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Donald Drumpf (Trump) Made Millions of Dollars by Bankrupting Atlantic City Casinos

2016-06-12

Here he is again: the businessman who was the “best”, ripping off casinos and regulatory agencies to bankrupt casinos.  The story, in the New York Times and elsewhere, is an old and sordid one, and Donald made big money by cheating everyone who trusted him.  Three casinos were in Atlantic City: the Trump Marina Hotel Casino (now the Golden Nugget), the Trump Taj Mahal (now under new ownership), and the Trump Plaza Casino and Hotel (now closed.)  The Trump Marina was sold at a heavy loss five years ago; the Trump Plaza was closed; and the Trump Taj Mahal is still operating, under new managers.

Donald started with the Trump Plaza, a casino financed by Harrah’s on Trump property, in 1984.  The next year, Trump opened another casino, based on a Hilton project and financed with $352 million in bonds; this one he called Trump Castle.  The second casino was in direct competition with the first.  In 1986, Harrah’s sold its stake in Trump Plaza to Donald for $220 million.  The third and biggest casino, the Taj Mahal, was based on a Resorts International property; even before it opened, in 1988, the New Jersey Casino Control Commission expressed concern over the “rapidly escalating” costs of building.

Donald told the Commission that he abhorred junk bonds, then went out and financed final construction with just such bonds.  He issued $675 million in bonds at 14% interest, and total debt on the Taj Mahal exceeded $820 million.  Donald has admitted that with each financing, he extracted money to invest in Manhattan real estate.  As a result, a casino analyst at a famous investment firm predicted that the Taj would have to take in $1.3 million a day (an unheard of sum) to keep up the interest payments.  Donald had the analyst fired, but that same analyst sued and won large settlements from both Donald and the investment firm.

In August 1990, with another recession pinching gambling revenue and real estate values,  Donald owed some $3.4 billion on his real estate holdings, including $1.3 billion on the casinos and over $800 million he had personally guaranteed.  Donald failed to make debt payments in November, and in December Donald’s father made him a quietly illegal loan of $3.3 million in cash (for which the father was fined $65,000 by the Casino Control Commission.)  In 1991 the casinos went into bankruptcy court and Donald was forced to sell his airline, his yacht, and his stake in the New York City Plaza Hotel (among other items).  Most humiliating of all, Donald was placed on a $450,000 a month personal budget.

A number of small businesses that contracted to build parts of these casinos didn’t get paid for their work, or were forced to accept as little as 30 cents on the dollar.  As a result, some were forced into bankruptcy themselves.  Donald didn’t suffer.  In 1993 and 1995, he sold more junk bonds, and in 1995 turned the Plaza into a publicly traded company by selling 10 million shares at $14 each.  Since he was the largest shareholder, he was able to use most of the money raised to eliminate some of his personally-guaranteed debt.

In 1996, Donald’s public company sold $1.1 billion more in junk bonds.  His company (based on the Plaza) bought out the Taj Mahal and the Castle (renamed the Marina.)  His shareholders sued after Donald used much of the money to pay off his personal loans.  The lawsuits were settled after Donald paid back some of the money.  In any case, he received a salary from his company as well as bonuses.  This pattern continued for years, with Donald repeatedly talking the company’s board into giving him control of assets or cash which he then used to pay off his personally-guaranteed debts.

The company went into bankruptcy four times under Donald’s control; in 2009, he walked away from it after the board refused to allow him to buy it back.  In 2014, the company went into bankruptcy a fifth time.

A small investor summed up the performance of Donald’s management over the years:

“People underestimated Donald Trump’s ability to pillage the company,” said Sebastian Pignatello, a private investor who at one time held stock in the Trump casinos worth more than $500,000. “He drove these companies into bankruptcy by his mismanagement, the debt and his pillaging.”

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