Trump’s tax audit and his bid for a Detroit casino

In recent visits to Michigan, Donald Trump has vowed to restore Detroit’s economy and tirelessly work to provide jobs for young, unemployed African-American residents of Detroit, while also cutting taxes.

“I will produce for inner cities and I will produce for the African Americans,” Trump said at one event, blaming Detroit’s long decline on decades of Democratic rule. “What do you have to lose by trying something new like Trump?”

Possibly a lot, if the reality behind similarly brash promises he made in Detroit 20 years ago are an indicator.

Back in 1997, Donald Trump’s New York-based company, Trump Hotels and Casino Resorts Inc., was one of 11 groups that sought a casino license after Michigan voters approved a proposal a year earlier that allowed for as many as three casinos in Detroit.

Then, as in his presidential campaign, Trump made ambitious claims about what his business acumen and financial investments could do for Detroit -- promising hundreds of jobs for Detroiters, a showstopping hotel and casino, and millions of dollars to tear down vacant buildings.

But Trump’s casino pitch was ultimately brought down by some of the same issues that critics say hinder his presidential campaign today: a lack of tangible evidence to support his bold plans and, as Bridge learned, Trump’s reluctance to produce tax returns.

‘A magnificent casino’

“We look forward to doing a really spectacular job in Detroit,” Trump vowed in June 1997 as he entered the fray for a casino license. “We think it’s going to be a terrific place, a magnificent casino and, if we’re chosen, we will not disappoint.”

Trump proposed an 800-room casino hotel and related amenities employing 6,500 people, the most jobs of any bidders. He also signed an agreement to fund a large expansion of the Motown Museum and said he would spend $14 million to tear down abandoned buildings. Both offers were contingent on Trump getting a casino license.

His development plan was highly popular with Detroit residents, who saw Trump as a larger-than-life celebrity who could bring some glamour to a drab city. Detroiters favored Trump’s casino plan over all others in a November 1997 EPIC/MRA poll of 1,000 city residents, the Detroit Free Press reported at the time.

Trump’s bid was among the seven finalists, but he ultimately failed to win a license. Records reviewed by Bridge show he was undone, in large part, because his casino company was on the brink of financial collapse, according to a Las Vegas accounting firm hired by the city of Detroit to evaluate the finalists’ proposals.

A November 1997 analysis by Nelson Malley & Thorne found Trump’s company had $1.7 billion in long-term debt, was “significantly over-leveraged”-- meaning it was having trouble making interest payments on its debt -- and losing tens of millions of dollars a year.

“The company’s ability to continue to operate under its current capital structure is questionable,” the accounting firm wrote, and Trump’s sources of capital for his required 20 percent equity contribution “not readily identifiable from the proposal.” Financing for the proposed $542 million Detroit casino was dependent on a successful $400-million, junk-bond offering.

The accounting firm concluded that plan by Trump and another bidder, Detroit businessman Don Barden, were the weakest financially of the seven.

Nelson Malley & Thorne’s analysis was buttressed by the views of a financial expert who testified against Trump in a legal dispute involving Trump’s bid to build another casino in Florida at roughly the same time Trump was seeking a casino license in Detroit.

John Finnerty, a finance professor at Fordham University, said in a 2010 affidavit obtained by Bridge that Trump’s casino development company was “financially incapable of serving as the developer and manager” of the proposed Florida project back in 1996.

And Trump Hotels & Casino Resorts Holdings, the company that operated Trump casinos in Atlantic City, N.J. and Gary, Ind. on behalf of Trump Hotels & Casino Resorts Inc., faced a high likelihood of declaring bankruptcy by 2000, Finnerty concluded, due to the weakened state of the parent company.

Trump filed six bankruptcies in his former hotel-and-casino empire, including a 2004 filing by Trump Hotels & Casino Resorts, which owned the Atlantic City and Gary casinos.

Checks and tax returns

Bob Berg, a Detroit public relations executive who represented Trump in his bid for a Detroit casino, said he doesn’t recall financial problems being much of an issue as Trump dazzled Detroiters with his plans to help revitalize the struggling city.

During Trump’s presidential campaign, there have been numerous reports of Trump not paying his contractors and suppliers. But Berg said he was always paid for his public relations work by Trump’s organization.

“Their checks always cleared,” he said, chuckling.

Most of the those seeking a casino license enlisted well-known local businesspeople as partners in an attempt win favor with the city. Trump teamed up with Mel Farr, a former Detroit Lions star who later became one of the largest African-American auto dealers in the country.

