Casinos, Crime, and Junk Bonds: Trump’s Rise in Atlantic City
This article covers the history of the resort casino and legalized gambling in New Jersey. It also covers Donald Trump’s initial rise in Atlantic City and his interactions with organized crime. It is the second entry in the series “Donald Trump, Corruption, and the Insidious Influence of Organized Crime.” While it is not necessary to read the previous entries, it is recommended.
The first article examined Donald Trump’s early real estate career in Manhattan and his involvement in civic corruption and with organized crime.
This article is an excerpt from my book, While We Slept: Vladimir Putin, Donald Trump, and the Corruption of American Democracy, available here.
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Donald Trump had dreamed of owning a casino as far back as 1976, when he regaled reporters about his ambition to build the largest casino in Las Vegas and name it Xanadu.
Before he made his move on Atlantic City, Trump lobbied to legalize gambling in New York City. Indeed, he had designed his first development in Manhattan, the Grand Hyatt, to be able to accommodate a casino floor. Despite Trump’s vocal advocacy, the legalized gambling movement in New York slowed to stall and Donald turned his attention to New Jersey.
The History of the Resort Casino and the Legalization of Gambling in New Jersey
For Benjamin “Bugsy” Siegel, expanding the mafia’s reach to Las Vegas was something akin to an obsession.
It was 1945 and America was riding high. While the rest of the world was still digging itself out from under rubble after the devastation of World War II, America was about to enter a post-War boom period.
After the deprivations of the Great Depression and the shortages and rationing that accompanied the war, Americans for the first time in years had disposable income and a pent up desire to spend it.
Gambling, that perennial of human vices, had long been the purview of underground establishments and organized crime.
Many of the politically connected bigwigs in the East Coast mafia establishment, like Meyer Lansky, then operating in South Florida, and Frank “the Prime Minister” Costello, had interests in underground casinos around Miami and New Orleans.
Ben Siegel, if you called him Bugsy you were liable to be put in the hospital, had a different, larger vision. That vision would take him to a desert backwater known as Las Vegas.
The 39-year-old Siegel had come a long way by 1945. As a young teenager he had prowled the streets of the Lower East Side of Manhattan with his friend and fellow Jew, Meyer Lansky.
Together they formed the Bug and Meyer Gang, and could often be found brawling with Irish and Italian youths in the street.
After a particularly brutal brawl, a judge said of Siegel and Lansky, “You boys have bugs between your ears.”
As Lansky was known as the brains of the outfit and Siegel the brawns, the moniker “Bugsy” stuck with the latter. The two boys gained the attention of another young up-and-coming hoodlum in New York, Lucky Luciano.
Soon the Bug and Meyer Gang was disbanded and replaced with a new gang called Murder Inc.
Siegel and Lansky would prove pivotal allies for Charlie “Lucky” Luciano as he founded the organizational structure that guided American organized crime for decades to come.
Luciano sent Siegal out West to solidify and expand the mafias hold over illegal rackets in California. By 1936 he was firmly entrenched in Los Angeles, had seized control of multiple trade unions related to the entertainment industry and was regularly extorting Hollywood studios in exchange for maintaining labor peace.
Siegel enjoyed early success in LA, purchasing a Beverly Hills mansion, socializing with tinseltown elite and becoming a member of respected country clubs. Some of the famous personages Siegel was known to associate with included Cary Grant, Clark Gable, Gary Cooper and studio executives Louis B. Mayer and Jack L. Warner.
However, Siegel’s lasting influence would be felt not in New York of Los Angeles, but in Las Vegas. Gambling had been legal in certain formats in Nevada since 1881, but in 1931 the Nevada state legislature legalized virtually every form of gambling in a misguided attempt to counteract the ravages of the Depression.
By the end of the Second World War, legalized gambling presented organized crime with its most promising means of income and Bugsy Siegel was intent on being the first man to cash in.
Siegel utilized his underworld contacts in 1946 and raised $3 million dollars from Meyer Lansky, who by then was running an underground gambling empire of his own, as well as Lucky Luciano’s successor Frank Costello and a number of other criminal backers.
What distinguished Siegel’s vision from those who came before was that he was going to develop the first luxurious casino-hotel as opposed to just an underground gambling den. The Flamingo wasn’t the first casino on the Las Vegas strip, but it redefined what Americans would come to expect when they thought of what a casino was.
