“You’re fucking sick of it?” Trump responded. “Well, I’m fucking sick of the results down there.”
“Donald, you can go fuck yourself!”
O’Donnell dictated a letter: “Dear Donald: Effective immediately, I resign my position as president and chief operating officer of Trump Plaza Hotel & Casino. Jack.” (Years later, Trump gave a different version, saying he fired O’Donnell.)
Other departures further decimated Trump’s team. He fired the vice president for human resources who had built the Taj’s workforce. He demoted the president of the Taj casino, invoking what would become one of his favorite put-downs: the executive was a low-key “Type C personality.” The growing crisis led to more stories about Trump’s possible downfall. In June, Trump went public with his strategy of blaming others, including Hyde, who had overseen all of Trump’s casinos. “Steve was my great friend, but I just saw things that I frankly wanted changed because I wasn’t satisfied,” Trump said. It was only after the helicopter crash, he bluntly acknowledged, “when I started getting involved and watching the operation in Atlantic City.”
Through it all, Trump clung to his billionaire image. “It’s ridiculous,” he said of suggestions that he lacked the cash to pay contractors who had built the Taj. “I have a lot of money.” Behind the scenes, however, Trump was frantically negotiating with his bankers. At any instant, they could call in many of the loans, demanding repayment. Trump kept reminding them that, unless they gave him relief, they all would suffer together.
• • •
BY THE LAST WEEK in June, Trump and the bankers had a tentative plan to restructure his loans. The bankers would provide $65 million, deferring interest payments on about $1 billion in loans for up to five years. In exchange for that breathing space, the bankers would assume control of vast chunks of Trump’s empire. They would place liens on many of his most prized possessions, including his three casinos, the yacht, and his personal plane. They would compel him to sell off much of what he owned. In a particular indignity, they would place him on a personal spending leash—a budget of $450,000 a month at first, dropping within two years to $300,000—a fortune for most people, but a substantial curb on Trump’s habits. Trump needed to keep up appearances, the bankers reasoned, to be in position to sell off his assets. Still, an obstacle remained. Some of the foreign banks balked, protesting that the deal was too easy on Trump. Finally, only two holdouts remained, both in Japan, a culture in which unpaid loans are a source of shame, even suicide. One night, Robert McSween, a Citigroup managing director who dealt with the foreign banks, realized that only one solution remained. At 11:00 p.m., he was still in his office when he called Trump at home: “Donald, you gotta come over and talk to these guys.” McSween remembered Trump sounding miserable, dejected, as if he were almost crying: “Why bother? There’s no way this is getting done. It’s all over.”
McSween said he persuaded Trump to get dressed, get in his limo, and drive the five blocks to Citibank headquarters. McSween, Lane, and a few other bankers escorted him into a conference room with a speakerphone. They dialed the Japanese bankers, who had gathered in a Tokyo office. At first, Trump was hunched over, downcast. He apologized to the bankers in Tokyo. McSween motioned for him to pick up the pace. Trump, the pitchman, found his cadence. Once the loans were restructured, he promised, the money would grow. It would all be great. Within thirty minutes, the bankers half a world away said they would sign the agreement.
On August 21, Trump was back in Weil, Gotshal’s offices, seated this time at the head of the conference table. Pomerantz, the attorney representing Citibank, was to his left, handing him document after document to sign. “Donald, this is the lien on your house,” Pomerantz told him. “This is the lien on your boat. This is the lien on Mar-a-Lago.” The agreement was complex—two thousand pages in all. When the document signing was complete, Trump’s bankers would hold the keys to a shriveling empire.
Trump, however, portrayed his humbling before the bankers as a victory. “It was the greatest deal I ever made because I saw the world collapsing, and instead of waiting a year, I took my pride and I said the hell with it,” he recalled years later. “I’m telling you, six months later the banks were in such trouble they couldn’t have given you ten cents.” He had barely escaped. Yet, during the document signing, an aide arrived with stacks of books. Trump opened the cover of each one, inscribed “Thank you” in his bold, angular autograph, and handed out copies of his fresh release, Surviving at the Top.
