Trump, page 37
The problem was Trump bought the casino without forcing himself to choose between it and the Plaza, and then he paid a hundred million more for the Hilton than he would pay a few months later to buy out a similarly sized casino-hotel he’d built himself on the Boardwalk. The thought that he might be overpaying a company with no alternative but to sell never seemed to occur to him; neither did the reasonable concern that two casinos might be one too many for a tiny organization with no casino experience.
Donald signed a contract on April 27, 1985, and went immediately to the DGE for license approval. He was treated with reverence. No one seemed to remember that he’d just passed the character and integrity test in the 1982 licensing and that DGE had expressly found then that neither he nor his corporate entity could demonstrate the business and casino experience necessary for a license. This question had also not been resolved in Donald’s second appearance before DGE and the CCC in 1984, since he’d sought licensing as Harrah’s partner and Harrah’s clearly had the ability and experience. Despite this history, the quick-and-easy license for the Castle was the first the commission had ever granted to an applicant with no gaming background. To top it off, the key employee licensed to run the operation was Ivana, whose only prior job experience was modeling and interior decorating.
While DGE and CCC rushed to approve Donald’s bond financing mechanisms for the purchase, one commissioner, Joel Jacobson, voted against a resolution exempting Trump’s bondholders from having to qualify as financial sources. Jacobson went out of his way to separate his financing objection from Trump personally, whom he praised, but he assailed “the array of Rube Goldberg nonfunctioning corporations” set up “to disguise” the fact that “the only asset that stands behind these bonds is the casino-hotel.” Since the statute clearly required that anyone who holds securities in a casino, including bonds, qualify for a license, Jacobson charged that Attorney General Kimmelman’s ruling that Donald’s unprecedented bond sale was exempt from review was an “erosion of the statutory requirements.”
Jacobson was a lone prophetic voice attempting to rein in the wild bond financing that was taking over the industry. DGE and the other members of the CCC had taken the position on the previous Bally’s and Claridge applications that where bonds were widely distributed and freely traded, the holders didn’t have to qualify. While Jacobson had also opposed those sales, he pointed out that Trump was now taking this ruling a step further and privately placing, at least initially, the Trump bonds. Trump was also the first individual, rather than a publicly traded company, to be permitted to go to the bond market, meaning there was literally nothing behind the bonds but an untested operator.
The new Donald was willing to load his casino with debt. He went to Drexel’s Michael Milken again, but encountered the same stubborn insistence on a 10 percent Trump equity contribution. In the end, Donald’s first wholly owned casino and first venture in the public markets led to a grand total of $352 million worth of mortgage-backed bonds, issued by Bear Stearns, an investment banking house so determined to enter the casino business it was apparently willing to top anything Drexel had to offer. Donald also made an immediate $70 million capital contribution to cover improvement costs—but all of it was borrowed from Manufacturers Hanover, one of the few major New York banks willing to invest in a casino. He was clearly determined to make his new casino the best that borrowed money could buy or build.
It was, of course, impossible for DGE to qualify every individual who bought a casino bond, but that was hardly the point of Jacobson’s persistent argument. Even the commission chairman, Trump backer Walter Read, conceded that the CCC had “always tried to encourage the use of traditional financing sources, such as banks,” adding that “it was heartening to see that such financing has become the rule of the Atlantic City casino industry.” But neither Read nor anyone else would slow down the rush to Trump’s gigantic bond sale, the first of four that the commission would authorize for Donald, allowing him to issue almost $1.3 billion in notes to the public, as if there were no limit to the revenue that quarter slots and blackjack could generate. The commission was allowing the financial foundation underlying its protected industry to become as soft as the sandy earth beneath the casinos.
The experience and financing questions aside, the DGE and CCC also skipped blithely past the Trump character and integrity issues that were the heart of its legal mandate. Neither confronted the obvious first question: If an affiliation with Sidney Korshak could sink Hilton, why didn’t Roy Cohn taint Donald Trump? If a mob-tied lawyer on a $50,000-a-year retainer who rarely talked to any top Hilton executives could nonetheless cost the company a license, why wasn’t Trump even questioned about his ties to his principal lawyer, who told one reporter that Donald called him “fifteen to twenty times a day, always asking what’s the status of this, what’s the status of that?”
