A week before the Trump Taj Mahal would finally open, Trump’s casino executives organized a pep rally for more than six thousand new employees. In the casino’s cavernous new arena, dealers and maids and cocktail waitresses wore glowing neon sticks around their necks and wrists while dancing and singing along to “We Are Family,” the 1970s disco hit by Sister Sledge. Hoots and hollers erupted from the darkness. After a few more songs, lasers shot colored light rays across the large room. Theatrical smoke puffed from the stage. On several large projection screens, a man appeared with the bug-eyed stare of a silent movie villain, a satin turban atop his head.
“I am Fabu the Fabulous!” his voice bellowed from loudspeakers. “I am the resident genie of the Trump Taj Mahal…the eighth wonder of the world!” Fabu went on to explain that he had not been summoned by “any mere lamp rubbing,” but rather it was “your spirit of teamwork, of motivation, and of commitment to success that got me here.”
The leadership team that Trump had installed after the helicopter crash the previous fall took the stage and shouted questions to generate excited cheers in response. “When I told you that this building is the most fabulous hotel casino in the world, did I tell you the truth?” asked Walter Haybert, who Trump had named president of the Taj Mahal. “Do we have the most magnificent casino in the world?” asked Willard C. “Bucky” Howard, the casino’s executive vice president. Robert joined the executives and kicked up his leather loafers with casino dancers. “We’re going to give our customers so much fun they won’t want to leave us!” he told the crowd of employees.
More smoke filled the stage. The triumphant song “Eye of the Tiger” from the Rocky films blasted from the speakers. Curtains parted, and out into the smoke and thumping music walked Donald Trump. The crowd chanted “Donald! Donald!” in unison. He took the microphone to fire up his staff. “Boy, a lot of payroll,” he began, killing the excitement in a flash. “I asked someone, ‘Am I paying them today, or does it start Monday?’ And I was told it started two weeks ago. That’s okay.”
He then threw a line of support to his employees—“You really are great people”—before patting himself on the back for once again overcoming naysayers. “You know, the risk with the Taj was getting it built. But the building has come out so well,” he said. “It’s going to be a lot of fun proving people wrong about it. I love proving people wrong.
“When we took on this project, we made a decision: Do we go first class, or do we go in with paint and glue. And we decided, at great cost, to lay it on the line.”
The people Trump wanted to prove wrong were mostly industry analysts who agreed that he had laid everything on the line, but doubted the market in Atlantic City could support his spending. Back in December, Fortune had pointed out that Trump had missed two deadlines to complete construction and faced a possible cash crunch. A $47 million interest payment was due on May 15, only a few weeks after he would begin generating revenue. The popular Wall Street publication, Grant’s Interest Rate Observer, wrote that Trump’s overall debt put his financial stability “under suspicion.”
It was all the sort of quantitative analysis Trump despised. He produced a letter from the Arthur Andersen accounting firm saying he had hundreds of millions of dollars on hand. “I don’t need a lot of cash,” he said. Then he began trying to sell his yacht and the Plaza Hotel, but only to have cash for more acquisitions, he insisted.
Analysts believed Trump would simply be taking players away from other casinos, including the two he owned. So did his own executive vice president, Bucky Howard, who remembered telling Trump before the opening that the Taj Mahal was going to fail. “It was doomed way before the start,” Howard later recalled.
Marvin Roffman had been saying for more than a year that the Taj Mahal would need on average $1.3 million of revenue every day to meet Trump’s debt payments, a level the Atlantic City market could not support. In December 1989, he told the Miami Herald that Trump’s fame and the spectacle of the huge Taj Mahal would make for a flush spring and summer, but the cold winter months in New Jersey would be a challenge.
Two weeks before the scheduled opening, The Wall Street Journal quoted Roffman making the same point: “When this property opens, he will have had so much free publicity he will break every record in the books in April, June, and July. But once the cold winds blow from October to February, it won’t make it. The market just isn’t there.”
