Karen Yi

@karen_yi

ATLANTIC CITY - Donald Trump often boasts he made a lot of money in Atlantic City, despite the repeated failures of his casinos there, but what he does not mention is his casino empire’s repeated run-ins with government regulators over broken promises and violating casino rules.

“The record before us is laced with hyperbole, contradictions and generalities,” then-New Jersey Casino Control Commission member Valerie Armstrong said in a 1988 hearing over Trump’s bid to take over Atlantic City’s Taj Mahal. Inconsistencies in Trump’s testimony, Armstrong said, “make it difficult to evaluate adequately the licensee’s fitness for licensure.”

As Hillary Clinton is set to speak Wednesday in Atlantic City about the financial background of Trump’s casinos, records gathered over four months by the USA TODAY Network shine light on an era marked by battles with regulators who often doubted statements by Trump yet allowed him to keep operating. The review also found Trump’s casinos repeatedly broke state rules, leading to more than a million dollars in fines. The most egregious rule-breaking centered on the casinos’ illicit efforts to cater to high rollers and last-ditch maneuvers to stave off the financial collapse ahead.

Despite his troubles in New Jersey, Trump eagerly sought to become an international casino mogul, adding an Indiana riverboat and trying to open more casinos in states including Nevada, Illinois, Pennsylvania, Colorado and Missouri and countries including Canada and New Zealand.

All of this generated a trail of legal paperwork across the country. There are transcripts from days of hearings during which state regulators scrutinized his promises, his finances and his New Jersey casinos’ track record for following the rules. Among the cases:

Discrimination against employees : A $200,000 penalty after pit bosses at Trump Plaza pulled black and female workers off games to accommodate a big-spending player rumored to prefer white dealers. The high roller repeatedly used racial slurs, including the n-word and “black bastard,” state records show. A 1991 hearing transcript quotes one state regulator saying the incidents “allowed or even fostered the impression that enough money will buy anything, including the willingness of an employer to humiliate its employees.”

: A $200,000 penalty after pit bosses at Trump Plaza pulled black and female workers off games to accommodate a big-spending player rumored to prefer white dealers. The high roller repeatedly used racial slurs, including the n-word and “black bastard,” state records show. A 1991 hearing transcript quotes one state regulator saying the incidents “allowed or even fostered the impression that enough money will buy anything, including the willingness of an employer to humiliate its employees.” Cars for cash : A $450,000 fine against the Plaza in 1991 for giving a high roller $1.6 million under the guise of three Ferraris, three Rolls-Royces, a Mercedes and two Bentleys — a failed attempt to evade a state ban against casinos giving gambling patrons cash.

: A $450,000 fine against the Plaza in 1991 for giving a high roller $1.6 million under the guise of three Ferraris, three Rolls-Royces, a Mercedes and two Bentleys — a failed attempt to evade a state ban against casinos giving gambling patrons cash. Illicit loan: A $65,000 fine against Trump’s Castle in 1990 after Trump’s father illegally loaned the resort $3.5 million to save his son’s company from defaulting on an interest payment. One commissioner called it “the most unique singular action that has ever taken place out of tens of billions of dollars that have been moved around Atlantic City one way or another," according to state records.

New Jersey’s rulings on the casino violations did not implicate Trump personally. Trump’s campaign did not respond to repeated requests for comment over the past two weeks, including an emailed list of specific questions.

Beyond the violations, records show Trump repeatedly perplexed state regulators as they pressed him for specifics. He reneged on promises to casino authorities in New Jersey and Indiana. And, as his Atlantic City casinos cycled through multiple bankruptcies, records show some casino regulators in other states were skeptical about his expansion plans.

"If a person is willing to exaggerate and not be specific" to casino regulators, said I. Nelson Rose, who served as an expert witness for casinos and the government in gambling cases, "it does say something. One of the things it says is he thinks he can get away with anything. ... It also shows (Trump’s) willingness to really go to the line and beyond where he doesn't consider himself bound by promises, he doesn't consider himself bound by statements."

Trump’s testimony before agencies in four states reveals a figure familiar to the world today: a media-savvy entrepreneur with a taste for luxury and unwavering confidence in his brand.

