As Trump appeals to black voters, Gary recalls casino deal
Posted 10:33 a.m. Wednesday
GARY, Ind. — Donald Trump swooped into Gary, Indiana, on his private jet and pledged to make the down-on-its-luck city great again.
It was 1993, and the New York mogul was wooing officials in the mostly black city to support his bid to dock a showboat casino along a Lake Michigan shoreline littered with shuttered factories. Trump and his representatives later told state gaming officials he would leverage his "incomparable experience" to build a floating Shangri-La, with enough slot machines and blackjack tables to fill city coffers and local charities with tens of millions each year, while creating scores of well-paid jobs for minority residents.
"We are looking to make this a real peach here, a real success," Trump said of the project.
Today, as the Republican presidential nominee pursues black voters with vows to fix inner-city troubles, many Gary residents say his pitch to solve the problems of crime and poverty is disturbingly familiar. Like others who have done business with Trump, they say their experience offers a cautionary tale.
Little more than a decade after investing in Gary, Trump's casino company declared bankruptcy and cashed out his stake in the boat — leaving behind lawsuits and hard feelings in a city where more than one-third of residents live in poverty. Trump's lawyers later argued in court that his pledges to the city were never legally binding. Trump told The Associated Press that his venture was good for Gary.
Local civic leaders disagree.
"What you had was a slick business dealer coming in," said Roy Pratt, a Democratic former Gary city councilman. "He got as much as he could and then he pulled up and left."
A company town founded by U.S. Steel just 30 miles southeast of Chicago, Gary peaked in size in the 1960s at nearly 200,000 as black residents arrived from the South looking for jobs and an on-ramp to the American dream.
Gary's fortunes fell with the steel industry. The remaining 77,000 residents abide persistent crime and chronic unemployment. Broadway, the once-thriving main thoroughfare, is now lined with vacant buildings, a boarded-up wig shop here, a once-regal theater there.
In 1993, when Gary was to get Indiana's first licenses for riverboat casinos, there was Trump, presenting a plan for a casino he claimed would revitalize the city's waterfront.
Due to concerns over his finances after two then-recent corporate bankruptcies, city officials initially did not recommend Trump for a license, but he didn't give up. Trump went directly to the Indiana Gaming Commission with a beefed-up proposal.
In a September 1994 presentation, Trump's team touted his "superior marketing and advertising abilities" to pitch a 340-foot long vessel called Trump Princess with more than 1,500 slot machines and enough nearby parking for 3,000 cars. Trump also said he would revamp an "eyesore" hotel near City Hall, according to a transcript.
Trump's team projected an annual take of $210 million by the fifth year the casino was operating. Gary's cut would be 1 percent of the gross gaming revenues along with other taxes, a projected haul of about $19 million annually.
To sweeten the pot, Trump's representatives said they would try to ensure that at least two-thirds of the casino's staff would be minority residents from the surrounding area, according to the transcript.
He offered to fund a new charitable foundation endowed with a 7.5 percent stake of the casino's stock, estimated by Trump's company to be worth $11.5 million. His official proposal also listed eight "local minority participants" in the project, a diverse group of men in medicine, business and law.
"When we put our name on something it's more than just recognition," Trump told the commission. "It's very important to us so we're looking for a long-term, very solid relationship."
Based on the strength of Trump's revamped proposal, the state gaming commission overruled Gary officials, awarding Trump one of the two casino licenses. A May 1996 agreement signed by the Trump organization said the developer would "endeavor" to fill 70 percent of its 1,200 full-time jobs with minorities, and more than half of them women. Trump was to invest $153 million, including $10 million on local redevelopment projects that included renovation of the sagging downtown hotel.
The eight business partners in Trump's license application had been offered a chance to buy shares worth more than $1 million, but most didn't have the money.
So both sides negotiated a deal. For no cash up front, they would be given 7.5 percent of the stock for the riverboat and another 7.5 percent was to go into a trust benefiting local charities, according to a summary of the deal Trump's lawyers sent to one of the men, Buddy Yosha.
The men were to pay in promissory notes and would be repaid later in cash or dividends from the casino.
A brief outline of the agreement was in the original casino application. And Trump's Indiana-based attorneys confirmed the investors' role in a February 1994 letter, saying they were confident they would get the license, show "genuine interest in being a good corporate citizen" and "provide substantial benefit" to local residents.
However, the men said Trump reneged once the license was approved. None got stock in the casino, and the money for charity was less than promised.
All eight sued Trump for breach of contract, alleging they were used to "Hoosierize" Trump's application with gaming officials and then dumped once the license was approved.
"We felt cheated," Yosha told the AP. "He said he'd do one thing and then he changed. It's like what he's doing with every position. He changes in the middle of the stream."