Farr, who had a 5 percent ownership interest in Trump’s casino proposal, saw his auto dealership empire collapse after defaulting on $50 million in debt owed to Ford Motor Credit Co. in the early 2000s, according to Automotive News. He died in 2015.

The Nelson Malley & Thorne analysis said neither Farr nor his entertainment company had “any experience or exposure relevant to the (Detroit) casino project,” suggesting Farr’s role was minimal.

C. Beth DunCombe, who chaired Detroit’s casino advisory committee at the time of Trump’s casino pitch, said Trump’s problems went beyond company debt.

Trump, she said, was the only bidder who refused to release tax returns, which the city required. She said he claimed he couldn’t release them because they were being audited -- the same reason he has given for not releasing them now as a candidate for president.

“That really stood out,” DunCombe said. She couldn’t remember if the city had asked for his personal or his corporate tax returns, but said his failure to release them was a major reason Trump’s bid was not among those recommended to then-Detroit Mayor Dennis Archer, DunCombe’s brother-in-law.

Mayor Archer picked the winners, subject to approval by state gaming regulators. The winning bids, announced in November 1997, came from Atwater Casino Group (which later became Motor City Casino), Greektown Casino Group and MGM Grand.

Seen better days

DunCombe said her team learned a lot about the bidders as committee members traveled around the country investigated their properties.

They first stayed at Trump’s Taj Mahal casino hotel in Atlantic City. DunCombe said the property was so shabby she wondered if the city had made a mistake in embracing the casino industry. The carpets were worn and there were cigarette burns in the furniture.

“It looked like it really needed to be spruced up,” she said. “There was a lot of deferred maintenance. I was really discouraged that we were going to have gaming here. It didn’t feel good.”

In 1991, Trump had declared bankruptcy for the Taj Mahal, which he once called “the eighth wonder of the world.” He later sold the property and, as it happens, the casino was finally closed by its owners this month.

It’s impossible to know if a Trump casino would have succeeded in Detroit had he been granted one of the three licenses. Berg said he thinks he would have, saying the city’s three casinos “are still going strong. I can’t think of any reason why he wouldn’t have been successful.”

And Trump clearly believes today that once in the White House, he can deliver economic improvement to African-American communities like Detroit. During an appearance in rural Dimondale, near Lansing, Trump bragged that he would become so popular with African Americans that, by the end of four years in office, he would capture 95 percent of their votes.

It is a bond the GOP nominee sought to strengthen in a much-publicized appearance at a Detroit church in early September, and through his pledges to expand school choice, cut taxes, make Detroit and other cities safe, and end racial and political devisiveness.

But Detroiters, once enamored of the celebrity businessman, have cooled considerably.

A statewide WDIV/Detroit News poll taken at the end of September found zero support for Trump in Detroit, although only 39 city voters were polled. That’s in line with an NBC News/Wall Street Journal/ Marist poll this past summer which found zero support for Trump among African American voters in Ohio and Pennsylvania as well.

DunCombe said Michigan developed one of the toughest casino regulatory structures in the country, which would have forced Trump or any other bidder to perform or lose their license. A Trump casino failure would have jeopardized thousands of jobs, 66 percent of which he had said would go to Detroiters.

“If he had been granted a license, he would have done things right,” she said. “If he had done things wrong, he wouldn’t have had a casino.”

About The Author

Rick Haglund

Rick Haglund has had a distinguished career covering Michigan business, economics and government at newspapers throughout the state. Most recently, at Booth Newspapers he wrote a statewide business column and was one of only three such columnists in Michigan. He also covered the auto industry and Michigan’s economy extensively.