"There’s a certain impetuousness that he displayed which is public,” said Brian Spector, an attorney who worked for Trump’s casinos. “He wanted his name attached to things that he acquired; he felt his name had an intrinsic value that went beyond the raw value of things."

Promises unfulfilled



In 1986, when Trump was seeking a renewed license for Trump’s Castle, New Jersey commissioners blasted his team for “numerous direct and sharp conflicts” in their testimony.

Standing in the way was Trump’s resistance to fund road improvements, an obligation passed on from the casino’s previous owners. Trump said he had not fully understood the commitment and sued to void it. Over seven days of hearings, the Casino Control Commission and its lawyers attempted to straighten out what Trump knew. “As far as I’m concerned, somebody’s not telling the truth,” commissioner E. Kenneth Burdge said.

Trump backed out of another pledge to the state before the Taj Mahal opened in 1990. Construction vendors were not getting paid and the casino, then owned by Resorts International, was over budget and behind schedule. Trump pushed to take over, saying he needed full control to get prime financing instead of high-interest, high-risk junk bonds.

“The rates are so high on the junk bonds that they make the company — (a company) that could have been a very good company — they make them junk,” Trump told the state commission at a Feb. 8, 1988, hearing. “So, it’s like a self-fulfilling prophecy almost.”

Trump’s testimony sold himself as a skilled manager who could achieve deals where others failed and get banks to offer better financing. “I mean, the banks call me all the time. It’s easier to finance if Donald Trump owns it.”

Then Trump financed the Taj with exactly what he promised he would not: $675 million in junk bonds at 14 percent interest, bankruptcy records show.

The Taj missed its first interest payment in 1990. Eleven months later, the casino filed for bankruptcy, and Trump gave up 50 percent of his ownership to bondholders in the restructuring deal.

In December 1990, as Trump’s Castle teetered toward missing an $18 million debt payment, the mogul’s father, Fred C. Trump, illegally loaned the casino $3.5 million by sending an attorney to buy gambling chips that were never used, according to state records. The family bailout broke state law because casino loans must follow strict procedures and come from approved financial sources. Trump’s father was not an approved source.

"We know that the people involved are not just the average run-of-the-mill employees in the house," casino commission member Armstrong said at a 1991 hearing when the state decided to fine the casino $65,000, complaining the identities of some involved were kept secret. “This was something which happened, ... people did it, people planned it, they carried it out, and we still don’t know who those people are.”

Trump's Castle and Trump Plaza separately filed for bankruptcy in 1992. The casinos eventually reorganized under Trump Hotels & Casino Resorts and filed again for bankruptcy in 2004, then reorganized as Trump Entertainment Resorts and filed again for bankruptcy in 2009. Over the years, Trump’s stake in the casinos dropped to 10 percent before they were either sold or closed. In all, Trump’s Atlantic City casino properties filed for bankruptcy protection five times.

“Seven years ago, I left Atlantic City before it totally cratered,” Trump said in the first GOP debate in August. “And I made a lot of money in Atlantic City. And I’m very proud of it.”

J. Michael Diehl, owner of Freehold Music Center, sold the Taj Mahal eight pianos for $100,000 in 1989. Trump, he said, “wanted everything perfect." But Diehl said he was stiffed on the deal. He waited for months for his check and eventually took out a loan to pay his manufacturer.

A few months later, the Taj Mahal offered him three options for payment: take 70 cents on the dollar, wait until the casino was profitable or force it into bankruptcy and get pennies on the dollar. “I had no other choice but to swallow the bitter pill,” said Diehl, 88, who lives in Millstone Township, New Jersey. He took the $70,000 payment, losing 30 percent on the deal.

“At that time, $30,000 was a lot more than it is today. I tightened my belt and had little money to spend on my kids and my food and my clothes,” said Diehl. “I’m very concerned now, if (Trump) does that kind of business with a small business and he takes advantage of people … he cares less about the average worker.”

Flouting state regulators

Casino patron Robert Libutti was known for temper tantrums. He’d chuck dice into chandeliers and at security booths and throw game chips on the casino floor. One state regulator called him one of “the most obnoxious, abusive persons that we have had in this town,” state records show. Libutti, who died in 2014, was eventually banned by the state from all Jersey casinos over alleged ties to organized crime. But the premium player gambled thousands at a time, and Trump Plaza responded by catering to his desires, even if that meant breaking the law.