Trump could not take it anymore. He sent a letter that day to Roffman’s boss, Norman T. Wilde Jr., president and chief executive officer of Janney Montgomery Scott. He called Roffman’s comments “an outrage,” and added, “I am now planning to institute a major lawsuit against your firm unless Mr. Roffman makes a major public apology or is dismissed.” The firm’s chairman, Edgar Scott, never addressed whether Roffman had been correct in his assessment. Scott told Roffman that he could no longer speak to the press or testify before the Casino Control Commission, and that he would lose his bonus for the year. Scott called Trump the next day to let him know Roffman had been disciplined and to ask how Trump wished the firm to handle an apology. Trump said he wanted Roffman to write him a contrite letter. After his bosses found Roffman’s draft letter to be insufficient, they wrote one for him. “Unquestionably, the Taj’s opening will be the grandest and most successful the city has ever seen,” the new letter said, and added that Roffman had “every hope that the Taj will ultimately be very profitable.” Roffman, still concerned about losing his job, signed the letter.
Trump thought the letter did not go far enough. He wanted Roffman to say he was sure the Taj Mahal would be profitable. Roffman went home and stewed over what had happened. His duty, as he saw it, was to be truthful to investors and potential investors. The next afternoon, he sent a fax to Trump retracting his apology and saying he had not written the letter himself. He was fired the next morning.
Trump also took his war of words to Neil Barsky, the Wall Street Journal reporter who quoted Roffman’s warning. Since covering real estate for the New York Daily News, Barsky had long been one of the few reporters to scrutinize Trump’s claims and promises. “Dear Neil,” Trump wrote in a letter to Barsky. “From your first incorrect story on Merv Griffin—to your present Wall Street Journal article, you are a disgrace to your profession! Sincerely, Donald J. Trump.”
By then, his problems with Ivana had broken into public view and added another layer to doubts about his finances. He was on a plane returning from Tokyo, having attended a Mike Tyson fight there, when Liz Smith, the lead gossip columnist at the Daily News, wrote that Ivana had been devastated to learn “that Donald was betraying her.” She had been so busy, Smith wrote, taking care of the family while serving as “her husband’s full-time business partner, that she had absolutely no idea that the marriage was in trouble.”
The Sunday that he returned, Donald moved out of the Trump Tower triplex and into the smaller apartment that he had bought for his parents to use. He began dishing self-serving insider details to reporters, especially his friend Cindy Adams, the gossip columnist at the New York Post. Donald’s first line of attack was to argue that he was the one, not Ivana, who instigated the split. But the appetite for tawdry details was endless. An entertainment reporter for the Post would later recount sitting in the office with the top editor when Trump called demanding front-page treatment making him look good. After prodding, he offered that Marla always said that Trump provided her the “best sex I’ve ever had.” The quote, which Marla soon disavowed, became one of the most famous front-page headlines in New York City tabloid history.
Eric and Ivanka were still young enough not to be entirely aware of all the attention. But Don Jr., twelve, grew angry with his father and stopped speaking to him. The boy began spending summers with his maternal grandparents in Czechoslovakia, where he learned to hunt and fish from his grandfather.
Around the same time that he took up with Marla, Trump had persuaded his unwitting wife to sign a new prenuptial agreement increasing the cash she would receive in the event of a divorce to $25 million and removing a phrase mentioning “the great love and affection each has for the other.” After confronting Marla in Aspen, Ivana came to believe she had been played, that Donald had known he would be leaving her soon and lured her with the increased payout to somehow prevent her from getting even more. She made it clear she would challenge its validity in court, creating another threat to his finances.
Trump had toyed with bringing Marla Maples to the Taj opening events, but aides convinced him otherwise. In an interview on national television, Donald called the split “a horrible thing on a personal basis,” but said it had piqued interest in the coming opening of the Taj Mahal. Requests for press credentials jumped from two hundred to more than two thousand, he said. “It brings people maybe for the wrong reasons,” he said. “I don’t like bringing people for that reason. But nevertheless, the controversy probably is not a negative thing in terms of a building or a business.”
