ATLANTIC CITY, N.J. -- The Trump Castle Casino Resort, admitting that a $3.5 million loan from Donald Trump's father violated state gaming laws, has agreed to a $30,000 penalty, officials said Tuesday.
Fred Trump, through his lawyer, bought 700 gray gambling chips in December without intending to gamble.
The purchase of the $5,000 chips gave the casino enough cash for an $18.4 million interest payment.
A spokesman for the Division of Gaming Enforcement said that Fred Trump has agreed to apply for a license that would allow him to lend money to the casino. He would then be able to make a similar loan in June, when the casino's next interest payment is due.
Under the settlement, Trump Castle can continue to use the elder Trump's money, but will pay $30,000 to the state.
The settlement must be approved by the Casino Control Commission, which may consider it in May.
The Castle, like other Trump properties, has been suffering from cash flow problems. On Tuesday, Trump announced a plan to turn the Plaza Hotel in New York into condominiums, and his glitzy Taj Mahal Casino Hotel is set to file a reorganization plan with a federal bankruptcy judge in Camden, N.J.
The law requiring licensing of casino lenders is aimed at preventing members of organized crime from controlling the industry. Another provision, adopted in 1988, requires casinos to notify the commission before borrowing money.
Fred Trump's loan allowed his son to avoid default on the mortgage, which could have cost him control of the casino. The loan is also free of interest.
But because state law guarantees that gambling chips will be redeemed, Fred Trump, unlike most of his son's creditors, has security for his loan.
