It’s pretty safe to say that the casino business tends to be a bit squalid.  The lure of easy money at all levels of the business brings out the most wonderful human tendencies.  We’ll be discussing the things that commonly go on in the casino business, one of Mr. Trump’s main enterprises.  Then we’ll leave you to scratch your head and wonder what all may in fact have taken place under his watchful eyes.

“Around here integrity has come to mean you haven’t been convicted of a felony.”

Commissioner,  W. David Waters Jr., Casino Control Commission

The Mob

The Mafia aka the “the mob” was very active in Atlantic City in the 80s.  They controlled a lot of the usual mob stuff but they also pretty much ruled the construction industry and the unions.  If you wanted to get stuff built at that time, you had to deal with the mob.

Nevertheless, with the new gambling laws in place, building was an absolute necessity.  And build they did.  Some of the prospective casino owners managed to stay largely on schedule, although strikes and mysterious construction delays plagued  many other would be casino owners, and overall much of the new construction ran into various unexplained difficulties.

OK, great, some money may have changed hands to facilitate smooth schedules.  Prove it.  Oddly enough, the mob does not favor written contracts, so proof is a bit tricky to come by.

But there are contracts with S&A Concrete, a business owned by Anthony “Fat Tony” Salerno, the boss of the Genovese crime family.  A contract with Fat Tony may have been a piece of the puzzle in securing other considerations to smooth development at the time.

Later, Rudy Guilliani would come along and prove instrumental in taking apart the mob, but in the early 80s during the Atlantic City casino boom, the mob was largely intact and still running the show.  So if you built in Atlantic City, you worked with the mob.  QED.

The Big Three

Human greed fuels the casino business at every level.

  1. Casino owners stand to profit enormously from a well-run gaming operation.  This allows them to secure large financing deals and manage large daily takes, excuse me “revenues.”
  2. Lenders are lured by the easy money and above average returns offered by the high yield bonds often used to finance casinos, or simply by the big numbers, with dollar signs on the ledger clouding everyone’s thinking.
  3. Players are the life blood of the casino industry, and in spite of the documented house advantage, are caught up in the excitement of game play and the adrenaline of occasionally being ahead.  Addled by the emotions and the drinks, they then open the family pocket books to the casino owners.

Big wheel keep on turnin’

Creedence Clearwater Revival, John Fogerty, Proud Mary


The Casino Control Commission

The passage of legal gambling laws was predicated on the requirement of a Casino Control Commission to bring order and regulation to the industry and to prevent the much feared mob involvement.

The fact of the matter is that legal gambling now operates at a level beyond the mob’s ability to finance, and while patrons frankly enjoy the tawdry association with the wise guys of yore, modern casinos tend to be run by large corporations which encourage the mob image as it adds just the right edge of excitement and illicitness to the proceedings.

While the concept of the Casino Control Commission was good, the actual implementation, filtered through the ever present “human greed” factor, is definitely not so great.  The commission comes down hard on the little guys such as the craps dealer or cocktail waitress, but they happily look the other way for the big guys.  Thus they can look like they are doing their jobs by ruining the career of a dealer for a small slip up, but in the interest of the economy, the city, the taxes, the jobs, or political pressure, they can turn a blind eye to much greater misdeeds.

“Too big to fail” is most certainly a factor and while they are supposed to guarantee the financial worthiness of the casino companies, they will allow a casino owner to bring in their own paid expert witness, and relax their definition of financial worthiness from “able to pay now” to “might have a plan to be able to scrape by at some point in the future maybe if everything goes well.”  They don’t want to be responsible for large scale loss of jobs, loss of tax revenue, or even simple blight on the gambling neighborhood in the form of a vacant facility.

Dubious real estate “deals”

A prospective casino owner secured a lot, but felt it was too narrow. They then exerted a little political influence and “bought” a one foot strip of the property on the other side of the street for $100.  Owning property on both sides of the street, they were then able to claim “air rights” over the street and build a building which extended out over their property line.

That’s just one tiny example but it helps shows the imagination and, dare we say, lofty human inventiveness and spirit, which can go into structuring real estate deals for a casino.

Junk Bonds

Junk bonds garnered a huge amount of publicity in the 80s during the height of the Gordon Gecko corporate raider hostile takeover era.  Many civilians believe junk bonds were subsequently outlawed or at least regulated out of existence.  This is definitely not the case.

What were pejoratively referred to as “junk bonds” were instrumental in financing many large casinos. “Junk bond” is a just colloquial term for high risk high yield debt.  This type of bond has always been, and likely will always be, a piece of the financial investor’s arsenal.  The so called “junk bond” is attractive because it offers a dramatically higher yield when compared to more stable or secured debt, and even taking into account the higher risk of default, the high yield bonds do tend to offer overall better returns.

