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 The billionaire front-runner to be the Republican candidate in the
U.S. presidential race says he sometimes refuses to pay bills from
contractors he has hired and then forces them to negotiate the final
figure down.
"I've had many people that when they work for me they get very
rich," Trump said in an interview with Reuters, but, "sometimes I
renegotiate." Adding: "I'll do that with probably 10 or 15 percent
of contractors."
The strategy has left some small business owners who have done jobs
for him over three decades of real estate deals saying they have
felt cheated and don't want to ever work for him again. In a number
of cases they have also faced big legal bills from subsequent court
action.
Reuters reviewed more than 50 court cases and liens from contractors
related to Trump projects in New York, Atlantic City, Miami and West
Palm Beach, and interviewed dozens of people who have done
construction jobs or legal work for him. The majority said they were
paid in full and happy to work for him but at least a dozen said
they had been left out of pocket or had watched as other contractors
were short-changed.
Trump said these were cases in which it was clear he was being
overcharged, or that a contractor had done bad work. Under those
circumstances, he would refuse to pay the full amount of a final
bill when it arrived, he said.
It is far from clear whether Trump's approach will hurt his
presidential campaign. During a press conference in September, he
indicated he would seek to renegotiate contracts if he gets into the
White House, this time on behalf of taxpayers. "I fight like hell to
pay as little as possible," he said. "You can't spend millions of
dollars for something you could do for $2,000."
"POOR HABITS"
To be sure, wrangling over prices and fees is more common in
construction than in other industries. It's not unusual for
contractors to issue "change orders" seeking additional payment on
the grounds that their original estimates were too low or did not
account for a certain expense, industry experts say.
But the Trump conflicts Reuters analyzed had nothing to do with
change orders. They were instances in which he decided the finished
product was not worth the originally agreed-upon price.
Donald Gregory, general counsel for the American Subcontractors
Association, a Washington-based trade group that represents
individual building contractors, said renegotiating fees at the end
of a job is not standard practice.
"It certainly isn't the run of the mill activity, even in this
post-recession environment that has probably brought some poor
habits to the construction industry," he said.
"Some developers have made themselves very wealthy in this country
by squeezing five or 10 percent out of folks."
Reuters reviewed seven examples of big struggles - many carried out
in court during which Trump's opponents faced teams of powerful
lawyers - over payments between Trump and small businesses, six of
which ended favorably for Trump. Of the seven, two people who shared
their stories did not want their names to be used. Two others did
not agree to share any information beyond what was in the public
record.
"I know when I'm being overcharged," Trump said in the interview.
"Other people don't and they're suckers."
 FIGHT TO GET PAID
Trump said at first he did not remember the story Tama Starr, the
president of Artkraft Strauss, told in a Nov 4 op-ed in the New York
Daily News.
She described designing an advertisement in the 1990s for Trump on a
billboard her company owned near LaGuardia Airport in New York.
According to her account, he liked the work, but when the bill came,
he only paid half. She eventually collected the other half when
Trump asked for the ad to be displayed for longer than originally
expected and sent in money he thought would go toward the extension.
Artkraft Strauss instead took the ad down.
After initially saying during Monday's interview he didn't remember
her, Trump then said he hadn't wanted to pay the full amount because
he was unhappy with the quality of the work.
"I let them know that," he said.
In an interview on Monday, Starr and the company's vice president
for design and engineering, Bob Jackowitz, denied ever hearing from
Trump about his criticism of the ad.
TAJ MAHAL
Trump fought on a grander scale with the individual contractors who
built his Atlantic City Casino, the Trump Taj Mahal, in 1990.
The hotel was finished just before a recession brought Trump to the
edge of financial ruin. He would eventually take the Taj Mahal into
bankruptcy. But first he asked to pay the contractors 30 cents on
the dollar, according to Charles Sperry, the president of Baring
Industries, which had a multi-million dollar contract to provide
kitchen equipment like stoves, walk-in freezers and countertops.
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"It's not that common to just come back and unilaterally start
slicing off the big percentages of contracts and saying 'we'll
settle out for this, you can take it or leave it,'" Sperry said.
The contractors joined together and sent representatives of the
group to negotiate with Trump, according to Sperry. He said they
eventually received 90 percent of what they were owed. Sperry said
it was just enough to cover expenses and pay workers, but not enough
to realize a profit for Baring's work.
Another contractor on the Taj Mahal job who didn't want to be named
because he was afraid of being sued by Trump, said the Taj Mahal job
was the first time he'd had to negotiate for his final payment in 30
years of working, including jobs on other high profile Atlantic City
casino properties like the Golden Nugget, The Sands and Bally's. He
said he decided never to bid on a Trump project again.
Trump blamed the Taj Mahal problems on a financial crisis he faced
then, and said it was "ancient history."
He said in general he has a good reputation among contractors. "I'm
known as being a fast pay," he said. "The contractors love me."
LEGAL POWER
It's expensive for a small business to collect unpaid bills. Legal
fees can quickly rise above the disputed sum. But on top of the
expense, businesses going up against Trump in court face a
relentless foe, legal records show.
Only one lawyer Reuters interviewed, Fort Lauderdale attorney
William Scherer, claimed a victory over Trump. He won a suit in Palm
Beach County small-claims court in 1994 to recover $5,000 Trump owed
him for some work Scherer's firm had done for the real estate mogul
in Florida. Scherer said he had already offered Trump a reduced rate
"to curry favor with him," which was why he pursued such a small sum
when Trump declined to pay.
Trump said on Monday he did not know who Scherer was and did not
remember the incident. Trump’s lawyer Alan Garten told the South
Florida Sun Sentinel, which wrote about the incident in July, that
"It sounds like [Scherer] got paid in the end."
In 2001, a Trump company accused Columbus Construction Corp., a
small firm that had done work on a Trump-owned golf course in
Westchester County in New York, of overcharging for some earth work.
A judge awarded Trump $3.3 million in damages and legal fees, court
records show. The company's chairman August Nigro did not respond to
requests for comment.
In 2007 Trump sued his lawyer in the case, Y. David Scharf, and his
firm Morrison Cohen, for malpractice, accusing the firm of treating
him like a "cash cow" and charging him unfairly, according to court
records and news reports. The firm claimed Trump had asked for a
discount because of his fame. The parties agreed to a confidential
settlement in 2009.
Scharf, reached by phone, declined to comment on the case but said
he is on good terms with Trump.
"He was overcharging me," Trump said of Scharf. "I could feel it in
my bones."
The Morrison Cohen lawsuit, which was widely covered in the press at
the time, colored Trump's reputation in the New York legal world,
according to a dozen interviews with corporate lawyers. Reuters did,
though, talk to lawyers who had worked for Trump for years and said
he had never neglected to pay his bills.
"If you bill Donald Trump fairly and you're transparent and you get
him results, you're not going to have a problem," said Lawrence
Rosen, a lawyer who has represented Trump on various matters since
1993.
He's been a tremendous client. He just wants to be treated fairly."
(Reporting By Emily Flitter; Editing by Martin Howell)
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