How Fred Trump kept Trump Castle Casino afloat with an illegal loan
Watch The Full Story: https://youtu.be/1VhhgZX61pg
The property that would eventually become Trump Castle didn’t start off that way. The casino was built to completion by Hilton Hotels, which was then denied a gambling license by the State of New Jersey due to alleged ties to organized crime. So Donald Trump swooped in to buy the property from Hilton for $320 Million dollars and opened it’s doors in 1985.
Within five years the casino was struggling as it lacked direct access to the Atlantic City Expressway, and was basically a lone outpost of gambling away from the Boardwalk. Plus, it was in direct competition from its newly opened sister property the Trump Taj Mahal. This lead to Trump nearly missing an interest payment to bondholders and that’s when Fred Trump stepped in. Ordering his attorney to go to the casino and deposit a certified check. After which the lawyer went to a high stakes blackjack table and, drawing against the money on deposit, bought $3.35 million dollars in gray $5,000 chips. The attorney placed the chips in a bag and left the casino hotel having no intentions of ever gambling.
The next day, Fred Trump wired another $150,000 dollars to the casino that again was converted into $5,000 chips and removed from the establishment. This meant in total Fred had purchased $3.5 million dollars of Trump Castle chips. The infusion of cash allowed Donald to meet the interest payment and keep enough money on hand in the casino to continue operations. Now if Fred Trump had simply loaned the money to his son, Donald could have either loaned it to the casino or made a capital contribution but then there would be no way for either of them to get that money back as it would first go to creditors. And here’s the whole problem with what these guys did.
The Casino Control Act of New Jersey has very strict guidelines as to who can loan a casino money and the state Division of Gaming Enforcement is especially concerned about casinos seeking funding in less than obvious methods. In fact this type of loan is extremely unscrupulous because the state guarantees the public that gaming chips can always be redeemed despite the current status of a casino’s liquidity. So by turning the money into chips the state is on the line for payout should those chips ever show up on the shores of a Jersey Beach.
The state went after Donald. He was allowed to keep the $3.5 Million dollars but was fined a pittance of $30K, less than one percent of the loan amount. Fred Trump for his involvement in this scam agreed to apply for an official license as a financial source, which then allowed him to make another loan possible several months later to again pay the interest due to bondholders. What’s interesting here is that according to the law Fred Trump should have been ineligible from gaining a license as he had previously admitted violating the provisions.
None of these loan scams made any difference though as Trump Castle was still unable to make it’s next payment of $338 million to keep the bonds afloat and the casino began debt restructuring in May 1991 barely six years after opening.
But wait the story isn’t over yet because Donald still had another trick up his sleeve. First, Hilton offered to repurchase the property for $165 million dollars, which Trump of course rejected because it would have meant a loss of $155 million dollars from his initial purchase. He did however agree to give the bondholders 50 percent ownership of the Castle, in exchange for reduced interest rates and forgiveness of $25 million dollars of debt. This plan was filed as a prepackaged bankruptcy in March 1992.
But then…and hold onto your seats cause this is where the art of the deal meets the art of the scam. Trump reacquired full ownership of the Castle in a refinancing deal in December 1993. He then sold the property in September 1996 to his own new publicly traded casino company, Trump Hotels & Casino Resorts for $525 million dollars, which meant according to Trump himself the value of the property had skyrocketed by $205 million dollars despite stockholders and market analysts deeming the price hyper-inflated. Trump defended this pricing saying the new company’s holding over all the Trump casinos would produce $500 million dollars in cash flow a year and without Trump Castle under the umbrella the company would only expect to bring in $285 million dollars.
Okay, let me do that for you again slowly. Cause it’s all in the art of the scam. So Trump Hotels & Casino Resorts a publicly traded company held at that time all Trump casinos including the Taj Mahal, Trump 29 in California, Trump Casino in Indiana, and two casino’s in Trump Plaza but he’s saying that the Trump Castle will net nearly half of all cash flow for the company each year. And keep in mind this was 1996 and no casino had ever had a million dollar day intake.
He then attempted to bamboozle a couple of investor companies into buying a stake in the casino all of which fell through. Most likely because someone on the investor side realized the numbers didn’t make sense. And all this time the Atlantic City casino values were plunging. To put the icing on the cake Trump Hotels & Casino Resorts declared bankruptcy in 2009 after amassing $1.2 billion dollars in debt.
This is very very dangerous stuff. This scam artist is running for the president of the United States of America and look what he does to his own companies with little regard to investors, bondholders or stock buyers. He simply doesn’t care. If he’s able to walk away then in his mind no one was hurt. But believe me there are people and companies who put money into these schemes at every single turn and what did it get them – absolute heartbreak. This man is extremely dangerous. If elected not only will he have the nuclear codes but he’ll directly be able to impact this nation’s economics and no one in the mainstream media is bringing these solid facts to the American people. Why? This isn’t a joke. This is America’s future.