Debt is rated by several institutions (Moody’s, S&P, Firth) from AAA (stable or highly secured), AA, A, BBB, BB, B, CCC, CC, C, down to D (actively in default).  There may or may not be plus or minus signs involved to further elaborate on the expected risk of the debt.  High yield debt may also involve various covenants which guarantee or restrict behavior related to that debt.

What happened in the 80s was a certain Michael Milken had the imagination to use high risk debt to finance the hostile takeovers of large companies, with the target company’s assets then being plundered to pay the debt and pocket a nice profit.

There is plenty of controversy over the issue, but it’s possible Michael Millkin really did very little wrong.  But what he was doing seemed so unjust that folks figured he must be doing something illegal, so Rudy Guilliani (again) went digging to find out what was rotten in Denmark.  He, rather unsurprisingly, managed to find some aspects of Michael’s maneuverings which did not meet the letter of the law, so Michael went to prison for 22 months.

Whether Michael intentionally did anything wrong is subject to speculation, but it’s possible he never deliberately attempted to flout the law at all.  He may have just missed some details. But Guilliani made more political hay, the movie Wall Street demonstrated to the public how ruthless these guys were, and the rest shall we say is history.

The widespread assumption was that something with a tawdry name like “junk bonds” would be bubbles on the ocean in the wake of all that.  Not so.  Financial types happily adopted the new moniker, even creating an ETF for high risk debt called JNK, and while the high risk bond market did in fact dry up for a short spell, human avarice brought it back to life shortly thereafter.

Now back in the heyday of junk bonds, many casinos were financed by Milken himself and his company Drexel with “junk” bonds.  Of course, at the onset, the potential creditor paints a sunny picture of how the debt will be repaid.  Good ol’ human nature (have we mentioned human nature before?) ensures that, with lots of dollar signs and zeroes clouding judgement, common sense and diligence take a day off.  So huge commitments were made without even real fleeting realistic hope that the debtor could make the interest payments (the “vig”) on the loans.

Underage gambling

Let’s delve into some of the dubious practices casino owners engage in to help their bottom line.  One of the most startling elements is the laissez-faire attitude towards underage gambling.  Not only that, but underage drinking has also gone quietly unnoticed.  A bar or pub might be completely closed down for allowing underage drinkers, but no such enforcement would happen for a casino.

The minor would be allowed to gamble, would be plied with drinks, and only when it came time to collect winnings might be subject to scrutiny regarding their age.

It’s a pretty handy situation for the casino owner: a minor who loses, loses, the house wins.  A minor would walks away with earnings is suddenly examined for being of legal age, and if they are found to miss the mark, they are not allowed to collect those winnings and are turned over to law enforcement.

For casino owners, it’s a win-win.  For the minors, the early taste of gambling may lead to a lifetime of compulsive gambling problems, not to mention issues with alcohol.

One might imagine that some casino owners would ethically rise above this, but that would certainly be the exception.  There may be some casino owner somewhere who has done the “right thing” but in a business where everyone does it, and there’s always great pressure to produce numbers, only the rather naive would suppose that the casino owners would exhibit any altruism or morality.

Luring high rollers

Casino owners often compete for the business of the high rollers or so-called “whales” who come and make enormous bets.  The casinos employ hosts whose job is to guarantee that these players receive appropriate amenities, comps, and individual attention.  The casino may reach out to these players with generous advance offers to attract their business, such as promises to extend credit, free rooms and food, limousines, helicopters, you name it.

Rules are of course in place to prevent dubious incentives such as prostitutes or explicit misrepresentations of financial transactions, but those rules fall subject to the “wink wink nod nod” interpretation of the hosts in the heat of the moment.  While the cocktail waitresses are expressly forbidden from going up to the gambler’s rooms, several might in fact accompany a big player to his  room anyhow to continue the festivities upstairs.

Keeping high rollers at the table

A casino owner can go to unbelievable lengths to keep a gambler at the tables longer.  The longer they play, the longer the house has to reap the benefits of the inexorable odds.  So if a big gambler decides to walk away while he’s up, orders may be given to do whatever it takes to return the gambler to the tables so the casino will not have to pay out big winnings.

A famous Japanese gambler was up $5 million when he decided to call it a night.  Frenetic activity happened behind the scenes, and when the host and gambler arrived in the limousine at the airport, the gambler’s private pilot said he felt “unlucky” and didn’t want to fly.

The gambler went to the commercial airlines and looked for another way to return to Japan.  No flights were available on that carrier and the gambler, not being able to speak English, never found out there might have been other carriers that could have helped.  Instead the casino host generously offered the gambler free accommodation at the casino hotel for the night.  What a swell guy!

So the gambler returned to the casino, of course ended up back at the tables, and lost big, finally going bust which ended his spree.  (The gambler was later killed, likely due to unpaid gambling debts.)

They’ll do anything to get your money.  They’ll wreck your marriage if it will get them money.

