Trumped up: Kluge bankruptcy means all signs point to Donald

Patricia Kluge has always had a knack for strategic moves, so why should her personal bankruptcy be any different?

As lenders converged to seize her winery and her beloved 45-room Albemarle House, she found a way to seize an opportunity– to get a longtime chum who also happens to be America's top dealmaker to deliver a new message: This land is now… The Donald's land.

That's the point conveyed by dozens of no-trespassing signs recently erected by the man who turned "You're fired!" into a catch-phrase and whose books on real estate include such titles as How to Get Rich and the memorable Think Big and Kick Ass.

Donald Trump has brought his hard-bargaining style to the Charlottesville area.

By purchasing the fields surrounding Albemarle House and letting the grass grow high, Trump (as first reported by the Wall Street Journal) has begun sending sly signals to prospective buyers that the 23,000 square-foot mansion might have many luxurious amenities. But a front yard is not one of them.

"This is one of the most interesting plats of a home I've ever seen in my life," says Charlottesville real estate broker Roger Voisinet, as he eyes a map of the property which shows that Albemarle House sits on a gerrymandered lot offering less lawn than any starter home in Forest Lakes.

"It's most illogical and unmarketable," says Voisinet. "I can't see anyone buying it."

Actually, there is someone uniquely interested in buying it: The Donald himself. Trump appears to be parlaying his near monopoly of the former Kluge properties into a lower price on the last piece of the puzzle.

"He wouldn't do it if he didn't have eyes on the house," says Voisinet. "It just shows how astute he is."

Less astute, says Voisinet, was a bank that would lend $23 million on a mansion whose once-private driveway now bears a stark white sign with thick black lettering: "New public road to Trump Farm Shop."

But Bank of America did its lending when Patricia Kluge was still the queen of the Virginia wine world, her visage gracing the cover of this publication and many others. A set of business setbacks led to the embarrassing spectacle of listing Albemarle House for sale and then letting the price spiral downward from $100 million to $48 million to $24 million. At today's asking price of $16 million, Trump has publicly said that it's still far overpriced.

Trump's trick was securing the 217-acre tract that the late John Kluge had set aside for his namesake as a device to prevent his ex-wife, Patricia, from selling the mansion in which the younger John Kluge was raised. As a family confidante first told the public when Trump unveiled his quest for Albemarle House back in February, the yard includes a right-of-first-refusal, a legal opportunity to match any purchase offer on the mansion and its 98 acres.

The property is now listed jointly by a Richmond office of CB Richard Ellis and Charlottesville-based estate broker Jim Bonner. On a sweltering July day when a reporter drives up for his first look at Albemarle House, a contractor reveals that the air-conditioning upstairs isn't working. Bonner may really have to hustle for his commission.

"We're actively marketing, and we've had considerable interest," says Shirley Norton, a spokesperson at Bank of America, the property's owner. Norton declined to discuss the wisdom of lending $23 million on a property where a dinner table-sized "no trespassing" sign now greets anyone trying to absorb the once pastoral view.

If Albemarle House, like the winery, is now inexorably marching toward the arms of the Donald, Patricia Kluge and her husband have seen their wings clipped, as the pair are now embroiled in the awkward spectacle that is bankruptcy court.

Their first public hearing in the liquidation process came Friday, July 15, a day after her high-concept gas station was auctioned off and an hour after about a half dozen other couples began getting interrogated by the federal trustee to reveal the whereabouts of any property that might be sold to partially satisfy creditor claims. Kluge and Moses walked calmly down the carpeted steps inside the federal courthouse, he in a dark business suit and she in a proper cream-colored woven dress.

"All the good stuff is gone," said Kluge, answering questions about what happened to a once-voluminous jewelry collection and why she values her last two fur coats at just $200.

Kluge was once married to the richest man in America. Now, she's half of a duo facing claims of over $47 million with assets of just $2.6 million, according to the federal Chapter 7 filing.

