Trump Taj Mahal casino settles U. S. money laundering claims

Trump Taj Mahal casino settles U.S. money laundering claims

Feb 11 (Reuters) - The parent of Trump Taj Mahal, one of Atlantic City, New Jersey s struggling casinos, has settled U.S. government charges that it violated federal laws designed to thwart money laundering, court filings show.

Trump Taj Mahal Associates LLC agreed to the assessment of a $10 million civil penalty by the Treasury Department s Financial Crimes Enforcement Network, according to a proposed consent order filed on Tuesday with the U.S. Bankruptcy Court in Wilmington, Delaware.

The penalty will take the form of a general unsecured claim in Trump Taj Mahal s bankruptcy.

In exchange, Trump Taj Mahal admitted to have willfully violated reporting and record-keeping requirements under the federal Bank Secrecy Act from 2010 to 2012.

These violations included many that had been previously revealed by the U.S. Internal Revenue Service as far back as 2003.

The settlement requires court approval.

Any payout to the government may be less than $50,000, because unsecured creditors are expected to receive only a small fraction of sums owed, court papers show.

A lawyer for Trump Taj Mahal, whose parent Trump Entertainment Resorts Inc is also in Chapter 11, did not immediately respond on Wednesday to a request for comment.

The Bank Secrecy Act requires casinos to report suspicious transactions of $5,000 or larger.

Trump Taj Mahal failed to file about half of the required suspicious activity reports during periods covered by two recent IRS reviews, the consent order said.

Several Atlantic City casinos have closed or gone bankrupt in the last year, after competition from nearby states ended the city s former dominance of gaming in the eastern United States.

Trump Entertainment s bankruptcy reorganization calls for Trump Taj Mahal, which has 2,248 hotel rooms and 18 restaurants, to remain open, court papers show.

Trump Money Laundering Casino Scandal

In the early 1980s, Donald J. Trump was a big star in the casino sphere of New Jersey s very own Atlantic City. Casting a large shadow in the gambling industry, Trump s casinos in Atlantic City contributed nearly a third of the city s entire gambling revenue.

If that wasn t enough, his casino and real estate portfolio in Atlantic City directly employed over 8,000 of its citizens. When the Trump Taj Mahal was first built in 1990, it was the biggest, brashest casino in the world. Boasting a 42-story story, the Trump Taj Mahal wasn t just New Jersey s tallest building, but it was the world s largest casino also.

Renowned for its exquisite glamor, the eighth wonder of the world was host to over 3,000 slot machines, world-class gourmet chefs, dozens of luxurious restaurants, and crystal chandeliers scattered throughout that were worth $15 million alone. If that wasn t subtle enough, the staff were even forced to wear turbans garbed with real ostrich feathers.

It Ended with a Whimper

Despite this excessive extravagance, Trump and the Federal Authorities would come to the eventual realization that not all that glitters is gold. Building up ever-larger mountains and mountains of debt, the Trump Taj Mahal casino would eventually bring intense federal investigations, record-breaking fines, and multiple bankruptcies.

At one stage, the New York Times even calculated that the casino would need to make $1.3 million a day just to cover all of its debts. With its financial handlings in complete disarray, it wasn t long before the Financial Crimes Enforcement Network (FinCEN) cast its all-seeing eye to the whole affair and brought the whole house of cards crumbling down.

After the final Trump casino bankruptcy, the Taj Mahal would see its assets go for a slim fraction of what they were originally bought for. The once grandiose Austrian crystal chandeliers, poker tables, and even the lavish lamps would all end up on the auction block in a desperate attempt to pay back debtors.

The Late Wonder of the World

As a result of increasing pressure, Trump eventually took his leave of Atlantic City in 2009, after which the billionaire Carl Icahn took over the keys to the Trump Taj Mahal Casino and attempted to save it from the brink of collapse. However, it would prove to be too much of a burden even for a billionaire and in February 2017, the casino officially died.

Afterwards, Hard Rock International purchased the building for $300 million and reopened it as the Hard Rock Hotel & Casino Atlantic City back in 2018. This might be a lot to take in, and you may be reading asking yourself, how could such a meteoric rise lead to such a catastrophic collapse?

In an interview, Icahn himself stated that he had lost millions on this cursed business endeavor. So where exactly did the Trump Taj Majal Casino go wrong? What did it fail to do to keep the Feds and debt collectors away from its doors?

Throughout the upcoming sections, we will spell out how this entire casino venture was doomed from the very beginning and how recklessness and a complete disregard for the law would combine to act as a magnet for money laundering and fraud which would signal the casino s inevitable demise.

