Nelson Johnson - Boardwalk Empire - The Birth, High Times, and Corruption of Atlantic City

With financing next to impossible, Maheu and Sanders recruited partners Midland Resources and developers Robert Lifton and Howard Weingrow to help salvage the project. But Maheu and Sanders didn’t have the resources to continue and control of the venture was turned over to the new partners. Plans again were revised, but they were unable to secure funding for what they dubbed the “Atlantic Plaza Hotel Casino.” That’s when Trump arrived. The Donald reached a deal to lease the land from the partnership and took over the project, permitting him to enter Atlantic City cheaply.

At the time of Trump’s arrival, Atlantic City’s casino industry was having growing pains. The industry had expanded faster than the market could grow, and that led to some difficult moments. There were nine casinos in place—several losing money—and none under construction. With the resort far from rebuilt, state and local officials were desperate for someone to put construction workers back to work and bring additional tax ratables and employment to the city. Trump sensed the anxiety and seized the moment. He moved in with grand plans, which officials praised as the start of the “second wave.” Then he held his plans hostage until he received concessions from city and state government that would insure his investment.

Trump brashly insisted he wouldn’t go forward unless he was first licensed as a casino operator. “I didn’t want to be in a weak negotiating position with the Casino Control Commission. … My strongest card was the fact that construction of new casinos in Atlantic City had come to a complete standstill. State and city officials, I knew, were hungry for new evidence that Atlantic City was a good investment.” He told the state he wasn’t willing to “sit around twiddling my thumbs waiting for answers” if the license investigation took a year or more. The result was an informal agreement to complete the process within six months.

Technically such a request was impossible to fulfill. Regulators license a building and find that its owners are qualified to run and operate it. The distinction had not been a problem before Trump because every other operator opened its gaming hall under a temporary license—a convenience that allowed regulators to open a casino complex as soon as it was physically ready even though investigation of the owners wasn’t complete. By this time, temporary licenses had been abolished and Trump wouldn’t risk building a casino without first knowing he could run it. The move accomplished two goals simultaneously. It gave Trump the excuse he needed to go out and find others to risk their money on the project and also put pressure on regulators to move quickly with their investigation. The commission couldn’t issue a license to him, but it did the next best thing—it held a hearing and determined Trump met all the qualifications to hold a license, once his building was complete.

One of the first design problems faced by Trump was that the hotel was to be built on a narrow sliver of land. The location next to the Boardwalk Convention Hall was fine, but a hotel less than 200 feet wide would be difficult to build and operate. Trump needed more width for his project. To handle this problem, he reached out to local attorney Pat McGahn. Resorts International had used McGahn effectively for years to get matters through local government, and Trump recognized the value of a local player. Quietly, McGahn arranged several private meetings with his friends in city hall to discuss a radical new plan for the project. A proposal was developed to allow Trump to buy the air rights over Mississippi Avenue, the street separating the hotel site from Convention Hall. The street is the only access to the Hall’s underground parking garage and was used heavily by traffic visiting the Hall. Being able to build above it permitted Trump to develop a much wider casino, more attractive to gamblers. In a period of just one month—lightning speed by Atlantic City standards—the new plan was approved by the city, and the air rights over Mississippi Avenue were sold for $100. McGahn’s ability to secure the air rights for a token is in stark contrast to a similar situation at Caesar’s Boardwalk Regency. When Caesar’s requested the air rights over a narrow alley, rarely used by the public, city hall demanded $500,000.

Shortly after work started, Trump reached a deal with Holiday Corporation, the Memphis-based firm that owned Harrah’s Casino Hotels in Nevada and the Harrah’s Marina Hotel Casino in Atlantic City. It was July 1982, and Holiday agreed to provide the financing and manage the casino hotel. All Trump had to do was build it and turn over the keys. In exchange, he would receive one-half the profits. Trump had found someone else to assume the risks while he shared in the rewards, but he wasn’t happy. Within months of the Plaza’s opening, Trump grew restless with Harrah’s control of his casino. He wasn’t content to sit on the sidelines and let someone else get all the glory. There was constant bickering between the partners over how the facility should be run. Trump was convinced that Harrah’s was doing a lousy job.

To the Donald, one of Harrah’s biggest mistakes was the failure to take advantage of his name. Trump felt his name had drawing power and he wanted it shouted to the world. The official name of “Harrah’s Boardwalk Hotel Casino at Trump Plaza” had to be changed. He demanded that his name be moved up. So it became “Harrah’s at Trump Plaza.” While the name change fed his ego, it didn’t solve the underlying differences between the partners, nor did it quench his thirst to run a place of his own. Trump got the opportunity in 1985 by a means no one could have predicted.

The Casino Control Commission, in what will likely be remembered as that agency’s biggest blunder ever, denied a license to the Hilton Hotels Corporation. Unlike Trump, Hilton had started construction of its $325 million casino hotel prior to being cleared by the regulators. After all, who could anticipate the denial of a license for an international hotel chain that hosted presidents and kings at its luxurious hotels? Under intense pressure, the commission agreed to reopen the Hilton hearing and reconsider additional evidence. But the initial denial left the Hilton organization so angry it refused to risk further damage to its reputation and gave up on being licensed. To make things worse, Hilton was facing several other problems at the time. Steve Wynn of Golden Nugget, Inc. was threatening a takeover of the company, and the estate of the company’s founder, Conrad Hilton, was contesting a claim by his son Barron to the estate’s controlling block of company stock. To add to the problems, an order of nuns who were the principal beneficiaries of the estate believed the estate would receive more for the stock in a sale to someone other than Barron Hilton—a sale that could help them in their mission to care for orphans and the poor. Unable or unwilling to fight major battles on both coasts, Hilton put the casino up for sale and the Donald was ready to buy.

Trump obtained a $325 million loan from Manufacturers Hanover Trust Corporation to purchase the Atlantic City Hilton—a large risk for a single bank, but revealing of how strong Trump’s standing was then at only age 39. Uncomfortable, perhaps because he was on the hook for the money, Trump quickly sold $350 million in mortgage bonds in the junk bond market to finance the property, removing his personal guarantee. He didn’t have to worry about finding someone to run “Trump’s Castle Hotel Casino,” since part of the deal with Hilton required its management team to stay in place, at least until the end of the year.

Upon opening his second casino in June 1985, Trump was a prince, and not just of his Castle. By owning more than one casino, Trump had positioned himself to become a major player in Atlantic City—more influential than politicians or casino regulators. There was only one annoyance. As he basked in the glory of the casino’s opening, Trump was hit with a lawsuit by his partner on the Boardwalk, who was also his competitor across the street at the Marina. After fighting with him over the name of Harrah’s at Trump Plaza, Holiday Corporation didn’t want Trump to use his name on his new property, which was across from Harrah’s Marina. Having a taste of what it was like to run his own casino, Trump went back to the junk bond market and raised the funds needed to buy out Holiday’s interest in the Plaza. A short time later, he successfully fought, and bought, his way out of costly road improvements, which Hilton had agreed to as part of the approvals for the casino hotel. Trump then made some quick money in the stock market, employing “green mail” to weaken several competitors, by threatening takeovers of Holiday Corporation, Caesars World, Inc., and Bally Manufacturing Corporation.