The Death of Roy Cohn, Resorts International, and Donald Trump’s Financial Downfall
This article covers the death of Donald Trump and Roger Stone’s key mentor Roy Cohn, how Trump became the biggest casino magnate on the Atlantic City Boardwalk through the purchase of the organized crime-linked company Resorts International, and the events that led to Trump’s six corporate bankruptcies. It is the third article in the series “Donald Trump, Corruption, and the Insidious Influence of Organized Crime.” While it is not necessary to read previous entries, it is suggested.
The first article examined Donald Trump’s early real estate career in Manhattan and his involvement in civic corruption and with organized crime.
The second article covered Trump’s connections to organized crime and civic corruption as a casino magnate in Atlantic City.
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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Roger Stone tells several variations of the story of how he first met Roy Cohn in 1979. Stone is notorious for playing fast and loose with the truth. In recounting his own personal history, he has no scruples when it comes to highlighting or even exaggerating the infamous.
In one version of events, Stone first met Roy Cohn at a party held by Sheila Mosler, a socialite and vice chairman of the New York County Republican Committee.
In another, Roy Cohn’s name came up on a rolodex given to him by Michael Deaver, an advisor to Ronald Reagan.
At the time the 27-year old Stone was the political director of New York, New Jersey, and Connecticut for the Reagan Campaign.
Regardless of how initial contact was made, all the stories end up with Stone visiting Cohn at his 68th Street townhouse in Manhattan.
“When I got there, Roy was in his bathrobe, eating three strips of bacon burned crisp and both halves of a deviled egg,” Stone said. He noticed a heavy set man sitting next to Cohn.
“Mr. Stone, I want you to meet Tony Salerno,” Cohn said, introducing the young Reagan staffer to the underboss of the Genovese crime family.
“So Roy says we’re going with Reagan this time,” Salerno chimed in. Stone launched into his pitch for the California governor as Cohn and Fat Tony listened intently.
“You know, Tony, everything’s fixed.” Stone quoted Cohn as saying. “Everything can be handled.” Salerno mentioned the Supreme Court. Cohn continued. “Cost a few more dollars.”
In his book about the assassination of John F. Kennedy, Roger Stone outlandishly claims that he asked Salerno who had killed Kennedy.
“It was Carlos and LBJ,” Stone claimed Salerno told him, referring to the New Orleans mafia chieftain Carlos Marcello and Lyndon Baines Johnson.
“He started telling me how he was going to help me set up the Reagan Campaign,” Stone said, referring to Cohn. “[E]verything from union endorsements to office space.”
“He told me to ride down to the courthouse with him. He had a young lawyer with him, and it was clear that Roy knew nothing about the case he was going to argue. But he knew it didn’t matter. He used to say, ‘Don’t tell me the law. Tell me the judge.’ Roy knew how the world worked.”
Cohn had another suggestion for Stone during their first meeting.
“You need to meet Donald and his father,” Cohn insisted. “They’d be perfect for this. Let me set up a meeting.”
“I went to go see him,” Stone recalled, “and Trump said, ‘How do you get Reagan to 270 electoral votes?’ He was very interested [in the mechanics] — a political junkie. Then he said, ‘O.K., we are in. Go see my father.”
Stone travelled to Fred Trump’s Avenue Z office in Coney Island. “True to his word, I got $200,000. The checks came in $1,000 denominations, the maximum donation you could give. All of these checks were written to ‘Reagan for President.’ It was not illegal — it was bundling. Check trading.”
The Trumps even arranged for Stone to open Reagan’s New York City campaign headquarters in a townhouse next to the 21 Club. It was the beginning of a fateful political alliance.
After Reagan’s election, Cohn and Stone became friends. Cohn even arranged a party for Stone’s 30th birthday at the 21 Club. Stone went on to form a high powered Washington lobbying outfit with Charles Black, Paul Manafort and Lee Atwater called Black, Manafort, Stone & Atwater.
Stone brought in one of the firm’s earliest clients: Donald Trump. Stone’s contacts within the new Reagan administration, and with Governor Thomas Kean in New Jersey, would prove valuable to Donald.