At the entrance road to the Taj Mahal, visitors drove between two large concrete arches and matching life-size elephant statues. The casino’s exterior was capped by colorful onion domes and seventy-foot-high minarets. The sprawling gambling floor, bigger than two football fields at 120,000 square feet, held more than 3,000 slot machines and 160 gambling tables, all surrounded by gold mirrors, large crystal chandeliers, Carrera marble, and purple carpeting.
At the front door, the “Sultan’s Royal Greeters” wore elaborate sparkling turbans, ostrich feathers, gold sashes, and tassels, with lots of purple. Employees worked in character and were referred to as “performers”—Sinbad the Sailor, Ali Baba, or a few of the Forty Thieves. It all created the feel of an Epcot installation at Disney World without much attention to authenticity, a kitschy fantasy detached from history, geography, and certainly from its namesake mausoleum in India. The restaurants danced around continents—a Safari Steakhouse, a Marco Polo Italian restaurant, and a Casbah lounge—and suites bore the names of King Tut, Cleopatra, Michelangelo, and Alexander the Great. Cocktail waitresses wore culture-clashing Turkish fez caps with harem pants. “It’s all Hollywood,” explained Steve Campbell, the Los Angeles–based interior designer who oversaw such choices. Campbell said he found his inspiration in a 1960s television sitcom. “It’s the I Dream of Jeannie look.”
The architect, Francis X. Dumont, described his guiding vision as “a maharajah’s palace.” Paul Goldberger, the New York Times architecture critic, described the result as a “plain building dressed up to within an inch of its life” and offering no more real joy than “the bleakness of crumbling Atlantic City” outside.
But an architecture critic from the Times was most certainly not the target audience. Alma Guicheteau, seventy-six, and Teresa Tamanini, sixty-eight, two self-described “casino buddies,” made the hour drive from their homes in Vineland, New Jersey, to survey the big trial opening.
“Ooooh, Alma, look at those chandeliers,” Teresa cooed. “They’re byooooootiful.”
Alma saw a sharp-dressed man and asked him, “How the hell do you get your parking stamped?” She had accidentally hit the jackpot. The man in a suit and tie turned out to be Bucky Howard. “I’ll personally initial it for you,” Bucky said, “and you know what else? Donald Trump is about to walk through that door.”
And so he did. Trump walked over and signed autographs for Alma and Teresa of Vineland. Both were delighted. “Teresa,” Alma said as Trump walked away, “he’s thinner than he is on TV.”
The Taj, as everyone called it, filled that week with gamblers and gawkers, many of them older women who came for a thrill of possibly bumping into Donald Trump. Joanne Jones of Lakewood, New Jersey, scampered a few steps across the floor of the Taj Mahal and slapped Trump lightly on the shoulder, then started screaming. “I touched him. I touched Donald!”
She caught her breath for a beat, and then lost it again. “Ooh, I can’t stand it,” she shouted. “I have to go to the bathroom.”
Joanne and Alma and Teresa could not see that behind those doors, Donald’s chances of being saved by a rush of cash from his new casino were dwindling. After a trial opening on Monday, his finance people could not reconcile the cash with the totals from the three thousand slot machines. The numbers were off by almost $2 million. In the push to open, the director of finance at the Taj became so exhausted that he collapsed on the casino floor and was hauled out on a stretcher. As gamblers lined up outside by the thousands, the Casino Control Commission informed Trump that he could not open the doors again until he could show where the money went.
In a panic, Trump called John R. O’Donnell, the experienced casino pro whom Stephen Hyde had put in charge of running Trump Plaza, now Trump’s only profitable casino. O’Donnell, who everyone called Jack, was only thirty-two, but he had spent his life in and around casinos. His father had transformed a pinball manufacturer into Bally Manufacturing, the largest maker of slot machines in the world.
O’Donnell’s assistant interrupted him during a staff meeting to tell him Trump was on the line. O’Donnell suspected the boss was not calling with good news. “Jack, I’m at the Taj…. I got big fucking problems over here,” O’Donnell remembers Trump saying. “I’ve been in meetings with the state all morning. They’re not going to let me open. I’ve got a bunch of fucking idiots down here.”