Doomed from the Start

Like all casinos, the Trump Taj Mahal had a legal responsibility to prevent money laundering. After several federal investigations, the authorities discovered a plethora of disconcerting facts about how the casino operated.

From problems with slots machine accounting, to willful and repeated violations of the Bank Secrecy Act, the Trump Taj Mahal was a hotbed for suspicious transactions and failed to maintain effective anti-money laundering measures at every turn. Staff also failed to keep appropriate records of the resort s currency transactions, adding to the overall lack of transparency.

In the eyes of Uncle Sam, how the biggest, brashest casino in the world was operating was essentially an open invitation for fraud. So how do we know money laundering occurred?

The House Always Wins

If you ever find yourself running a casino, bear in mind that all transactions over $10,000 have to be recorded alongside a name, address, and time in case the authorities ever need to see this information. By keeping the books clear, you can help prevent crime and money laundering (making dirty money clean),

For instance, if a casino isn t doing good bookkeeping, there s nothing to stop somebody with dirty money buying $10,000 worth of chips, not playing them, and cashing them out to get clean money from the casino by claiming they were legitimate winnings. With the Trump Taj Mahal, authorities found that the casino violated bookkeeping rules 106 times within the first two years.

Causes for Concern

Despite its high visibility, the New Jersey Casino Control Commission begun to cast a watchful eye over the Trump Taj Mahal s performance because of the rapidly rising costs and were considering rescinding its gaming license. Initially, Trump was able to sweet talk them and promised to rein his expenses in.

Within a few months, however, Trump had acquired a total debt

of the Taj Mahal that amounted to $820 million and it seemed unfathomable that he could recover. By the end of 1991, the casino filed for its first bankruptcy with Trump giving away 50% of his stakes to bondholders to absolve his debts. Although, he did manage to keep a managerial role over the casino.

According to some FBI stories, the casino also became a hotspot for the Russian mob, who would bet large amounts of cash there. This, along with the shoddy bookkeeping practices, paved the way for the first federal fine that the casino would receive.

First Fine

In many ways, the fines that the Trump Taj Mahal received were groundbreaking. In the 1990s, the only casino in Atlantic City to fail consistently at anti-money laundering measures was the Taj Mahal. Due to its lack of transparency and for endangering the livelihoods of its workers, the US Treasury Department issued the casino with a whopping $477,000 fine in 1998, an unprecedented figure at the time.

While the casino resort itself denied any evidence of money laundering in their establishment at this time, the Trump Taj Mahal agreed to pay the penalty for breaking the Bank Secrecy Act. While this story caused a media circus, it would pale in comparison to the second fine that was to follow several years later in 2015.

Piling on the Pressure

Five years later in 2003, FinCEN investigators would find repeat violations of the Bank Secrecy Act and begun to pile on the pressure. It should also be noted that despite its multiple bankruptcies, Trump was still making money at this time from the casino. In the Trump Taj Mahal s contract, there existed a clause that the Trump organization had to be offered all contracting jobs first.

However, even if they turned down a project they could still get paid. In 2007, the casino gets an official stern warning about its practices yet didn t take adequate steps to fix the problems. While it may have kept the beast from the door momentarily, it would all prove too much for the Trump Taj Mahal in the end and the casino would end up in seriously hot water.

By 2010-2012, the Trump Taj Mahal was filing less than half of the reports legally required. In 2009, the casino filed for bankruptcy for the fourth time and Trump himself stood down as a member of the board. By 2012, investigators from the US Treasury Department were watching the casino like a hawk.

Additionally, there were also rampant fraud cases all across New Jersey in this period. Individuals from New York were committing elaborate bank fraud by stealing money from people s bank accounts and using casinos to launder the money in Atlantic City.

Remarkably, it was the banks that alerted the police to the bank fraud scheme, not the Taj Mahal. All at the same time that the Treasury was looking into the casino!

Chapter 11 Bankruptcy

As a quick side note, we feel that it s necessary to briefly describe what chapter 11 bankruptcy is and how the Trump Taj Mahal used it to stay afloat during such a turbulent time. In total, Donald Trump has filed for Chapter 11 bankruptcy six times for various companies. This bankruptcy type allows a company to remain in business whilst under the supervision of a bankruptcy court who will reorganize the business accordingly to appease creditors and buy some time.

Second Time, Second Fine

In the end, the Trump casino scandal would prove to be too much and in 2015, both FinCEN and IRS investigators found irrefutable evidence of wrongdoing by the Trump Taj Mahal. The casino had no choice but to willfully admit to multiple violations of the Bank Secrecy Act. As a result, the casino was slapped with a record-breaking $10 million fine for failing to combat money laundering on its premises.

