Casinos failed, but Trump hit it big
Review of records: Investors who bet on him paid price
By Russ Buettner and Charles V. Bagli
ATLANTIC CITY, N.J. — The Trump Plaza Casino and Hotel is closed, its windows clouded over by sea salt. Only a faint outline of the gold letters spelling out T-R-U-M-P remains visible on the exterior of what was once this city’s premier casino.
Not far away, the long-failing Trump Marina Hotel Casino was sold at a major loss five years ago and is now known as the Golden Nugget.
At the nearly deserted eastern end of the boardwalk, the Trump Taj Mahal, now under new ownership, is all that remains of the casino empire Donald Trump assembled here more than a quartercentury ago. Years of neglect show: The carpets are frayed, and dust-coated chandeliers dangle above the few customers there to play the penny slot machines.
On the presidential campaign trail, Trump, the presumptive Republican nominee, often boasts of his success in Atlantic City, of how he outwitted the Wall Street firms that financed his casinos and rode the value of his name to riches. A central argument of his candidacy is
that he would bring the same business prowess to the Oval Office, doing for America what he did for his companies.
“Atlantic City fueled a lot of growth for me,” Trump said in an interview in May, summing up his 25-year history here. “The money I took out of there was incredible.”
His audacious personality and opulent properties brought attention — and countless players — to Atlantic City as it sought to overtake Las Vegas as the country’s gambling capital. But a close examination by the New York Times of regulatory reviews, court records and security filings leaves little doubt that Trump’s casino business was a protracted failure. Though he now says his casinos were overtaken by the same tidal wave that eventually slammed this seaside city’s gambling industry, in reality he was failing in Atlantic City long before Atlantic City itself was failing.
Bankruptcy protection
But even as his companies did poorly, Trump did well. He put up little of his own money, shifted personal debts to the casinos and collected millions of dollars in salary, bonuses and other payments. The burden of his failures fell on investors and others who had bet on his business acumen.
In three interviews with the Times since late April, Trump acknowledged in general terms that high debt and lagging revenues had plagued his casinos. He did not recall details about some issues but did not question the Times’ findings. He repeatedly emphasized that what really mattered about his time in Atlantic City was that he had made a lot of money there.
Trump assembled his casino empire by borrowing money at such high interest rates — after telling regulators he would not — that the businesses had almost no chance to succeed.
His casino companies made four trips to bankruptcy court, each time persuading bondholders to accept less money rather than be wiped out. But the companies repeatedly added more expensive debt and returned to the court for protection from lenders.
After narrowly escaping financial ruin in the early 1990s by delaying payments on his debts, Trump avoided a second potential crisis by taking his casinos public and shifting the risk to stockholders.
But he never was able to draw in enough gamblers to support all of the borrowing. During a decade when other casinos here thrived, Trump’s lagged, posting huge losses year after year. Stock and bondholders lost more than $1.5 billion.
All the while, Trump received copious amounts for himself, with the help of a compliant board. In one instance, the Times found, Trump pulled more than $1 million from his failing public company, describing the transaction in securities filings in ways that may have been illegal, according to legal experts.
Trump now says he left Atlantic City at the perfect time. The record, however, shows that he struggled to hang on to his casinos years after the city had peaked and failed only because his investors no longer wanted him in a management role.
Bitter feelings
There are those here who fondly remember Trump’s showmanship, the thousands he employed in a struggling city, and the tens of millions of dollars in tax revenue his casinos generated.
“He was a great person for the company,” said Scott C. Butera, president of Trump’s company at the time of its 2004 bankruptcy. “With his oversight, his brand and marketing, he’s really adept.” Others were hurt. “He helped expand Atlantic City, but he just did not put the equity into the projects he should have to keep them solvent,” said H. Steven Norton, a casino consultant and a former casino executive at Resorts International. “When he went bankrupt, he not only cost bondholders money, but he hurt a lot of small businesses that helped him construct the Taj Mahal.”
Beth Rosser of West Chester, Pa., is still bitter over what hap- pened to her father, whose company Triad Building Specialties nearly collapsed when Trump took the Taj into bankruptcy. It took three years to recover any money owed for his work on the casino, she said, and her father received only 30 cents on the dollar Trump crawled his way to the top on the back of little guys, one of them being my father,” said Rosser, who runs Triad today. “He had no regard for thousands of men and women who worked on those projects. He says he’ll make America great again, but his past shows the complete opposite of that.”
Though he has acknowledged mistakes in piling crippling debt on Trump Hotels and Casino Resorts, Trump has steadfastly maintained that his resorts were the best-run and highest-performing casinos in Atlantic City.
“The casinos have done very well from a business standpoint,” he told Playboy magazine in 2004. “People agree that they’re well run, they look good and customers love them.”
In reality, the revenue at Trump’s casinos had consistently lagged behind their competitors’ for a decade before larger forces ravaged the industry. Beginning in 1997, his share of the Atlantic City gambling market began to slip from its peak of 30 percent.
Revenues at other Atlantic City casinos rose 18 percent from 1997 through 2002; Trump’s fell 1 percent.
Competition grew more intense in 2003, when the Borgata Hotel Casino and Spa opened. The $1.1 billion, 40-story resort redefined the concept of an Atlantic City luxury casino. Revenues at Trump casinos dropped an additional 6 percent in a little more than a year.
.“‘So in love with him’
Had Trump’s revenues grown at the rate of other Atlantic City casinos, his company could have made its interest payments and possibly registered a profit. But with sagging revenues and high costs, his casinos had too little money for renovations and improvements, which are vital for hotels to attract guests. The public company never logged a profitable year.
“There’s something not right when every single one of your projects doesn’t work out,” said Marvin B. Roffman, a casino analyst at Janney Montgomery Scott, an investment firm based in Philadelphia.
Trump Marina was sold for $38 million, less than 10 percent of what the company paid Trump for it in 1996. The Plaza was shuttered. But Trump continued to earn money from the casinos. In 2011, the casinos reported leasing a Trump helicopter for $390,000 and spending $236,000 for “Trump labeled merchandise,” including $197,000 for Trump Ice bottled water.
In retrospect, David Hanlon, a veteran casino executive who ran Merv Griffin’s Atlantic City operations, said, Trump succeeded in repeatedly convincing investors, bankers and Wall Street that “his name had real value.”
“They were so in love with him that they came back a second, third and fourth time,” Hanlon said. “They let him strip out assets. It was awful to watch. It was astonishing. I have to give Trump credit for using his celebrity time and time again.”
Some of Trump’s former investors no longer see the value.
“People underestimated Donald Trump’s ability to pillage the company,” said Sebastian Pignatello, a private investor who at one time held stock in the Trump casinos worth more than $500,000. “He drove these companies into bankruptcy by his mismanagement, the debt and his pillaging.”