The basic concept of the famous Flamingo Hotel and Casino would be emulated the world over in the years to come.
Unfortunately for Siegel, he wouldn’t live long enough to see the lasting influence of his endeavor. He poured money into the Flamingo project, which went nearly three times over budget.
When the Flamingo hastily opened its rooms weren’t ready and therefore unoccupied. To make matters worse, the casino suffered from a run of bad luck and initially lost money.
Siegel’s investors came to believe that he was skimming money from the casino, and in 1947 Siegel was murdered in the home of his mistress by being riddled with nine.30 caliber bullets fired from a military carbine.
Siegel’s tumultuous reign had come to an end, but gambling in Las Vegas was just getting started. Until the mid-1970s, Nevada remained the only place in the United States were gambling was legal.
During that period, the mafia invested heavily in the city. The 1950s saw the establishment of numerous mob-backed casinos, many of which were financed by the corrupt, organized crime-linked Teamsters Central States Pension Fund, including the Sahara, Sands, Dunes, Riviera, Tropicana and Stardust.
Donald Trump’s attorney and mentor, Roy Cohn, who had played a pivotal role in facilitating Trump’s entry into the Manhattan real estate market, was intimately familiar with the relationship between organized crime and the corrupt Teamsters Union. In fact, Cohn himself was an investor in the Teamster funded development of Sunrise Hospital in Nevada. Other investors included the bootlegger and Cleveland organized crime baron Moe Dalitz, who later held an interest in the Desert Inn casino in Las Vegas.
Despite the efforts of the anti-mafia Attorney General Robert F. Kennedy, who also vigorously and unsuccessfully pursued Roy Cohn, the influence of organized crime over Las Vegas continued to grow. In the 1960s mob-linked Teamsters money was behind the opening of Caesar’s Palace, as well as Circus, Circus.
Two events, one occurring in the late 60s and the other in the mid-70s, would signal an important change in the national landscape when it came to gambling.
In 1967, the reclusive billionaire Howard Hughes purchased the Desert Inn Casino for $13 million. It was the first in a string of buy-outs that would become early examples of corporate ownership of hotel casinos. Hughes’s ownership interest in the casinos would not be last but rather signify the start of a trend.
In 1976, Nevada lost its treasured status as the only state to allow for legal gambling. On the same day Jimmy Carter was elected the 39th President of the United States, voters in New Jersey passed a referendum that allowed for legalized gambling in Atlantic City.
Atlantic City was incorporated in 1854. The names of its major streets, Boardwalk, Park Place, etc, have been immortalized by the board game Monopoly. The city was initially built to be a weekend getaway for blue collar Philadelphians.
Over the years, wooden boardwalks were constructed over the beaches and became home to all manner of crackerjack amusements, including an odd variety of freak shows, hot dog stands, cheap beer spots and the world’s first Ferris wheel.
The first Miss America Pageant took place in Atlantic city in 1921.
Gambling has been a mainstay of the city since its inception, both the legal and illegal variety. Early in the city’s history nickel betting games took place in the back of cigar stores.
As time went on, the illegal gambling venues became more swanky, with spots like the Bath and Turf Club and the 500 Club, the latter a famous rat pack watering hole owned by Paul “Skinny” D’Amato.
The 1950s saw a crackdown on illegal gambling operations and many of the classier establishments shut down. With the advent of jet travel, tourism in general declined in Atlantic City and an economic malaise settled in.
In 1976, a referendum on the legalization of gambling in Atlantic City was held in New Jersey. The pro-gambling campaign was funded by Resorts International, a Bahamas-based gaming company.
The Paradise Island casino, operated by Resorts, was suspected by the Justice Department of operating a “Lansky skim” and had hired members of the Lansky Syndicate.
Hank Messick, a journalist, Lansky biographer, and expert on organized crime, believed that the legalization of gambling in New Jersey was the master plan of old school bootleggers like Meyer Lansky and Gerardo Catena of the Genovese crime family who operated in the Garden State during Prohibition.
“The dice-roll there will mark the final triumph of the old syndicates — those boys who started out as young men in the ’30s as bootleggers and worked their way into narcotics,” Messick told The Washington Post a week before the casinos New Jersey opened. “No matter who has opened the doors in Atlantic City, the mob will still be there.”
