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December 4, 2022

That Time One of Donald Trump’s Companies Got in Trouble for Reporting Ludicrously Deceptive Non-GAAP Results

Cretinous cheese puff and future American emperor Donald Trump likes to remind people of his long run as a very smart, very successful, very smart and very successful — probably the greatest ever, if he's being honest about it — businessman.

There are too many stories to go around about all his WINNING, so to balance out the coverage, let's enjoy this fun blast from the past courtesy of Fortune that tells a less successful tale. It's about the time Trump Hotels and Casino Resorts got in a little trouble with the SEC:

In June of 2002, when the SEC brought the landmark action against Trump Hotels and Casino Resorts, the agency said it pursued the Trump case—its first for this type of abuse—because it provided a “stark illustration of how pro-forma numbers can be used deceptively and the mischief they can cause.” The agency accused Trump Hotels of using “fraudulent” reporting used to “tout purportedly positive results.”

WHAT? Boasting about over-inflated success only made possible by comically misleading everyone? NOT OUR DONALD!

Prompting the SEC’s pioneering foray was a Trump Hotels press release from October of 1999. It appeared to announce a big improvement in Trump Hotels’ earnings. According to the release, the casino operator had $403 million in revenues and $14 million in net income in the third quarter of 1999, improvements over sales of $397 million and profits of $5.3 million for the same period in 1998. The release then boasts that its earnings per share of $0.63 handily bested analysts’ estimates of $0.54. The numbers, Trump’s press release said, demonstrated substantial progress towards making its money-losing operations profitable.

In reality, the actual numbers fell far short of that, much like Trump's shrimp fingers in a child's gloves. The explanation was simple enough — they took out some bad stuff and put in some good stuff. The company closed Trump World's Fair and excluded the $81 million charge associated with that, but also reported "a thoroughly extraordinary item" — the termination of a lease — that resulted in a gain of $17.2 million. 

It took a little while, but everyone caught on:

Within three days, Deutsche Bank and Bear Stearns issued reports stating that Trump management was acknowledging that the big “improvements” were really the result of the one-time gain of $17.2 million. When that item was excluded, it emerged that revenues dropped 2.9%, and that profits hadn’t more than double [sic], but instead had fallen by almost 43%.

As mentioned above, this was the first case of its kind brought by the SEC so that's another feather in the cap of our future president. Oh! And it's also worth mentioning that Arthur Andersen was Trump's auditor which is just too good. Only the best!

[Fortune via Matt Levine]

Image: Gage Skidmore/Wikimedia Commons

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