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ILYA MARRITZ: Hello, it's Ilya Marritz with a Trump, Inc. podcast extra. Trump, Inc., of course, is a joint reporting project by ProPublica and WNYC. 

Back in February, we did an episode on alternative financing. This is the idea that Donald Trump couldn't always pay for his real estate deals through traditional bank loans, so he found other ways to raise cash. It's a theory put forward by Glenn Simpson, founder of the research firm Fusion GPS — it’s the company behind the infamous dossier on Trump and Russia. Simpson told Congress, “When you look closely at the numbers — golf courses that Trump purchased in Ireland and Scotland — they don't make a lot of business sense.”

Here are Glenn Simpson's words, read by actor Kelly AuCoin:

GLENN SIMPSON: [READ BY KELLY AUCOIN] … enormous amounts of capital flowing into these projects from unknown sources and — or, at least on paper, it says it's from the Trump Organization — but it's hundreds of millions of dollars. And these golf courses are just, you know, they're sinks. They don't actually make any money. So, you know, if you're familiar with Donald Trump's finances and the litigation over whether he's really a billionaire, you know, there's good reason to believe that he doesn't have enough money to do this. 

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MARRITZ: We’re going to talk now with two journalists who have spent a lot of time thinking about this question of how Donald Trump paid for his properties.

David Fahrenthold just published an article looking at Trump's deals in the nine years before he ran for president. Along with his Washington Post co-writers, Jack Gillum and Jonathan O’Connell, he found that, in that time, the Trump Organization bought golf courses, mansions, a winery. In all, it spent $400 million on property, and most of those transactions were all cash — unexpected for a man who has called himself “the King of Debt.”

PRESIDENT DONALD TRUMP: I’m the King of Debt. I'm great with debt. Nobody knows that better than me. I've made a fortune by using debt. 

MARRITZ: And with me now is David Fahrenthold. Hey David. 

DAVID FAHRENTHOLD: Hey.

MARRITZ: Also here with us is Adam Davidson. He covers business and economics for the New Yorker, and he tweeted about David's article, quote, “This could well be the single most important story ever on Trump.” [BEAT] Hey, Adam. 

ADAM DAVIDSON: Hey Ilya! 

MARRITZ: So, David, you and I spoke in February, and at the time, you told me your goal for this year is understanding Trump's debt. So is this the surprising answer to that question? He actually doesn't have that much debt, because mostly he's been paying cash over the past decade?

FAHRENTHOLD: Well, he still has a lot of debt and there's still a lot about his debts that I still don't understand, but this was a really surprising byproduct of that reporting.

We went looking at the land records — the deed records for all these different things that Trump had bought going back 10 years, expecting to find a bunch of loans, because that's how he'd always done things — he’d always use mortgages to buy property. That's how everybody does things in the real estate business. You borrow money to buy. 

And instead, when we pulled these land records, what we found was, in at least 14 cases, Trump had done something really unusual — he’d bought them with all cash. 

MARRITZ: So give us a picture of the kind of properties Trump bought and developed in those years before he ran for president. Where are they? What kind of money did he pay? 

FAHRENTHOLD: Well, they started relatively small. The first one he bought was a — an estate in Scotland in 2006 that he bought for, I think, $12 million and developed over a period of seven years into a golf course. Then he continued buying mostly golf courses in the U.S., and these were generally sort of smaller, exurban golf courses that, for one reason or another, were in some sort of financial distress, so he got them cheap — outside Philadelphia, outside of New York, outside Charlotte — and buying them all in cash. But then when you get later in this time period, closer to when Trump starts to run for the presidency, the numbers get much bigger. Uh, in 2014, right before he ran for president, he spends $80 million to buy two really big, money-losing, money-pit golf courses: one in Scotland, one in Ireland. And then after he spent that 80 million to buy them, he pours in tens of millions more just to operate them, to renovate them, to keep them running while they lose money.

MARRITZ: So, Adam, David already mentioned that it's kind of unusual to not do financing when you're acquiring large properties somewhere. Exactly how weird is that, and why do most real estate developers get loans? 

