Trump Family MCI Fraud Exposed, Highlighting Gianaris, Barnwell Bill

By Jonathan Sperling

President Donald Trump received more than $413 million from his father Fred’s real estate empire, the majority of which he pocketed thanks to tax and real estate schemes, a New York Times investigation revealed on Tuesday.

One of those alleged schemes relied on marking up Major Capital Improvements and transferring the fraudulent cost to tenants in the form of lucrative rent increases.

But as the Eagle reported in August, two Queens lawmakers have been hard at work trying to put an end to the shady tactic that enabled the Trumps to amass their real estate fortune.

 State Sen. Michael Gianaris introduced a bill to end MCIs//Photo courtesy of Michael Gianaris.

State Sen. Michael Gianaris introduced a bill to end MCIs//Photo courtesy of Michael Gianaris.

State Sen. Michael Gianaris (D-Astoria) and Assembly Member Brian Barnwell (D-Woodside) partnered in August —weeks before The Times’ investigation came to light—to end current rules related to MCIs, such as tied-in rent increases.

"Landlords have been abusing the MCI system since it was created and it's no surprise the Trump Empire was at the center of the storm,” Gianaris told the Eagle. “My bill will protect tenants from unscrupulous landlords and I am hopeful a Democratic Senate majority will get it done," said Senator Michael Gianaris.

In 1992, the Trumps formed All County Building Supply & Maintenance, which allowed Fred Trump to make enormous cash gifts to his children, including Donald, under the guise of legitimate business transactions. The maneuver helped Fred Trump avoid paying a 55 percent tax on gifts, according to the Times.

In one example, Fred Trump negotiated a 10 percent discount on 60 boilers purchased from an industrial boiler company, A. L. Eastmond & Sons. All Country paid the boiler company the discounted price negotiated by Fred Trump, but its invoices issued to Fred Trump were padded by 20 to 25 percent, adding hundreds of thousands of dollars to the cost of the boilers, according to the Times’ findings.

After the formation of All County, the Trumps claimed more than $30 million in capital improvements — including the inflated boiler costs — to justify rent increases for thousands of apartments in the rent-stabilized buildings they owned throughout the city the Times reported. The MCI law enables landlords to pass the cost of improvements or expenses on to tenants and get around rent regulations.

Gianaris and Barnwell’s bill would replace the MCI’s rent increase stipulation with a tax credit for landlords in order to offset renovation costs.

“Too many tenants are priced out of their homes because of MCIs whose only improvement seems to be the landlord’s bottom line,” Gianaris said in August. “All New Yorkers deserve high quality, affordable homes and our proposal brings us closer to that goal by ensuring repairs are made without burdening tenants with unreasonable costs.”

In 2014, the Furman Center on Real Estate and Urban Policy reported that 55 percent of all New York City renter households were rent burdened, meaning that their housing costs were equal to at least 30 percent of their income. A 2015 study by the Citizens’ Budget Committee revealed that Queens had the highest proportion of rent-burdened tenants of any borough.

“The Major Capital Improvement program is responsible for hundreds of millions of dollars in rent increases on rent regulated tenants,” Barnwell said. “It is unacceptable that we maintain a program pushing middle to low income New Yorkers out of their homes while allowing landlords to continue to make monstrous profits. Under our legislation, landlords will not be able to increase tenants’ rents due to repairs/improvements the landlord should already have made.”