The FTC asks Justice Dept. to prosecute Donald Trump

The Trump Timeline

Sources linked at end of page.


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On or shortly before November 19, the Federal Trade Commission asks the Justice Department to prosecute Donald Trump for using a “parking” agreement to purchase a large stake in two hotel and casino companies.

This kind of trade involves investors (Trump) having a bank buy stock in a company for them, that they then have an option to buy from the bank later for a pre-determined price. This helps investors avoid disclosing their purchase and keeps the stock price low before they buy. It’s not a big deal, unless the reason for the purchase is to attempt a takeover of a company, in which case the purchase is illegal.

Under the Hart-Scott-Rodino Act of 1976, potential acquirers must provide notice of their intentions to give the Government time to mount an antitrust challenge. Otherwise, a merger might be consummated and could then be difficult to reverse… Any prosecution would entail a civil case in which the penalty would be a fine.

The New York Times

Based on reporting at the time, Trump File believes the method relies on what is now called “options trading.” When someone purchases an option (a put or a call), the price of that option increases but the stock does not.

The investment firm Trump used for the scheme is Bear Stearns — Jeffrey Epstein’s former employer. Alan Greenberg, the CEO who hired Epstein, refuses to comment when asked about the scandal or his work with Trump. However, reporters uncover that Trump has “two somewhat mysterious accounts” with the company.

No one has ever been prosecuted for using this investment method. The FTC wants Trump to be the first, for he illegally purchased a large stake in Holiday Corporation (Holiday Inn) and a controlling stake in Resorts International.

Trump took control over Resorts International in July. This is how he acquired the unfinished Taj Mahal hotel and casino. He purchased five percent of the Holiday Corporation’s stock in 1986, profited $32 million, and now intends to take over the company and sell its properties. Executives stop him.

Trump had discovered that the true value of Holiday Corporation was in real estate, so he started buying up stock. Holiday officials one day “woke up to learn that he owned 5 percent of their stock,” she recalls. “What struck me was that by buying up the stock and forcing the sale, he had nothing but a careless disregard for all the people who lost their jobs at what was an American icon, not just a Memphis icon. He didn’t care. He was simply a ruthless businessman.”

To avoid a takeover attempt by Trump, Holiday Corporation management had borrowed heavily to make lump-sum payments to shareholders and ultimately engineered the sale of the company in 1988 to the English brewery, Bass PLC. To reduce its debt, Holiday then sold much of the company’s real estate in a move that mirrored Trump’s intentions.

Memphis Magazine

Next year, the Justice Department files a lawsuit against Trump for violating merger notification rules. Trump settles the suit on April 5, 1988, and agrees to pay a $750,000 fine but never publicly admits to violating the law.

External Sources

The New York Times 1 (Archived)

Memphis Magazine (Archived)

Resorts International, Archived

The New York Times 2 (Archived)

Mother Jones – Bear Stearns (Archived)

Photo: Harry Benson via TIME

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