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Saturday, December 9, 2017

How Molded Fiber Glass Co. got the shaft from Donald Trump

Molded Fiber Glass built the onion domes and minarets for one of Trump's great failures for $3 million.  They had to sue to get their money, but only got $1 million

 Molded Fiber Glass Co. is preparing to close its Aberdeen plant in February, putting 409 employees out of work.  While it enters history as one of the transient companies  that had a brief use for Aberdeen,  its own history includes being a dupe in one of Donald Trump's  perfidious bilking schemes.

The story is recounted in an Associated Press story which ran most prominently in the Atlantic city newspaper, which is where Trump built his Taj Mahal casino, a failed enterprise which demonstrated just what kind of '"businessman" Trump was.   He opened his $1.2 billion casino in April 1990.  It filed for its first bankruptcy in July 1991.  Trump was trying to corner the casino business in Atlantic City, but his finanancing was shaky and fraudulent.  The New York Times reported that "Mr. Trump assembled his casino empire by borrowing money at such high interest rates — after telling regulators he would not — that the businesses had almost no chance to succeed. " He raised  capital by offering junk bonds.   During its run, the casino violated almost all of the financial rules, among which was money laundering.  Tump managed to divest himself of the property by 2009 after a constant history of bankruptcy proceedings and it was taken over by fellow billionaire Carl Icahn.  Trump left behind a number of contractors and other businesses who he did not pay.  Defaulting on bills was the art Trump used in his deal-making.  Molded Fiber Glass was one of his victims.

In early 1990, Trump was pushing contractors to finish their work so the casino could open for business.  But in February, they became concerned when payments for work that had been completed stopped.  The AP story takes up the story of Molded Fiber Glass:

Five hundred miles away, in Ashtabula, Ohio, Robert Morrison of the Molded Fiber Glass Co. was pressing his workers to finish the domes and minarets and other faux Moorish ornaments in time for the April opening — and worrying about who was going to pay for all of it. An invoice sent a few weeks earlier for $1.4 million still hadn't been paid.
"Naturally, you assumed you'd get paid," Molded Fiber Glass CEO Morrison wrote in a book about the Taj published in 1994. "Donald Trump was flamboyant, but he was an immensely successful contractor who paid his debts.”
Many contractors didn't know what to think. Trump was denying he was in financial trouble: "I have a tremendous amount of cash," he told the Washington Post that March. Far from being overstretched, he told Newsweek, he was looking to expand: "I think the people with a lot of cash —and I have a lot of cash — are going to be able to make beautiful deals in the next few years."
  Morrison of Molded Fiber Glass was getting desperate for his money and so he turned to Irwin Tobman, a field supervisor in Atlantic City overseeing the installation of the domes and minarets. Tobman had been told earlier by a Trump official that the delay in sending the check was due to a "slight glitch.”
 On June 12, Molded Fiber Glass sued for the $3 million it was owed. A few days later, its lawyers ratcheted up the pressure; they threatened to remove the domes from the Taj and cart them away. The New York Post headline: "The Taj May Go Topless.” 
Molded Fiber Glass never removed its domes, choosing instead to join with Lundy and 46 others in a negotiated settlement with Trump for cash equal to 33 cents of each dollar owed, plus 50 cents in convertible bonds, according to Morrison's book. Trump also threw in a "right of first refusal," meaning the contractors would get future work at the Taj if they matched the best bid from others. The bonds would eventually pay in full, but the holders had to wait at least several years.
Strapped for money, some contractors sold them immediately, getting a fraction of what they were worth at maturity. Among the sellers was Morrison of Molded Fiber Glass, according to Tobman, his man in Atlantic City. Morrison ended up having to write off $2 million of the $3 million that Trump owed him, according to his book. The company refused to comment.
A telling line in Robert Morrison's account is, "Donald Trump was flamboyant, but he was an immensely successful contractor who paid his debts.”   Morrison, who died in 2002, wrote a book about the entire affair titled High Stakes to High Risk: The Strange Story of Resorts, International and the Taj Mahal.  A search on the Internet turns up no reviews or accounts of the book, but the overall impression is that Morrison, the founder of  molded Fiber Glass, regards the Taj Mahal affair as corporate business as usual.  He calls Trump who had already earned  reputation for bilking contractors "an immensely successful contractor," and any who checked knew that Trump did not always pay his debts.
As the  AP story relates, "Trump's cash crunch left Morrison with no money to pay the dozen companies he had hired to help with the Taj work. But Morrison paid them anyway... by borrowing the money."    Still, "The trouble wasn't enough to keep Molded Fiber Glass from doing work for Trump again. The company helped with the roof of the Trump Parc East, a residential building overlooking Central Park in Manhattan... "

When AP reporters contacted some of business people who were stung by Trump about that they thought him, they did not "believe Trump acted badly given the hardball, sometimes unscrupulous nature of industry."   in other words, it was business as usual.

One of the men, however told the reporters, "If ethics or morality has nothing to do with business, he's a very good businessman."

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Aberdeen, South Dakota, United States