They're begging the court for permission to hold on to their two dogs, $81,000 worth of wedding and engagement rings, a pair of all-terrain vehicles, a signed Ronald Reagan movie poster, two Belgian shotguns, and a Lord Mountbatten beaker and stand– whatever that is. They explained to the court that they also need to hold on to their wine collection (valued at $5,000) because of their new jobs working for Donald Trump.

The filings show that Trump has hired Kluge at a salary of $125,000 and Moses at $142,000 to help run what's now well on its way to becoming the Trump winery, ever since Farm Credit of the Virginias foreclosed on the winery they built around Albemarle House.

"That's the great thing about bankruptcy for them or for anyone else," says Farm Credit's attorney Bill Shmidheiser. "Once they file, whatever they earn is theirs."

Shmidheiser, who estimates that unsecured creditors will probably only see a nickel for every dollar they're owed, wasn't the only creditor's representative watching the hearing. Also in attendance was the development director of Piedmont Virginia Community College, which is still seeking the nearly half a million-dollar balance on what was once heralded as the school's largest donation: $1.2 million for a science center which opened last fall.

Not counting personal guarantees for the busted business loans, court documents show that the largest creditor is another school, Jordan-based King's Academy, to which Kluge has an outstanding pledge of $900,000.

Other big creditors include Anton Sattler Inc. ($75,000 for painting Albemarle House), American Express (over $68,000 in credit card debt), and the D.C.-based law firm of Baker & Hostetler ($515,000). Closer to home, the Michie Hamlett law firm is owed over $50,000. And among the smaller creditors is a Scottsville-area Ace hardware store called Paulett's and Commonwealth H2O, the latter of which installed a water-treatment system.

"I'm sure she didn't have this in her plans," says Commonwealth owner Linda Schroeder. "But it is extremely difficult for a small business to absorb a loss when things go askew with a customer's finances."

Things have definitely gone askew, yet companies are still willing to work with the couple. For instance, even after defaulting on the $3.7 million loan SonaBank made on the nearby house the couple dubbed "Glen Love," they continue to dwell in the 6,600-square foot residence, as renters paying $5,500 a month and getting maid service thrice a week.

But the person who seems most eager to work with them is Donald Trump, or more directly, his 27-year-old son, Eric Trump, who says he's been zipping into town at least once a week since his father secured the vineyard property at a post-foreclosure auction in April. There, the Trumps scored about 776 acres for just $6.21 million, nearly 90 percent of a set of tracts that had been backed by about $34 million in loans.

"I think we made an incredible deal," says Eric.

Since the auction, Eric Trump says the family company has also acquired the former Kluge Farm Shop which will reopen later this year as the Trump Winery Tasting Room.

"We work fast," says Trump. "We're shooting for roughly a month."

With their well-known father, Eric Trump and his two siblings operate what he likes to call the "largest mom-and-pop in the world," a set of golf, gambling, and vacation resorts from sea to shining sea. And that's what Kluge and Moses were missing, says the lawyer who disposed of the wine lands.

"Donald Trump will be successful," says Shmidheiser. "He can call it Trump wine. He can put it in his golf courses and hotels and– bang– he's got a way to market it."

Eric Trump says with many Kluge wines already receiving high ratings from Wine Spectator and other critics that the Kluge appellation may survive alongside Trump-branded wines.

"When something's working, you don't fix it," says Trump. "We're going to play that by ear."

What Trump says he's certain about is that the winery will intensify its standing as a top destination for weddings and upscale conferences that want the Trump touch.

"Charlottesville really fits the brand," says Trump. "There's a tremendous amount of wealth there, it's a very classy place, and my father's been following it for a long time."

But what about the recent allegations that some so-called Trump projects merely bear the Trump name without any real investment?

"My father builds and acquires more buildings than any other human being in the United States," says the son. "We're probably the most under-levered hotel company in the country."

And Smidheiser, though Farm Credit lost millions at the Kluge winery, sees the arrival of the Trumps as a positive jolt for the the local economy and a way to let Kluge and Moses gracefully edge away from the glare of unflattering publicity.

"They did a great job producing wine," says Shmidheiser. "They just couldn't sell the wine."