The untold story of 'dangerous' Australian casino connections that saved Donald Trump from financial ruin

By Josh Robertson, ABC

Hong Kong's powerful Cheng family have wanted a piece of the Australian casino industry for nearly 40 years.

Now, through their family-controlled conglomerate Chow Tai Fook Enterprises, they hold a billion-dollar-plus stake in the Star Brisbane, Australia's most expensive casino venture.

It was this quest for an Australian casino that thrust the Chengs into an unwitting role in something more significant: the rise of Donald Trump.

An unlikely partnership between the self-promoting New York tycoon and the publicity-shy Hong Kong billionaires was forged decades ago in bids to build casinos in north Queensland and New Zealand.

And this led to the Chengs saving Trump from financial ruin, resurrecting a career that eventually took him to the White House.

The alliance ended in a flaming heap amid claims of betrayal, lawsuits and a tax fraud investigation.

Now with the eyes of the world on Trump as he campaigns again for the US presidency, his former partners have finally chalked up one achievement he couldn't.

And they've done it with the kind of baggage that once kept both them and Trump out of the Australian casino business.

'Dangerous' casino bids

Trump and the Cheng family first came into each other's orbit as part of rival bids for Sydney's first casino at Darling Harbour in 1987.

This put both parties on the radar of New South Wales authorities, who were concerned about their business associations with organised crime figures.

Trump was 40 years old, already world famous, and the owner of two casinos in Atlantic City, the US gambling hub.

He told The Australian newspaper that if his Sydney casino proposal won the day, it would deliver "not only… the largest, but one of the most magnificent, one of the most beautiful hotels anywhere in the world".

The NSW police board wasn't buying it.

They might have known about a 1986 report from New Jersey's crime and corruption watchdog, which found one of Trump's casinos was built with the help of mobster-controlled companies.

In a confidential report to NSW cabinet, the board said "Atlantic City would be a dubious model for Sydney and in our judgement, the Trump mafia connections should exclude the Kern/Trump consortium".

The Cheng family, whose company New World Developments was part of another team bidding for the casino, had their own shady connections.

From a hard scrabble background, the family patriarch, Cheng Yu Tung, had built a fortune in the jewellery business and property before buying a stake in casinos in Macau.

His partner in the Sydney bid, Macau gambling tycoon Stanley Ho, had organised crime associations that would eventually see him banned from the Australian casino industry.

Another of their Macau casino partners, Yip Hon, had been publicly named in 1984 by a US police chief as an "international narcotics smuggler" who had laundered nearly US$400,000 (NZ$640,000) in Atlantic City casinos.

The NSW Police Board blew both their bid and Trump's out of the water.

The board told state cabinet that it was "firmly of the view that on tests of sound repute, probity and integrity", neither bid "can be considered, indeed each would be dangerous".

A merchant bank commissioned by the NSW government, CBIC Australia, also found the bids were financially unviable.

These damning assessments remained secret until the release of cabinet documents 30 years later.

None the wiser about what killed their bids, Trump and the Chengs came back to Australia for a second bite of the cherry.

And this time, they joined forces.

'Fantastic partners'

By 1992, Trump was in trouble in the US.

He was billions of dollars in debt and his Atlantic City casinos were tanking.

Billed as the "eighth wonder of the world", his third casino, the Taj Mahal, made investors wonder why they'd bet on Trump.

But his image as a maven on the move still held weight elsewhere.

In Australia, an entertainment promoter called Kevin Jacobsen was looking to make a splash with a bid for a casino in Auckland.

Jacobsen, the brother of singer Cole Joye, was a world-class impresario who brought Bruce Springsteen to Australia and made a fortune from the Dirty Dancing stage show.

Jacobsen and his business partners, including Māori traditional owners, had already brought in Hong Kong backers: the Chengs' New World.

The Jacobsen camp also had dealings with an Atlantic City casino consultant called Al Glasgow, who once branded Trump "the baby boomer's Howard Hughes".

With Glasgow's help, they brought in the high-profile New York entrepreneur as the face of the project.

A source familiar with the deal, who asked not to be identified so they could speak candidly, said this involved "a hell of a lot of work, and there were a bunch of forward parties".

"I think [Trump] sent out 5 or 6 executives," they said.

"All sorts of presentations, all sorts of work, lots of documentation and quite a few dinners.

"Kevin was there once playing the piano at the bar in the Hyatt and they were all having a rollicking good time."