Donald wasn’t the only Trump who would benefit from their early relationship with Roger Stone. Both Cohn and Stone would pull strings within the Reagan administration to aid with the appointment of Trump’s elder sister Maryann to a federal judgeship.
Roy Cohn enjoyed access to the Oval Office. He introduced President Reagan to the up-and-coming Australian news magnate Rupert Murdoch. After the meeting, Murdoch joined a CIA-backed propaganda effort to promote Reagan’s policies in Latin America.
Ronald Reagan’s CIA Director William Casey had been in near daily contact with Cohn during the 1980 campaign. Casey had served then as Reagan’s campaign manager.
Murdoch was also a client of Black, Manafort and Stone, a lobbying and political consulting firm co-founded by Roger Stone and Paul Manafort.
Rupert Murdoch’s Fox News later became a key pillar of conservative media support for Trump’s 2016 candidacy and later presidency.
In 1983, Governor Kean had nominated Maryann for the position. At the time, Stone was still acting as Keane’s informal advisor. The nomination was controversial as Maryann had achieved the New Jersey Bar Association’s lowest favorable rating.
When it appeared that someone else was in line in front of Maryann, Cohn contacted Reagan attorney general Ed Meese and advocated on her behalf.
A few months later, she landed the position.
“Roy can do the impossible,” Donald told a Cohn staffer over the phone.
Unfortunately for Roy Cohn, perhaps the greatest fixer of his age, there would soon prove to be one challenge he couldn’t talk, bribe, threaten or use his contacts to get out of. By the mid-1980s, the AIDS crisis ravaging the gay community across the United States.
“Should I commit suicide now or later?” is how Cohn responded to his doctor on November 4th, 1984 after receiving the diagnosis that he had AIDS, according to notes kept by a switchboard operator in his office.
Cohn never publicly admitted that he had AIDS. Instead, he claimed that he had liver cancer. As he grew increasingly ill, Trump pulled away from his lawyer, friend and mentor by moving his cases to other attorneys without providing Cohn an explanation.
When one of Cohn’s friends was dying of AIDS, he asked Trump if he could arrange for a hotel room (without mentioning what disease Eldridge was suffering from). Trump did so but sent Cohn the bills, which he refused to pay. Eventually the hotel asked the dying man to leave as they were worried about their reputation.
“I can’t believe he’s doing this to me,” Cohn lamented. “Donald pisses ice water.”
Adding insult to injury, the appellate division of New York’s Supreme Court charged Cohn with professional misconduct involving dishonesty, fraud, deceit and misrepresentation. The number of ethical violations had finally caught up with Cohn.
In one instance, he had visited a wealthy client in the hospital after he had suffered from a stroke. Cohn claimed that during the visit the client had made him the trustee to his estate. A nurse on duty watched as Cohn guided his dying client’s hand to sign a legal document.
During the hearing, several people lined up to attest to Cohn’s character, including Trump. However, in the end, it wasn’t enough. Cohn was disbarred and died shortly thereafter, on August 2nd, 1986.
Resorts International, the Trump Taj Mahal and a Debt-Fueled Spending Binge
By the late 1980s, Trump was a fixture of American life. While his presence in tabloids and gossip columns had introduced him to New Yorkers in the 1970s, he was still largely unknown across the United States as a whole.
It was the publication of his ghost-written autobiography The Art Of The Deal in 1987 that established the enduring legend of Donald Trump. The book was launched in a star studded party in Trump Tower and would go on to be a bestseller.
“Lying is second nature to him,” Tony Schwartz, ghost writer of The Art of the Deal, told The New Yorker in 2016.
“More than anyone I have ever met, Trump has the ability to convince himself that whatever he is saying at any given moment it true, or sort of true, or at least ought to be true.”
According to Schwartz, many of Trump’s lies revolved around money, “how much he had paid for something, or what a building he owned was worth, or how much one of his casinos was earning when it was actually on its way to bankruptcy.”
