casino license negotiations, and
his casino partnership with Harrah’s.
For each, we will focus on Trump’s level of need, his Plan B, and how he strengthened his leverage. We will address leverage in terms of his counterparts’ alternative plans in Chapters 6 and 7.
Trump’s First Casino Deal—Creating a Strong Plan B
Donald Trump wanted in on gaming before he ever did a New York City real-estate deal. “As far back as 1976, he was telling reporters he would build the world’s largest casino in Las Vegas and name it Xanadu.”179 But when New Jersey approved casino gambling in 1977, Trump started eyeing Atlantic City seriously.
His first step—just like in real estate—obtain the rights to the land on which to build a casino. He decided to lease and not buy. Why was this a smart negotiation move? Leases better satisfied his interests (as opposed to buying), as Trump could lock down a key casino property but still walk away with little lost if the deal didn’t happen. “Preserving his options [with this move] was precisely what Donald wanted.”180
As Trump wrote, “I never get too attached to one deal or one approach. I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first.”181
Trump wanted to develop a good Plan B, too. The better his Plan B/alternative, the stronger his leverage.
His best Plan B versus an Atlantic City casino? A New York City casino in his newly redeveloped Grand Hyatt Hotel (the old Commodore). But New York had not legalized casino gambling. Trump sought to change this—taking practical, concrete steps to strengthen his leverage vis-à-vis a New Jersey opportunity. This is a crucial and often overlooked leverage-enhancing strategy.
Here was Trump’s effective research-based strategy.
In 1979, when the campaign for gambling heated up in New York, Donald became a prominent public spokesman for it. Declaring in a multipart Daily News series on gambling that the still-in-construction Hyatt was designed for casino use, Trump said: “We designed the building so it can easily be converted to one larger than the MGM Grand in Las Vegas.
[Trump later said in a July New York Times feature that] “We are missing the boat every day casinos are not approved.”182
New York did not approve casino gambling. But Trump’s strategy provided leverage for his Atlantic City negotiations.
He also intimately involved himself in the substance of those negotiations, using his leverage to get a great deal on the leases where he would build his first casino. Here’s how his interactions were described in Trump Show.
The [negotiations] took place on a hot March day in an unair-conditioned Resorts suite, and as the hard bargaining wore on, [Trump’s broker and lawyers] who’d come down from New York with Donald, and many of the rest of the group got down to their shirtsleeves. Donald’s only concession to the heat, however, was his unbuttoned suitcoat. He chatted and sparred with [his counterparts] and, after threatening at various points to “just forget about it,” he finally arrived at the basic terms of the deal. [Emphasis added.]183
Two elements to highlight. One, Trump fully engaged in the substantive details. This later changed. And two, Trump’s comment several times to “just forget about it” reflects his ability to walk and go with his Plan B—a powerful leverage move.
And while we don’t know if Trump would have walked (he could have been bluffing—creating the misperception he would walk), his creation of a New York Plan B and the existence of other deals at the time made this statement credible.
Did Trump negotiate a good deal? Yes. He got the lease and only paid out “an unescrowed $1.5 million, and his counterparts gave him promissory notes that would require the repayment of even these sums if certain conditions weren’t met.”184
Trump’s leverage was key.
New Jersey Gaming Approval—They Are Desperate, and Trump’s Not
Donald Trump wanted an Atlantic City casino. But he didn’t need it.
New Jersey needed Donald Trump—desperately. This gave Trump leverage. And he knew it.
On March 14, 1982, the [New Jersey] Casino Control Commission took up Trump’s application for a casino license…. Atlantic City officials all but bowed before him. It didn’t matter that he had no experience running a casino, had not assembled financing, and had been investigated for dealings with organized crime figures. To the officials, Trump’s presence showed the city was on its way back….
The license was approved in less than two hours. [Emphasis added.]185
The timing worked out well for Trump, too. Atlantic City was desperate for Trump. He wasn’t. Strong leverage for Trump.
This also illustrates another important leverage element: timing.
RESEARCH: Given the fluid nature of leverage, you will always want to complete your agreements when your leverage reaches its peak. Strike while your leverage is hot.
How? Constantly strive to maximize your leverage. Don’t assume it will stay the same. In fact, time alone often strengthens one of the parties’ leverage. Time may work for you or against you. When you have strong leverage, exercise it and get the deal done.186
When you sign the deal may determine if you even have one.187
Trump knew his strong leverage might not last.
So what negotiation strategy did he execute to seize this window of opportunity, described in Making Trump as “perhaps the most lucrative negotiation of Trump’s life”?188
Two things. One, he pushed hard to get a license in six months instead of the usual 18 months.
New Jersey required all license applicants to complete a highly detailed personal history under a system designed to fulfill the promise to New Jersey voters that Atlantic City would not become a mob-run Las Vegas East….The state was so diligent in vetting would-be casino owners that it sent detectives overseas to interview people and inspect documents.189
What was Trump’s hurry? His leverage could change. And Trump was “unwilling to endure such a lengthy inquiry, [so he] set about arranging special terms to prevent scrutiny of his past, a practice he has continued to this day,” according to Making Trump.190
In other words, an expedited process might not allow New Jersey to complete its due diligence. If New Jersey fully vetted Trump, noted Making Trump, it would have found several usually disqualifying elements he did not include in his application, including:
A 1979 federal grand jury inquiry into how he had acquired the Penn Central railroad yards on the West Side of Manhattan (federal agents had interviewed Trump twice on this);
The