After the passage of legalized gambling in 1976, the trend of corporately owned hotel casinos was massively accelerated by developments on Wall Street. In the 1970s and 80s there was a boom in the high-yield bond market, better known as junk bonds.
The man most associated with the junk bond bonanza was a senior executive at the now defunct investment bank Drexel Burnham Lambert named Michael Milken, known as the Junk Bond King.
By the 1970s, many once successful blue chip American companies had fallen on hard times. Milken was the first to realize that Wall Street credit agencies had downgraded many of these once venerable corporations to C-grade status, otherwise known as junk.
Milken not only raised money through buying bonds from these companies, but soon began casting a wider and wider net and buying bonds from all manner of companies with low credit standing.
He put together his own high-yield bond department, started taking massive gambles and raised immense sums of money. Some used the money raised by betting on debt to become corporate raiders. Others, invested in casinos.
Milken’s tsunami of junk bond cash washed over Atlantic City and even the proceeds of organized crime paled in comparison. As Pulitzer Prize winner David Cay Johnston puts it in his book Temples of Chance, America Inc. bought out Murder Inc.
The first client Milken brought to Drexel was Steve Wynn, owner of the Atlantic City resort casino the Golden Nugget. Other mainstream corporations jumped on the 80s junk bond bandwagon to the tune of $5 billion, including Hilton, Holiday Inn and Ramada.
Milken was indicted and plead guilty to charges related to an insider trading scandal. Decades later, President Donald Trump pardoned him.
In Atlantic City, Trump was destined to become the biggest name on the boardwalk, and while he didn’t use Michael Milken to do it, he did rely on the accumulation of vast debt.
Trump in Atlantic City: Casinos, Civic Corruption and Organized Crime
Donald Trump’s first challenge was to find a suitable location for a casino. Atlantic City had fallen on hard times. More people lived in Public Housing within its city limits than anywhere else in America.
The casinos were designed to hide this reality, keeping their customers distracted by the gaudy lights and attractions littering vast casino floors. The parcel Trump first identified was an ideal location at the center of the boardwalk strip, next to the convention center and easily accessed by drivers making their way into the city from the local expressway.
Trump’s associations organized crime in Atlantic City began almost as soon as he stepped out of his limo. This had the potential to pose an enormous problem for him, as New Jersey regulators were meant to deny anyone with links to organized crime a license to own or operate a casino.
Trump was determined to lease the parcel for what would become the Trump Plaza Hotel and Casino and many of the key players in the complex ownership scheme of the site had shady affiliations, none more so than Daniel Sullivan and Kenny Shapiro.
Trump had worked with Daniel Sullivan before to sort out labor issues on the Grand Hyatt and Trump Tower projects.
Sullivan had a rap sheet, court records show that he had been arrested on assault charges and had been imprisoned for larceny. He served as a middle man between the mafia and organized labor.
In 1966, Sullivan was the last person to see labor lawyer Abraham Bauman alive, presumed murdered, and friends had reported that Sullivan had told them that he knew where Jimmy Hoffa was buried. Sullivan was also an FBI informant.
While Sullivan was working on Trump’s Grand Hyatt project, he was overheard by an FBI surveillance team meeting with Theodore Maritas, the corrupt president of the District Council of Carpenters.
Maritas, who was under federal investigation, was later indicted for labor racketeering along with a member of the Genovese crime family.
Shortly after his arrest he disappeared. Prosecutors assumed he was murdered by the mob after he had become a cooperating witness.
After FBI agents overheard Sullivan speaking with Maritas, they looked up his file and realized that Sullivan himself had acted as an FBI informant years earlier.
Special Agent Walter Stowe, an undercover specialist for the FBI, began an ongoing relationship with Sullivan in order to gain insights into the relationship between organized labor and the mafia.
He soon heard about a brash young New York developer trying to open a casino in Atlantic City.
Sullivan told Stowe that through a trash hauling business he owned in Atlantic City he had met a struggling business owner in possession of a prime piece of boardwalk real estate, which he subsequently purchased.
This was the land that Donald Trump wanted to develop for his casino. Sullivan didn’t own the property outright, he had bought it in a partnership with a man named Kenny Shapiro.