With clients who ranged from John Gotti to the sons of Carlo Gambino, Cohn reportedly hosted gatherings of the commission itself—which included the heads of the five crime families—at his town house. His closest mob confidant and client, Tony Salerno, was so involved in Atlantic City that he was believed to have sanctioned the murders of the hit men who killed Scarfo’s predecessor, boasting on federal tapes: “I’m the fucking boss, that’s who I am. Connecticut is mine; New Jersey is mine.” One Cohn aide specifically remembers a 1983 get-together at Cohn’s town house living room that supposedly included the lawyer and his two clients—Trump and Salerno—right around the time that Salerno’s S&A Concrete was building Trump Plaza, the Third Avenue residential tower. Yet no DGE report even considered the possibility that Cohn’s mob liaisons—from Salerno to the infamous John Cody—might have been used to facilitate Trump construction projects. In fact, the agency’s top investigator conceded in a court deposition that they had not even looked at any of Trump’s subcontractors when they initially licensed him.
DGE was also oblivious to the implications of the Cohn/Trump relationship that were clearly related to casino operations. If Korshak’s ties with the mob-run hotel workers was at the heart of the CCC problem with Hilton, why were Cohn and Trump’s cozy connections with the same union unimportant? The head of the New York local of the Hotel Workers, Vito Pitta, who acknowledges that he was “very friendly” with Cohn, signed a separate contract with Trump at the very moment that Donald’s Castle application was pending before the CCC. Donald eagerly broke ranks with the city’s Hotel Association on the eve of a 1985 strike by Pitta’s union to sign this agreement, pleasing Pitta so much that he called the Scarfo crime family overlords running Local 54 in Atlantic City on Trump’s behalf, telling them that Donald “would be no problem for the local there.” A year later, Trump severed himself from the Hotel Association in Atlantic City as well, signed his own contract with Local 54, and was virtually the only owner spared a bitter strike. “They have good relations with him in Atlantic City,” said Pitta, “as good as we have here.”
Predictably, Cohn was even tied at the hip to Korshak, who took the extraordinary step of contradicting his client Hilton’s attempt before the CCC to minimize their relationship and released thank-you notes from Hilton in the middle of the hearing. Korshak’s actions so damaged Hilton that he indirectly helped deliver the casino to Trump. Not only were Sidney and his brother, Marshall, frequently on the phone to the town house, they were the lawyers for Cohn’s tawdry parking lot business, which also controlled lots in Chicago and was the subject of a federal probe there as well.
Obviously, one reason DGE overlooked the Cohn connection was that he was wrapped in a cloak of respectability—extending from the White House to the governor who appointed the casino investigators. Yet unlike the frequently indicted Cohn, Korshak had never been charged with a crime. And unlike Korshak, Cohn wound up disbarred in 1986 after a prolonged disciplinary probe and hearing that featured Trump’s appearance as a fawning character witness. Years before that, Martindale Hubbell, the prestigious directory of the American Bar Association, had refused to even list Cohn’s law firm, stating it was unable to “develop a file of confidential recommendations to support the necessary rating for the senior member of the firm.”
But it wasn’t just Cohn that DGE missed. By the time the agency recommended the Castle license, Mike Mathews was in jail and there was clearly no impediment to a review of the 1984 allegations pursued by the FBI about the Shapiro conduit contributions for Trump. The long-moribund Polish worker case had finally begun receiving press attention in New York, and civil suits were making it harder and harder for investigators to ignore the obvious implications for the Trump Organization. Nonetheless, the DGE reports on Trump during this Kimmelman era were so scant and swift that they made the DGE probe of 1981 seem thorough.
