Tag: casinos
The Art Of The Inside Deal: How Regulators Rescued Trump

The Art Of The Inside Deal: How Regulators Rescued Trump

Published with permission from The Washington Spectator

Americans wouldn’t be imagining today what a Trump presidency might be like were it not for a crucial moment more than 25 years ago when government saved Donald Trump from his own profligate spending. In fact, it was one carefully calculated response by one of his attorneys that saved Trump from financial collapse—just two years after Trump had proposed himself as a vice-presidential running mate for George H. W. Bush.

That moment, when New Jersey’s Casino Control Commission decided that Trump was too big to fail, was rich with lessons not just about Trump, but about how government can favor some people over others—and about how lots of journalists, then and now, don’t understand Trump.

From 1985 until 1990 Trump was awash in greenbacks. Over those four and a half years profits at his enterprises flowed into his pockets at the rate of $10,000 an hour in cash, around the clock.

At the time, Trump told me and everybody else that he was worth $3 billion. It was a dubious claim for a simple reason. If he was that rich, why was he unable to pay his bills as they came due?

In February 1990 Trump quit paying many of his personal bills. Reporting then for the Philadelphia Inquirer, I got his personal financial statement, which showed that he expected his income to fall to $748,000 in 1992 and to $296,000 the year after. That’s a lot of money to most people, but not to a “billionaire” with a personal 727 jet to maintain.

In April casino regulators made public a document showing Trump was down to his last $1.6 million.

Payments on more than a billion dollars of bonds on his three Atlantic City casinos came due every 90 days, but as the next payments loomed Trump lacked the money to make them.

About 100 vendors at the newly opened Trump Taj Mahal casino had not been paid. Many contractors took legal action to protect their interests. And the Trump Shuttle, equipped with what Trump said were gold sinks, was down to $1 million cash, not enough to pay employees and keep the fleet of Boeing 727s fueled, or to pay for constant repairs, since almost all the planes were more than 20 years old.

As April ended, I broke the story that Trump’s own personal financial statement showed he was worth far less than he claimed.

All this and more forced the New Jersey Division of Gaming Enforcement (DGE) to do something it had failed to do for years—examine Trump’s finances, to see if he met a critical legal requirement to own a casino, namely that he was financially stable.

The basic standard was simple: the ability to pay bills as they came due. If you had to roll over old debt into new, that was fine with casino regulators, so long as you did not miss payments. The law put the onus on Trump to establish his financial stability by “clear and convincing evidence.”

As the DGE moved in, Trump’s bankers had an accounting firm go over his finances. I summarized their report showing he had a negative net worth of $295 million this way: You may well be worth more than Donald Trump. That story ran above the masthead of the Inquirer’s front page with the headline “Bankers Say Trump May Be Worth Less than Zero.”

The morning that story ran was the critical moment for Trump. Near Trenton, the Casino Control Commission listened to testimony about whether Trump was financially stable. If it ruled he was not, his casino license would be rescinded.

The case that Trump should keep his licenses was made not so much by Trump’s own lawyers as by state employees at the DGE, who asked questions shaped to gloss over the growing gap between the revenue Trump was taking in and the bills he had coming due. It was a curious proceeding, as the DGE was supposed to investigate casino owners, workers, and the games themselves to ensure integrity and financial stability, not defend the owners.

A report by the Kenneth Leventhal accounting firm showed that Trump’s financial situation was deteriorating rapidly. Instead of ending the year with $24 million in cash, the accountants’ revised estimate showed he would run dry before the year’s end.

DGE’s own 111-page report noted that of the $3.2 billion Trump owed (not owned, but owed) he had personally guaranteed $833.5 million. Absent an agreement by all creditors, Trump faced an uncontrolled domino-effect chain of bankruptcies in which if one creditor moved against one Trump property the others would follow.

More than 1,000 lawyers working for Trump and his creditors (who already billed almost $11 million) had worked out a “fragile” deal to keep Trump going, hoping to minimize losses on the loans they had extended without checking his finances carefully.

The deal required approval by at least four of the five Casino Control Commission members. After two commissioners asked skeptical questions, Trump attorney Nick Ribis called for a break.

The dozen reporters in the front row stood up, a few looking bewildered. “They’re rehearsing the answer to the next question,” I advised my colleagues. “When they come back, they’ll have the witness say Trump will be torn apart by the bankers unless the commission votes immediate approval of his deal with them.”

Minutes later, Thomas Cerabino, a Trump lawyer at the center of the private bankruptcy negotiations, took the stand. The next question came not from Trump’s lawyers, but from DGE’s Thomas Auriemma.

What would happen, Auriemma asked, if the commission delayed approving the deal?