• • •
THE BANKERS DEMANDED THAT the Trump Organization put its financial house in order and hire a chief financial officer and create a fiscal plan. Trump found his man by happenstance. He picked up a copy of a finance magazine that featured on its cover thumbnail photos of nearly a dozen chief financial officers. Trump asked a visiting investment banker to tell him which CFO was best. The banker pointed to one he knew, Steve Bollenbach, who was working in Memphis for a hotel-and-gaming company and was eager to return to New York. Trump had never met him but offered the job, and Bollenbach accepted. But when Bollenbach asked for a significant signing bonus, he got his first glimpse of the situation close-up. His boss-to-be had no cash for a bonus. They devised a plan: Trump persuaded Citibank to release its lien on unit 11A in Trump Parc Condominium, the former Barbizon Hotel on Central Park South. Thus Bollenbach came to own a twenty-eight-hundred-square-foot apartment with commanding views of the park.
Before long, Bollenbach was in the witness chair in the Casino Control Commission’s main office, at a hearing on Trump’s deal with the bankers. Bollenbach was asked how much Trump was worth. “Well, he tells me he’s worth $3 billion,” Bollenbach responded. The answer was technically true; Trump had, indeed, told him that. But Bollenbach did not yet know how much money his new boss had. He had worked at the Trump Organization for one day.
When Bollenbach began delving into the organization’s finances, he got a surprise. The small staff on the twenty-sixth floor of Trump Tower included three accountants. Each knew about pieces of the fraying empire—the casinos, for instance, or the condos. But no one knew the overall picture; there were no consolidated financial reports. The Trump Organization seemed to Bollenbach less like a company than like one guy making investments. Bollenbach put together the organization’s spreadsheets, listing each asset, its likely earnings, its debt, and its anticipated losses—basic figures that businesses routinely calculate.
Around this time, a confidant of Trump’s became alarmed at the way his life seemed to be coming unglued: his financial mess, the drawn-out divorce fight, the humiliation. “I don’t know how to say this nicely, but at times I was wondering, you know, would somebody put an end to themselves with the pressure?” said the confidant, who revealed his thoughts twenty-five years later on condition that he not be named. Far from anything dire, the confidant saw that Trump “showed up every morning at eight a.m. . . . tie tied, suit pressed, focused, and moving forward, and asking, ‘What do we do now?’ ”
Trump continued to act like the billionaire he still told people he was. He failed to make payments on his yacht, yet he convinced the bank to pay for insurance; the bank reluctantly went along after Bollenbach pointed out that, for the bank to protect its own interest, the boat had to be insured and its owner couldn’t afford to do it. Trump missed so many payments on his five helicopters that bankers clamored to claim them; he hid the choppers somewhere in New York for days before finally divulging where they were. The banks got the helicopters.
Trump nonetheless still radiated star power. When he and Bollenbach were in Atlantic City, they strolled now and then, with Trump’s perpetual trio of security guards, a mile along the boardwalk from the Taj to his Plaza Hotel & Casino, to get some lunch. Crowds followed along, eager to get close, talk to him, touch him. The more time Bollenbach spent with Trump, the more he was struck by Trump’s unshakable faith that his empire would endure intact. Bollenbach, however, recognized that the bankers’ rescue p
lan was only a partial solution. It had not addressed $1.3 billion in debt on the three casinos, including the $675 million in high-interest junk bonds that Trump had used to buy the Taj. Although the Taj was breaking records for Atlantic City’s gambling earnings, interest rates on the bonds were so high that the casino’s income couldn’t cover the bond payments. The first was due in mid-November, and Trump was in danger of missing that one, too.
So, late in the summer, Trump began another round of negotiations, trying to restructure the debt on the Taj bonds. Trump was so anxious to save badly needed dollars that he negotiated even when it seemed there was nothing to discuss. One day, Ken Moelis, an investment banker recommended by Bollenbach to help restructure the Taj debt, arrived at Trump’s office. If he succeeded, Moelis’s fee would be $8 million. “That’s crazy,” Trump responded, demanding a $1 million reduction. Moelis stood firm. After a half hour of discussion, Trump fished a coin out of his pocket and said they should flip for the difference. Moelis made sure the coin had a head and a tail, then tossed it in the air. He watched in dismay as it landed on the table, then bounced on the floor, landing near Trump. Moelis leapt across the table, trying to see the coin before Trump picked it up. It was too late. “Heads, I win!” Trump declared, and the price was shaved by $1 million. (Years later, asked whether he had really won the toss, Trump responded with a smile: “Only God knows. And me, I guess.”)