Kenny Shapiro was a Jersey Shore real estate speculator later identified by the New Jersey State Commission of Investigation as a “financier” for the Philadelphia mafia syndicate run by Nicodemo “Little Nicky” Scarfo.
During his bloodthirsty reign, Scarfo was believed to be involved in over two dozen murders in the 1980s alone.
The Scarfo crime family had infiltrated the 20,000 strong hotel and casino’s union and was a force to be reckoned with in the city.
As recently as January of 2023, Trump was photographed at one of his golf courses standing next to Joey Merlino, the one-time successor to Scarfo’s violent criminal empire.
Shapiro’s office was located on the boardwalk and detectives monitoring it often noted a steady stream of wiseguys entering and exiting the premises.
Sometime in April of 1981, Sullivan brought Walter Stowe and Damon Taylor, a supervisor of organized crime investigations at the FBI, to Trump’s office. The developer, labor fixer and two FBI agents had a conversation.
An FBI memorandum described the meeting as follows:
“The purpose of this meeting was for DONALD TRUMP to express his reservations about building a casino in Atlantic City.”
“TRUMP advised agents that he had read in the press media and had heard from various acquaintances that organized crime elements were known to operate in Atlantic City.”
“TRUMP also expressed at this meeting, the reservation that his life and those around him would be subject to microscopic examination.”
“TRUMP advised that he wanted to build a casino in Atlantic City but he did not wish to tarnish his family’s name.”
Trump courted the FBI agents, suggesting they send undercover agents to the casino. Trump invited Agent Stowe to play a round of golf with him at a private Westchester Course and took him out for lunch at the esteemed 21 Club. He even offered Stowe a job with the Trump Organization.
Despite his wining and dining of Agent Stowe, Trump knew perfectly well the kinds of characters he was dealing with.
“Some of those guys were tough guys. Shapiro. They were tough guys. In fact, they say that Dan Sullivan was the guy that killed Jimmy Hoffa,” Trump told his biographer Timothy L. O’Brien. “They were tough guys and not good guys.”
“I was able to handle them,” Trump continued. “I found Sullivan to be the tougher of the two. He would constantly bring up the names of friends of his who were in the FBI.”
“He had many people in the FBI, who he would claim were his friends. And you’d say: You were talking to a saint almost. He would always talk about honesty. That everything in life was honesty. And yet he probably wasn’t an honest guy
“[S]hapiro was like a third-rate, local real estate mafia. Nothing spectacular. And you know, I get lucky. I heard a rumor that Sullivan — because Sullivan was a great con man — that Sullivan killed Jimmy Hoffa. Because I heard that rumor, I kept my guard up.”
“I said, ‘Hey, I don’t want to be friends with this guy.’ I’ll bet you that if I didn’t hear that rumor, maybe I wouldn’t be here right now. If I didn’t hear that rumor, I would have been much more prone to be taken into the whole crazy scheme of things.”
Despite the rumors, Trump leased the property. His signature alone, however, wasn’t sufficient to push the deal over the finish line. The signature next to his was, unsurprisingly, Fred Trump’s.
In order to pay for the lease, Trump relied once again on the line of credit his father had established with Chase Bank. It was the same line of credit that allowed him to continue construction on the Grand Hyatt after there had been significant cost overruns.
Trump applied for his first casino license on May 1st, 1981.
His decision to lease the property as opposed to buy it outright was a risky move. According to New Jersey regulations, in order for a gambling license to be awarded, all of the owners of a building site needed to be cleared of links to organized crime, not just the individual holding the lease.
Sullivan and Shapiro were likely to come under scrutiny. Matters were further complicated when Trump agreed to help finance Sullivan’s purchase of a drywall manufacturer called Circle Industries. Trump, according to the deal, would be a one-third partner in the company.
Circle Industries was one of a group of 20 drywall makers known as “The Club.” The company was implicated in a racketeering scheme between the carpenters’ union and the Genovese crime family.
The leaders of the Genovese crime family were represented by Roy Cohn.
Trump used political connections as he navigated the regulatory bodies. Executive Vice President of the Trump Organization, Louise Sunshine, had worked as a fundraiser for New York Governor Hugh Carey and had extensive contacts within the administration of New Jersey Governor Brendan Byrne.
