[Rushtalk] Donald Trump’s bankruptcy dodge: This is how lawyers and regulators helped him fudge solvency and avoid collapse - Salon.com

Tom Matiska tom.matiska at att.net
Fri Jun 3 19:01:31 MDT 2016

Trump should tout his experience with large scale bankruptcy.  The next President will need such skills.  Tom
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Carl Spitzer <lynux at keepandbeararms.com> wrote:

>Democrats do have a point here his failures are as big as his successes.
>Its almost as if he is long cycle manic depressive.
>Saturday, Apr 30, 2016 10:28 AM UTC 
>Donald Trump’s bankruptcy dodge: This is how lawyers and regulators
>helped him fudge solvency and avoid collapse 
>Twenty-five years ago, the government saved Donald Trump from his own
>profligate spending. It's an important lesson 
>David Cay Johnston, Washington Spectator 
>      * Share
>Topics: Bankrupt, Donald Trump, Editor's Picks, Elections 2016,
>Innovation News, Technology News, Business News, News, Politics News 
>Donald Trump's bankruptcy dodge: This is how lawyers and regulators
>helped him fudge solvency and avoid collapseDonald Trump, pictured on
>Nov. 20, 1990. (Credit: AP/Mark Lennihan)
>Americans wouldn’t be imagining today what a Trump presidency might be
>like were it not for a crucial moment more than 25 years ago when
>government saved Donald Trump from his own profligate spending. In fact,
>it was one carefully calculated response by one of his attorneys that
>saved Trump from financial collapse—just two years after Trump had
>proposed himself as a vice-presidential running mate for George H. W.
>That moment, when New Jersey’s Casino Control Commission decided that
>Trump was too big to fail, was rich with lessons not just about Trump,
>but about how government can favor some people over others—and about how
>lots of journalists, then and now, don’t understand Trump.
>>From 1985 until 1990 Trump was awash in greenbacks. Over those four and
>a half years profits at his enterprises flowed into his pockets at the
>rate of $10,000 an hour in cash, around the clock.
>At the time, Trump told me and everybody else that he was worth $3
>billion. It was a dubious claim for a simple reason. If he was that
>rich, why was he unable to pay his bills as they came due?
>In February 1990 Trump quit paying many of his personal bills. Reporting
>then for the Philadelphia Inquirer, I got his personal financial
>statement, which showed that he expected his income to fall to $748,000
>in 1992 and to $296,000 the year after. That’s a lot of money to most
>people, but not to a “billionaire” with a personal 727 jet to maintain.
>In April casino regulators made public a document showing Trump was down
>to his last $1.6 million.
>Payments on more than a billion dollars of bonds on his three Atlantic
>City casinos came due every 90 days, but as the next payments loomed
>Trump lacked the money to make them.
>About 100 vendors at the newly opened Trump Taj Mahal casino had not
>been paid. Many contractors took legal action to protect their
>interests. And the Trump Shuttle, equipped with what Trump said were
>gold sinks, was down to $1 million cash, not enough to pay employees and
>keep the fleet of Boeing 727s fueled, or to pay for constant repairs,
>since almost all the planes were more than 20 years old.
>As April ended, I broke the story that Trump’s own personal financial
>statement showed he was worth far less than he claimed.
>All this and more forced the New Jersey Division of Gaming Enforcement
>(DGE) to do something it had failed to do for years—examine Trump’s
>finances, to see if he met a critical legal requirement to own a casino,
>namely that he was financially stable.
>The basic standard was simple: the ability to pay bills as they came
>due. If you had to roll over old debt into new, that was fine with
>casino regulators, so long as you did not miss payments. The law put the
>onus on Trump to establish his financial stability by “clear and
>convincing evidence.”
>As the DGE moved in, Trump’s bankers had an accounting firm go over his
>finances. I summarized their report showing he had a negative net worth
>of $295 million this way: You may well be worth more than Donald Trump.
>That story ran above the masthead of the Inquirer’s front page with the
>headline “Bankers Say Trump May Be Worth Less than Zero.”
>The morning that story ran was the critical moment for Trump. Near
>Trenton, the Casino Control Commission listened to testimony about
>whether Trump was financially stable. If it ruled he was not, his casino
>license would be rescinded.
>The case that Trump should keep his licenses was made not so much by
>Trump’s own lawyers as by state employees at the DGE, who asked
>questions shaped to gloss over the growing gap between the revenue Trump
>was taking in and the bills he had coming due. It was a curious
>proceeding, as the DGE was supposed to investigate casino owners,
>workers, and the games themselves to ensure integrity and financial
>stability, not defend the owners.