“[H]e’s in it for the money,” Schwartz said, reflecting on Donald’s primary inner motivations. “One of the most deep and basic needs he has is to prove that ‘I’m richer than you.’”
Schwartz continues, “He’s a living black hole.”
“He’d like people when they were helpful, and turn on them when they weren’t’. It wasn’t personal. He’s a transactional man — it was all about what you could do for him.”
In his time with Trump, Schwartz noted that he seemed to spend very little time with his family and didn’t have any close friends. Despite that fact that in the book Schwartz wrote that Fred Trump was Donald’s greatest influence, Schwartz said that Trump, “barely talked about his father — he didn’t want his success to be seen as having anything to do with him.”
“There are two Trumps,” Schwartz wrote for The Guardian. “The one that he presents to the world is all bluster, bullying and certainty. The other, which I have long felt haunts his inner world, is the frightened child of a relentlessly critical and bullying father and a distant and disengaged mother who couldn’t or wouldn’t protect him.”
The idea that Trump should release an autobiography originated with Si Newhouse, a friend of the late Roy Cohn. Newhouse was the owner of Conde Nast and had noticed an uptick in sales after Trump was featured on the cover of GQ.
Newhouse approached Trump about the project and Donald was interested. The man selected to actually write the book was a journalist named Tony Schwartz. Though Schwartz came to believe that Trump was a blustering, pathological liar, he did what he was paid to do and produced a flattering portrait.
What America read about in 1987 was the heroic rise of America’s most famous and successful businessman. Trump, in this alternative reality, was a handsome, self-made man who had pulled himself up by his own bootstraps to become America’s preeminent dealmaker.
One of the more iconic figures of 1980s Wall Street mythos was the corporate raider. Fueled by junk-bond financing, the takeover wars were in full swing and vast fortunes were being made by individuals like Carl Icahn who seemed to have the ability to raid corporate America at will.
By 1986, Trump’s goal was to seize control of a public gaming company, ideally one that would allow him to grow his already considerable presence on the Atlantic City boardwalk but also one that would allow him to expand into America’s gambling Mecca in Las Vegas.
The debt fueled financing that would for a short time allow Trump’s gambling and real estate empire to rise to Olympian heights would also sow the seeds of his eventual financial downfall.
After discussions with a casino analyst at Michael Milken’s bank Drexel Burnham Lambert, Trump first targeted his recent partner Holiday Inn. Despite their acrimonious split over the Plaza and Donald’s low view of their management, he was attracted to the company’s assets, in particular their two casinos in Las Vegas.
An additional perk to any takeover attempt was that even if a company attempted to thwart it by repurchasing their own shares at a premium, the takeover artist would still profit handsomely by the subsequent rise in stock price. The practice came to be known as greenmail.
Trump financed his purchase of $70 million worth of shares with a loan from Bear Stearns.
To fend off the takeover threat, Holiday assumed $2.4 billion in junk bond and bank debt from Drexel, the same bank that had goaded Trump into making the takeover attempt in the first place.
Trump walked away from the deal having earned $18.8 million, Drexel received $95 million from Holiday Inn in fees and expenses.
His appetite whetted, Trump next moved on Bally Manufacturing Corp., which operated a competing casino on the boardwalk. Bally bought back Trump’s shares in a private transaction at premium and Donald walked away yet again with a debt fueled profit.
Trump’s most audacious takeover attempt was of Resorts International, which had opened Atlantic City’s first casino following legalization in 1978.
On its opening day, lines stretched for blocks and legend has it that some players preferred to wet their pants rather than lose a seat at the tables.
By 1986, Resorts founder Jim Crosby was dead, the company had racked up $700 million in debt and construction was just getting started on what, upon completion, would be the largest casino in the world, the Taj Mahal.
Resorts’ new lead executive Jack Davis was hunting for new ownership when Trump appeared on his radar screen.
Resorts International was initially the Mary Carter Paint Company, which has faced allegations and litigation over claims about whether or not it operated as a front for the CIA. That question remains without an answer.