This culminated in Trump flying to Auckland in August 1993 for nine hours to spruik the casino proposal "with the Māoris and with New World, two fantastic partners".

"The Māoris are going to be great beneficiaries because a lot of the profits are going to be going towards their education and healthcare and other things," Trump said in an NZ TV interview.

"And I think it's going to be a fantastic partnership."

The source familiar with the deal said Trump seemed "interested in doing the press [and] lapped up the attention from the female journalists, loved it".

Trump had flown via Hong Kong, where he met New World representatives face to face.

"And he kept the guy from New World that came out [to New Zealand] very, very close to him," the source said.

The Auckland bid was knocked back.

But the new partnership with Trump and the Chengs gave them a chance to try their luck again across the ditch.

The Queensland government advertised around the world for interested parties in a new casino for Cairns, "the hub of Australia's tropical playground".

Trump never made it to Cairns.

But in October 1992, the Marlin consortium - including Trump, New World and Jacobsen's team - pitched the most extravagant proposal of the lot.

Their A$161 million plan included a casino at the old Cairns Customs House site, to be operated by Trump Casinos, with 70 tables and 840 poker machines, almost double what the current casino has today.

The Chengs' New World would build and operate a 182-room hotel.

But according to a "strictly confidential" report to Queensland cabinet in July 1993, a committee of state bureaucrats was underwhelmed by the bid.

"The committee… felt that the Marlin proposal for the Customs House site, while having many features of unique quality, was not superior to other proposals for that site," the report, which was released last year, said.

Marlin's alternative A$135 million proposal for a casino at an old railway site was "somewhat less well developed" than its rivals, the report said.

They didn't make the shortlist.

Even if they had, it's not clear Trump or the Chengs would have run into vetting problems as they did in NSW six years earlier.

The Queensland report lauded the state's "worldwide reputation for having clean casinos".

But it made no mention of the organised crime associations which had troubled the NSW Police Board.

That was despite a second US government report a year earlier naming the Chengs' Macau casino partner, Yip Hon, as a member of Chinese organised crime group, the Hung Mun Triad.

It seemed Queensland left the background checks to other jurisdictions.

It endorsed the probity of another consortium bidding in Cairns which involved construction group Leighton.

The fact it had been shortlisted for casinos in Melbourne, Brisbane and New Zealand "must indicate they are sound and solid throughout", the committee said.

The Chengs must have agreed that Leighton was a good operator because months later, New World teamed up with the builder for another crack at a Sydney casino tender.

But NSW authorities found a problem with Leighton.

Revelations the company had been involved in illegal tender practices in the building industry led to the NSW regulator banning Leighton executives from any role in managing the casino.

Their partners, the Cheng family, didn't even make it to the vetting stage.

Links with triads, a former Australian PM

By mid-1992, secret intelligence reports from the Canadian High Commission in Hong Kong painted a less than flattering picture of New World and its founder Cheng Yu Tung.

They were written by Royal Canadian Mounted Police officer Garry Clement, who was on lunch and coffee terms with Hong Kong's police commissioner and its Independent Commission Against Corruption operations chief.

In one report, seen and verified by the ABC, Clement said New World's headquarters was "frequently the venue for meetings involving well known Triad figures".

"It is suspected by some RHKP [Royal Hong Kong Police] contacts that New World is one of the legitimate corporations which is used for the co-mingling of illegal assets," he said.

Clement noted Cheng Yu Tung's casino interest put him "in direct partnership with… Yip Hon", the accused narcotics smuggler, money launderer and Chinese triad member.

But none of this seemed to filter back to Australia.

Cheng Yu Tung's business associates included former Australian prime minister Bob Hawke, who had horseracing ventures in China.

It was Hawke who reportedly introduced the Cheng family to the Sydney casino bid with Leighton.

Hawke's business partner, Sunny Yam, sat on the board of the casino joint venture company with Cheng Yu Tung's son, Henry Cheng.

The role of a former Australian leader in introducing the partners of an alleged organised crime figure to a casino bid went unremarked upon at the time.

But in November 1993, the Sydney Morning Herald reported that New World had "backed out of the Sydney Casino bid rather than participate in what it considered to be an unduly intrusive probity process".

It quoted one insider as saying: "They are very private in Hong Kong."

"New World operatives considered the questions so intrusive they weren't game to show them to the directors… I don't know if the directors ever saw them. Of course, the Casino Control Authority couldn't allow any exemptions, so that was that."