Unless the commission acted immediately, Cerabino testified in slow deliberate words, “the banks will move apart and take whatever steps they think are appropriate to protect their interests.”

With that warning from one of his lawyers, Trump avoided the B word, but it was made clear to commissioners that an uncontrolled bankruptcy was one day away. Only two other reporters wrote stories explaining what Cerabino had said—how he managed to convey, without saying it directly, that Trump was on the verge of ruin. That’s because most reporters merely quote people accurately, often with little understanding of the issues.

Before the hearings resumed the next day, several reporters rushed up to me, one clutching my big front-page headline, asking when I would retract my story. They said that Ribis, Trump’s casino lawyer, had just told them my story was wrong. I marched over to Ribis, asked a series of short questions whose answers established that my story was correct, and got him to confirm to my peers that no retraction of even correction would be requested.

When the commissioners entered the room they faced a choice. They could approve the “fragile deal” with the banks or go with the evidence showing that Trump was financially unstable and rescind his license.

That’s when four of the five political appointees used their power to take Trump’s side. The commission told the bankers they were free to foreclose on Trump. However, while they would be in possession of three large seaside hotels, there would be no gambling because the banks lacked casino licenses.

The commission’s action was extraordinary because state law provided for such a circumstance, allowing the commission to seize financially unstable casinos and keep them going with the existing staff until a new buyer could be found. Instead, the state of New Jersey took sides, favoring Trump over the interests of his bankers and the people who had put their money in those banks.

Four months later, as Christmas 1990 approached, Trump was again running out of cash. “Donald will need $180 million more from the banks to make it,” a source intimately familiar with the details of Trump’s finances told me back then.

It was the beginning of Trump having to relinquish his stakes in a host of enterprises—and by 1991 the Trump Taj Mahal was in Chapter 11 bankruptcy, the first of what would become four business bankruptcies. He later sold stock in his casinos, where investors not only lost their shirts, but during the fourth bankruptcy case creditors successfully demanded that Trump get lost. These days Trump licenses his name for much of his revenue.

Today Trump shrugs off the four bankruptcies, saying it’s a standard business tactic to restructure debt. But back in 1990 he was as afraid of that word as he is today of taking another tough question from Hugh Hewitt or Megyn Kelly. And but for government saving Trump by taking his side against his bankers, his business would have been tied up in years of litigation and we almost certainly would not be imagining the prospect of Donald Trump living at 1600 Pennsylvania Avenue. Because Trump would have been sunk beneath a sea of red ink.

David Cay Johnston is a Pulitzer Prize-winning investigative reporter. His most recent book is an anthology, Divided: The Perils of Our Growing Inequality.

Photo: U.S. Republican presidential candidate Donald Trump reacts as he is introduced during a campaign event in Concord, North Carolina March 7, 2016. REUTERS/Chris Keane

Fantasy Sports Bet On The Legislature In Florida

Fantasy Sports Bet On The Legislature In Florida

The red-light district that masquerades as the Capitol building in Tallahassee, Fla., is bustling as always with the Legislature in session.

It’s the annual festival of whores, when many Florida lawmakers sell out and roll over for high-rolling special interests, if the price is right. And the price is seldom wrong.

Buying one legislator doesn’t cost that much, but getting an entire bill passed to benefit your industry requires buying (or at least leasing) a bunch of them, which adds up to big bucks.

As an example, fantasy sports companies have spent more than $220,000 to recruit top Florida legislators on behalf of FanDuel, DraftKings and other daily fantasy leagues. These are online gambling operations that desperately don’t want to be regulated like gambling operations.

The companies insist their pay-to-play games reward skill over chance, but that’s a joke. Putting down cash on a quarterback’s Sunday performance is no different than betting on a race horse or a greyhound.

New York is seeking to ban fantasy sports companies from that state because the attorney general says they violate the gaming laws. Nevada, the galactic mecca of gambling, says that FanDuel and DraftKings promote wagering, plain and simple. The attorney general of Texas calls it “prohibited gambling.”

Florida, of course, remains wide open for business. No matter how you feel about online betting, the strategy of the competing companies offers a prime lesson on how to game a polluted political process.

Sen. Joe Negron, who’s next in line to be Senate president, is pushing a law that the daily fantasy sports sites have been fantasizing about. It legalizes play, and essentially grants exemption from gaming laws.

Online companies would pay $500,000 up front to operate in Florida, and $100,000 annually to renew their licenses. Minors would be barred from playing, though the companies wouldn’t be regulated like casinos or pari-mutuels. There would be no criminal penalties for violations.