Resorts International had been funded by, and employed individuals linked to, the Meyer Lanksy syndicate, which had funded Las Vegas’ first resort casino and controlled illegal gambling operations across the US.
Lansky, described as the “financial genius of organized crime,” had relocated his international operations to The Bahamas after the Cuban Revolution forced him out of Havana.
Resorts International established casinos in The Bahamas, at the time one of the earliest examples of an offshore banking secrecy jurisdiction.
The head of Resorts, James Crosby, was friends with Richard Nixon and his close associate and banker, Charles “Bebe” Rebozo. The casino at Paradise Island had been suspected by Congressional Watergate investigators of being used to launder money that was then routed to Nixon’s Committee to Re-Elect the President (CREEP).
Lansky associates, including Moe Dalitz, who had invested with Roy Cohn in Sunrise Hospital, sat on the board of The Bahama’s based Bank of World Commerce (BWC), which IRS officials believed was used to launder criminal proceeds from the United States offshore to Switzerland.[3]
Castle Bank, which shared numerous connections to Resorts International, was also connected to the CIA.
Castle was co-owned by Paul Helliwell, an OSS veteran who served as the paymaster for the CIA’s Cuba operations, and Burton Kanter, an attorney closely associated with the Outfit, the Chicago organized crime syndicate.
Clients of Castle included Moe Dalitz and the Pritzker family, who had partnered with Trump on the Grand Hyatt.
Roy Cohn’s client “Fat Tony” Salerno of the Genovese Crime Family was involved in Lansky’s clandestine investments and activities in the The Bahamas.
What Trump learned or understood about Resorts sordid past is unknown but bears further inquiry.
Lynden O. Pindling, the leader of The Bahamas, was represented in Washington by Black, Manafort and Stone.
In March of 1987, Trump purchased $96 million worth of Resorts shares using borrowed money and took control of 88% of shareholder votes.
Even after he wrangled with management and eventually won a highly advantageous casino operating agreement, it wasn’t enough for Trump. He wanted to own Resorts outright and was vying to take the public company back into private ownership.
After the 1987 stock market crash, Resorts shares had dropped to a point where Donald could buy enough to do just that.
Regulators, who would have to sign off on such a move, worried about Trump’s ability to take on not only the considerable debt held by the company, but the construction costs of the gargantuan Taj Mahal, which were now approaching between $800 million and $1 billion.
Despite the misgivings of several officials, Trump’s cache and influence over New Jersey regulators again won the day.
His plans to buy Resorts outright were derailed when Merv Griffin, a television game show magnate who wanted in on the corporate raiding action, derailed Trump’s takeover attempt by making a move himself.
After a lengthy public dispute that spilled out into the press, they two ended up negotiating a deal whereby Trump took ownership of the Taj Mahal in Atlantic City and Griffin took over the rest of the company.
Trump funded his purchase of the Taj Mahal with $675 million in 14% junk bonds, which placed him on the hook for $95 million in annual interest payments for the Taj alone.
He then proceeded to take on an additional $125 million in bank loans to allow him to complete the daunting construction project. Leveraged to the hilt, Trump now placed an enormous bet on Atlantic City.
In 1986, the entire city’s gambling revenue was $2.5 billion, but that translated into combined returns of only $74 million across every casino.
To make matters worse, Trump now owned three casinos in the boardwalk and was now at risk of competing against himself.
It was now imperative that Trump complete the construction of the newly branded Trump Taj Mahal in a timely and cost effective fashion and manage seamless roll out.
The culture among executives at the remarkably small and insular Trump Organization was turning into a liability.
Al Glasgow, Trump’s casino consultant, described the atmosphere of the Trump Organization at that time as “disorganized crime.”
Trump had hired an experienced casino hand in the executive Steve Hyde to manage the Trump Plaza in 1986, but Hyde found himself butting heads with Ivana Trump, who had taken on a prominent role, despite her lack of experience, managing the Trump Castle.
Things became more chaotic when it became an open secret among Trump Organization executives that Donald was carrying on an affair with a young actress and model named Marla Maples.
