After thirty-one hours of deliberation, the jury reached a verdict. Sibilia helped broker an unusual compromise. As the forewoman started to read the verdict on July 29, 1986, the USFL owners initially thought they had won a startling, historic victory. The jury ruled the NFL was a monopoly. But the forewoman kept reading: “Damages: one dollar,” which the court would triple to $3. Sibilia’s compromise had been to call the NFL a monopoly, but absolve it of blame for the USFL’s financial struggles. NFL officials celebrated. Without significant damages, they knew their rival was doomed. “We’re lost now,” said one USFL executive. “We’re dead.”
Myerson promised his clients he’d win them damages on appeal, but that never happened. The case was held up in appeals court for years over the USFL’s legal fees, more than $5 million, which the NFL ultimately had to pay. The USFL never played another game. A few stars—Walker, Flutie, Steve Young—were immediately snatched up by the NFL, but most players from the disbanded teams either retired or tried to catch on with teams in the NFL or even the Canadian Football League. In Trump’s book, Trump: The Art of the Deal, he came close to expressing regret: “I bought a losing team in a losing league on a long shot. It almost worked, through our antitrust suit, but when it didn’t, I had no fallback. The point is that you can’t be too greedy. If you go for a home run on every pitch, you’re also going to strike out a lot.” He laid much of the blame on his fellow owners: “If there was a single key miscalculation I made with the USFL, it was evaluating the strength of my fellow owners. In any partnership, you’re only as strong as your weakest link.”
Although the USFL’s demise was one of Trump’s first major public failures, the story faded over time amid the ceaseless torrent of Trump’s subsequent ventures. Despite the league’s ignominious end, his USFL adventure gave Trump, already a celebrity in New York, his first extended run of national attention. His first national newsmagazine profile came in Sports Illustrated, and his first national television appearance came on Sunday NFL pregame shows. To much of America, Trump was now the successful young developer from New York City who had taken on the NFL.
Some USFL alumni blamed Trump for the league’s collapse and said the NFL was able to paint Trump as the villain because he was one. “Only Donald Trump could somehow turn the behemoth of the NFL into an underdog,” said Michael Tollin, who ran a production company that made USFL highlight videos. Trump’s involvement with the USFL was all about “self-aggrandizement, narcissism, and his efforts to find a way to get a team in the National Football League.” In 2009, Tollin directed the ESPN documentary Small Potatoes: Who Killed the USFL? To Tollin, the answer was simple: Trump. The documentary’s climactic scene was an uncomfortable interview at Trump Tower: “I don’t even think about the USFL anymore,” Trump said. “It was a nice experience, it was fun, we had a great lawsuit.” When Tollin asked if the move to the fall happened too quickly, Trump replied, “We had owners that were dying, we had owners that couldn’t pay their bills. And when you have that, you have to act a little bit quickly. . . . A couple more questions and then I want to get out of here. I’ve had enough of this.” Tollin then presented Trump with the result of the trial: the damages award from the NFL, a check for $3.76. (The seventy-six cents was interest.) Trump looked at it awkwardly, then quickly handed it back and ended the interview: “Well, that’s very good. You can have it. Okay, thank you very much. Good luck, fellas.”
Trump lost an estimated $22 million on the New Jersey Generals. The Dallas Cowboys—the team Trump said he considered buying in 1983 but wouldn’t because you could only succeed “laterally” in the NFL—were sold in 1984 for $85 million. That ownership group flipped the team in 1989 to Jerry Jones, for $170 million. In 2015, Forbes declared the Cowboys the most valuable sports franchise in the world, worth an estimated $4 billion.
Trump flirted with buying an NFL franchise a few times after the USFL. In 1988, he discussed purchasing the New England Patriots, but ultimately bowed out. In 2014, he made a $1 billion bid for the Buffalo Bills, but was beaten by a $1.4 billion bid. In early 2016, he was asked about losing out on the Bills. For once, Trump was content with defeat. Running for president, he said, was “more exciting. And it’s a lot cheaper.”
