By Sydney H. Schanberg
First published in Newsday, April 4, 1995
Step right up, cries the barker with the jaunty derby and twirling cane, don’t miss out on your chance of a lifetime. Donald Trump has a deal for you. Please come closer, folks, I have to whisper this: If you act quickly, Donald is willing to sell you $285 million in casino stocks and bonds. And, oh yes, before I forget, the Securities and Exchange Commission has asked me to advise you that the odds are you’ll never see this money again.
That’s right, Young Donald is offering anew to let you buy the heirloom lint that is the last remaining occupant of his pants pockets. He’s still buried in a mountain of debt, more than $100 million of it personally guaranteed. So naturally, being a man of the people, he would like you to bail him out before he has to do something vulgar, like filing for personal bankruptcy.
Such an act could shut him down as the gambling king of Atlantic City, since New Jersey law requires casino owners to have “financial stability.” The Trump Organization “owns” three heavily debt-burdened casinos there. All three have been losing money. That’s of course why Donald, as a financial sage, wants to expand them — with other people’s money.
As you know, Donald has been running these hustles for years, conning local governments into subsidizing his projects (e.g., Trump Tower got about $40 million from New York City in tax reductions) and conning banks and insurance companies into loaning him the construction costs. In case you still think that big-name bankers are an intelligent race, just look at the customer money they’ve thrown away on their judgment that Donald Trump was a stable businessman.
It’s helpful not to lose touch with Donald’s unstable history. Remember how he reneged on his agreement to renovate the subway complex below the Grand Hyatt hotel? Remember how, after trying the usual strong-arm tactics to roust legal tenants out of a building on Central Park South so he could tear it down, he then offered — surely out of profound humanitarianism — to put homeless people in the apartments that were vacant? And remember how, when he served as chairman of the New York committee to build a local Vietnam memorial, he offered to pick up most of the cost if only the veterans on the committee would agree to name it the “Trump” memorial?
More recently on Donald’s history channel, in 1990 he and his companies defaulted on $3 billion of debt. The banks put him on an allowance. Unfortunately, from his early days as a school truant, Donald has never been able to live within his allowance. Nothing has changed, so he’s always short of the cash he requires to keep his name on the party lists and in the gossip columns. As a result, he has had to resort to his legendary hustles.
According to an interesting story by David Cay Johnston in yesterday’s New York Times, Donald has met his personal needs only by drawing unusual fees from his main gambling joint, the Trump Plaza Hotel and Casino. Last year, he took a $572,000 fee for negotiating a lease of space to Time Warner in a planned expansion of the hotel — an expansion that was halted by a judge’s ruling last week. Time Warner has yet to pay anything for the lease and may never do so; it has the right to cancel the agreement within two years.
On that same planned expansion, Trump was also personally paid a $1-million “construction management services” fee to supervise demolition of the building next door.
Even this expansion is being financed with other people’s money — in this case, the public’s dough. There’s something in New Jersey called the Casino Reinvestment Development Authority (CRDA), and this body awarded Donald $14.6 million in tax credits, which represents more than a quarter of the $55-million expansion price tag.
CRDA also invoked eminent domain in condemning three privately owned parcels of land that Trump wants for the expansion. Last week’s decision by a New Jersey judge threw out the condemnation, noting that Trump had, after the fact, altered his expansion plan to include additional gambling space, instead of just additional hotel rooms. In essence, the ruling said that the condemnation of the $14.6-million award violated state policy because it represented a use of public monies for a private person’s benefit. Trump’s lawyers said they would appeal.
Meanwhile, in the event any of you are contemplating throwing some mad money at Trump’s proposed stock and bond offerings, I suggest you read the fine print of the documents he submitted to the SEC last week for review.
These papers, for example, caution potential buyers that “there can be no assurance that Trump will be successful in repaying or rescheduling his indebtedness or that his assets will appreciate sufficiently to provide a source of repayment for such indebtedness.”
Another chilling sentence reads: “Any failure by Trump to repay or reschedule his indebtedness or otherwise maintain financial stability may have a material adverse affect” on the payment of interest or return of principal.
Donald never wrote sentences like these in the heady days before he was under surveillance. He just took other people’s money and bought a yacht with gold fittings and cruised around as if he was something more than a hustler.