Donald kept the Georgia-born 26 year-old hidden away in a succession of high roller suites held under the name of his bodyguard.
Donald eventually tired of Ivana’s presence in Atlantic City and sent her away to manage the Plaza Hotel, which he had recently purchased in Manhattan.
Trump issued an ultimatum to Ivana, “Either you act like my wife and come back to New York and take care of your children or you run the casino in Atlantic City and we get divorced.
As the 80s drew to a close, Trump entered into one of the most chaotic and irresponsible phases of life, capping off the decade with an epic buying spree.
The Plaza Hotel had cost him $409 million, at the time the most money ever paid for a hotel.
The man he negotiated with, Thomas Barrack, would later become the billionaire head of his Inaugural Committee. Barrack was indicted for being an illegal foreign agent of the United Arab Emirates but was acquitted.
Trump personally guaranteed $109 million. Trump spent even more on upgrading the building, which was modeled after a 1907 French chateau. The Plaza’s cash flow in 1988 was just over $15 million, the debt service Donald owed in 1989 his newly purchased prize was $45 million.
A year later, Trump bought a bankrupt regional airline that he renamed Trump Shuttle for $356 million.
Trump, who had no experience running an airline, took out a $380 million loan from Citibank to make the purchase, personally guaranteeing $135 million. The deal closed within days of the Taj buyout.
In addition to the 21 depreciating Boeing 727’s, Trump also owned the $30 million Trump Princess, then the largest in the world that had once belonged to the intelligence-connected Saudi arms dealer and figure in the Iran-Contra scandal, Adnan Khashoggi. Trump paid close attention to Khashoggi, whom he enjoyed negotiating with over the yacht.
“I read every word about Adnan Khashoggi,” Trump told Dominick Dunne of Vanity Fair.
Roger Stone lobbied successfully to have the harbor of Atlantic City dredged so the yacht could be docked off of the Trump Castle to serve as a high rollers suite.
Trump’s inexplicable spending binge mirrored a turn for the surreal in his personal life. Mike Tyson visited Donald in his Trump Tower office. While there, the boxing heavyweight title holder proceeded to confront Trump over rumors that he had been carrying on an affair with Robin Givens, Tyson’s wife at the time.
Associates of Don King had reportedly told Tyson that they had overheard Trump suggesting that Givens was bad at oral sex, saying of Tyson’s wife, “She’s got the sharpest teeth in the world.”
“Everyone’s telling me that you’re fucking my wife and I think you’re fucking my wife,” Tyson reportedly told the developer.
“Mike,” Trump replied, “let me tell you something: I never even thought about it. And I heard those rumors and they’re disgusting. In fact, I called you a couple of times to tell you that I heard those rumors and it pisses me off. And I never, ever even thought about it. She’s your wife, she with you, she’s loyal to you, and it’s total bullshit.”
Donald apparently put Tyson’s fears to rest because he ended up falling asleep on Trump’s couch after the conversation.
In 1984, Donald signed a contract with a New Jersey helicopter company to transport high rollers to and from his casinos. The company was co-owned by Joey Weichselbaum, a two-time felon arrested in 1965 for grand theft auto and again in 1979 on charges of embezzlement.
Weichselbaum’s helicopter company was financially unstable, regularly going bankrupt and then reopening under a different name. Regardless, Trump paid the company $100,000 a month for servicing Trump Plaza and $80,000 a month for Trump Castle. Weichselbaum was paid $100,000 a month and offered a company car and driver.
While his helicopter company serviced Trump’s casinos, Weichselbaum was involved in a massive, multi-State cocaine trafficking operation. According to his 1985 federal indictment, Weichselbaum co-owned a used car lot named Bradford Motors where Columbian drug smugglers would deliver both cocaine and marijuana that would either be distributed on the spot or hidden in vehicles and driven to buyers.
The dealership acted as a front for drug dealers who attempted to conceal their illegal transactions through phony car sales. Despite the fact that it risked his casino license to associate with criminals, Trump considered using the helicopter company even after Weichselbaum had been indicted.