Saving Donald Trump

Three times and no dice in Australia, the Cheng family saw opportunity beckon in the US with their would-be casino frontman.

Donald Trump was a mogul in distress.

He was in danger of losing what he once described as "the greatest piece of land in urban America".

He had planned to turn a disused railyard beside the Hudson River in Manhattan into Trump City, featuring the world's tallest skyscraper with him living at the top.

But by 1994, Trump was having trouble paying the mortgage on the site, let alone the money to develop it.

The Cheng family had an eye for a distressed sale, having once swooped on cheap Chinese property in the wake of the Tiananmen Square massacre.

They began circling their first major property development in the US.

Trump's trip to Hong Kong to seal the deal was reportedly an awkward affair.

He struggled with chopsticks and fish head banquets.

He baulked when his hosts invited him to bet $1000 a hole playing golf.

They ribbed the American, a teetotaller, about a possible drinking contest.

But in July 1994, more than a dozen Hong Kong investors stepped in to bail Trump out.

They included Cheng Yu Tung, Henry Cheng and David Chiu of Far East Consortium, future co-owner of the Star Brisbane casino.

"In Hong Kong, China, we've done bigger projects than this, much bigger," Henry Cheng said after the deal.

They picked up Trump's US$250 million mortgage for a steal at US$90 million.

It was a shrewd investment - but generous to Trump.

The deal gave him a 30 per cent cut of profits and more importantly, saved him from bankruptcy.

For a decade, the project which became known as Trump Place was a fruitful partnership.

Trump negotiated property tax breaks worth hundreds of millions.

His Hong Kong backers bankrolled the US$3 billion development of seven apartment buildings.

And then in 2005, they sold the remaining land for US$1.76 billion, a record deal for New York.

But Trump cried foul.

He claimed the land was sold behind his back for below market value, and sued his Hong Kong backers for US$1 billion in damages.

In the court case, Trump accused the Cheng group of receiving "kickbacks" from the sale, claiming a US$35 million commission paid to an offshore company owned by the group was a bid to avoid tax.

The New York Supreme Court dismissed Trump's claims in 2006.

Trump reportedly lashed out at the "incompetent judge", declaring "this whole thing should be investigated".

And then it was.

A Manhattan District Attorney, Robert Morgenthau, ran a two-year probe into alleged tax evasion involving the Cheng investor group.

Investigators suspected a bogus "finders fee" of US$17 million from the Trump property sale might have been funnelled back to the investors via a company in the British Virgin Islands (BVI).

In 2009, Morgenthau announced that investigators had tracked the flow of money through the Channel Islands and London to "someone in Hong Kong who we believe is connected to [the investors]".

They charged a US broker for the Cheng group with grand larceny and tax evasion, alleging he used a shell company to hide a $US1 million sales bonus.

Morgenthau said he hoped for more arrests, but was having "difficulty in getting foreign records" from Hong Kong officials.

He didn't get any further.

The case wound up in 2010 with the Chengs' broker pleading guilty to a misdemeanour and paying US$135,000 in fines.

An unnamed Hong Kong company reportedly also had to pay US$5 million in back taxes from its role in the sale.

No-one else was charged.

Trump's mudslinging didn't stick.

Billionaire bragging rights

The Chengs finally backed a winner in Australia with the Star Brisbane casino venture in 2015.

The new Brisbane casino isn't exactly a jewel in the crown for the Cheng family, whose international business empire ranges from coal mining to hotels, healthcare and financial services.

On paper, it's dwarfed by their other Australian asset, Alinta Energy, a multi-billion-dollar portfolio of power stations and gas pipelines.

And their rotten luck with casino partners continues.

Star's licences to operate Australian casinos still hang in the balance after their own money laundering and criminal infiltration scandals.

However, the Cheng family have withstood renewed scrutiny by the Queensland government in response to revelations by the ABC about their record of business associations with organised crime figures.

Their company Chow Tai Fook has been cleared to take its place as a Brisbane casino licensee, and will earn commissions on every high roller it brings to town.

The Chengs have the Australian casino stake Trump wanted but could not get.

And the family fortune is now three times bigger than Trump's at an estimated US$22 billion.

These are bragging rights that just might resonate with an old business partner who bit the hands that saved him.

"It's too bad this happened," Trump reportedly said of the falling out in 2016.

"You let them know that Donald Trump has great respect for them, ok?"

- This story was first published by the ABC.