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DAVIDSON: Yeah. It — it’s so weird that. There's almost nobody who ever, ever does it. Um, I called a lot of real estate professionals and [CHUCKLES] one guy could think of, like, a billionaire he knew many years ago who didn't like to have any mortgages. But, as a general rule, the business of real estate is borrowing money so that your money can go much farther. And the way Eric Trump and the Trump Organization presented themselves to David in the article was to say, “Well, we preferred to pay cash, because then we didn't have debt,” as if the decision they were confronted with was, “Do we buy these golf courses with debt, or do we buy these golf courses with cash?” But that is not the way to think about it. If you have $80 million to spend on real estate, you could spend all $80 million on one property or two properties, and then you're fully committed to those properties becoming worth a lot more money.

Or, you could take that $80 million and borrow, say, $800 million, and buy a much larger number of properties. And the reasons to do that are many-fold. Borrowing for real estate is better in every possible way. And Donald Trump is one of the leading figures, both arguing that, and — and behaving that way. So this — this sudden turn to cash truly, truly, truly, in every way — a business way, a Trump way — makes zero sense. 

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MARRITZ: David, where did the Trumps get the money to buy these projects? 

FAHRENTHOLD: Well, what I can tell you is what Eric Trump told us when we called him for this story. He said, “Look, our businesses throw off“ — “our existing businesses,” and that would be, you know, leases on commercial buildings in New York, profits from other golf courses, licensing fees from various other things — that those things throw off so much cash, we’re just rolling in cash to such a degree that we could use our cash flow to pay for these projects. But, you know, we didn't have to sell a property. We didn't have to dip into our savings. We just have so much cash coming in every day, we could siphon off a little bit of that cash and buy these projects. That's his explanation. I — because the Trump Organization is so private, I don't really have a way to peer into their — you know, to peer back into their bank accounts from those years to see whether that's plausible, but that's what he says.

MARRITZ: Knowing what you know, does that make sense to you? 

FAHRENTHOLD: Well, to me, the question is what Adam was talking about earlier. It's not just a question of, “Did they have” — you know, if they spent $445 million in cash and real estate properties, to me, the question is not just that they would have had enough cash to cover the bills, but did they have so much cash that this sort of — as Adam described — kind of unorthodox, not very profitable, ill-advised strategy would be such a small part of their operation, they could afford to do it? Or would they have been giving away all their ready cash — all their cash — into these things that, you know, from a real estate perspective, are very risky and not very smart investments. 

DAVIDSON: And David, when I do the math, I've spent the — the days since your article looking at everything we know about his businesses, I can just about get to $400 million over 10 years, but it's hard. I mean, it's assuming, you know, he has The Apprentice money, which he claims got up to $30 million a year, although I think a lot of people are skeptical about that. And then, if you look at his four commercial properties, he'd have to be making a truly unusually high profit margin to get tens of millions out of those.

Most of his other businesses are, you know, $1 or $2 million a year kind of businesses or — or many or money-losing. So it's hard for me to get to $400 million with the cashflow of the businesses we know about. And if we do get there, that would mean he put all of his free cash. And, by the way, this is a man with an incredibly expensive lifestyle. You know, operating a [LAUGHS] 757 Boeing jet is not cheap — operating all the homes, and the staff, and the limos. You know, we're talking about tens of millions of dollars a year in costs there, and then operating all these businesses we've been talking about — that costs money, too. So it is very hard for me to believe that this was truly cash that they had sitting around and thought, “Well, why not put it all into a small handful of highly dubious investments.” 

MARRITZ: Adam, okay. So, why did you say that this could be the single most important story ever on Trump? 

DAVIDSON: Well, I think what David and Jonathan and, uh — did was — was bring us. Forced us to really confront the heart of the Trump business model and to see that even now, even after all the ink has been [LAUGHS] spilled, all the — all the tape has been recorded about Trump, there’s this fundamental question we have: Where did the money come from and why was it spent the way it was spent? 

You know, I think it is possible that there is a legitimate reason. I don't think that this article proves that this was a fundamentally criminal operation or — or some such. I think it forces us to ask even more fundamental questions about, “What is this company? Where did it get money, and what was its business, and was its business really real estate, or even real estate branding?” Because, if you look at projects where people sink tens or hundreds of millions of dollars into dubious investments that are likely to either lose money or — or barely break even, I mean, I think anybody looking at that instantly thinks, “money laundering.”