On the recommendation of media magnate and Roy Cohn friend Si Newhouse, Trump hired a new attorney named Nick Ribis.
Ribis was personally acquainted with Joe Fusco, the head of the New Jersey Casino Control Commission’s (CCC) licensing division. Ribis and Fusco later became business partners.
A conflict existed between New Jersey’s promise to enforce casino regulations and the economic imperatives of Atlantic City that Trump exploited with ruthless efficiency.
After learning that the casino licensing process took 18 months, Trump invited New Jersey’s attorney general John Degnan and the head of the Division of Gaming Enforcement (DGE) to Nick Ribis’ office and threatened to pull out of Atlantic City altogether if the process wasn’t expedited.
As New York State was still considering whether to legalize gambling, Trump further hinted that he would fully support that effort if he didn’t get his way. Degnan, who was about to run for Governor, agreed to speed up the process.
After receiving this accommodation, Trump became an opponent of legalized gambling in New York. The measure failed
Part of the CCC’s licensing process included an investigation into Trump’s character and integrity. On his licensing application, Donald was asked whether he had ever been the subject of a government investigation. The penalty for incomplete or false answers was the denial of the license.
Of course, Trump had been the subject of multiple federal investigations. Though his application has never been made public, there is every indication that Donald intentionally omitted disqualifying facts from it.
There appears to have been no mention of the 1979 federal grand jury investigation put together by the United States attorney for Brooklyn Ed Korman into a shady deal Trump struck to obtain an option to buy the West Side Rail yards, for which Donald was interviewed by the FBI.
Trump also failed to mention that he was questioned by the FBI over his relationship with labor racketeer John Cody during the construction of Trump Tower.
The application also inquired as to whether he had ever been the subject of a civil suit or accused by any government entity of violating a “statute, regulation or code.”
Trump had been sued by the Department of Justice for housing discrimination. He lied on the form, stating he had never been investigated. His misrepresentation was shunted into a footnote of the DGE’s final report, where it was claimed that Trump had “volunteered information” about the suit prior to being asked about it during a DGE interview.
Without explanation, Scarfo mob associate and co-owner of Trump’s leased parcel Kenny Shapiro was omitted from the probe and subsequent DGE report altogether.
Two weeks after Trump had been awarded the casino license, authorities began 24-hour surveillance over Shapiro’s boardwalk office given the multiplicity of nefarious criminal contacts he maintained.
Trump’s relationship with Shapiro had by then expanded beyond the casino itself and now included negotiations over the purchase a parking lot.
The DGE did look into Daniel Sullivan, but used it as an exercise to discredit Sullivan without delving too deeply into his relationship with Trump. Regardless, Trump grew nervous when the DGE started looking into Sullivan, so nervous that he went ahead and told investigators about Sullivan’s relationship with the FBI.
In doing so, FBI records show that Trump imperiled a potential FBI undercover operation designed to root out organized crime at his future casino. When contacted by the DGE, Sullivan refused to answer any questions about his relationship with the FBI. No operation was ever conducted at Trump’s casino.
In the 1981 casino licensing report, there were insights into Trump’s opaque personal finances.
Trump provided himself with a relatively modest salary of $100,000 a year and had only $6000 dollars in savings. At the same time, he awarded himself generous fees from his projects, $1 million from the Grand Hyatt, and also had already amassed a significant debt, $34 million from the Chase bank credit line that he secured through the help of his father.
The report also revealed the means by which Trump avoided paying federal income taxes. While publicly maintaining at the time that he was worth hundreds of millions of dollars, in the years 1978 and 1979 Trump paid exactly $0 in federal income tax.
He managed to do this partially through deductions that were available at the time for real estate developers.
As construction of the Grand Hyatt and Trump Tower had yet to be completed at the time, he could take advantage of massive write-offs. Trump also preferred to define the ownership of his developments as partnerships.
For his casinos, Trump listed himself as both the sole general partner, as well as the sole limited partner as a way to reduce his tax burden. Claiming losses from these partnerships allowed him to report “negative income,” and thus pay no income tax.
