were no hard feelings: Business was business. (Kennedy left the bank at the end of 2009.) But the lawsuit did what the defaults somehow had not: It prompted Deutsche Bank to wash its hands of Donald Trump. In the future, he wouldn’t even be permitted to enter the bank’s golf tournament.