>A report by the Kenneth Leventhal accounting firm showed that Trump’s
>financial situation was deteriorating rapidly. Instead of ending the
>year with $24 million in cash, the accountants’ revised estimate showed
>he would run dry before the year’s end.
>DGE’s own 111-page report noted that of the $3.2 billion Trump owed (not
>owned, but owed) he had personally guaranteed $833.5 million. Absent an
>agreement by all creditors, Trump faced an uncontrolled domino-effect
>chain of bankruptcies in which if one creditor moved against one Trump
>property the others would follow.
>More than 1,000 lawyers working for Trump and his creditors (who already
>billed almost $11 million) had worked out a “fragile” deal to keep Trump
>going, hoping to minimize losses on the loans they had extended without
>checking his finances carefully.
>The deal required approval by at least four of the five Casino Control
>Commission members. After two commissioners asked skeptical questions,
>Trump attorney Nick Ribis called for a break.
>The dozen reporters in the front row stood up, a few looking bewildered.
>“They’re rehearsing the answer to the next question,” I advised my
>colleagues. “When they come back, they’ll have the witness say Trump
>will be torn apart by the bankers unless the commission votes immediate
>approval of his deal with them.”
>Minutes later, Thomas Cerabino, a Trump lawyer at the center of the
>private bankruptcy negotiations, took the stand. The next question came
>not from Trump’s lawyers, but from DGE’s Thomas Auriemma.
>What would happen, Auriemma asked, if the commission delayed approving
>the deal?
>A second commissioner asked a question and and Cerabino responded in
>slow deliberate words: Unless the commission acted immediately, Cerabino
>testified in slow deliberate words, “the banks will move apart and take
>whatever steps they think are appropriate to protect their interests.”
>With that warning from one of his lawyers, Trump avoided the B word, but
>it was made clear to commissioners that an uncontrolled bankruptcy was
>one day away. Only two other reporters wrote stories explaining what
>Cerabino had said—how he managed to convey, without saying it directly,
>that Trump was on the verge of ruin. That’s because most reporters
>merely quote people accurately, often with little understanding of the
>Before the hearings resumed the next day, several reporters rushed up to
>me, one clutching my big front-page headline, asking when I would
>retract my story. They said that Ribis, Trump’s casino lawyer, had just
>told them my story was wrong. I marched over to Ribis, asked a series of
>short questions whose answers established that my story was correct, and
>got him to confirm to my peers that no retraction of even correction
>would be requested.
>When the commissioners entered the room they faced a choice. They could
>approve the “fragile deal” with the banks or go with the evidence
>showing that Trump was financially unstable and rescind his license.
>That’s when four of the five political appointees used their power to
>take Trump’s side. The commission told the bankers they were free to
>foreclose on Trump. However, while they would be in possession of three
>large seaside hotels, there would be no gambling because the banks
>lacked casino licenses.
>The commission’s action was extraordinary because state law provided for
>such a circumstance, allowing the commission to seize financially
>unstable casinos and keep them going with the existing staff until a new
>buyer could be found. Instead, the state of New Jersey took sides,
>favoring Trump over the interests of his bankers and the people who had
>put their money in those banks.
>Four months later, as Christmas 1990 approached, Trump was again running
>out of cash. “Donald will need $180 million more from the banks to make
>it,” a source intimately familiar with the details of Trump’s finances
>told me back then.
>It was the beginning of Trump having to relinquish his stakes in a host
>of enterprises—and by 1991 the Trump Taj Mahal was in Chapter 11
>bankruptcy, the first of what would become four business bankruptcies.
>He later sold stock in his casinos, where investors not only lost their
>shirts, but during the fourth bankruptcy case creditors successfully
>demanded that Trump get lost. These days Trump licenses his name for
>much of his revenue.
>Today Trump shrugs off the four bankruptcies, saying it’s a standard
>business tactic to restructure debt. But back in 1990 he was as afraid
>of that word as he is today of taking another tough question from Hugh
>Hewitt or Megyn Kelly. And but for government saving Trump by taking his
>side against his bankers, his business would have been tied up in years
>of litigation and we almost certainly would not be imagining the
>prospect of Donald Trump living at 1600 Pennsylvania Avenue. Because
>Trump would have been sunk beneath a sea of red ink.
>This story first appeared on The Washington Spectator
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