Trump, Bankruptcy and How to Negotiate Debt
Back in September 2015 we wrote a blog article about Donald Trump and his several business bankruptcies. As we pointed out on that date, and as the Republican candidate hopeful points out whenever he can, these were not personal bankruptcies under Chapter 7, but business reorganization bankruptcies under Chapter 11.
Trump’s casino, The Trump Taj Mahal, owned by Resorts Atlantic City, cost almost $1 billion to build, opened in 1990 with Michael Jackson appearing! Jointly owed initially with Merv Griffin, among other notable features was that it contained Scores, the first casino strip club in the US.
Cleveland Lawyer Remembers Suing Trump in Bankruptcy Court
According to a story in cleveland.com, Attorney Pat Sullivan was working for the Jones Day law firm in Cleveland
Things started to go bad immediately; the marble columns were missing, many rooms were not finished, over 200 contractors were not fully paid, to the tune of $72 million.
Unfortunately, within a year Trump’s Resorts which was heavily in debt with insufficient income and he threatened the bondholders that he would not make payments because he was unable to come up with the money. By putting Resorts into bankruptcy, Trump figured he could pay a few cents on the dollar and move on; a business deal, as he reports. The bondholders, however, hired Jones Day and they sued Trump on the theory of fraudulent conveyance – conveying the bonds to the bondholders when the underlying payback scheme would never work; it was a fraud. The bondholders sought Security and Exchange Commission permission to issue Trump Futures. Once allowed by the SEC, Jones Day offered the contracts as a publicly traded security; offering the public a chance to own a piece of the lawsuit, and creating negotiating leverage. Once issued, the lawsuit settled, in 1991.
It is worth noting that the Resorts Atlantic City deal was one of the biggest undertaken by Trump. Unfortunately it failed. When negotiating with the bondholders, he said that their claims were “wholly baseless and ultimately wasteful” before settling. Nevertheless, the attorney for the bondholders claimed that the failure in the Resorts Atlantic City points to a “flawed business judgment and to a reckless speculative bent” by the candidate businessman.
Trump’s Bankruptcy and Fitness to be President
We have no personal political bias in this bankruptcy blog. We simply are in favor of laws that protect the consumer. The Consumer Financial Protection Bureau is the best federal agency to protect consumers in many areas this blog covers.
In the Trump bankruptcy cited above, he lost control of his Atlantic City casino, significant personal property, and was given a “fresh start” just like our personal bankruptcy clients are awarded a “fresh start.” Most of our clients use their fresh start bankruptcy laws to their advantage, and move on with their lives nicely. Trump has done the same. Let’s not hold his bankruptcy reorganization against him; put it in context with what he has undertaken, what he has achieved, and how his investments have performed.
Bankruptcy Attorney Neil Burns
For a free personal bankruptcy consultation in Boston, call Attorney Neil Burns. He has 30 years of experience, and will guide you through the system with careful planning and preparation. Call today if you have creditors calling or filing for judgments.