Law enforcement involved in the Weichselbaum investigation theorized that his role at Trump’s casinos may have been more nefarious than simply providing gamblers helicopter rides.
According to undercover sources, there was reason to believe that Weichselbaum may have served as a cocaine conduit for high rollers staying at Trump Plaza and Trump Castle.
Though Weichselbaum plead guilty, he denied that Atlantic City was part of his cocaine distribution network.
Two months after the indictment, Weichselbaum and his brother rented an apartment Trump personally owned at the Trump Plaza condominiums in Manhattan. They each paid $3000 dollars in cash per month for the apartment, which was on the lower end of what would normally be charged, the rest was covered by helicopter services.
There is every indication that Weichselbaum and Trump maintained a personal relationship. Weichselbaum’s parole officer maintained that he had told him of Trump’s affair with Marla Maples before it had become public knowledge.
Weichselbaum cautioned Trump to end things with Maples and even suggested that she move into his unit at Trump Plaza condominiums.
Weichselbaum’s case was moved from Cincinnati to New Jersey and put before Trump’s sister, Maryanne. She recused herself as the presiding judge after making it known that she and her husband had flown on Weichselbaum’s company’s helicopters.
During the trial, Trump sent a letter to the judge in which he described Weichselbaum as, “conscientious, forthright, diligent and a credit to the community.”
While others involved in the cocaine ring received up to 20 years, Weichselbaum received three years and was released after 18-months, telling his parole officer he planned on working as a consultant to Trump.
On October 10th, 1989, a helicopter-related catastrophe struck (the helicopter was not operated by Weichselbaum) when one carrying three Trump Organization executives crashed into the trees that separate traffic on the Garden State Parkway.
Everyone on board died instantly, including Steve Hyde, Trump’s most experienced and trusted hand at operating a casino.
As the Taj Mahal was due to open its doors in a matter of months, the timing of the loss could not have been worse. Infighting among upper management, mounting debts and a deteriorating relationship with his wife hand increased the volatility of Trump’s temper and he was increasingly taking it out on his staff by way of explosions and bitter denunciations.
Trump now owed $1.3 billion to junk bond buyers and $1.9 billion to over fifty banks, placing his overall debt at $3.2 billion.
Construction on the vast Taj was falling behind schedule and proving far more expensive than initial projections had forecast. It was critically important for Trump that the Taj be completed on schedule by April 2nd as a bond payment was due by May 15th and Trump needed the cash flow from his new casino to be able to pay it.
The Trump organization begged vendors, who had yet to be paid for their services, to press ahead and redouble their efforts to finish the project on time. Though they continued to work, many were later stiffed, with some having to close their doors because of the lost revenue.
When the Taj Mahal finally opened on April 5th, 1990, it was already $108 million over budget and Trump was struggling to meet payroll for his nearly 7,000 employees.
Three days earlier the casino had opened for a disastrous test run in which many of the change dispensers which fueled the Taj’s 3,000 slot machines jammed.
The casino cage, which served as the on premises bank, was half the size it needed to be for the gargantuan Taj. Amidst all the chaos, $400,000 dollars was left in a bag that was used to prop open a door.
The official opening fared no better. Few notable celebrities attended the festivities, which were marred by fire alarms. Trump’s boardwalk casinos were competing with each other.
The American economy was in a recession and Trump’s debt load was beginning to squeeze him like a vice. Trump owed 253 subcontractors a total of $69.5 million for the Taj Project alone. It was only a matter of time before the bottom fell out of the Trump empire.
As Trump’s professional world unraveled, so did his personal life.
His relationship with Ivana crumbled in the face of his open affair with Marla Maples. It was during this period that Ivana claimed in a sworn court deposition that Donald had raped her. She walked back the claim after they had reached a divorce settlement.
After entering the eye of the public through his business achievements and the success of The Art of the Deal, Trump was now a national tabloid figure and his divorce with Ivana was one of the most covered scandals of the period.
As Donald’s financial position grew more precarious, he engaged in questionable accounting and business practices.