By now you’ve already guessed that Negron is taking money from the industry. A political action committee connected to the Stuart Republican received $10,000 from the Fantasy Sports Trade Association in September.

Another productive $10,000 donation went to Rep. Matt Gaetz of Fort Walton Beach. He is dutifully cheerleading a similar bill through the state House, piously declaring, “Government should have little to no involvement in the recreational daily lives of Floridians.”

Does that mean Gaetz also supports legalizing marijuana, which millions of Floridians use recreationally? Nope. Evidently the pot growers haven’t written him a big enough check.

Fantasy sports operators have laid down big bets on key lawmakers besides Gaetz and Negron. Their lobby group donated $30,000 to a political committee run by Rep. Richard Corcoran, the House appropriations chairman and future speaker of the House.

The current Speaker, Steve Crisafulli, has a PAC that took at least $10,000 from the industry. So did a committee associated with Senate Appropriations chairman Tom Lee. GOP leaders aren’t the only ones with their palms out. Fantasy sports lobbyists also gave $25,000 to the Florida Democratic Party. (It was just a gesture of politeness, since the Democrats are powerless in the Legislature.)

Not all lawmakers are up for grabs. After Nevada ruled that sites such as DraftKings promote gambling, Florida’s Senate majority leader, Bill Galvano, actually gave back $15,000 he’d received from the Fantasy Sports Trade Association.

This defies all odds, but it really happened. Spreading tons of money around usually works wonders. Just ask the Seminoles.

In 2013, the tribe forked out $500,000 to Let’s Get to Work, Gov. Rick Scott’s political action committee. Scott recently signed a new gambling compact that would give the tribe’s seven casinos exclusive rights to roulette, craps and blackjack. In return, the state would be guaranteed at least $3 billion from profit-sharing over seven years, beginning in 2017.

The Scott deal, a potential windfall for the Seminoles, has yet to be approved by the Legislature. We all know what that means: Checks are flying.

The tribe opposes legalizing fantasy sports sites, which means lawmakers can shake big donations from both sides. Already the Seminoles have distributed more than $2 million to at least 90 state politicians (mostly Republicans), several political action committees and both major parties.

This is how it gets done in American politics — you pay to play. It’s as true in Tallahassee as it is in any brothel.

(Carl Hiaasen is a columnist for the Miami Herald. Readers may write to him at: 1 Herald Plaza, Miami, Fla., 33132.)

Photo: A FanDuel logo is displayed on a board inside of the DFS Players Conference in New York November 13, 2015. REUTERS/Lucas Jackson

Candidate Trump: Will Media Scrutinize Casino King’s Gamy Connections?

Candidate Trump: Will Media Scrutinize Casino King’s Gamy Connections?

Now that Donald Trump is actually running for president — defying many predictions that he could never tolerate that level of public scrutiny — it is time for a closer look at his career. Beyond the bizarre bluster of his Castro-style announcement speech, The Donald has a lot of tough questions to answer.

Trump’s premier chronicler is none other than Wayne Barrett, my close friend and former Village Voice colleague, whose brilliant 1992 book Trump: The Deals and the Downfall, examined in withering detail the panoply of federal and state subsidies, tax breaks, and dubious political relationships (mostly with Democrats) that formed the foundation of his fortune.

Of particular concern, given Trump’s casino and construction interests, are his enduring connections with organized crime, a subject thoroughly explored by Barrett. As summarized by the Philadelphia Inquirer, Wayne’s book asserted that “throughout his adult life, Donald Trump has done business with major organized-crime figures and performed favors for their associates.”

Key among these assertions is that in 1983, after Trump had obtained a casino license, he met with Anthony “Fat Tony” Salerno, head of the Genovese crime family, at the Manhattan townhouse of Roy Cohn, a lawyer who represented both men. The book cites an unnamed eyewitness as its source.

Other casino executives have had their licenses revoked or were denied a license just for being photographed in the company of major organized-crime figures, including Salerno.

At the time of the purported meeting, Trump was using a concrete company called S&A to build his Trump Plaza condos in Manhattan, according to federal court records cited in the book. S&A was controlled by Salerno and Paul Castellano, then head of New York’s Gambino crime family, according to those same records.

The book alleges numerous other dealings that Trump had with officials of mob-controlled concrete firms and with mob-influenced unions, and often cites government documents and interviews with named individuals.

