Doing Biz With The Donald
That company is now a subsidiary of Icahn Enterprises – controlled by fellow 1 percenter Carl Icahn – which bought it out of Chapter 11 bankruptcy in February. The travails in recent years of Atlantic City’s casino resorts have been well documented, but recently the Associated Press took a closer look at Trump Taj Mahal’s history, especially its 1991 bankruptcy.
Spoiler alert: Those who follow Trump’s presidential campaign may sense a bit of déjà vu.
When the Taj opened in April 1990, Trump owed $70 million to 253 contractors employing thousands who built it. A year later, when the casino collapsed into bankruptcy, those owed the most got only 33 cents in cash for each dollar owed, with promises of another 50 cents – at least to the companies that survived long enough to collect it. To finance the Taj, Trump claimed he could borrow at low prime rates from banks because, as he testified, big banks were calling him “all the time,” begging him to take out loans.
He instead sold $675 million in high-interest junk bonds. Opening day was pushed back twice, to April 2, only six weeks before a $47 million bond payment came due.
Contractors noticed in February that checks stopped arriving. Trump denied he was in financial trouble: “I have a tremendous amount of cash,” he told the Washington Post that March. And then he doubled down. Far from being overextended, he told Newsweek, he was looking to expand: “I think the people with a lot of cash – and I have a lot of cash – are going to be able to make beautiful deals in the next few years.” One of the reasons some contractors heard for the delay in pay: Trump said he needed to complete audits first to make sure they weren’t overcharging.
The delays meant that contractors had to pay out of pocket to pay their workers and vendors – or agree to new, lower offers from Trump and get paid immediately. Trump Taj Mahal opened unfinished. Trump IOUs to companies doing work for the Taj, which included overdue bills from contractors, jumped to $76 million in April – up 80 percent in four months – and $100 million in May. But Trump seemed unconcerned: “I have a lot of money,” he told the New York Times at the time, “and the Taj has a lot of money.” A trail of lawsuits seems to show otherwise. The company that installed the domes and minarets on the roof sued for $3 million and threatened to take them down and cart them away if it didn’t get paid.
A roofing and HVAC company sued for another $1 million, accusing Trump officials of fraud. Regulators unsealed a report, over Trump’s objections and written by his own accountants, revealing that despite Trump’s claim to “billionaire” status, he would be broke by the end of the year if he didn’t “take drastic action.”
Trump Taj Mahal filed for bankruptcy 10 months later, and many of those contractors never were repaid in full. When the casino emerged from Chapter 11, Trump got a contract to manage it. He later folded the Taj into a publicly traded company holding other casinos. That company, eventually called Trump Entertainment Resorts, went on to lose hundreds of millions over a dozen years, collapsing into bankruptcy twice. But Trump raked in $82 million in fees and salary and bonuses, according to Fortune magazine estimates. Michael McLeod, whose studio created the giant sculpted elephants outside the Taj, says his anger over the episode has faded, and he can joke now about how he once got stiffed by a famous billionaire.
Giving a slide presentation of his work to an architectural firm two days after Trump swept the New York Republican primary in April, he slipped in two photos – one showing one of the elephants, the other showing Trump’s name on the casino marquee in red lights. “This guy never paid me,” MacLeod deadpanned. Everyone laughed.