Joan Libutti

In another anecdote, a high roller’s wife would not let him return to the casino, so the casino host sent a limo to pick up the gambler’s wife to take her shopping so the gambler could slip out and play.

And then some high rollers go to leave and find the helicopter they have been promised has a short term mechanical issue, so they are encouraged to return to the tables to wait for the situation to be corrected.  The list of tricks goes on and on, and this is unfortunately probably the rule rather than the exception.

Where the money comes from

Casinos are not required to care where the money comes from as long as it comes.  Thus they may end up taking in the proceeds from very illicit activities such as large scale drug sales.

You might say “what they don’t know…” but the casino owners would, during the Cocaine Cowboy days of the 80s, keep representatives in Medellin to lure the drug cartel bosses to the casino.  So sure, they might not know exactly where the money comes from, but given they’ve taken an active role in attempting to attract ill gotten gains, it’s a stretch to completely excuse them from any responsibility for the violation of those other pesky laws.

And so by comparison, a gambler playing with funds embezzled from his business looks, relatively speaking, squeaky clean, and even a gambler playing with funds coming from strange sources and/or with strange restrictions, such as the requirement that a check be cashed at a specific bank, heck, is not even on the radar.

The rules of game play

One could suppose, in such a highly regulated industry (cough cough) that at least the rules of game play would be inviolate.  Silly person.  The casino might publish a booklet with the rules of play for a particular game, but the actual rules used at the tables might be considerably different.

It’s the old “hidden in plain sight” thing, where no one would think to examine the rules because surely someone would have noticed.

But when someone did notice a number of discrepancies, they kept running up blind alleys attempting to chase down responsibility.  It was a major issue for the player, but a minor issue for the casino.  The individual invested countless hours, the casino basically just waited for them to run out of money, time, and motivation, and go away.  They quietly updated their rules booklet, but that was all that came out of it.

“Not the norm” you might say.  Possibly.  But when you look at the aggregate of all the violations, that old expression death by 1000 paper cuts comes to mind.

Private bankruptcy

Behind the publicly disclosed bankruptcies, there will often be countless financial maneuverings undertaken to keep a casino afloat.  By negotiating individually with creditors, the casino owner might be able to avoid the scrutiny of a full-on public bankruptcy, but also obtain similar advantageous arrangements.  By getting a creditor to agree to a reduced cents-on-the-dollar payback, they may enjoy the benefits of a bankruptcy without all the negative press, without the impact to their credit worthiness,  and most crucially without all the creditors becoming aware and competing for the pot.

Behind every real bankruptcy, there are likely many of these “private bankruptcy” wranglings as the debtors struggle to find ways to move forward.

The illegal loan

We’re trying to avoid specifics, but one offense stands out as being so egregious that it’s worth bringing up.  How casinos are licensed and how they are financed are, in theory, very tightly regulated.  Only the holder of a valid casino license is to be allowed to put money into a casino.

But on December 17th, 1990, when Donald Trump’s Trump Castle was facing default on their mortgage, Donald’s father, Fred Trump, came to the casino, bought $3 million in chips, and left without playing a single game.

This effectively injected enough cash  into the casino that they could afford to meet their obligations (are least for a very short time).  But this type of financial transaction was expressly forbidden as casino owners were supposed to keep all such financial movements out and visible in the light of day.

You might suppose the Casino Control Commission would quickly clamp down on this, as it was pretty immediately known about, but a strange dance of “see no evil” ensued.

Instead of being forced to repay the money and paying a hefty fine, as called for by the regulations, Trump got off with a small token fine and was allowed to keep the money.

Trump Castle did in fact seek bankruptcy protection a few short months later, but that’s another story.

In conclusion…

We don’t want to insult bar owners by saying that a casino owner is just a glorified bar owner, but that’s the reality.  They may often be far more heartless, as the casino depends on the financial foolishness of the players at all levels.  They actively seek out the potential players.  They encourage, market, advertise, ply with alcohol and comps, use lavish building, and glitzy shows and much more.  Sometimes they even dress it up in the flag as the “American entertainment.” All in an effort to lure people into their establishments.

This is the so-called “third wave” of legal gambling and it has spread across most of the states of the union in some form or other.  Gambling has twice before been made illegal, but like a zombie it always returns, promising jobs and taxes and freedom and the American Way but often ruining lives and families in the process.

So you can be John Deere and invent a device which dramatically improves farming and people’s lives or you can open a casino which drains economies and ruins people’s lives.  It depends on your personality.

That’s how to create wealth… by turning rocks into machines, not by tossing dice.

Don Hermann and Hugo Schnekloth on John Deere


Temples of Chance, David Johnston, book, copyright 1992

Donald Trump and the mob, CNN, July 31, 2015

High yield debt, Wikipedia

Bond credit rating, Wikipedia

The mob in Atlantic City, Google search

N. J. agency says Trump loan illegal,, April 1991