11
* * *
The Great Unraveling
The air was cool and the fog thick over the Atlantic City boardwalk on the morning of June 16, 1990, as people gathered on risers outside the Trump Taj Mahal hotel and casino. Ten weeks had passed since its troubled opening, and Donald Trump was due to arrive for a surprise celebration of his forty-fourth birthday.
The two thousand or so Trump employees and their families stood across from the slate-gray ocean, on a stage erected for the occasion. Doug Cox, a motivational speaker Trump admired, warmed up the crowd. A wiry man with a white beard, Cox had run team-building workshops for nearly every employee of the mogul’s casinos over the prior four years. Cox had been in California, attending his son’s high school graduation, when he got an urgent call from a Taj manager, asking if he could get to Atlantic City to host the birthday rally. Cox took a red-eye to Philadelphia, where a driver whisked him to the rally. He directed the crowd to play imaginary trombones in the air while he led the vocals on James Brown’s “I Feel Good.”
Some in the crowd understood just how much Trump needed cheering. News reports had disclosed his casinos were in trouble. His buying spree, his astonishing accumulation of debt, and his affair with Marla Maples now threatened a great unraveling of his mystique and his empire. Trump’s cash was in such short supply that, on the day before the rally, he had, for the first time, missed a payment on one of the casinos—$43 million due on the Trump Castle Hotel & Casino. Two days before, on June 14—Trump’s actual birthday—an accounting firm that he had retained completed a devastating review of his finances. The confidential analysis by Kenneth Leventhal & Co. said that of Trump’s twenty-two assets—the casinos, the yacht, Manhattan’s Plaza Hotel, and all the rest—only three were running a profit. He had piled up a remarkable $3.2 billion in debt. The monthly cash balance from all his businesses was tumbling into the red. His net worth: negative $295 million.
By the time Trump boarded his helicopter for the twenty-minute hop from New York to Atlantic City, his financial troubles—his missed payment, and the specter of losing control of the Castle casino if he couldn’t conjure up the money within ten days—had jolted many of his employees. On this morning, the lead headline in the Press of Atlantic City was “Trump Skips Payment on Castle Bond.”
Trump was running late. It was close to noon by the time his Super Puma helicopter landed on the Castle’s roof. A limo ushered him down Huron Avenue to the Taj. The fog had lifted as Trump glimpsed the balloons and signs that his workers held aloft. A band struck up “Happy Birthday.” The crowd yelled, “We love you, Donald!” An Asian high roller presented him with a rug, a needlepoint of Trump’s visage. No one mentioned the negative headlines. But as Trump stood on the stage in blazer and red tie in front of a banner that said WE’RE BEHIND YOU 400% DONALD, the bad news seemed to weigh on his mind. “Nobody wants to write the positives,” he shouted to the crowd. “Over the years, I’ve surprised a lot of people. The largest surprise is yet to come.”
• • •
TRUMP HAD, INDEED, MADE a career out of surprising people. He had created an empire greater than his father’s, assembling stellar properties in Manhattan, his trio of casinos in Atlantic City, even an airline. He prided himself on buying or building the very best, sometimes overpaying out of faith in the Trump name and an ever-expanding market. His propensity for purchases that played to his ego had been especially evident in his acquisition of one of New York’s most storied properties, the Plaza Hotel. Trump often had gazed at the château-style Plaza from his office at nearby Trump Tower—and decided he must have it. To trumpet his 1988 purchase, he took out a full-page advertisement in New York magazine and made a startling confession about his deal for the nineteen-stor
y landmark hotel he called his Mona Lisa. “I can never justify the price I paid, no matter how successful the Plaza becomes,” he wrote under the title, “Why I Bought the Plaza.”
The price—$407 million—was not the point, Trump suggested. The hotel was etched into American culture. Scenes in F. Scott Fitzgerald’s The Great Gatsby were set in the Plaza. The architect Frank Lloyd Wright lived in a second-floor suite while he designed the Guggenheim Museum. The Plaza was the home of Eloise, the fictional six-year-old who carried out escapades while living with her nanny on the “tippy-top floor.”
