OUT TO TRUMP THE PRITZKERS
Kenneth R. Clark, Tribune Staff Writer CHICAGO TRIBUNE
Declaring that it’s payback time for those who kicked him when he was down, Donald Trump filed a $500 million lawsuit Wednesday against the Pritzker family of Chicago and their Hyatt hotel chain.
Trump’s action, filed in U.S. District Court in Manhattan, charges the Pritzkers used “fraud, extortion and money laundering” in a bid to force him out of his 50 percent ownership in the New York Grand Hyatt.
Trump says the Pritzkers wanted him out because of an exclusivity clause in his contract blocking any further hotel expansion by Hyatt in the New York metropolitan area. His suit demands a jury trial and exclusive ownership of the hotel.
His battle with the Pritzkers-Jay, Thomas, Nicholas and Robert-began in 1975. That was just before Trump, then 28, built the Grand Hyatt after first buying the decrepit Commodore Hotel at Grand Central Station from the bankrupt Penn Central Railroad for $10 million.
Trump wheedled a $120 million tax abatement from the city and persuaded bankers to lend him $80 million more for a project that wound up revitalizing the entire area. With both his fortune and his celebrity made, Trump went on to build a series of other projects, prominently bearing his name.
The collapse of the real estate and junk-bond markets knocked Trump down, but-despite the hopes of his many enemies-not out. Today he owns three casinos and a hotel on Atlantic City’s famed boardwalk.
Before the Grand Hyatt opened in 1980, Trump sold 50 percent of it, along with a management contract, to the Pritzkers. In return, he demanded and received an exclusivity clause under which the Pritzkers were forbidden to open, own or manage any other large-scale hotel in Manhattan or the city’s other four boroughs, including at Kennedy or LaGuardia airports, without Trump’s approval.
Trump said Wednesday that the Pritzkers wanted to build more hotels in New York and were willing to wreck the Hyatt if necessary to achieve their goal.
“What they wanted to do is make the hotel so unprofitable that I would sell them my interest for nothing and they could get out of the restrictive covenant,” he said.
To that end, Trump’s suit charges that the Pritzkers extracted $60 million in unearned management fees, transacted business with other Pritzker-owned corporations to bilk the hotel of additional money and netted even more funds through “improper bookkeeping.” His suit further alleges that the Pritzkers gave free hotel accommodations to Hyatt executives and that a high-ranking Hyatt officer used hotel funds to renovate a private residence.
“Hyatt hired Marriott for $75,000 to teach them how to do the laundry in the Grand Hyatt,” Trump said. “Hyatt spent $250,000 in consultant fees to study the roof for leaks. They would order a chair in New York, then ship it to Chicago. They would get a design fee for a chair that is already designed, then take a shipping fee and a storage fee after storing it for a couple of months before sending it back to New York.
“One of the top Hyatt officers in the hotel was caught-by me, not by them-writing checks in excess of $100,000 on the hotel account to fix up an apartment in Port Chester, N.Y. Despite my reporting it, they haven’t even let him go. He spent thousands of dollars for marble, paintings-you have no idea. What they’ve done is disgraceful, and I’m going to stop them.”
In a statement, Richard Schulze, a spokesman for Hyatt, called Trump’s suit “totally without merit. It is just another lawsuit filed by Trump as a diversionary tactic, attempting to intimidate and to substitute publicity for substance.”
Schulze said Trump has refused to make required payments on Grand Hyatt obligations, and that Hyatt has begun two arbitration proceedings to force him to do so. “In the meantime,” Schulze’s statement said, “Trump’s new lawsuit will be dealt with in court, which is the appropriate forum.”
Trump said Hyatt’s cruelest blow of all came in 1991 when, overextended by the junk bond-financed construction of his Taj Mahal casino in Atlantic City, he found himself hundreds of millions of dollars in debt.
The burden forced him to swap mortgage debt for equity by selling his yacht, the Trump Shuttle and his stake in the Plaza Hotel, which he continued to control. That, he said, is when the Pritzkers tried to finish him off.
“I was a great partner,” Trump said. “I built this hotel, and I did it quickly, efficiently and effectively. Then I turned it over to them and left them alone. I trusted them, but when I was in trouble two and a half years ago, and in the middle of a horrendous divorce, rather than say, `You’ve been a great partner; what can we do to help?’ they made a capital call for almost $40 million to fix up the Grand Hyatt. In addition, they called for $62 million to cover various shortfalls in operating accounts.”
Trump’s version of the arbitration cases in which he and Hyatt are pitted is that in one, the $62 million amount was reduced to less than $1 million, and that the other, involving $40 million, is pending.
“They attacked me when I was down,” Trump said. “Now I’m doing great again and it’s my turn. I always said, the first time I got back on my feet, the Pritzkers would be the first people I’d go after.”
The Pritzkers and Hyatt are no strangers to litigation. In 1978 the Securities and Exchange Commission found that the Pritzkers had used Hyatt to engage in “self-dealing” to the detriment of shareholders.
In a 1988 suit Jay Pritzker was assessed a $150 million judgment after a jury found in favor of Paul S. Dopp, a New Jersey businessman who accused Pritzker of using “deceit or duress” to breach a 1984 contract to join him in buying the Dorado Beach and Cerromar casino hotels in Puerto Rico. That judgment remains under appeal.