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MARRITZ: David, what's the next question you're going to try to answer?

FAHRENTHOLD: Well, a couple of things. One, we're trying to find, you know — have I seen the whole universe? Are these all the all-cash transactions, or have there been other things that Trump paid a lot of cash for? Just as an example, today, I'm trying to figure out the system of land records on the French Island of St. Martin in the Caribbean, because Trump bought a big estate there for maybe around $19 million in 2013, which is right in the middle of all these ca— all cash transactions, and I want to know how he paid for that one. So that's one thing. 

MARRITZ: I heard that one's for sale. Is that right? 

FAHRENTHOLD: It is for sale. He's taken the price down from $28 million to $16.9 million and still hasn’t sold. Which is good news for you, Ilya. I know you've been thinking about getting into Caribbean real estate, so [MARRITZ LAUGHS] this is your chance. So that's one thing. 

So it's hard to understand the full breadth of these cash transactions. And also, we — we only know — the $445 million we found is only a — a lower bound. In many cases, Trump has said about his U.S. golf courses, “I put $250 million in,” “I put a hundred million dollars in them after I bought them.” But that’s — that’s hot air. That's not — that’s not written down any place. So if I can find him anything more about how much cash he actually put into some of these golf courses, the number might get higher. That's one thing, generally understanding the scope of the problem.

The other thing is, trying to figure out more about where the money came from, which means let’s investigate what Eric Trump said. Let's try to understand the cash flow within the Trump Organization. Do they have enough to spend money in this way? And then, if not, you know, who else might have been his partners. If there are partners — silent partners here — you know, is there any evidence that points to that?

And, as Adam said, that could be a question that ends up with the answer “No, it was all Trump's money. He made it, you know, from his other businesses.” But we still have to ask it. And I think we're just at the beginning of trying to understand the answer to that question. 

MARRITZ: I want to read to you, David, what Eric Trump told you. He said, quote, “We had incredible cash flow and built incredible wealth.” “He,” meaning his dad, Donald Trump, “didn’t need to think about borrowing for every transaction. We invested in ourselves.” Did he say anything more about how this could make business sense? Cause I think Adam made a pretty good case that that doesn't make business sense to buy properties all-cash when you're a major investor.

FAHRENTHOLD: He did not. It's inter— it’s interesting. The case made was not, like, “This makes so much business sense. Every business should do it the way we do it.” No, he — instead, he said, basically, “We do it because we like the way it feels” in two ways. One, he said, “You know, sometimes when we go look at a property, we get really attached to it. We form an attachment to it. We want to move on it quickly. We don't want to have to go to some lender and send out a pitch book and, you know, haggle over terms. We just want to buy it.” 

And he said that Doonbeg, the one in Ireland, which cost, I think, $13 million to buy, and it's been many millions more of money pumped into it since, he says, “Well, we saw that seven days before we bought it. We looked at it. We liked it. We bought it. We can't move that fast if we're trying to get loans from the bank.” 

MARRITZ: Wow. 

FAHRENTHOLD: Yeah, nobody does that. But — so that's one thing. The other thing was that he says, “We're just changing the nature of this business. We're not in the sort of big-risk, big-borrow, big-reward business that his father was in in the ‘80s and ‘90s. We’re in the, you know, generational assets. You know, we're going to buy things and hold on to them and take the cashflow out of them and live off that.” So what’s the second argument is that during the same period, they make several really, really large, risky transactions that are much more like the old Trump, where they borrow a ton of money to buy properties that seem kind of risky, and fly in the face of that sort of, you know, almost Amish-style of business that Eric is talking about. The very conservative, patient style of business. They buy Doral, the golf course in Miami, they buy this huge hotel in Washington, D.C.; borrow tons of money for both those transactions in 2012. If you're converting your business over to this sort of slow, patient, generational asset sort of thing, those two transactions don't make any sense. 