After an expedited and incomplete investigation, Trump received his casino license. Ultimately, all he had to do was buyout Sullivan and Shapiro’s ownership stake in the parcel, which he did for $8 million. He also pulled out of the Circle Industries deal with Sullivan.
Trump’s timing was propitious, as Circle Industries was indicted shortly afterward for its involvement in a fraud and tax evasion scheme.
While Trump maintained to the DGE that he would have no further personal, social or business dealings with Sullivan, he later offered him a job as his chief labor labor negotiator in 1992.
Regarding Kenny Shapiro, Trump also continued to deal with the mafia financier as well, and Shapiro was about to be entangled in a scandal that would reach the highest levels of Atlantic City’s municipal leadership.
Atlantic City had just replaced its form of city government and 47-year old city commissioner Michael Matthews was running for mayor.
During the campaign, Matthews met with Frank Lentino, Frank Gerace and Al Daidone, leaders of the Local 54 of the Hotel Workers Union. Matthews later admitted to federal officials that he understood the union leaders to be speaking to him as representatives of the Scarfo crime family.
In exchange for $125,000 in campaign contributions, Matthews agreed to use his position in city government to lend support to contractors backed by Scarfo.
Daidone, who was later indicted on charges for conspiring to murder a union rival, put Matthews in touch with Kenny Shapiro. Shapiro, in his capacity as financier for the Scarfo mob, arranged for $35,000 to be funneled to the Matthews campaign.
The cash came from a variety of sources, some of which, according to Sullivan and Shapiro, were made by third parties at the request of Donald Trump.
“I understand you’re going to be the next mayor of Atlantic City,” Matthews recalled Trump telling him during a meeting on December 4th, 1981, during the height of the campaign and the very same month the candidate met with the Scarfo associates.
Matthews maintained that Trump, “wanted to know if he could donate to my campaign.”
It was against state law for casino owners to donate to political campaigns. Sullivan and Shapiro told investigative reporter Wayne Barrett that they spoke with Trump about having his New York subcontractors donate to the Matthews Campaign, with Trump later reimbursing them.
Sullivan and Shapiro also claimed that Trump asked Shapiro to make a $10,000 donation to Matthews under the promise that he would be reimbursed.
Shapiro made the contribution, but claimed that Trump never paid him back. Contributions by entities attached to the Trump casino project accounted for nearly 50% of Matthews total campaign cash haul.
As the campaign progressed Matthews, who was still a sitting city commissioner, advocated for Trump while he was negotiating zoning and air rights issues with the city. Matthews ended up winning the mayor’s race by a narrow margin, 359 votes.
A year later, Frank Lentino, one of the mafia conspirators funding Matthews’ campaign, was recorded discussing the matter with an FBI informant. The story hit headlines on December 3rd, 1983 and Matthews, after a brief stint on the lam in Florida, returned to Atlantic City and was arrested.
After Shapiro’s grand jury testimony, Trump and others at the Trump Organization were questioned by FBI agents. During the trial Matthews pleaded guilty, preventing Shapiro from taking the stand and keeping his grand jury testimony from entering discovery.
Ultimately, no charges were filed against Trump.
After securing his casino license and necessary zoning rights, Donald searched for financing and a reputable casino operator. When discussions with “Junk Bond King” Michael Milken failed to pan out, Trump entered into negotiations with Harrah’s.
Harrah’s, a Las Vegas institution, had recently been purchased by Holiday Corp, parent company to the iconic Holiday Inn hotel chain. Though founded by Evangelical Christians, a new generation of management had seen a different kind of light and entered the casino business.
The company opened a casino in Atlantic City and was looking to expand its presence on the boardwalk. While courting their investment, Trump failed to inform Harrah’s that construction on his casino was barely off the ground and he had so little money that he was relying on his father’s credit simply to keep his Atlantic City project creeping forward.
In June of 1982, Trump took Harrah’s board members on a tour of his construction site. In order to make it appear as though there was activity taking place, Donald paid a crew of workers to push large mounds of dirt around the previously inactive construction site.
His minor deception worked, because three weeks later Harrah’s invested $50 million up front and agreed to secure financing for the construction and upon its completion take charge of day-to-day operations of the casino-hotel. It was, by nearly every measure, a coup for the young dealmaker.