In 1989 John O’Donnell, the president of Trump Plaza presented Donald with an accurate 1990 projected operating income of $64 million. Trump exploded as the numbers were not high enough for his liking.
O’Donnell, who wrote about the experience in a memoir, was made to go back and produce over optimistic, false projected income of $92 million.
The inflated number distorted that actual value of Trump’s financial portfolio at a time when he was actively seeking loans, which potentially constituted fraud. There was also some discussion at the time of taking the casinos public, and had they done so the inflated numbers would have constituted a violation of securities law.
Too Big To Fail: The Bankruptcies of Donald Trump
“Donald Trump is driving 100 miles per hour toward a brick wall, and he has no brakes,” an agitated banker told Neil Barsky while sitting at a poker table at one of Trump’s casinos in May of 1990. “He is meeting with all the banks right now.”
Barsky, a reporter for The Wall Street Journal, followed up with Trump’s top lenders: Citibank, Bankers Trust, Chase Manhattan and Manufacturers Hanover. He learned that Trump’s lenders realized they were either going to have to all agree to huge restructuring of Trump’s loans or Donald would have to declare personal bankruptcy.
By June of 1990, just two months after the Taj opening, Donald Trump was in a fight for his financial existence.
His yearly interest payments had ballooned to $350 million, far exceeding his cash flow. Trump had attempted to sell or refinance many of properties and assets he had so rapidly accumulated but had failed.
As a consequence of the deregulation of the financial industry during the Reagan administration, traditional banks faced competition from savings and loans (S&Ls) and began to seek out revenue through lending to riskier borrowers.
Real estate departments within many banks grew in importance and stature. However, by 1989 the Federal Reserve was concerned about how the general economic downturn was impacting the real estate market and had the major American banks review their real estate exposure.
Government bank examiners visited Chase Manhattan and discussed the possibility of arranging mergers between banks that were overly leveraged in the cratering real estate market.
Specialists at the banks that had been lending to Trump reviewed his files and came to the conclusion that he was facing imminent bankruptcy unless something was done to reverse the slide and done quickly.
Trump’s debt-fuelled spending was enabled by a banking establishment which had bought into the hype of the Trump brand. Trump’s fame had led usually cautious financial institutions to disregard traditional lending guidelines and collateral requirements.
Major banks in New York City issued loans to Trump and then syndicated them with a broad assortment of international banks from Japan, Germany, France, Canada, and the United Kingdom.
This earned Citibank, Trump’s largest lender, and others a fortune in syndication fees and allowed them to reduce their exposure by saddling a host of foreign banks with the majority of the financing.
According to Citibank’s lead counsel during their negotiations with Trump, by 1990 Donald owed a combined $4 billion to more than 70 banks, with $800 million personally guaranteed by his own assets.
Eventually over 18 months of negotiations ensued between Donald and representatives from the 72 banks that owned pieces of the syndicated loans. Nearly one thousand bankers, lawyers and accountants took part in the process that was held in Trump Tower and in the boardrooms of multiple major financial institutions.
Given the sheer size of their exposure to Donald, he had what is referred to as debtors leverage, the banks had more to lose if Trump went under than if they bailed him out. In other words, Trump was too big to fail.
After an intense back and forth and the courting of hesitant foreign banking institutions, a settlement was eventually reached that provided Trump with an immediate loan of $20 million and a five year $65 million bailout plan.
The interest on nearly half of Trump’s bank debt was suspended.
Donald was forced to hire a Chief Financial Officer, the man he selected for the job was Stephen F. Bollenbach, a talented negotiator with experience in Atlantic City.
The banks imposed a generous monthly allowance of $450,000 for Donald. Though Trump was eventually forced to sell off Trump Shuttle, his yacht and several other properties, the deal he struck with the bankers fundamentally left him with ownership over his assets.
Trump did not stick to the strict terms of the deal for long. His experience with the banks had taught him that they in fact did not want to own or operate hotels or casinos. The realization allowed him to act more freely.