Trump sent a limousine to pick up O’Donnell. At the Taj, two security guards rushed him past the jeering throngs waiting outside. He remembers one woman screaming out, “Whatsa matter, Donald? Ain’t ya got enough money?” As he walked to the gambling floor, O’Donnell saw over a hundred men and women in suits huddled, whispering to one another. He recognized the Casino Commission officials and approached Robert Trump and Harvey Freeman, the lawyer and key Trump adviser. He asked Robert if things were as bad as they looked. Robert, calm as ever, said, “I don’t know, Jack. It doesn’t look good.”
Nearby, Freeman was staring at the purple carpeting and muttering to himself. “Not good…This is not good.” O’Donnell tried to get him to speak clearly. Freeman mumbled something about the opening representing “a make-it-or-break-it” moment. “You don’t know how big this is,” Freeman said, as O’Donnell remembers it. “We’ve been spending like crazy…We’ve got to reverse this.”
O’Donnell made his way to Trump, who looked uncharacteristically tired and wrinkled. “Jack, you’ve got to get me opened,” Trump said, and then repeated it, “You’ve got to get me opened.” O’Donnell said he needed time to figure out the problem. “No,” Trump said, cutting him off. “That can’t be…fifteen minutes. You’ve got to get this place open in fifteen minutes.” O’Donnell knew that would not be possible, but he agreed just so he could get to work. By then it was already 1:15 p.m. The day was slipping away.
O’Donnell spent the next two hours diagnosing the problem. Casino regulations required the involvement of two sets of employees in transfers of cash between the main internal bank, known as “the cage,” and the change booths placed around the floor. Every transfer had to be documented. The system was designed to prevent employees from skimming cash from the ocean flowing before them. More than $5 million had moved through that process on the first short trial day. But O’Donnell found that massive transfers had not been documented, mostly due to poor planning and training. This was a major problem, a violation of state regulations that carry fines. It couldn’t be undone.
O’Donnell thought the only solution would be to count the money accurately, work through the variances with the regulators, and agree to pay whatever fines the state levied. He knew Trump would be impatient. The first day of test runs, with all the excitement of the new building and endless media attention, had yielded a win for the house on the slots of $603,000, about half of what Trump needed every day to make his interest payments.
As he moved through the casino, he crossed paths again with Trump and Walt Haybert, the Taj president. “I want him fired,” Trump was screaming at Haybert. Trump was disappointed that the finance executive who had collapsed had not been sacked even before he was released from the hospital. “I don’t want to see his fucking face in this building again.” From Donald’s perspective, the executive had failed and fainted not because of pressure due to poor planning and execution by the management team, but because he was soft. “I’m gonna fire all you assholes,” he said to Haybert. “I want pricks in here. I want people in here who are gonna kick some ass.”
O’Donnell waited for an opening before explaining his plan to Trump. He spent the next hour with staff counting cash and reaching an agreement with the regulators. Finally, at 4:20 p.m., the state allowed the doors to open, more than six hours after the scheduled start. The crowd had shrunk to a few hundred. News reporters had hung around. Trump assured them the delay was caused by his own success. “It was a lot bigger than everybody anticipated,” he said. “The tables were flawless, but the slots did so much business it took longer than expected to reconcile.”
The slot machine troubles for the first day had been papered over. But the operational problems remained unresolved. As the crowd and reporters moved on, Trump turned to O’Donnell. “Jack, from now on, you’re in charge here,” he said, as O’Donnell remembered. “You got carte blanche. You fire whoever you want…. Look at these jerk-offs.”
Trump took a limousine to the Castle casino, where he boarded his helicopter and headed home to his parents’ apartment in Trump Tower. While O’Donnell and Robert Trump oversaw the rest of the work for the grand opening on Thursday night, Trump spent the next two days holed up in his office with lawyers preparing to refuse to revise the prenuptial agreement with Ivana.