Armed with his instant license, Trump met his mid-June deadline and opened his Castle for the peak season. His decision to name Ivana to run the casino, however, caused a wide rift within his company and his family. Robert had wanted the job himself, and ever since he had tried to downplay Ivana’s interior decorating role during the construction of the Plaza, Trump insiders had sensed a tension between the two. Robert was so disappointed about being bypassed that he told friends in the company that he was thinking about leaving. Donald’s explanation was that Robert was “so good with the bankers and regulators” that he couldn’t afford to lose him to a single property. Fred finally intervened and spoke with both his sons, piecing the family company back together. Ivana, meanwhile, began working a few days a week until she gradually got a grasp of the casino business. By late 1986 she was spending most weekday nights in Atlantic City, working 7:00 A.M. to 9:00 P.M., fully in charge of the operation.
Four months after the Castle opened, the first news reports of Trump’s agreement to buy the Plaza from Harrah’s appeared, although the details of the deal, and the ongoing hostilities and lawsuit, delayed the sale until early 1986. For this purchase, his $250 million bond sale, also handled through Bear Stearns, would raise funds that exceeded the nearly $60 million up-front payment he had to pay Harrah’s and the $152 million in outstanding bank debt. The first bond bonanza had gone so well he decided to seek financing that left him with an excess $30 million or so to cover renovations and whatever else was needed. Trump made no significant capital infusion of his own, borrowed or otherwise. In addition to the bond debt, he gave Harrah’s a $17 million note and assumed $11 million in mortgages due on properties underlying the garage. Still, the $278 million debt was less daunting than what he’d assumed at the Castle.
DGE and CCC approved Donald’s acquisition of Harrah’s interest routinely in the spring of 1986, without any apparent examination of the scandal exploding in New York that involved so many people close to Donald, particularly his lawyer Stanley Friedman, already under state and federal indictment, and his longtime ally on the Board of Estimate, Donald Manes, who’d committed suicide while under FBI scrutiny. The regulators certainly knew of Trump’s association with both men since DGE had briefly noted in one report Donald’s practice of personally authorizing free rooms for Friedman, though he had no gambling credit line, and had been informed by the Queens District Attorney of Trump Plaza’s refusal to comply with a subpoena seeking junket records for two notorious Manes bagmen, Geoffrey Lindenauer and Jerome Driesen.
One issue did arise, however, that could not be ignored and would test even Donald’s charm with the two agencies. In June of 1986, when the Castle came up for a renewal of its 1985 license, Donald faced his first tough run through the CCC process. Though in the end, a majority of the commission would approve the license, one new commissioner, Valerie Armstrong, opposed it and battered Trump witnesses during this and two more hearings in 1987 about inconsistencies in the prior testimony of Donald and two of his Dreyer & Traub attorneys. While Chairman Read, unlike Armstrong, ultimately supported the Trump license, his disdainful remarks about the Dreyer & Traub testimony were subsequently interpreted by DGE as an indication of the commission’s view that the Trump lawyers lacked credibility.
The issue was the road improvement near the Castle that Trump had assumed responsibility to partially pay for when he bought the Hilton. While Ribis assured the commission during the original Castle hearings that Trump was committed to making the roadway contribution, Robert Trump told State Department of Transportation (DOT) officials five days later that he could not state for certain that the Trump Organization would honor this “unconditional” contractual commitment. Barely a month later, Donald met with the DOT commissioner and sharply criticized the planned improvements. Within a few months, Robert was threatening the commissioner that the Trump Organization would tie up DOT in court for ten years unless it radically altered the roadway plan, cutting the cost to a small fraction of its estimated $36 to $60 million budget. (Trump was supposed to split the price evenly with two other casinos.) When DOT rejected Trump’s alternate plan, the threatened lawsuit was filed.
Some of the commissioners at CCC clearly believed that Trump had decided not to finance the improvement well before Ribis vowed at the 1985 hearing that the Trump Organization would “stand in the shoes” of Hilton and fulfill the pledge. This problem was compounded when Donald and other company witnesses at the 1986 renewal hearing tried to lay the blame for their abdication of the roadway commitment on Hilton, which they contended had not fully informed them about the cost and nature of the improvements. In his attempt to distance himself from knowledge of the roadway provision, Donald painted quite a different picture of himself as dealmaker than the on-the-case, detail man who stars in his books. He professed ignorance of a costly provision that appeared in the purchase contract and the bond offering, both of which expressly stated an estimated project cost. Since he was also claiming that he thought the roadway plan was nonbinding, Donald had to concede he hadn’t read the Hilton’s state environmental permit, which was predicated on it or his own similarly conditioned casino license.
