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A Boston bank lent millions to Trump. It wasn’t smooth sailing

The Trump Princess, shown docked in Boston in 1988, was bought with a loan from Boston Safe Deposit and Trust Co.
The Trump Princess, shown docked in Boston in 1988, was bought with a loan from Boston Safe Deposit and Trust Co.Globe staff/File

It was 1988, and the buttoned-down bankers of the venerable Boston Safe Deposit and Trust Co. were clinking champagne glasses with Donald Trump on his 282-foot luxury yacht as it cruised around Boston Harbor.

The bankers, from one of the city’s oldest institutions, had just signed a loan to provide the New York real estate mogul financing to buy the Trump Princess yacht for $29 million. Purchased from a billionaire Saudi arms dealer, the ocean-going vessel featured a disco, a helicopter pad, a swimming pool, and a three-room hospital.

The loan was a risky leap into the go-go ’80s for staid Boston Safe, which for more than a century made its money managing the fortunes of old New England families. It was also the bank’s entry into Trump’s glitzy, high-rolling world, which in just a few years would all but collapse, forcing banks and creditors to salvage what they could. Now, the financial decisions of 30 years ago are causing Trump new problems.

At the time, though, the Boston bankers were reveling in their success, and celebrating with the man who eventually recovered his business footing and would become the Republican nominee for president.

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“There must’ve been more than 200 guests on board. Everybody was quite dazzled by him,’’ recalled Tim Vaill, a retired financial executive who was president of Boston Safe at the time. “But it didn’t last for long, because the credit problems started to arise.”

Bankers and their wives had their photos taken that evening with Trump, as servers passed hors d’oeuvres on a 90-minute sail. Said Vaill, “It was really quite a party.”

The loans by Boston Safe — which included a $12 million mortgage on Trump’s Mar-a-Lago estate in Palm Beach, Fla. — were small in the scheme of his vast borrowing binge. Yet they injected the Boston bank into the scrum of lenders fighting to get their money back in the early 1990s.

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Only a few months after the party on the Princess, in January of 1989, the bank’s chairman, James N. von Germeten, was fired for accounting irregularities linked to Boston Safe’s aggressive business expansion.

The Securities and Exchange Commission also sanctioned the chairman. The bank and its corporate parent, the Boston Co., went through a management shakeup and stepped back from the risky loans. But it took several years to sort its business with Trump.

In the end, Trump reported a $916 million loss on his 1995 taxes, according to a report in the New York Times over the weekend.

The yacht cost some $4 million a year to operate, and Trump boasted at the time of how frequently he entertained guests on it. Built in Italy, the boat was featured in a James Bond movie, “Never Say Never Again,” with the name Flying Saucer.

But by 1990, Trump’s finances were running aground. He was under pressure from losses and heavy debt loads at his Atlantic City casinos and Manhattan real estate projects. And now he was falling behind on his loans to Boston Safe, too.

That summer, executives of the Boston bank barged into a meeting in Manhattan of dozens of Trump’s bankers and lawyers, the Globe reported at the time.

They demanded repayment of the yacht and Mar-a-Lago loans, and nearly derailed a broader bailout plan for Trump’s debt-soaked operations.

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The other bankers at the meeting were angry at the interruption, according to the report, and the bailout finally went through, including terms limiting Trump’s household spending to $450,000 a month. Boston Safe also came away with a “significant improvement on the security of one loan,’’ the Globe reported, although it was unclear if that was for the yacht or Mar-a-Lago.

Publicly, Trump told people he had no longer had time for boating. He had the Princess on the market for $115 million for about a year, according to press reports at the time, but could not sell it. Finally, Boston Safe in 1991 repossessed it, ultimately selling it through a broker. News accounts had different estimates of the sale, ranging from $20 million to $34 million.

Trump denied in press reports that the boat had been repossessed. He and his lawyer said at the time they sold it to the bank for $42 million, at a profit.

In a statement Tuesday, Hope Hicks, a spokeswoman for the Trump campaign, said, “Mr. Trump swapped the boat for the loan. The loan covered 100 percent of the purchase price and he had no money in the deal, but was able to use the boat for a period of three years.”

A spokesman for Bank of New York Mellon Corp., which bought the Boston Co. in 1992 in the midst of its Trump dealings, declined to comment.

Even after selling the yacht, Boston Safe still was far from done with Trump.

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The $12 million Mar-a-Lago loan was due to mature in December 1993. But Trump was behind in those payments, along with many others, according to financial details in a 1995 report by the New Jersey Division of Gaming Enforcement.

In 1992, he made an interest payment on the loan, and persuaded Boston Safe not to foreclose on the elaborate, 118-room palace built by cereal heiress Marjorie Merriweather Post in the 1920s.

Trump later exercised an option to extend the loan two more years to December 1995, the year when his financial chaos would come to a head. In the meantime, rather than lie low and save money, Trump continued to make intricate development plans.

He decided to turn the Palm Beach estate into a private social club, as it was too large and costly to maintain as a single residence. He would apply with local officials to make the change, and sell memberships for tens of thousands of dollars apiece. He also asked the bank for permission.

But in September 1993, the bank said no. And the battle didn’t stop there. The bank sued Trump in 1994 in Florida, saying it did not want to be held liable for refusing Trump’s request to change the terms of the Mar-a-Lago loan.

Trump countersued, saying the transformation to a club would not hurt the value of the property, or put the bank’s mortgage at greater risk. The dispute would delay the opening of the club.

In court documents, Trump called the bank’s position an “arbitrary, capricious and unwarranted breach’’ of his mortgage agreement, according to a March 1994 report in the Palm Beach Post.

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Finally, Boston Safe relented. The compromise: Trump had to repay the loan before the club could open its doors.

By 1995 Trump was beginning to get clear of his many financial troubles, not least because of the willingness by his lenders to write off some of his prodigious debts. He was able to shift other debts onto the casino company that he took public that year as well.

And 1995 was noteworthy for another reason: the $916 million loss that Trump claimed on his tax filings.

That year, the Mar-a-Lago club opened in the spring. Today it charges members $100,000 to join, and it hosts glitzy events and celebrity weddings, including Trump’s to Melania in 2005.

Mar-a-Lago has also become an important home for Trump the candidate, staging numerous political events there so far during the campaign.

His spokewoman, Hicks, added in the statement: “Mar-a-Lago was a simple mortgage, on by far the best house in Palm Beach, Florida, which he still owns, debt free.” She added, “The loan was paid off in full many years ago.”


Jeremiah Manion of the Globe staff contributed to this report. Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.