By the time the negotiations began, the bonds’ market value had sunk to as low as thirty-three cents on the dollar, and many had been sold by their original owners to investors specializing in distressed assets. A steering committee of Taj bondholders met with Bollenbach and other Trump representatives in New York at the Plaza. The talks centered on how much equity in the Taj the bondholders would extract if they lowered the interest rate on Trump’s 14 percent bonds. Offers and counteroffers seesawed. Tempers flared. Two days before Thanksgiving, when Trump’s bond payment was due, he proposed to lower his interest rate more than in his earlier offers; bondholders rejected the idea and prepared to force him into bankruptcy. That evening, the talks broke off.
The next night, however, the two sides were back at the Plaza. Behind the scenes, an idea had emerged from two men pivotal to the talks: the head of the bondholders’ steering committee, Hillel Weinberger, who had bought a large bloc of the distressed Taj bonds for his employer, Loews Corp.; and the billionaire financier Carl Icahn. A Queens native like Trump, Icahn had built his reputation in the 1980s as an investor and corporate raider. He held the controlling interest in Trans World Airlines, stripped its assets, and took it private, leaving the airline in debt and prompting its former chairman to call Icahn “one of the greediest men on earth.”
Like Trump’s bankers before them, Icahn and Weinberger reasoned that the Taj—and their investment—would retain the greatest value if they kept Trump in charge. Pushing him out of the Taj or into involuntary bankruptcy would frighten away gamblers, force a search for a new casino operator, and require a new gaming license. The other casinos in town would, like vultures, hire away the Taj’s first-rate hosts and lure the casino’s prized high rollers.
Television crews camped along Forty-Fifth Street, outside the bankruptcy lawyers’ office where Trump’s people and the bondholders haggled. Midnight came and went. Trump defaulted on his bond payment. The talks shifted to the phone, with Trump doing his own negotiating, until 2:00 a.m., when the parties hung up, deadlocked.
At daylight, the bondholders scheduled a midday press conference to announce that there would be no deal. At midmorning, the bondholders’ lead negotiators decided to try again. By noon, they and Trump had an agreement. Trump got what he wanted at the Taj—whisker-thin majority ownership: 50.5 percent of the stock and control of the casino’s board. The deal was folded into a new kind of legal tool, a “prepackaged” bankruptcy—in which the two sides would dip briefly into court to ratify their agreement—instead of a drawn-out traditional bankruptcy that would leave the fate of the Taj, the bankers, and Trump himself in the unpredictable hands of a judge. When the bondholders’ leaders shared these details with the larger group, some were angry. They had wanted to exact revenge against Trump, not rescue him. Icahn, the billionaire with the most bonds, got on the phone and argued that the agreement was the best they could get. “We’re both on a life raft now, and it’s sinking,” he told a dissident bondholder. “We have to do something to save ourselves.”
Late in the afternoon, Trump stood in a gilded conference room at the Plaza and cast the blame far from himself. “The Taj Mahal,” he told the crush of reporters, “is caught in a huge recession—maybe the word is depression.”
The tentative agreement that day was not the end of the drama. Four months later, in April 1991, Trump again faced New Jersey’s casino regulators, needing them to renew the Taj’s license. The commission approved licenses only if casino owners could show they were financially stable. The commission staff’s report on Trump’s financial condition painted a dark scenario. Despite the deal with the bankers, Trump could be expected to “exhaust his available financial resources in July” and “cannot be considered financially stable.”
Nevertheless, when commission members convened in Atlantic City three days later to vote, they became the latest group to give Trump a break. There was more to consider than his fragile finances, they reasoned. If the commission withdrew his license and the Taj failed, what about all the employees who would lose their jobs, the vendors who would be cut off from Atlantic City’s biggest casino, the taxes that New Jersey and the city would forfeit? With one dissenting vote, the commission let the Taj stay open for another year.