DAVIDSON: I would say that there's some piece of information that we are missing, because none of the explanations make sense. I mean, I think we learned in 2007, 2008 — and Trump himself learned this very, very vividly — being hugely exposed to a small number of real estate plays is not a great way to maintain your wealth, long-term. And, as it happens, golf in Scotland is going through a crisis right now. And so Eric Trump's explanation — it literally makes no sense. It's the opposite of what is true. I mean, go to any investment advisor and say, “I want to maintain generational wealth. I'm thinking of plopping $80 million on this one piece of underperforming land in Scotland.” It — it’s absurd on its face.

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MARRITZ: Maybe now's a good time to turn to the huge news that we learned this week of what is probably, really, the most direct evidence of Russian money entering Trump world. This is the news that an LLC controlled by Trump's lawyer, Michael Cohen, took half a million dollar payment from Columbus Nova, an investment firm with links to the Russian businessman Victor Vekselberg. This is right after Trump was elected. I don't know which one of you wants to take this, but, how does that play into the picture that we're developing of the Trump business model? 

DAVIDSON: This is yet another example of sort of my window of what is possible radically opening. I've been part of many, many conversations over the last few weeks and months with — with other reporters covering Trump that go something like this: 

“Hey, don't you think Trump wants to profit off the presidency?” 

“Yeah, I think he does, but there's too many eyes on him. It's too risky. He won't do it.” 

And here we have his personal attorney, apparently profiting directly, and nakedly profiting off the presidency. And either he did that without Trump's knowledge — which is quite striking, that his personal attorney and consigliere and close advisor is profiting off the presidency —

MARRITZ: Well, he — he claims he made a payment to Stormy Daniels without Trump’s knowledge, either — at least initially. 

DAVIDSON: Right, and he made a payment [LAUGHS] to Stormy Daniels without Trump's knowledge. Um, this is yet another example where all the explanations make no sense. So, Columbus Nova, which paid Cohen, said, “Oh, it's not — we're not owned by Vekselberg.” I've been talking to people who work at Columbus Nova, and they say, “We might not be technically owned by him, but all the money we invest is his.” 

Uh, similarly, you know, Columbus Nova and AT&T are arguing, “Well, we just want Cohen's insight, his keen [LONG PAUSE] insight.” Aside from getting into the taxi cab business, it's not clear what value Cohen could possibly bring these companies. So it does seem that there was a fairly naked, you know, shakedown operation by one of Trump's closest guys. And we're obviously —

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DAVIDSON: — going to be obsessively trying to figure out: Did Trump know about it? Did he not know about it? I do think that the combination of David and Johnathan's article and the Cohen news means that this week we have a much, much bigger sort of investigative target than we did even last week, when we had a pretty big investigative target.

MARRITZ: How about you, David? Does — does the Cohen news change your sense of direction of where you're going to be going next? 

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FAHRENTHOLD: Uh, it doesn’t, thankfully. And I work in a newsroom with a lot of other people who are very, very interested in the Cohen news and are digging into it. So I'm staying in my lane of the Trump Org itself, not Cohen. Although, you know, what we've seen — I think — in the last few days is a sign that these stories may all converge the idea of, you know, what Cohen was doing, what the Trump Org was doing, Stormy Daniels payments. It may — in some sense, it may all turn out to be sort of one big pool of money that we're looking at, and we're all just seeing pieces of it. So it doesn't change my job yet, but it certainly may. 

MARRITZ: Adam Davidson is a staff writer at the New Yorker. David Fahrenthold is a reporter at the Washington Post. Thank you both very much. 

DAVIDSON: Thank you. 

FAHRENTHOLD: Thank you. 

MARRITZ: And if you know anything about the Trump Organization's use of cash to buy property, we want to hear from you. You can send us tips or documents securely. Find out how at TrumpIncPodcast.org.

Trump, Inc. is produced by Meg Cramer. The associate producer is Alice Wilder. The engineers are Wayne Schulmeister and Bill Moss.

The editors are Eric Umansky and Charlie Herman. Terry Parris, Jr. is ProPublica’s Editor for Engagement. Jim Schachter is WNYC’s Vice President for News. Steve Engelberg is ProPublica's Editor-in-Chief. Original music by Hannis Brown.

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