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Top 10 most bananas stories from Trump's time as a casino boss20 February 2017
It's President's Day here in the U.S., and while we've certainly had our fair share of presidents who gamble — as I wrote about last year — for the first time in history, we have a president whose gambling experience comes from the operator side. In the 1980s and 1990s, Donald J. Trump was the Casino King of Atlantic City, owning three properties in the New Jersey seaside resort town previously best known for saltwater taffy and being the setting for the board game Monopoly.
It was . . . an eventful period, to put it politely.
I was too young to gamble (or read the news) in the '80s and '90s, so this year, I found myself very interested in all the old stories that bubbled back to the surface during the yearlong circus that is an American election. Here are 10 of the most interesting stories I found about Trump's time in the casino biz. Some are important and some are trivial, but they're all very Trump.
10. That time he forgot that his Tour de Trump event would cost money . . . repeatedly
This anecdote was brought to my attention by Zach Ellwood of the Reading Poker Tells books and excellent video series, and comes from John R. O'Donnell's 1991 memoir Trumped!, which chronicles three years spent working as an executive at Trump Plaza.
In this story, O'Donnell describes having multiple meetings with Trump about planning the 1989 Tour de Trump cycling event, which was expected to lose money in its first year to the tune of $700,000, but be profitable afterwards. Each time, Trump is flabbergasted by these numbers, gets angry, and has to have the plan explained to him anew.
After talking him down again the day before the race, O'Donnell reports that the event goes off successfully and everything is fine, until:
Publicly, Donald proclaimed the Tour de Trump "the most successful event ever." But a month later, after he got the Trump Plaza's profit and loss statements for May, he exploded at me all over again, this time in Steve's office. "You see these numbers? What the hell is going on? How in the hell did we lose so much money in this month?"
"For chrissakes, Donald," I said. "You've heard these numbers before. Why are we going through this?"
"Don't give me that shit. I never knew I was going to lose all this fucking money on this! I don't believe what's going on here. What are you guys doing to me? I can't fucking believe this. I can't believe it. You're supposed to be watching this."
Apparently, this conversation happens again when quarterly financials come in.
9. That time he bought land from some Mafia guys
As I reported when I went to Atlantic City last fall, I had a viscerally negative reaction to the sight of the shuttered Trump Taj Mahal. To me, the once-vaunted "eighth wonder of the world" looked like it was built out of dirty Lego blocks.
After the trip, I floated this observation past my dad, whose career is also in East Coast real estate construction, but on the insurance side of things. His response was a derisive, "Yeah, that's the shitty prefab concrete from the Gambinos."
This seemed plausible, but I figured it warranted fact-checking. Turns out, the fact-checkers at Politico, Politifact, the Washington Post, the Wall Street Journal and nearly every other major journalism outlet thought the same, taking me down a rabbit hole of 30 years of connections to construction firms in New York and Atlantic City run by New York's Gambino and Genovese crime families, as well as Philadelphia's Scarfo-Bruno outfit.
The basic facts that all the investigative pieces I read agree on are: a) that Mafia families completely controlled the concrete and cement trade in New York during the earlier years of Trump's career; b) that Trump Plaza in Manhattan contracted with a company called S&A Concrete that was joint-owned by Gambino and Genovese bosses; c) that in Atlantic City, Trump leased the land he built Trump Plaza Hotel and Casino on from mob financier Kenny Shapiro and Teamster boss/FBI informant Daniel Sullivan; and d) that the Trump Plaza casino was built in part by two construction companies controlled by Philadelphia mob boss Nicky Scarfo.
While the tower structure at the Taj is indeed made of prefabricated concrete, it looks like the concrete contractor used was L. Feriozzi Concrete Company in New Jersey, whose only connection with the Mafia seems to be buried deep in this rather boring court case from 1989. Trying to follow the mob connections of Trump's Atlantic City career mostly gets you a lot of stuff about regulatory shenanigans, FBI investigations and sketchy land deals; trying to find anything about contractors for the project gets you to the next item on this list.
8. Those times he didn't pay the contractors who built his casinos
This is neither funny nor would make an exciting movie; it's just sad — although possibly unsurprising from someone who nominated the Hardee's guy to be Secretary of Labor. Over the course of the election, several news outlets profiled small business contractors who had worked on various aspects of Trump's three casinos in Atlantic City. Many of these were small and medium-sized local businesses who were thrilled to get such big contracts, and were not in a great place to absorb the costs of never getting paid for them.
CNN profiled Beth Rosser and Steven Jenkins, whose father owned a company that installed toilet partitions and was hired to work on the Taj Mahal. When it went bankrupt, the family spent years fighting in bankruptcy court and eventually received 30 cents on the dollar of their contract. USA Today published a longread profiling — among others — Edward Friel Jr., whose father's Philadelphia-based company was hired to build cabinets for Harrah's at Trump Plaza. He was stiffed on a bill for $83,000, and the company eventually had to declare bankruptcy.