• • •
ONE STORY FROM THIS era is emblematic of the pressure Trump faced. The week before Christmas 1990, Trump’s father, Fred, dispatched a lawyer to the Castle casino, with its crimson and gold neon crowns over the front door. The lawyer, Howard Snyder, approached the casino cage and handed over a certified check for $3.35 million, drawn on Fred’s account.
Snyder then walked over to a blackjack table, where a dealer paid out the entire amount in 670 gray $5,000 chips. The next day, the bank wired another $150,000 into Fred’s account at the Castle. Once again, Snyder arrived at the casino and collected the full amount in 30 more chips.
Neither Fred Trump nor his attorney nor anyone else used any of the $3.5 million in chips to gamble. The gray chips were yet another emergency strategy to funnel cash to Fred’s hard-pressed son. Nearly a decade after Fred had lent his son $7.5 million to help pay off debts, Donald Trump, in his midforties, was again relying on his father as a financial crutch. In this instance, Fred stepped in because, six months after his son had missed the first Castle bond payment, another was coming due, and casino executives warned that they couldn’t pay the full amount. Trump’s father, they learned, could provide $3.5 million in cash, but there was a catch: if he simply gave the money as a gift, it would be siphoned off to the Castle’s many creditors. Depositing the cash into a gambling account was a way to sidestep them. Sure enough, the Castle made its bond payment the day Fred’s lawyer bought the first batch of chips.
By then, the Castle was Donald’s most endangered casino. He had missed three loan payments. The newer, fancier Taj was draining away customers. As 1991 began, the bleeding continued. For the first three months of that year, Castle gambling revenues dropped nearly one-third. For the year, it lost $50 million.
Years later, Trump contended that propping up the Castle with millions in his father’s chips had been Fred’s idea. “My father said, ‘Oh, let me do it, it’s easy with the chips,’ ” Trump said.
New Jersey casino regulators griped that, in reaching a settlement with the Castle, the state’s Division of Gaming Enforcement had agreed to shield the identity of the person who dreamed up the scheme. “I don’t think there is anyone in this room that doesn’t know how this came down,” commissioner Frank J. Dodd said. “Fred Trump didn’t wake up in the middle of the night and say, ‘I
feel like buying three and a half million dollars’ worth of chips.’ ” As unprecedented as the episode was, commissioners concluded that it had violated only a rule intended to keep organized crime out of Atlantic City. Under the rule, anyone who lends money to a casino must be approved as a qualified “financial source.” Because Fred was an unauthorized source, the commission unanimously voted to fine Trump Castle $65,000—more than the Gaming Enforcement Division had recommended, but less than 2 percent of the money that Fred had handed to his son’s casino. Neither Fred nor his son nor anyone else was ever personally punished.
The lifeline from the chip purchases didn’t last. Trump’s mountain of debt eventually compelled him, in March 1992, to put the Castle and the Plaza Hotel & Casino into the same kind of bankruptcy arrangement that had barely preserved his ownership stake in the Taj. Trump had now put all three of his casinos into bankruptcy. He survived thanks to a principle that had served him well: his creditors believed his name still had enough value to keep him in charge.
• • •
A FEW YEARS EARLIER, when he was first widening his lens beyond Manhattan to the possibilities in a down-and-out gambling mecca, Trump had told the Casino Control Commission that he only wanted what was best for Atlantic City. Many years later, he revealed a different perspective. The bottom line, he said, was that “for myself these were all good deals. . . . I wasn’t representing the country. I wasn’t representing the banks. . . . I was representing Donald Trump. So for myself, they were all good deals.”
The small-fry contractors who’d placed their faith in Trump and built his gambling palaces learned about his priorities the hard way. Mark Cutler thought he was hitting the big time when, in 1989, his Pennsylvania business won the contract to create the neon-red TRUMP TAJ MAHAL sign that would sparkle against Atlantic City’s skyline. Cutler, whose business dated to his father and uncle’s struggle to make a living during the Great Depression, went twice to Trump Tower in New York to make a deal with Trump. The casino magnate pounded his large desk, demanding the best of everything—the best materials, best finishes, best fabrication techniques, a sign that would last. Trump was demanding even about the metal edges of the sign’s twenty-foot-tall letters, insisting that they be red. It took some doing, but Cutler finally persuaded him that black edges would make each letter stand out more vividly against the night sky.
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