Trump had installed his wife, Ivana, who had overseen the Trump Castle in Atlantic City, as president of the Plaza, authorizing her to make it into “New York’s single great hotel, perhaps the greatest hotel in the world.” The restoration—gleaming chandeliers, a new Japanese restaurant, the ballroom returned to its original splendor—cost $50 million, more than twice what Trump had intended. Trump obsessed over how the remodeling was done. Once, while touring the hotel, he became livid about a slab of cut-rate Chinese marble that he had initially approved, saying it looked too cheap and was the wrong shade of green. “He was mad about it and he blamed me for it,” said Barbara Res, who supervised the Plaza reconstruction. “He was very, very angry, saying, ‘This is shit, this is no good. . . . You’re making a fucking fool out of me, you and Ivana.’ ” Res and Trump had sparred before, but she had never before seen him so furious.
The Plaza’s financial underpinnings, never sturdy, weakened. Trump’s purchase—a record price for a US hotel—was tens of millions of dollars more than the next-highest bid. He had borrowed the money, including $125 million backed by his personal guarantee, without collateral—a risky move. To make interest payments, the Plaza needed to fill all of its 814 rooms every night of the year at a rate of $500—more than twice what the hotel was charging.
Trump began to search for someone to invest in half of his cherished Plaza. He traveled as far as Japan to sit down with the wealthy Japanese who had been eager to put cash into Trump Tower. But they were put off by his debt, as well as his contention that Japan had been “taking advantage” of US military protection—a statement some perceived as anti-Japanese. Trump came home, no investor in sight, the Plaza’s debt mounting.
• • •
AS THE PLAZA’S FINANCES worsened, so did those of one of Trump’s most unlikely visions: a new airline, the Trump Shuttle. The same year he bought the hotel, 1988, he paid $365 million for the aircraft and northeastern routes that had belonged to bankrupt Eastern Airlines—a price many analysts deemed too high. Trump’s plan was to retrofit each of Eastern’s twenty-one worn-out Boeing 727 airplanes into a Trump-worthy “diamond in the sky.” He hired a company to advise him on a logo, and after the first plane came out of the paint shop, he seemed satisfied with a red TRUMP emblazoned on the fuselage. But the T on the tail was a problem. He wanted it bigger. He sent the plane back to be repainted.
As with the Plaza, Trump had borrowed money to make the purchase, leaving the airline so burdened by debt that, to turn a profit, it would need an unrealistically high number of passengers. As soon as the Trump Shuttle took flight in June 1989, it became another drain on his finances.
Trump didn’t know much about running an airline. Moreover, he discounted the advice of his own customers. Passenger surveys found that business travelers cared about little other than getting on-time service between New York, Washington, and Boston. Trump couldn’t believe that was enough. He insisted on installing leather seats, chrome buckles, and bird’s-eye maple paneling. The bathrooms were faux marble with gold-plated sinks.
Some of this luxury was impractical as well as unnecessary. Trump insisted on burgundy carpeting so plush that flight attendants had trouble navigating their meal and beverage carts. Trump’s solution? He told them to push harder.
All this added luxury had a cost—about $1 million for each plane. As the airline’s losses deepened, Trump came up with ideas that sometimes mystified his executives. He directed them to give every passenger a chip to one of his casinos, not realizing that his airline’s business travelers did not frequent Atlantic City. Only two chips were redeemed. Seeking to cut costs, Trump suggested that the cockpit crews be reduced from three people to two. The shuttle’s president, Bruce R. Nobles, pointed out that Federal Aviation Administration safety regulations required a pilot, a copilot, and an engineer.
• • •
BY SPRING OF 1990, Trump oversaw an empire at risk of collapse. It was in “severe financial distress as a result of cash flow shortages,” a Casino Control Commission report found. The Trump Shuttle lost $34 million during the first half of the year, and Trump was trying to sell it, along with his yacht. The opening of the Taj initially brought a windfall—which wouldn’t last—but the Taj was cannibalizing business from his other Atlantic City properties. A fading economy worsened matters, and threatened to make George H. W. Bush, who had succeeded Ronald Reagan, a one-term president. Suddenly, it seemed, Trump had neither the cash nor the credit he needed. The Trump Castle’s bond payment was due in mid-June. A $63 million loan payment was due the following month on stock Trump had bought in Alexander’s department store, a struggling, middlebrow retailer whose land he hoped to use someday for developments of his own.