7. That time his dad gave him an illegal $3.35 million loan via casino chips
OK, we're back into the fun scandals now, I promise.
This story comes from Mother Jones magazine, an outlet known for award-winning investigative journalism and for being one of the most unapologetically left-wing outlets in respectable media. This election season, it combined these two traits to bring us a project called The Trump Files, a collection of stories about Trump in varying degrees of unflattering absurdity. They range from the serious ("Trump's Long History of Getting Sued by His Own Lawyers") to the bizarre ("Watch Donald Sing the 'Green Acres' Theme Song in Overalls").
In 1990, Trump was at risk of defaulting on an interest payment for his Trump Castle casino — but since he'd already defaulted on the debt from the Taj Mahal, if anyone had just given him money, it would have gone to paying off that debt instead.
At that time, Fred Trump, Donald's father, arrived at Trump Castle and purchased $3.35 million in casino chips.
And then he did nothing, neither gambling nor cashing the chips back in. Trump Castle made its payment. A year later, the New Jersey Casino Control Commission investigated and declared the chip purchase to be an illegal loan. It recommended that Trump return the money, which he didn't, and fined the casino $65,000.
6. That time he filed a $916 million loss on his tax return
STOP ME IF YOU'VE HEARD ABOUT THIS ONE, GUYS.
OK, just because this scoop from the New York Times in October was front-page news on every outlet for days, that doesn't make it any less bizarre, so I wasn't going to leave it off the list.
This fall, an anonymous source, whom the internet speculates may or may not have been Marla Maples, leaked the front page of Trump's 1995 tax return to the New York Times. The return shows a staggering $916 million loss, enough money to allow him to skive off paying taxes for 20 years. Tax experts weighed in and indicated that much of this loss likely came from operating losses suffered by Trump's businesses earlier in the 1990s, including a loss of $25.5 million for the Trump Taj Mahal and a loss of $43.5 million for Trump Castle in 1990.
Now, casino operations is a pretty expensive field to be in, but this is still an astounding amount of money.
5. That time he got a securities analyst fired for pointing out that the Taj was in financial trouble
Marvin Roffman was a veteran securities analyst who had specialized in the Atlantic City gaming market since it was first established in 1978 when, in 1990, he did something that made Donald Trump very angry: his job.
After closely examining the market, Trump's other two casino properties, and the epic financial drama leading up to the Taj Mahal's opening (see No. 4), Roffman concluded that this was going to be a dumpster fire (I paraphrase; nobody said "dumpster fire" in 1990) and remarked as such to a Wall Street Journal reporter.
Trump lost his temper and spent three days harassing and threatening both Roffman and his employer, Philadelphia-based brokerage firm Janney Montgomery Scott, until Roffman was fired. Roffman promptly went into arbitration with his employer for wrongful termination and sued Trump twice in Philadelphia district court, once for defamation and once for interference with his contractual relationship with his employer. After months of legal wrangling, Roffman was awarded three-quarters of a million dollars in arbitration, and settled both court cases with Trump for an undisclosed amount.
Roffman used his winnings well, as a longread from Politico profiles his current lifestyle in addition to giving a fuller accounting of the drama.
An exquisitely dry recap of the story is also available from the financial magazine Barron's, which claims it "feels a measure of proprietorship over the Roffman affair" for having made fun of his brokerage house themselves shortly before this all went down.
In addition to being awarded gobs of money in damages, Roffman was also proven unequivocally correct in his assessment of the Taj's finances, which brings us to:
4. That time the Taj ran out of money in its first summer
There are few stories that start at "what kind of bonds should be used to finance this construction project" that end anywhere interesting to anyone who's not really deep into the construction bonds business (hi, Dad). The Trump Taj Mahal is a spectacular exception.
The curtain opens on this story in 1988 at a licensing hearing at the New Jersey Casino Control Commission, where Trump goes on a big old monologue about how he should be licensed to complete the beleaguered $1 billion project because he could get really good interest rates from the banks.
This turned out not to be the case, forcing Trump to buy junk bonds, which were exactly the type of bond he spent his hearing railing against and promising he wouldn't need. The interest rate on these junk bonds was 14%, meaning he would have to make $95 million in interest payments per year, just on the Taj, in addition to paying off the principal and making payments for his other properties. The finance euphemism for being in this sort of unpleasant situation is "highly leveraged." In practice, it meant the Taj defaulted on its debt within months.