The evening of the grand opening, a crowd of more than two thousand gathered near a stage in front of the main entrance, beneath a giant neon sign with the name “Trump” in bright red above the words “Taj Mahal.” Merv Griffin showed up to introduce Trump, a sign of how closely their futures had become intertwined with the survival of Atlantic City gaming. By then, the debt that Griffin piled onto Resorts had forced him to put the company in bankruptcy. Griffin took the stage to the sound of his first hit single—“I’ve Got a Lovely Bunch of Coconuts”—and made light of his reduced finances. “I used to have a lot of coconuts,” he said. No longer a foe, Griffin introduced Trump as “America’s foremost entrepreneur.”
Trump took the stage to a round of cheers. “What has happened here is really beyond my wildest expectations,” he told the crowd. “They talked about $1 million a day. I think we did that in the first few hours.”
Trump made no mention of the slot machine problems. He pouted, reached out with one hand, and rubbed the top of a three-foot-tall Aladdin’s Lamp. Fabu appeared on a large screen. “Good evening, master. I, Fabu, am here at your service,” the actor said to Trump. “Is this not a magnificent house? Open sesame!” The casino doors swung open, and a spectacular seven-minute fireworks show lit up the sky above the boardwalk. The patriotic march “Stars and Stripes Forever” blasted from loudspeakers.
Trump went to the ballroom on the second floor for a private party. His public relations people had been leaking the names of major celebrities who would attend. A fashion model and a few professional boxers showed up, but none of the movie stars—Tom Cruise, Jack Nicholson, Melanie Griffith—whose names had been floated. His father, Fred, who was now eighty-four, wearing a reddish toupee, mingled and beamed with pride at the magnitude of his son’s latest creation. Donald’s sisters, Maryanne and Elizabeth, also made the trip.
Robert Trump would not be relaxing at the party. State regulators summoned Trump’s executive team to several rooms in the hotel where they had set up offices to oversee the opening. Robert, John O’Donnell, and Harvey Freeman walked into the rooms at about midnight. Dino Marino and his staff were waiting. Marino, a certified public accountant and Notre Dame graduate, had been in charge of monitoring the finances of casinos in New Jersey since the first one opened in 1978. He told the Trump crew that the slot machine problems had not been fixed, and he could not give them the operating certificate they needed to open.
That set off a high-stakes strategy session between O’Donnell, Freeman, and Robert Trump. They had hired contractors to fix the physical problems with the cage and install more change booths. But they knew that the casino would not handle the cash from three thousand slot machines for several weeks. They decided their best chance was to ask Marino if they could open half the slot machines, with the rest roped off. At about 1:00 a.m. in the morning, Marino agreed.
They did not see Trump before turning in for the night. The next morning, they all received calls to be in Walt Haybert’s office by 8:30 a.m. The three of them arrived before Donald. He walked in with his hair still wet, sat down, and crossed his legs. He was clearly agitated. “Am I going to have all my slots open today?” he asked.
O’Donnell and Nick Ribis, Trump’s top lawyer in Atlantic City, started to answer. But Trump interrupted to ask Haybert whether he had fired the financial executive who had collapsed. He did not like the answer and began cursing. “Shut the fuck up!” he shouted at Haybert. “I tell you to do something and you don’t do it…This is the most fucked-up operation I’ve ever seen!”
Trump grew more animated when he said he had heard that he would not be allowed to open all the slot machines. “You guys are fucking crazy!” he yelled. “I don’t want it! I want every machine open this weekend!”
Haybert told Trump that there was no way to change course that fast.
“You!” Trump shouted at Haybert. “I’ve listened to you long enough. You know what? You’re a fucking idiot!”
He screamed that Haybert was “the one who fucked this place up.” He complained that just like when he opened the Trump Plaza casino years ago, the slot machines were not working when interest burned brightest. He had blamed the failure at the Plaza on his partners, the Harrah’s casino company. This time, he blamed the men sitting before him. “We’re going to lose a fortune!” he shouted.