With the Harrah’s windfall in place, Trump moved to purchase a nearby parcel to convert into a parking garage. The location he selected was owned by Salvatore “Salvie” Testa and Frank Narducci Jr.
It was curious ownership arrangement, as Testa, who was known as the “Crowned Prince of the Philadelphia Mob,” had murdered Narducci’s father by shooting him ten times in the face, neck and chest at point-blank range.
Testa and Narducci had apparently buried the hatchet as they were both members of the Scarfo hit-squad known as the Young Executioners.
Trump purchased the parcel for $1.1 million, a significant markup from the $195,000 that Testa and Narducci had paid for it. To distance himself from the purchase, Trump routed the payment through an associate and then to a Trump related entity.
Prior to his indictment, Mayor Matthews successfully lobbied for Trump to be exempted from several city restrictions related to his new parking lot, including the construction of a skyway linking it to his casino.
Trump also managed to get the city to approve signs that were larger than city regulations permitted after the mobbed-up union leader Frank Gerace, who was later indicted alongside Matthews, attended a meeting of the zoning board in order to make sure one of the union-linked members voted for the exemption.
A corrupt mayor and union leaders were not the only mafia-linked individuals and entities involved in the development of Trump’s first casino. During construction, the Trump organization used three subcontractors with links to the Scarfo family.
Nicky Scarfo himself was reported to have visited one of the contractors on the Plaza construction site.
An attorney Trump brought down from New York to negotiate with a trade union, Paul Victor Viggiano, was both related to a capo in the Genovese crime family and an associate of Roy Cohn’s partner Stanley Friedman in the Bronx Democratic Party. Viggiano partnered with Kenny Shapiro on several Atlantic City real estate deals.
As construction for the then named Harrah’s at Trump Plaza neared completion, Ivana Trump took a large role in determining the interior design. True to Trump’s trademark style, the casino displayed an over-the-top, marble-laden opulence, with columns draped in red cloth and bedecked with mirrors. At 39-stories, it was at that point the tallest building in Atlantic City.
The official opening took place in May of 1984. However, slot machine malfunctions and false fire alarms dampened the occasion. In fact, Harrah’s at Trump Plaza significantly underperformed, earning less than half of its projected profits for its first year in operation.
The disappointing first year was just one of many reasons why Trump’s relationship with Harrah’s had begun to fray.
The first, and perhaps most characteristic, was that Trump didn’t like the name. After much back and forth, he eventually eventually won his way and Harrah’s was dropped for his preferred Trump Plaza Hotel and Casino.
The name change didn’t placate Donald.
Displeased with the partnership itself, Trump wanted to own the casino outright. As a result, he dragged his feet on building the garage on the lot he had earlier acquired, hoping to use it to pressure Harrah’s into selling its stake.
Trump and Harrah’s couldn’t agree on a business strategy, with the Trump wanting to cater to high rollers and Harrah’s believing the steady business of slots customers was the recipe for success. It was Trump’s acquisition of a competing casino, however, that pushed Harrah’s over the edge.
The sequence of events that lead to Trump being able to purchase another boardwalk casino began in the Bahamas.
In early 1985 a bribery scandal erupted when it was discovered that $431,000 of money from Resorts International, which owned casinos both in the Bahamas and Atlantic City, had found its way into accounts linked to the island’s corrupt Prime Minister Lynden O. Pindling.
Pindling’s initial run for the presidency was bankrolled by individuals linked to the Meyer Lansky syndicate. As mentioned, Resorts International had employed individuals who had worked with Lansky in Havana at their casino on Paradise Island.
Pindling’s lobbyist in Washington, Paul Manafort, later served as the campaign chairman of Donald Trump’s 2016 presidential campaign.
Read my extensive exploration of Paul Manafort’s background here.
While Resorts denied allegations of bribery, the scandal splashed across the headlines and fell into the lap of the New Jersey Casino Control Commission right as Resorts gambling license was up for renewal.
Despite the pall cast by the scandal, Resorts owner James Crosby had maintained his relationships with important members of the Commission.
As a result, enough voted in favor of Resorts that it maintained its license. While accusations of corruption, insider dealing and the ensuing media firestorm that erupted was an embarrassment to the state of New Jersey, it proved an even greater problem for Barron Hilton.