By this time, however, Trump went from a man who controlled the casino to a franchisee who earned a small slice of profits for lending his brand name to the casino. In 2015, four months after an unparalleled fine in American history, Trump announced his bid for President of the United States.

You read that right! Four months before running for President, Trump was still making money from allowing a casino that had been under federal investigation to use his name. For the Trump Taj Mahal, and Icahn Enterprises (who would take over), this penalty would prove to be too much to handle and in February 2017 the casino was forced to close and sell off its assets during the liquidation process.

Just to Recap

We understand that this is undoubtedly an incredibly complicated story with many twists and turns of wrongdoing. For clarity s sake, we ve decided to outline the timeline of the ill-fated Trump Taj Mahal casino in the list below:

  • 1991 a year after it opens, Taj Mahal goes to bankruptcy court, Trump agrees to give away his 50% stake in return for lower interest rates from lenders
  • 1998 Trump borrows money from a casino company to pay back bankers. Issued $477,000 fine
  • 2004 Taj Mahal applies for bankruptcy for the third time. Trump steps down as chief executive but still remains in charge of the board
  • 2009 Applies for bankruptcy for the fourth time. Trump quits the board, leaves Atlantic City
  • 2014 Trump Plaza is closed, sells casino to Icahn Enterprises
  • 2015 Casino slapped with record breaking $10 million fine. Trump announces Presidency bid
  • 2017 Trump Taj Mahal Casino closes its doors

Final Thoughts

With the power of hindsight, comes the power for consideration. While this casino scandal didn t affect Trump too much in hindsight due to a lack of direct evidence implicating him, his reputation will forever be tainted with this Trump casino scandal in the public eye.

In the end, it seems that despite all of the peacock feathers and business posturing, Trump s investments in Atlantic City only brought more trouble. If you d like to learn about casinos that are actually successful and legitimate, check out some of the top online casinos in the USA, or some of our other in-depth guides for further insight!

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Home Government Investigations White Collar Criminal Defense Trump Taj Mahal Fined Record $10 Million for Inadequate AML Program

Trump Taj Mahal Fined Record $10 Million for Inadequate AML Program

As disclosed recently in a bankruptcy court filing, on January 27, 2015, the Financial Crimes Enforcement Network ( FinCEN ) imposed a $10 million civil money penalty pursuant to the Bank Secrecy Act (the BSA ) on Trump Taj Mahal Associates LLC. Trump Taj Mahal consented to the imposition of the penalty (subject to the bankruptcy court s approval) and admitted that its conduct violated the BSA. This $10 million penalty, reported to be the largest BSA penalty ever imposed upon a casino, highlights the government s ongoing focus on the gaming industry.

The BSA requires financial institutions, which include casinos, to establish and implement policies to detect and prevent money laundering. Casinos must implement anti-money laundering ( AML ) programs that require, among other things, the creation of internal controls to ensure compliance with the BSA, independent testing of their AML programs, AML training for personnel, the designation of individuals responsible for AML compliance, and the implementation of procedures to identify suspicious transactions and determine whether records must be made or maintained under the BSA. Trump Taj Mahal admitted that it failed to implement such an AML program.

With respect to these failures, Trump Taj Mahal admitted that its violations were willful, as that term is used in civil enforcement of the BSA. Trump Taj Mahal did not admit that it knew that its conduct violated the BSA or that it otherwise acted with an improper motive or bad purpose. Instead, the casino acknowledged that it acted with either reckless disregard or willful blindness.

The settlement proposes to treat the $10 million penalty as an unsecured claim in the Trump Taj Mahal bankruptcy case. Under the Bankruptcy Code, certain penalties assessed by the government are to be accorded priority, to be paid before general unsecured creditors. Based on current law, the penalty assessed for a BSA violation does not fall within the priority treatment, and any payment of the penalty would be based on a pro-rata distribution to general unsecured creditors. Notably, a criminal penalty assessed for a violation that occurred during the pendency of a bankruptcy (unlike the civil penalty here) might be treated as having priority by certain courts, but not all courts. Courts that deny priority to a penalty do so to enhance recovery for all creditors.

Recent enforcement actions against others in the gaming industry, as well as FinCEN Director Jennifer Shasky Calvery s recent speeches cautioning casinos not to let the entertainment component of their business color their view of their AML obligations, suggest that the industry will remain under FinCEN s scrutiny for the near future. As Director Shasky Calvery noted in June 2014, casinos are complex financial institutions with intricate operations that extend credit, and that conduct millions of dollars of transactions every day. They cater to millions of customers with their bets, markers, and redemptions. And casinos must continue their progress in thinking more like other financial institutions to identify AML risks. *

Trump s Taj Mahal Broke Money Laundering Rules in Early 90s, Records Show

The Trump Taj Mahal casino broke anti-money laundering rules 106 times in its first year and a half of operation in the early 1990s, according to the IRS in a 1998 settlement agreement.