Robert tried to calm his brother, saying there had been no way to see this coming. Donald interrupted. “I’m sure as hell not going to listen to you in this situation,” he said. He blamed Robert for convincing him to hire Haybert and not overseeing what was happening. “I’m sick and fucking tired of listening to you.”
Donald continued on his tirade. Robert had finally heard enough. He stood up, walked to his office, and told his secretary to find him some boxes. He packed as quickly as he could, then boarded a helicopter for Manhattan. Their days working together were numbered.
Within an hour, Trump demoted Haybert from president of the Taj to chief financial officer. He installed Bucky Howard, who had spent his career focused on marketing casinos but had never run one before, as the new president of the business central to his chances for survival. As he announced the changes to the top managers, Trump blamed them all for the slot machine failure and called them “weak shit” and “a bunch of assholes.”
About half of his slot machines would remain closed for the next several weeks, costing him millions of dollars. The existential threat of the coming interest payments was compounding.
Just minutes after he stopped cursing at his top executives, Trump welcomed Michael Jackson for a preplanned tour of the Taj. He and the legendary pop star walked through the casino floor smiling as they were mobbed by entertainment reporters and thousands of rabid Jackson fans. Trump’s security team could barely keep them moving through the throngs. Robin Leach, filming a segment about the casino opening for Lifestyles of the Rich and Famous, walked with them. They made for an unusual trio—the diminutive pop icon, the large braggart in pinstripes, and the everyman Brit who fetishized ostentatious spending. “To have Michael at the Taj Mahal, he’s my friend, he’s a tremendous talent, and, ah, it’s really my honor,” Trump said to the Lifestyles camera. “It’s, ah, it’s a big day for me.”
As Hal Gessner, Leach’s senior producer, later remembered it, Trump seemed like a “king showing us his fiefdoms.” But Gessner soon caught a glimpse of the king’s other side. As part of the episode, Gessner spoke with workers in the casino and heard that Trump was not paying the contractors who built the Taj. Gessner worried about the show someday being embarrassed. He spoke with Leach and suggested it might be prudent to stop filming episodes about Trump’s wealth. Leach agreed. “I think we kinda milked that cow, and we both knew it was over,” Gessner recalled.
Within a month, Trump admitted to withholding $35 million in payments to contractors. His spokesperson described the dispute as typical of the end of big projects. But Trump needed money. He had a $42 million interest payment coming due on the Trump Castle bonds, and another $47 million on the Taj Mahal bonds.
He called O’Donnell at home late one night and told him that he wanted to cut staffing at the casinos by 20 percent. O’Donnell objected, arguing that a staff reduction of that size would slow down operations so much that revenues would drop. “Just do it, Jack,” Trump told O’Donnell. “Just do it. It’s going to be a positive. Believe me.”
In a subsequent conversation, Trump once again blamed his misfortunes on the three casino executives who had died in the helicopter crash. They were more than colleagues to O’Donnell. Steve Hyde and Mark Etess had been his best friends. When Trump went down that road again, O’Donnell told him, “Donald, you can go fuck yourself” and quit. As O’Donnell saw it, Trump knew little about running a hotel and casino, and refused to listen to people who did, so he made unforced errors and then blamed others for his predictably bad outcomes.
Even before the layoffs and withheld payments to contractors, Trump had tried to generate cash by selling the Trump Princess, the Trump Shuttle, and part of his interest in the Plaza Hotel, but nothing came of it. He tried to refinance some loans, to no avail.
Trump’s bankers, who saw his attacks on Roffman as a sign of distress, began talking about calling his loans. Trump quietly retained an accounting firm, Kenneth Leventhal & Company, to meet with his lenders and negotiate a plan to reduce or suspend his debt payments. As a first step, the Leventhal accountants evaluated Trump’s finances. The situation was dire. They estimated that Trump would run out of cash in June. His businesses collectively were not producing enough profit to cover his expenses.
Leventhal set up confidential meetings at Trump Tower with Trump’s four biggest lenders. As many as fifty bankers and lawyers were slipping into the building every day for long meetings on the twenty-sixth floor with Trump and his aides.