A CNN report published over the summer points out that the property was out of money nearly from the day that it opened, rarely having enough cash on hand to cover daily operating costs. In its first 16 days of operation, it had four days in which its bank account contained less than zero dollars, overdrawn by as much as $1.7 million. It nearly defaulted on its payments in June, just two months after it opened, before scoring an 11th-hour bank loan. This bought the casino about six months before it filed for bankruptcy.
3. That time he got fined $650,000 for indulging a racist mobster
It is a truth universally acknowledged that people who make their living through theft, extortion and murder can never just be egalitarianly nasty and violent; they all gotta be total bigots, too.
One of the high rollers that liked to frequent Trump Plaza was one Robert LiButti, a wealthy horse breeder. LiButti reputedly had a nasty temper and ties to Gambino boss John Gotti. The ties to Gotti would get him banned from New Jersey's casinos in 1991; the temper would help get Trump's casino property in legal trouble before that.
LiButti on several occasions berated casino employees in racist and sexist terms and demanded that black and female employees be kept away from the craps tables he was playing at. In order to keep LiButti's business — he reportedly lost about $12 million at Trump's properties, making him one of their most profitable customers — the casino repeatedly removed employees from LiButti's tables. The Casino Control Commission investigated the matter and fined Trump Plaza $200,000.
Three months later, the Commission slapped Trump Plaza with another fine, this time for $450,000, for buying LiButti nine luxury cars. Apparently, it is against the rules to buy mobsters Ferraris. Who knew?
2. That time he created a fake anti-gambling group
At the time Trump got involved in the casino business, Atlantic City was the only place in the U.S. besides Vegas where gambling was legal. But eventually, that started to change.
The biggest threat encroaching upon Donald's turf was the prospect of legalized gambling in New York State, especially after the two tribal casinos in Connecticut had taken such a big bite out of the Atlantic City market in the '90s.
Around 2000, as New York was considering building a number of tribal casinos, the executive director of the New York State temporary commission on illegal lobbying, David Grandeau, started to notice a bunch of anti-gambling ads that seemed not quite on the up-and-up — namely, they attacked the state's Native American tribes in vicious, defamatory terms. The group was called the Institute for Law and Order, and it was supposedly based out of Rome, New York, and it was circulating quite a lot of ads for a group that Grandeau had never heard of.
Grandeau did some digging. The executive director of the Institute turned out to be a magazine subscription salesman. Grandeau did some more digging, and found sketchy former Nixon aide Roger Stone. Stone had invented and run the supposedly 12,000-member "grassroots" group entirely by himself, and he had done it on behalf of Donald Trump, who had signed off on everything.
Trump and Stone were eventually fined a quarter of a million dollars for their fake lobbying campaign, but the Native American tribe they targeted, the St. Regis Mohawk tribe, never got its casino.
1. That time he ran off high roller Akio Kashiwagi
This story made the casino industry rounds a number of times over the past year, because it belies an appalling lack of understanding of how casino operator math functions, at least for those of us in a line of work where you're expected to have an understanding of how casino operator math functions. Obviously, for non-industry people (i.e. most people), this is zero, but for Trump it should probably have been more than zero.
The best and most readable version of this story I found floating around was Politico's The Whale That Nearly Drowned The Donald, if only because it starts off with Kashiwagi's gruesome unsolved murder and then goes backward to the story it's actually trying to tell. All stories are better if you stick a gruesome murder right at the beginning.
The Cliffs Notes version of this story is that Trump wanted a high roller to keep his struggling casinos afloat and draw some glamorous press attention. Kashiwagi seemed like a good target, given that he was one of the biggest whales in the world and had some sort of ties to the Japanese underworld, providing an air of mystery. So Trump began tempting Kashiwagi to come gamble at the Taj, promising a penthouse suite and hiring a private cook and all that nonsense that super high rollers get.
It worked, and the reporters showed up, and everything was great until Kashiwagi started winning. He was betting $250,000 a hand, which meant a winning streak could put him several million dollars over the house. A big enough winning streak could bankrupt the already financially weak Taj Mahal.
At the end of Kashiwagi's first trip, he had won $6 million. Trump's executives knew that the only way to recoup that money was to get Kashiwagi back and let him play for as long as humanly possible, to let the house edge do its thing. They agreed to play until Kashiwagi was either up or down $12 million. However, Trump, impatient, called the game off when Kashiwagi was down only $10 million, afraid his fortunes would turn again.
Enraged, Kashiwagi went back to Japan. This was bad for Trump for two reasons: One, the world of super high rollers is small, and word would get around. Two, Kashiwagi had been playing on credit, and the $6 million check he'd cut bounced when Trump tried to cash it.
Top 10 most bananas stories from Trump's time as a casino boss is republished from Online.CasinoCity.com.
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