Comment Form

Add new comment

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

Comments

John Freeman
Thu, 10/13/2016 - 9:54am
Great story and great reporting. Beth DunComb did a fantastic job in vetting Trump and not being persuaded by Trumps rhetoric, just like the American people aren't buying Trump's boasts now.
Eric
Thu, 10/13/2016 - 11:01am
Plenty of people still buying Trump's B.S., the same people that still believe the gov't is coming for their guns.
Steve Hill Sr
Thu, 10/13/2016 - 10:55am
Great reporting. Interesting article.
Eric
Thu, 10/13/2016 - 10:59am
Liar, Liar, Pants on fire Trump, she said, was the only bidder who refused to release tax returns, which the city required. She said he claimed he couldn’t release them because they were being audited — the same reason he has given for not releasing them now as a candidate for president.
Tony
Thu, 10/13/2016 - 11:43am
I'm thankful Michigan has has stringent regulations re going! Detroit has been victimized by too many con artists and the state legislature as well,
Dennis Ritter
Thu, 10/13/2016 - 12:09pm
I'm shocked!! Be sure to send this story to the New York Times
Christine Sheldon
Thu, 10/13/2016 - 2:18pm
Yeah - he's still scamming people.
Eric
Thu, 10/13/2016 - 2:49pm
Developers use LLCs to separate their finances from the finances of each project, so it's hard to say how much wealth he's built that wouldn't have naturally accrued from the company started by his father. A few significant successful projects aren't likely to make a developer a billionaire as he claims.
Kevin Grand
Thu, 10/13/2016 - 6:57pm
Be that as it may, the money is still in his name. If he is as bad as people are trying to make him out to be handling money, he shouldn't have been able to hold on to as much of it as he did.
Eric
Tue, 10/18/2016 - 3:26pm
No one can prove what you're saying. He could've lost the fortune his father gave him for all we know.
Rick
Thu, 10/13/2016 - 5:58pm
Can you provide an official document (like a tax return) to prove he's a 'billionaire'? The public filings for his golf courses in the UK show he's losing money on them.
Kevin Grand
Thu, 10/13/2016 - 6:50pm
That highlighted portion of text...it's a link.
AnniePatC
Thu, 10/13/2016 - 12:51pm
Thanks, Rick Haglund, for some great reporting (as usual for you). This really brings home the Trump Brand to Michiganders and all those of us who know and love the "D".
Toby Citrin
Thu, 10/13/2016 - 1:01pm
Has this information been shared with the New York Times or Washington Post? It's sure relevant to the campaign.
Dan Lisuk
Thu, 10/13/2016 - 1:27pm
Hey Donald- see that sculpture hanging at the end of Woodward? Comin your way Nov. 8.
Vaughn Smith
Thu, 10/13/2016 - 1:33pm
Thank you for a well written article.
Andrew A. Paterson
Thu, 10/13/2016 - 1:41pm
For historical purposes you should know that the '97 attempt was Trump's second attempt to land a casino in Detroit. He took Mayor Young on a helicopter ride around Belle Isle to show him where up to twelve (gasp!) casinos and hotels could turn this bleeding city asset into a moneymaker. Mayor Young was a pretty smart guy, so he said 'fogetaboutit' to the New Yorker.
Carolyn
Thu, 10/13/2016 - 3:55pm
So you all believe lying Hilary? Good Luck, if she wins. She and Bill and the Dems are so corrupt. Goodbye USA. Open border.s? Very sad for the American people. Please unsubscribe me from any Bridge communication.
Ann Farnell
Sat, 10/15/2016 - 6:20am
Carolyn: All the fact checkers have Hillary at an honesty level close to 80% whereas Trump is lying so much they can't keep up trying to untangle when he might say something true. Any reading of biographies of Trump are quite clear that he has a long history of lying, stiffing people, using his charities to launder money so he can then pay himself tax free, conning people and groping and sexually assaulting women. Try David Cay Johnson. He's been following Trump for over twenty years. He's a reporter in Philadelphia starting to show up on TV lately. As to open borders...H said it was her dream. Can't anyone dream these days. Obviously, this is not the time for open borders or a N. Am. common market but it would have been the counterweight to the European Common Market and what will likely be a Pacific Common Market in a future probably neither of us will live long enough to see. What is more...why would you unsubscribe from anything just because they post an article you don't like? Are you going to leave the country when Trump loses?
Dot
Sun, 10/16/2016 - 8:48am
Thank you, Ann. That was a well thought out and accurate reply.
JoJo
Wed, 10/19/2016 - 9:57am
You hit the nail on the head! Good one!
Rick
Thu, 10/13/2016 - 5:55pm
Years and years later: the same con from The Donald. A house of cards (not playing cards).
ArtZ
Thu, 10/13/2016 - 6:23pm
Twenty years ago yup what had the economic benefits from the three casinos operating today.
John Smith
Thu, 10/13/2016 - 7:39pm
Detroit has been very successful at destroying their economic base. I imagine Tump is glad you turned him down!
Dogood
Thu, 10/13/2016 - 9:18pm
No mud on corrupt Hillary?
duane
Thu, 10/13/2016 - 9:48pm
Is Bridge about Michigan or Washington DC? This seems to be an article about national politics by linking it to a non-event nearly 20 years ago. Why should I care what didn't happen in Detroit back in the 1990s?
david zeman
Fri, 10/14/2016 - 9:32am
Because, as the article states, it echoes promises he is making today about Detroit in his run for president. And it was not a non-event, it really, really, really happened. David Zeman Bridge Editor
duane
Fri, 10/14/2016 - 3:36pm