As construction on a dock for two side-by-side riverboats proceeded in spring 1996, Trump's company began hiring in advance of the casino's grand opening in June. But his commitments to hire minorities and local businesses never came to fruition, according to local leaders.
"Trump reneged on both of those commitments," said Richard Hatcher, a Democrat who was Gary's first African-American mayor. "It simply did not happen."
Hatcher helped bring a 1996 lawsuit, weeks ahead of the casinos' opening, alleging Trump's organization failed to meet promised hiring goals for minority and local residents and businesses, and had only hired 20 percent minorities. Though more than half of Trump's casino staff was eventually made up of racial minorities, the lawsuit said blacks were overwhelmingly relegated to minimum wage jobs, such as valets and janitors. The better-paying positions on the casino floor, such as table dealers and pit bosses, were reserved for whites, according to the lawsuit.
Trump's lawyers said the minority hiring goals were not legally binding. They succeeded in getting the lawsuit dismissed on procedural grounds.
The other lawsuit, filed in federal court by the eight jilted business partners, continued. Six of the men dropped out of the case after Trump's company agreed to pay them a combined $2.2 million, but Yosha and another man, William Mays, refused to settle.
When the case went to trial in March 1999, Trump testified he didn't know the men.
"I have never even seen them until this morning," Trump told jurors. "I never had a contract (with them). I never even met any of these people. I was shocked by this whole case. I had no idea who these people were."
Yosha acknowledged that he had not met Trump but said he had negotiated extensively with Trump's lawyers.
The jury awarded Yosha and Mays $1.3 million. But Trump appealed, and in 2001 a federal appeals panel overturned the jury's award, saying the agreement between Trump's company and the two men had not been legally binding.
The judge also said Trump had met his charitable obligations through The Trump Foundation, a more modest effort than originally proposed, which was to give $5,000 college scholarships to 10 graduating high school seniors in Gary each year.
In 2004, Trump Hotel & Casino Resorts Inc., the parent company of the Gary casino, sought Chapter 11 bankruptcy protection. Trump sought to restructure $1.8 billion in debt, much of it tied to hotels and casinos in New Jersey and New York.
Don Barden, a prominent black businessman from Michigan who owned the casino boat moored next to Trump's, bought out Trump's stake in Gary the following year for $253 million. According to financial disclosures, the proceeds from the sale were used to shore up the financial condition of Trump's other casino and resort properties.
Through his spokeswoman, Trump told the AP he stood by his record but declined repeated requests to discuss the details.
"It worked out very well and was very good for Gary, Indiana," Trump said, according to his campaign.
Current Mayor Karen Freeman-Wilson, a Democrat, said there were some benefits to bringing gambling to the city. Gary still gets about $6 million a year in gambling revenues, but not the $19 million Trump originally predicted. Trump also brought his Miss USA Pageant to Gary twice, briefly providing some of the glitz and glamour he had promised.
What remains today is far from the world-class facilities Trump boasted he would create two decades ago.
A decade after Trump pulled out, the two original riverboats, now called The Majestic Star and Majestic Star II, are still docked in Gary's industrial harbor, hemmed in by a gray vista of dirt piles and cold smokestacks visible from the dingy windows. The carpets are faded and interiors dated with mirrored ceilings and walls. On a recent workday, a sparse jeans-and-sweat-pants crowd lined up for the serve-yourself soda and coffee between games.
The dilapidated hotel by City Hall was never renovated and was demolished in 2014. As for promises of high-paying jobs, a study for the state gaming commission found the median annual salary of a Trump casino employee in 2004 was $25,000, worth about $31,800 today when adjusted for inflation. That amount is slightly higher than the city's median household income.
"When a community brings in gaming to spur economic development, I think one of the things we look for are long term partners," Freeman-Wilson said. "That was not what we found in Donald Trump."
Trump won the county that includes Gary in May's Republican primary, but the area is expected to continue to be a Democratic stronghold in November. A GOP presidential candidate has not carried the county since Richard Nixon.
Headed into November, Trump hopes to win over black voters.
"What do you have to lose?" Trump asked at a recent rally in Florida. "It cannot get any worse. And, believe me, I'm going to fix it. I'm going to make it so good."
Asked about Trump's pitch, former Indiana gaming commissioner David Ross, who was on the board that awarded Trump the casino license, said it would be a bad bet.
"What you have to know is that Trump is for Trump and he's not for any black voters or anybody," said Ross, a physician in Gary and a Democrat. "He's not a guy who's looking to help people. What he's looking for is to make some money for Trump."
Biesecker reported from Washington.
Follow Associated Press reporter Sophia Tareen at http://twitter.com/sophiatareen and Michael Biesecker at http://twitter.com/mbieseck