Heir to the late Conrad Hilton, Barron sat atop his father’s hotel empire. The company was completing the finishing touches on a 60,000 square foot resort casino situated across the street from Harrah’s Marina, the casino owned by Trump’s partners at the Plaza.
Unlike Jim Crosby, Barron hadn’t adequately massaged his relationships at the CCC. A newly recondite Commission rediscovered its sense of moral purpose and, two days after the Resorts decision, voted to deny Hilton’s gambling license because of the company’s relationship with the prominent Chicago mob attorney Sidney Korshak, whom law enforcement accused of linking legitimate businesses with the underworld. Korshak was used by Hilton Hotels to ensure labor peace.
The irony could not have been lost on Trump. A competitor had been vanquished overnight due to his connection to a mobbed-up attorney, when Donald’s personal lawyer Roy Cohn was perhaps the only mafia lawyer in America who could claim to have been indicted more often than his clients.
Having a casino without a gambling license placed Barron Hilton in a difficult position. Donald offered to buy Hilton out, but was rebuffed as there emerged a slim reed of hope when the CCC voted to hold a rehearing. However, events further afield again intervened to Trump’s benefit. This time not in The Bahamas but Beverly Hills.
By 1985, Michael Milken was at the height of his powers and the era of the corporate raider had reached predatory new heights. Flush with a junk bond-fuelled fortune at his back, Steve Wynn began circling Hilton Hotels poised for a hostile takeover.
Anxious to keep control of his family company, Barron decided to cut his losses and sold to Trump. Donald called his new acquisition Trump Castle.
Harrah’s was enraged by the fact that their partner at the Plaza was now opening a competing casino next to Harrah’s Marina. After trading lawsuits and public condemnations, Harrah’s sold it’s half of Trump Plaza and Donald became the owner of not one but two casinos on the boardwalk.
Whereas the Trump Plaza took four years from conception to opening day, Trump Castle opened four months after Trump took over from Hilton. Trump was now one of the biggest players on the boardwalk, but the cost of being king was steep.
In a matter of months, Donald saddled himself with enormous debt. The purchase price for Trump Castle was $320 million.
Bear Stearns, seeking to emulate Milken and get into the casino game, raised over $352 million of mortgage-backed bonds that allowed Trump to make the purchase.
Donald then took out an additional $70 million loan from the bank Manufacturers Hanover to cover improvements.
In order to raise the capital to buy-out Harrah’s, Bear Stearns arranged for a $250 million bond sale. In all the acquisition cost Trump $278 million, which he covered almost entirely with borrowed money.
In the space of half a year Donald had borrowed in excess of $700 million dollars to fund the Trump Plaza and Trump Castle, not taking into account his other ventures at the time.
It marked an important milestone in Trump’s career. He was now operating with an enormous and ever growing debt load. He and the banks were confident the money making machine that was the casino business would ultimately pay off.
Trump’s takeover of the Plaza and Trump Castle meant that he had to face the DGE and CCC again.
After Hilton’s disastrous relationship with the mob-linked attorney Sidney Korshak, one might think Trump’s relationship with Roy Cohn might pose a problem. Particularly since one of Cohn’s top clients, Anthony “Fat Tony” Salerno, was not just a player in New York City but influential in Atlantic City as well.
Salerno, law enforcement officials believed, had sanctioned hits on the men who killed Nicky Scarfo’s predecessor.
Federal surveillance tapes of Salerno recorded him say, “I’m the fucking boss, that’s who I am. Connecticut is mine; New Jersey is mine.”
An employee of Roy Cohn’s told investigative reporter Wayne Barrett that Cohn had once arranged a meeting between Trump and Salerno.
No such problems emerged and Trump sailed through the licensing process unscathed. His years of courting officials and forging political connections had paid off.
Furthermore, Trump could now count another occupant of high office as a valuable ally. In 1982, Republican Thomas Keane defeated Democrat Jim Florio to become the 48th Governor of New Jersey. Keane won the race by 1,797 votes, the narrowest margin of victory in state history. The chief strategist for his campaign was an up-and-coming Republican political strategist and Roy Cohn protégé by the name of Roger J. Stone.
Read my in-depth article 9-part article series on Roger Stone here.
The next article will describe the events that precipitated Donald Trump’s corporate bankruptcies and the sweetheart deal that saved him.