State regulators in 1991 found pit bosses at Trump Plaza discriminated against black and female employees by removing them from craps games when Libutti played because they thought he disliked black and female dealers. The casino was fined $200,000 for discrimination.

The Casino Control Commission said that while the Plaza had no formal discriminatory policy in place, some lower-level managers reassigned workers based on their race and gender.

“They were more like unwritten rules and regulations, and a lot of things that were going on, that were said, were only done to appease customers,” said Newton Brown III, a black worker who told investigators in 1990 that he was reassigned at least five times when Libutti was in the casino.

Spector, an attorney who represented Trump’s casinos then but did not make key decisions, said an administrative law judge recommended throwing out the discrimination charge, but casino commissioners reversed the decision. State records indicate the practice at Trump Plaza went on for two years.

Employee Cathy Carlino testified at one state hearing that Libutti “started cursing, screaming, banging the table, ‘I don’t want no (expletive) woman here. I don’t need these (expletive) in my game. I told you people before. Get her out of here. Why are you doing this to me?’”

“There are, or ought to be, certain things that a casino hotel cannot sell or provide to a customer in order to assure his continued patronage,” then-casino commissioner Steven Perskie said. “These things include honor and decency and simple human courtesy and an unwavering commitment to statutory obligations, including the law against discrimination.”

In November 1991, state regulators again hit Trump’s Atlantic City casinos with fines for catering to Libutti by giving him nine luxury cars — three Ferraris, three Rolls-Royces, a Mercedes and two Bentleys — some of which were resold immediately. That, records show, let him get cash instead of the cars, which violated state law at the time. The deputy attorney general who investigated the case testified Trump’s casino concocted the scheme to keep Libutti’s business.

Trump’s Castle also masked illegal rebates as airfare at least seven times for another customer, according to state records. The casino called the payments “airfare reimbursements,” but amounts were as high as $25,000, far exceeding the cost of a flight to the gambler's home in the Philippines.

"It's really quite startling in the casino industry for a casino to put in a blatantly phony document to justify giving cash to a customer," said Rose, a gambling expert. Rose called the practice “open fraud.”

The casino was fined $176,000, and employees, including two vice presidents, were fined $53,000 for 23 violations.

A 'disappointed applicant'

The past was a topic for other states where Trump tried to expand.

Trump went before Nevada gambling regulators in 2004, seeking permission for his Trump Hotels & Casino Resorts to run a Vegas casino. He brushed off his early struggles in Atlantic City, assuring Nevada commissioners the market was improving and Trump casinos in particular were doing well. “I’ve become very much involved in the company over the last six months, and generally, when I get involved in a company, historically they work," he said.

That fall, Trump Hotels & Casino Resorts went bankrupt. Trump never opened a Nevada casino.

In 2006, he was telling his story again in Pennsylvania, asking to open a casino in Philadelphia.

“The Trump brand has just come out and has been considered the No. 1 brand anywhere in the world and in the shortest period of time,” Trump told the Pennsylvania Gaming Control Board. “We want to take that brand, and we want to take great construction, we want to take a fantastic site and a very important site and a site that is going to do something for a neighborhood that nobody else can compete with.”

Pennsylvania said no. The casino board found no evidence that Trump’s Keystone Redevelopment Partners would bring millions of dollars, jobs and business and was “not convinced that the Trump name would overcome the significant disadvantages of the site,” Pennsylvania records show.

Trump’s Keystone mounted two legal challenges when a competitor that got the license struggled to open and eventually went bankrupt. A state court rejected one Trump case, and a federal judge dismissed another.

Among the last of Trump’s approximately 1,800 casino lawsuits were his fight to get the Trump name taken off the Plaza and Taj Mahal in 2014, when he no longer controlled the casinos.

He left an impression in Atlantic City, though.

Trump is a brand, “and he promotes his brand,” said New Jersey state Sen. Jim Whelan, a Democrat who was Atlantic City’s mayor in the 1990s. “That’s what he does now, with over-the-top pronouncements and saying outlandish things.”

Karen Yi: 732-643-4277; kyi@gannettnj.com