By August, Trump defaulted on several loan payments he had agreed to pay and faced little or no reaction from the banks. Nor did the banks complain when he provided Ivana with $10 million upfront as part of his divorce settlement.
The banks, likely out of concern for their own reputations as opposed to his, joined Donald in stonewalling the House Banking Committee when they announced hearings into the Trump bail out imbroglio. The hearings never took place.
However, Trump still faced trouble with his irate casino bondholders. The Taj Mahal had been financed through $675 million worth of junk bonds with a crushing 14% interest rate.
The institutional investors who held roughly half of those junk bonds retained the head of Rothschild’s Inc. bankruptcy advisory team, Wilbur Ross. A graduate of Harvard Business School, Ross was widely seen as a bankruptcy expert.
After visiting the Taj, Ross determined that the casino would be more valuable if it retained the Trump name.
Ross later served as President Donald Trump’s Secretary of Commerce.
There would need to be a prolonged negotiation with the bondholders, and the number one bondholder was the notorious corporate raider Carl Icahn.
After intensive negotiations between Trump, Ross, Icahn and the bondholders, a new form of “prepackaged” bankruptcy was agreed upon that would reduce Trump’s ownership of the Taj to 50.5% but keep him in control of the casinos board.
It was the first of four corporate bankruptcies that Trump underwent, the Trump Taj Mahal in 1991 and the Trump Plaza Hotel and Casino, the Trump Plaza Hotel and the Trump Castle Hotel and Casino in 1992.
These privately negotiated corporate bankruptcies allowed Trump to narrowly avoid personal bankruptcy, despite the fact that he was hundreds of millions of dollars underwater.
Despite the negotiated soft landing with the banks and bondholders, Trump was still in desperate financial straits.
According to most contemporary outside observers, Trump’s reign as America’s most famous tycoon had crashed and burned in spectacular fashion in a blizzard of bankruptcy and personal scandal.
In the dark days of the early 90s, Trump still had a reliable ace up his sleeve, his father Fred Trump.
In December of 1990 a mortgage payment was due on Trump Castle and it looked to many that Trump might not be able to make the payment.
It was subsequently discovered that Fred Trump’s personal attorney Howard Snyder had visited the castle and purchased $3.5 million in chips and never cashed out.
As loans to casinos needed to be scrutinized by regulatory authorities, it was illegal. However, regulators once again treated Trump with kid gloves and he escaped with a $65,000 fine.
While Trump was able to leverage the sheer magnitude of his debt to the banks and bondholders to stay above water, many of the subcontractors and vendors who had worked on the Taj weren’t so lucky.
Trump owed $69.5 million to 253 subcontractors who had worked on the project and was offering them 30 cents on the dollar. Many of the small businesses were mom and pop shops that couldn’t absorb the loss and subsequently went out of business.
However, while the Taj Mahal may have been struggling, that didn’t mean that it wasn’t a popular location for gamblers and others with even less savoury intentions.
Investigative Journalist Seth Hettena uncovered that in the 15 months between the Taj’s grand opening and its filing of Chapter 11 bankruptcy, an investigative unit within the Treasury Department reported that the casino had violated money laundering rules 106 times.
The Taj’s vice president of Asian marketing Danny Leung was described by law enforcement during a Senate Subcommittee on Investigations hearing as “an associate of the 14K Triad,” a Hong Kong based criminal syndicate involved in murder, extortions and heroin smuggling.
During an investigation into the Russian mafia, FBI investigators discovered that the Trump Taj Mahal was a favorite hangout for Eurasion organized criminals.
“The Taj Mahal,” wrote Robert I. Friedman in his 2000 book Red Mafiya, “had become the Russian mob’s favorite East Coast destination. As with other high rollers, scores of Russian hoodlums received “comps” for up to $100,000 a visit for free food, rooms, champagne, cartons of cigarettes, entertainment, and transportation in stretch limos and helicopters.”
Trump’s shadowy and mysterious relationship with Eurasian Organized Crime would last for decades.
The next article in this series will provide an in-depth examination into Donald Trump’s connections to Eurasian Organized Crime.