Mr. Zeman, What event are you saying ‘really, really, really happened’, was it that the Trump organization was issued a license to operate a casino in Detroit and failed to deliver on his ‘promises’ or that he made certain ‘promises’ based on receiving the license to operate a casino in Detroit and those ‘promises’ were not fulfilled when his organization did not receive the license? Does Bridge include in those unfulfilled 'promises' that he did not build a casino and the 800 room hotel since? It is interesting how the people of Detroit wanted to give him the opportunity to deliver on his ‘ambitious claims’; their opinion didn’t seem to carry any weight in the decisions process. It is also interesting that of the three that were selected, I presume they all had credible financing/gaming experience, etc., one failed and the casino may have been sold in bankruptcy. I wonder what claims they made to receive their license and which of their ‘promises’ weren’t delivered on. Which do you see as a credible event; one where those who received a license made ‘promises’ or where ‘promises’ were made contingent on the receipt of a license and the license wasn’t issued? I believe since Mr. Trump’s organization was denied the license that all associated with that request is now a non-event. Are you saying that since ‘promises’ were made, regardless of context, he should be bound to those ‘promises’ simply because Mr. Trump said something even when it was contingent on certain events that didn't happen? If, as all the polls suggest, he doesn’t win election [thus a non-event] will Bridge hold him responsible if his campaign ‘promises’ for “America being great again’ fails to materialize?
Sat, 10/15/2016 - 8:27pm
Trump clams he is a good business man. His mega casino was too big, told by other casino business men. Like if you are going to make a big tank for the army. It does not help you if the tank can not cross the bridges where you want to invade. So I say he is, and was a bad business man who lost money. Not a good business man who had a run of bad luck. He was told the place was too big. So you have a business man who looses money recklessly, and can not take advice from smart advisors, that are experts in their fields. We should have Mr. Trump go and help out Mr. Putin.
Brian
Sun, 10/16/2016 - 1:18am
You state: And Trump clearly believes today that once in the White House, he can deliver economic improvement to African-American communities like Detroit. During an appearance in rural Dimondale, near Lansing, Trump bragged that he would become so popular with African Americans that, by the end of four years in office, he would capture 95 percent of their votes. While Trump states these things, I think it is a huge stretch to say he clearly believes these or any other thing he has stated. Go through all his public statements to date and he contradicts virtually every word out of his mouth. So he really doesn't believe any of it. The only thing you can say he believes is that people are naive enough to pick and choose to believe what he has said so that people who hold completely different viewpoints could still think he is on their side. Clearly Trump is on one side, the side of Trump. He was born a billionaire, if he was really that good at business, he would be a trillionaire or even a quadrillionaire. There are plenty of millionaires who started with virtually nothing, for Trump to be in their class, it would be quadrillions. He brags about everything else, many things that can't possibly be true, so if he actually was worth a trillion dollars he would be saying it loud and clear. His brags amount to him being worth what his father gave him. Most people I know are worth more now than they were worth when they were in kindergarten. By comparison, almost every person I know is a better businessman than Donald Trump. At least half of them will be a much better president than Trump as well. You really have to know how to sift the bull shit to find the very few nuggets of truth in what spews out of the mouths of people running for office in the US. There is what my sifter found on Trump. Clinton's only redeeming character is that she is not Trump. (I lie, her best redeeming character is that she is willing to listen to what the voters say and adjust her policies accordingly. I just hope she is telling the truth and not just saying what she thinks we want to hear. You know, like Trump.)
Daniel Schifko
Sun, 10/16/2016 - 8:53am
I remember Mr. Powers speaking at Cleary University. He promised a centrist source to give us straight news and bring Michigan together by rising above partisan politics in the media. Evidently he forgot to tell the staff because all we get is editorials like this that he has the nerve to call a story. Be honest and call your editorial journal what it is Mr. Powers; Bridge Ediitorial, your source for a left political view attempting to be disguised as a center view. No one has been fooled.
Judy Gardner
Sun, 10/16/2016 - 5:08pm
As i used to tell my students, "Never underestimate the power of self delusion." I think that Trump does sincerely believe the things he says, even if they have no basis in fact. As with many of his followers, he doesn't want to know the truth of his accusations. If he were in touch with reality he (and they) would have to face the fact that white racism is real, that he is intellectually and emotionally unprepared for the highest office in the land, and that his basic orientation is as one who surrounds himself only with people who will tell him what he wants to hear. As a friend of mine recently said, "We have a choice between a flawed candidate and a demagogue."