Having distanced himself from any knowledge of roadway improvements, Donald then felt free to ridicule the DOT plan, which called for an expensive overpass, until a commission questioner stopped him to ask: “Did you know that the plans which you called a disaster were not in fact prepared by DOT, but were prepared by Wilbur Smith Associates, your own consultant?”
“It wouldn’t matter to me who they were prepared by,” replied Donald, who claimed he didn’t know that he and the state had retained the same consultant. “I mean, Wilbur Smith could make mistakes, too. We all make mistakes.”
Four Hilton attorneys wound up offering a totally contrary view of Trump’s knowledge about the roadway project in sworn testimony, including one who claimed to have had a conversation directly with Donald at the contract signing the previous April, when Donald, holding the roadway plans in his hand, said he didn’t like them and questioned the lawyer about how binding the deal was. But the most damaging evidence was DGE’s retrieval from Dreyer & Traub files of a copy of a draft of the purchase agreement that was underlined and annotated throughout by a Trump lawyer. Right beside the single paragraph that contained the $11.7 million roadway improvement estimate were the initials “DJT” and the words “read agreement.”
Once DGE found this damning evidence, however, it began acting as if its own smoking gun was too hot to handle. Under new leadership but as acquiescent as ever, the agency concluded that the contradictory versions essentially canceled each other out and that no one could really determine precisely what had happened.* A baffled Armstrong said she was “unable to understand the Division’s dismissal” of the evidence corroborating the Hilton attorneys or the Trump Organization’s refusal “to explain or refute any of the matters” raised in the DGE report.
Chairman Read said he found Donald’s handling of the whole matter “perplexing and unsatisfactory,” but he and the rest of the commissioners other than Armstrong, all of whom were by then Kean appointees, rubber-stamped the license application.
Ironically, at the very same time in late 1985 and early 1986 that Trump was refusing to meet a state roadway commitment, other state officials awarded him a twenty-five-year lease on the publicly owned marina next to the Castle. Trump’s evasion of his roadway obligations was an acknowledged violation of the environmental permit issued by the state for the Hilton facility, yet the same environmental agency that announced this violation at a CCC hearing took no action to enforce the permit and then awarded him the marina lease. Trump won the lease despite intense competition from a local group of investors, whose bid was preferred by a Citizens’ Advisory Committee set up to advise state DEP. When the losing bidders charged that the state process had been rigged in Trump’s favor and sued, Trump wound up entering into a confidential settlement with them.
The marina lease and the roadway turnabout at DEP were manifestations of Donald’s bonds with the Kean administration. The glue remained Roger Stone, the Trump lobbyist who had again managed Kean’s election campaign in 1985 and was so close to the governor’s office he hired Kean’s retiring chief of staff. When Roy Cohn became very ill in 1984, Donald began to turn more and more to Stone, not just on New Jersey matters but as a kind of Cohn-substitute. Unhappily, Donald discovered that no one could replace Cohn. While Stone usually avoided direct interfacing with state agencies on Trump’s behalf, he did personally lobby for Trump on occasion—pursuing, for example, the state permits needed for a controversial 1,300-car employee parking lot located near the Castle. The lot provoked a storm of protest because it was literally at the foot of the only bridge leading into a small town, Brigantine, but Stone won another DEP reversal and Trump got his permit.
The most important consequence, however, of the Kean/Trump alliance was that the acquiescence of the governor’s CCC and DGE combined to embolden Donald, enticing him past the Castle and Plaza to unsuccessful takeover runs at most of the public companies with Atlantic City casinos, as well as the acquisition of Resorts, the construction of the Taj Mahal, and, finally, the purchase of the Atlantis, the Penthouse site, and the long-desolate Kenny Shapiro parking garage block near the Plaza.