More evidence emerged that Trump was in trouble. BusinessWeek and Forbes both reported that Trump would be coming up tens of millions of dollars short on his annual interest payments. Forbes estimated that Trump’s assets were only worth $500 million more than his debts. Casino regulators concluded at about the same time that his net worth was $205.7 million.
Trump claimed he was suffering under the weight of being himself. “It’s Trump bashing week,” he told The Press of Atlantic City. On the ABC show Primetime Live, he told Sam Donaldson that he was being persecuted by Forbes, the publication most central to building Trump’s fictional image as a self-made billionaire. “Forbes has been after me for years, consistently after me,” he told Donaldson, adding, “It’s a disgrace.” He complained that Forbes had undervalued his assets. He cited no evidence, only his belief that things he owned must be worth more than what he had paid to buy them.
“What I own is trophies,” he told Donaldson. “The Plaza Hotel, which I wouldn’t sell, but the Plaza Hotel’s a trophy. The Taj Mahal, where it has record earnings, that’s a trophy. I own trophies. A trophy doesn’t go down.”
“Well, now, you can’t pay your bills with trophies,” Donaldson said.
“I think you can pay your bills with trophies,” Trump replied.
A few weeks later, Neil Barsky, the Wall Street Journal reporter who had written about the Taj, was playing poker in an Upper East Side apartment with some prominent businessmen. A banker who knew that Barsky had occasionally covered Trump’s businesses offered a surprising bit of news: “Donald Trump is driving 100 miles per hour toward a brick wall, and he has no brakes,” the banker said. “He is meeting with all the banks right now.”
The next morning, Barsky began calling Trump’s lenders—Bankers Trust Corp., Chase Manhattan Corp., Citicorp, and Manufacturers Hanover Corp. He learned from his contacts about the secret meetings that had been taking place. Trying to avoid his payments, Trump had offered the banks a share of his ownership in the Plaza Hotel and the Grand Hyatt in New York, if they erased some of his debt. The banks rejected his proposal.
The banks had grown increasingly concerned that Trump’s businesses were not producing enough cash to cover his interest payments on $2 billion in bank debt, especially with interest payments also coming due on another $1 billion in bond debt. His only profitable businesses were the first two—the Grand Hyatt and Trump Tower—which he built in tandem with experienced partners.
Barsky’s story ran on the front page of the Journal on Monday, June 4, 1990, under the headline Shaky Empire: Trump’s Bankers Join to Seek Restructuring of Developer’s Assets. The banks were hesitant to call their loans and force Trump into bankruptcy because some of his properties were no longer worth enough to cover the money he owed on them, and because in a bankruptcy proceeding a judge would be in control. They discovered also that Trump had cross-collateralized his loans. If one bank forced Trump to repay immediately, it could set off a chain reaction with all of them fighting over the same properties. Most worryingly, they had lent Trump $900 million with nothing but his personal guarantee. If they called his loans due, assets would have to be unloaded at fire sale prices, and they would all be fighting for a place in line to collect.
The banks chose to force Trump to rein in his free spending and sell his biggest losers. “He will have to trim the fat: get rid of the boat, the mansions, the helicopter,” one banker involved in the talks told Barsky.
The day before Barsky’s story was published, Trump flew to Las Vegas on his personal jet to promote his forthcoming second book, Trump: Surviving at the Top, at an annual convention of booksellers. He checked into a suite with its own pool at the Mirage hotel and casino. That evening, Peter Osnos, Trump’s editor at Random House, went to pick up Trump and escort him to a reception the publisher was hosting for a thousand people. Osnos was surprised when Marla Maples answered the door, in a bikini. The couple had not appeared in public very much. Her presence would draw whispers and eyeballs.
The next morning, just as Barsky’s story was published, Trump spoke to the three thousand book-industry professionals in attendance. As Osnos would recall it, Trump took the stage to a large crowd mostly unaware that his reason for belief in his own excellence had just been pulverized.