Trump’s dealings with such figures have persisted long after the death of Cohn, who was among his closest friends as well as his attorney. In 2011, Barrett returned to this troubling topic for The Daily Beast:

In addition to being a television personality, Trump makes a lot of his money these days licensing his name for various hotel and condo projects, not to mention mattress and vodka brands. His most frequent partner in the condo/hotel deals—some of which have become actual projects and some of which haven’t—has been a small development firm called the Bayrock Group, which was headquartered in Trump Tower on Fifth Avenue in 2005 when the partnership began…Two days before Trump’s 2007 deposition in the O’Brien case, however, The New York Times broke a story about a top Bayrock executive, Felix Sater (aka Satter). Sater had gone to prison for plunging the stem of a wine glass into a commodity broker’s face in a bar fight. He’d also narrowly averted jail a second time, when he was named an “ unindicted co-conspirator” in a massive federal fraud case in 2000. Sater cooperated in this probe of a $40 million stock swindle, which resulted in 19 guilty pleas and the conviction of six mobstersincluding the nephew of Carmine “the Snake” Persico and the brother-in-law of Sammy “the Bull” Gravano.

The narrative continues downhill from there. When the late Rep. Geraldine Ferraro made history as the first woman on a major-party ticket in 1984, the political press followed Barrett’s lead in a scorching examination of her family’s mob ties. Will they do the same with Trump?

Photo: Donald Trump addresses CPAC 2015 (Michael Vadon via Flickr)

Casinos Just Aren’t The Answer

Casinos Just Aren’t The Answer

The video for the Bruce Springsteen song Atlantic City opens with a scene of the grand Marlborough-Blenheim Hotel imploding into a pile of dust. That was almost 40 years ago. The Traymore Hotel and other grand hotels were leveled in much the same spectacular fashion.

In their place rose glass boxes and concrete hulks to house new casinos. The Atlantic City dream was to fill New Jersey state coffers with gambling gold.

At the time, Nevada held a monopoly on casinos. The plan was to turn Atlantic City into a Las Vegas East drawing rollers — high and low — preferably from other tax jurisdictions.

But that dream went bad all around.

At least four Atlantic City casinos are closing this year, in part because of intense competition from newer gaming establishments in nearby Pennsylvania and elsewhere. Another problem for casinos nationally is the tough economy for their core market — blue-collar and middle-income workers.

Casino revenues in New Jersey are down 44 percent from their 2006 high, but the business is rough everywhere. The huge Harrah’s in Tunica, Mississippi, has also shut its doors.

The casino business is now in the advanced “cannibalizing” stage as competitors eat what’s left of each other’s lunch. By “competitors,” we mean both the casinos and the states relying on their revenues.

Atlantic City’s special tragedy is what was traded for the casino fantasy. Nowadays cities run entire visitor campaigns around the sort of fabulous old architecture Atlantic City so easily discarded. Imagine what today’s entrepreneurs could have done with a mythical beach resort smack in between New York and Washington!

Casino lust persists, but the argument has changed. Casinos are rarely portrayed as a font of tax revenues from out-of-state pockets. In most of the country, casino customers are increasingly locals who would have spent their spare dollars at local restaurants, theaters and other entertainment venues.

The new sales pitch for casinos rings more of desperation: If the state’s working class is going to be milked by gaming conglomerates and the states that tax them, better that the milking take place at home than in a neighboring state.

Some states have valiantly managed to hold the line. Nebraska, for example, does not allow full-fledged casinos even though Iowa has placed three in Council Bluffs, right across the Missouri River from Omaha. (Iowa’s gambling tax revenues are also falling.)

Massachusetts seems to be succumbing and is now involved in an odd negotiation with Mohegan Sun, an Indian casino operator applying to build an outlet near Boston. Mohegan Sun already has a big-league casino in eastern Connecticut, not far from the state border. Massachusetts wants a promise that it will not entice the state’s high-stakes gamblers to its flagship in Connecticut (where casino taxes are lower). Mohegan Sun has yet to agree.

The statesmen running New Jersey now figure: If casinos aren’t making it in South Jersey, perhaps the solution is casinos in North Jersey. How about putting them “somewhere in the swamps of Jersey” — a Springsteen reference to the Meadowlands?

The Meadowlands sit a mere nine miles west of Manhattan, a casino-free zone. New York state, however, seems to have its own plans. It is now considering several industrial-strength casinos just north of New York City (and, for that matter, the New Jersey state line).

Jersey’s casino boosters seem undeterred. A North Jersey state senator — mindful of South Jersey’s fear of new competition — recently ventured that a couple of big casinos in his part of the state “could produce in excess of $1 billion over 10 years to be reinvested in Atlantic City.”

Sure. If you say so.

Follow Froma Harrop on Twitter @FromaHarrop. She can be reached at fharrop@gmail.com. To find out more about Froma Harrop and read features by other Creators writers and cartoonists, visit the Creators Web page at www.creators.com.

Photo: Bob Jagendorf via Flickr

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