Trump Castle gets to keep the money, but must pay a $30,000 fine under terms of the settlement, Division Director Jack Sweeney said. Sweeney said Fred Trump also agreed to apply for a license as a financial source, which would make another such loan possible in June, when the next interest payment is due.
Donald Trump, the sole owner of Trump Castle, would not be disciplined under the proposed settlement, which must be approved by the Casino Control
Commission, Sweeney said. The commission may consider the settlement in May.
CALLED ROUTINE
Tom Auriemma, the division attorney assigned to the financially struggling Trump casinos, portrayed the settlement as a routine regulatory matter.
But a Pennsylvania State University sociologist who has studied the gambling industry for 24 years said the settlement reflected how New Jersey was weakening regulations to serve the needs of casino owners saddled with debt.
"I said a few years ago that New Jersey would stop enforcing the law as soon as things got tough in Atlantic City and that the casinos would put on
pressure to loosen up regulation," said Vicki Abt, a sociologist at Penn State's Ogontz campus and co-author of The Business of Risk: Commercial Gambling in Mainstream America.
State regulation of who owns and operates casinos and provides capital to them is intended to assure the public that mobsters and others with unsavory connections do not exert influence over the industry.
Under a provision adopted in 1988, Trump Castle was obligated to notify regulators in advance of the loan.
Three attorneys who represent non-Trump casinos said in interviews that in such a case, regulators would focus less on the violation and more on whether the source of the money was tainted. Two of them said that, unless the money came from a mobster, the violation would not be serious enough to jeopardize a casino owner's license.
CASINO CONTROL ACT
One, though, said the Casino Control Act, which Trump Castle admitted violating, bars anyone who has violated its provisions from being licensed as a financial source. Thus, that attorney said, Fred Trump is ineligible for licensing, and Trump Castle should be required to return the money, a move that would almost certainly force it into bankruptcy court.
The purchase of chips by Fred Trump was revealed in January by the Wall Street Journal.
Because the state guarantees the public that gaming chips can be redeemed, Fred Trump may be his son's only fully secured creditor.
The loan from his father appears to have saved Trump a bundle. Not only did he avoid default on the bonds - and the risk of losing control of Trump Castle as a result - but patrons who hold gaming chips normally are not paid interest.
The amount of the proposed fine, $30,000, is less than one percent of the loan amount. That is a smaller sum than other casinos have paid banks for loan-origination fees on loans of that size, Casino Control Commission documents show.
Nick Ribis, president of Trump's Atlantic City properties, said yesterday that he was aware of the settlement's general terms, but not the specifics. He said Trump lawyer Joseph Fusco would comment in a few hours, but as of last night Fusco had not responded.