Its a bit of forgotten history thats buried in federal records held by an investigative unit of the Treasury Department, records that congressional committees investigating Trumps ties to Russia have obtained access to, CNN has learned.

The casino repeatedly failed to properly report gamblers who cashed out $10,000 or more in a single day, the government said.

Trumps casino ended up paying the Treasury Department a $477,000 fine in 1998 without admitting any liability under the Bank Secrecy Act.

CNN obtained 417 pages of Treasury Department documents under the Freedom of Information Act. The records included the 1998 settlement, draft and final copies of a similar settlement in 2015, and exchanges between the Trump casino lawyers and federal regulators.

The 1998 settlement was publicly reported at the time, and the Associated Press noted it was the largest fine the federal government ever slapped on a casino for violating the Bank Secrecy Act.

But key details of the casinos cash reporting violations are missing from the publicly released documents, including the identities of the gamblers and casino employees involved in the transactions.

The congressional committees had asked the Treasury Departments financial crimes enforcement network, or FinCEN, to provide any information it has on Trump, his businesses, his top officials and campaign aides.

House and Senate investigators both said they had obtained access to data housed at Treasurys FinCEN — which will include details of these violations and potentially more, according to sources familiar with the investigation.

Congressional investigators say they are interested in the global network of Trumps finances to determine if FinCENs data shows connections between Trump associates and Russia.

The White House declined to comment, referring questions to the Trump Organization.

In a statement, the Trump Organization said it has had no involvement with the Taj Mahal, or any other Atlantic City property, for over a decade and has no knowledge of the events referred to in your email.

The 1998 settlement agreement itself, at just two-pages, is short on details. It only shows that the Taj Mahal failed to file currency transaction reports within the time period required. It states that Trumps casino, which opened in April 1990, made the violations sometime before December 1991.

In the settlement agreement, the casino disputed any willful failures to comply with the Bank Secrecy Act.

Normally, if a gambler cashes out $10,000-plus in a single day, the casino must fill out a form listing their name, physical address, Social Security number, and birthdate. The casino has 15 days to send the form to the IRS.

According to a dozen anti-money laundering experts, casinos often run into these problems. But getting caught with 106 violations in the casinos opening years is an indicator of a serious problem, they said.

The violations date back to a time when the Taj Mahal was the preferred gambling spot for Russian mobsters living in Brooklyn, according to federal investigators who tracked organized crime in New York City. They also occurred at a time when the Taj Mahal casino was short on cash and on the verge of bankruptcy.

Trump took on an enormous amount of debt to launch what was — at the time — the worlds largest, most flamboyant casino.

The Taj Mahal emerged from bankruptcy in late 1991, and Trump sold 50% of his stake to bondholders.

There were also financial issues at a second location in Atlantic City, The Trump Castle Hotel Casino, according to a 1991 New Jersey Gaming Enforcement report.

In the report, regulators described an incident on December 18, 1990, the day Trump owed an $18.4 million interest payment.

An attorney named Howard Snyder walked into the Castle casino with a certified check for $3.35 million drawn from a bank account belonging to Fred C. Trump. Snyder exchanged the check for 670 of the casinos gray gambling chips, which he put into a case. He then walked out of the casino.

By not cashing out the chips, the transaction amounted to a loan, regulators said.

New Jersey gaming regulators charged Trumps operation with violations of the states Casino Control Act for not disclosing his father as a financial backer.

The Castle failed to notify the Commission and Division in writing of the fact that the Fred Trump transaction would create a new financial source, the regulators said it their report.

Regulators imposed a $30,000 civil penalty on the Castle.

Trumps third gambling operation in Atlantic City, the Trump Plaza Hotel and Casino, had a better record. When the IRS audited its cash reporting in 1998 and 1999, it found that the casino correctly filed 99.99% of the time, according to a filing with the Securities and Exchange Commission.

FinCEN caught the Trump Taj Mahal dodging anti-money laundering rules again two decades later. In 2015, it fined the casino $10 million.

In the consent order, the casino admitted it willfully violated the Bank Secrecy Acts reporting and recordkeeping requirements from 2010 through 2012.

There was apparent laundering of funds using slot machine tickets, according to the 2015 consent order. And the casino didnt keep track of gamblers who deliberately cashed out in smaller payments to avoid having to report it to the federal government.

By then, however, Trumps involvement with the Taj Mahal was in name only. He had departed Atlantic City in 2009, maintaining a small stake in the casinos parent company.

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