Desperately in need of cash, Trump came up with an audacious act.
• • •
AS BANKERS ACROSS THE country tightened their lending practices, Trump still had a $100 million line of credit at Bankers Trust. Worried that his bankers would try to block any large transfer, Trump learned that they were going on vacation. He waited until they were gone; then, in a single day, withdrew virtually the entire $100 million. “I said, ‘Draw it down.’ . . . I took everything out of the bank,” Trump said in an interview for this book. When the bankers realized what had happened, Trump said, they were shocked. One “went absolutely berserk.” To Trump, the move seemed ingenious. His bankers thought it was reckless. Yet even the $100 million would not be enough. The possibility of personal bankruptcy loomed.
• • •
TRUMP TOOK A SEAT at a long conference table on the twenty-fifth floor of Manhattan’s General Motors Building, a Georgian-marble-and-glass skyscraper that occupied a full block between Fifth Avenue and Madison Avenue. Trump was used to being in charge, but on this spring 1990 morning at the law firm of Weil, Gotshal & Manges, he was surrounded by nearly thirty bankers united by a shared goal: to prevent Trump’s tottering financial empire from tumbling over the precipice—and taking their money with it.
It was the first face-to-face meeting between Trump and the group of bankers who, since the mid-1980s, had been lending him the money to buy most of his businesses and large-scale luxuries. These loans had now become a source of angst for a sprawling network of seventy-two banks. The biggest stakes lay with seven premier financial institutions—including Citibank, Chase, and Bankers Trust—but some had, in turn, sold parts of the loans to banks in Britain, Germany, and Japan.
Trump had borrowed from the banks during a time of easy money, which was coming to an end as the economy cooled. Only now had the bankers compared notes. Trump would later say the negotiations had been his idea. But with so much of his empire losing money—and so many loan payments coming due—bankers had their reasons for wanting to sit down with Trump. What the bankers discovered worried them. The arithmetic showed that Trump owed them, collectively, two-thirds of his $3.2 billion debt. Complicating the situation further, many of his loans provided that if he defaulted on any one such financing agreement, other bankers who had also lent to Trump could swoop in and demand payment on their loans.
To avert mutual destruction, a few of the lead bankers decided that their best hope would be to negotiate jointly with Trump. They would rein Trump in but leave him at the helm of his businesses. “He was basically worth more alive than dead,” said Alan Pomerantz, a Weil, Gotshal real estate attorney who represented Citibank.
Which is wh
y, on this morning, Trump came to the conference table to start negotiating. The group process was unorthodox, and no leader had been chosen. One of the few women in the room, Ann Lane, seized the moment. Lane, in her midthirties, was a Citigroup managing director for corporate debt restructuring, representing the bank with the most at risk. Lane blended a demure appearance with a take-charge manner. The bankers had to figure out just how much trouble they and Trump were in, she said, and find a solution acceptable to all. Trump had his own reasons for going along. Without borrowing more money, he would be unable, for starters, to cover his mid-June bond payment on the Castle casino or $28 million due the same day to Manufacturers Hanover Trust bank.
Trump’s troubles at his casinos had, meanwhile, multiplied. He had clashed with his top managers after the deaths of the three executives in the 1989 helicopter crash forced him to play a more direct role in his Atlantic City holdings.
John O’Donnell, the president of Trump Plaza Hotel & Casino, regarded Trump’s behavior as unsettling. He grew increasingly incensed at what he saw as Trump’s effort to blame two of the dead executives, Stephen Hyde and Mark Etess, for his financial problems. “I’m fucking sick of you treating these people this way,” O’Donnell told Trump, according to O’Donnell’s memoir.
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