He described the inevitably sad fate of someone—his future dead self, it seemed—who had been seen as a “great success, fantastic, fantastic” during his life. “He kicks the bucket. The kids fight over the estate. They say the Plaza Hotel is not a good location. Your ex-wives are all fighting and saying what a bum you are. Their husbands, who they marry, who’s living in your room—I’ve seen this—saying Trump was an idiot, what the hell did he know.”
He said some chapters in his book, maybe even the entire tome, might need to end with question marks. He had tried to convince Osnos to delay publication, but Osnos convinced him that this would be a bigger seller than his first book. “He knows how to turn me on, because I want to do that, keep going higher and higher. And then we die, and nobody gives a damn.”
On that day in June 1990, Trump owed banks and bondholders $3.4 billion, nearly all of it high-interest debt he used to assemble his eclectic empire in about six years. His casinos alone were teetering under the interest payments on $1.3 billion in borrowed money.
It all came to a head when he missed interest payments totaling $73 million that month. He and the banks struck a deal that suspended some future interest payments and gave him another $65 million loan to cover the coming interest expenses. Having seen the small-time operation on the twenty-sixth floor, the banks required Trump to hire a chief financial officer and stick to a business plan, two measures that would be a starting point for most serious businesses. Trump agreed not to seek any other loans and put nearly everything else he owned on the line as collateral.
One clause in the agreement was surely a bright spot for Trump. He would be placed on a monthly personal expense allowance of $450,000, a number that struck many as too absurdly large to consider a limitation. But considering the hole Trump had dug for himself, it was a pittance, barely enough to cover what he was spending to maintain Mar-a-Lago, only one of his homes.
That allowance, though, would keep his image intact. It meant he could maintain the appearance of wealth, which to him meant the appearance of success. That appearance is what had drawn flocks of regular people to his casinos and to a Republican rally in Vermont, and made talk-show hosts swoon. His businesses were failing, but the appearance was becoming his business.
Newspapers and television stations across the country focused on the extravagant allowance. Many of the articles quoted—who else?—Robin Leach: “Donald Trump has always lived and worked the lifestyle of the rich and famous, and it will continue under the new circumstances.”
With the $47 million bond payment on the Taj coming due on November 15, lawyers for Trump and the bondholders engaged in tense days of negotiations at the Plaza Hotel. They could not agree on how big a share of the casino Trump would give up to bondholders in exchange for lowering Trump’s 14 percent interest rate. A deal was reached as bondholders threatened to force the Taj into involuntary bankruptcy. Under a prearranged bankruptcy plan, Trump would only own half of the Taj, but he would control the company’s board. To hang on, he had agreed to an interest rate reduction of less than three points, a rate still so high that it all but guaranteed he would face more trouble in the future. He would also be paid an annual management fee of $500,000.
In announcing the deal, Trump took no responsibility for saddling the casino with so much costly debt, or for blowing his own construction budget by $160 million, or for creating more casino space than Atlantic City’s gamblers could support. He blamed all the Taj’s problems on a national recession. “Maybe the word is depression,” he told reporters that day.
During a fifteen-year rise, he had paid close attention to aesthetic details, from the waterfall and ficus trees in the lobby of Trump Tower to the angle of the telephone handsets on his yacht for high rollers. He had not paid similar attention to financial details, especially whether his individual businesses could support the payments on the money he borrowed to buy or build them. He glossed over those essential calculations by assuring himself, and anyone who asked, that revenues would rise to whatever was needed simply because the word “Trump” was above the door. It was his singular egocentric Field of Dreams business philosophy—if Trump builds it, they will come. It had been enabled by his father’s support, a rising economy, and a period of free lending.
But he had been proven wrong. The early results showed the Taj was not bringing more gamblers to Atlantic City, it was only drawing gamblers from the other casinos there, including Trump’s other two casinos. His businesses were cannibalizing one another. A moment of reckoning was upon him. It arrived during an economic period when he could not count on a rising tide to make up for his lack of fiscal discipline. He needed access to a deep well of cash.