Donald Trump no longer has a stake in a bankrupt luxury golf course in Puerto Rico, but his business partner on that project, under normal circumstances, would stand to gain handsomely in the rebuilding of the hurricane-ravaged commonwealth.
But like many things in the orbit of Trump’s business deals, normal circumstances don’t apply.
Trump’s former golf-course partner Empresas Diaz is the parent company of one of Puerto Rico’s most prominent roadbuilders and is owned by one of the best-connected families in the territory. But creditors, owed at the time almost $100 million, forced Betteroads Asphalt LLC and Betterecycling Corp. into filing involuntary bankruptcy protection on June 9.
Those creditors, which include Banco Popular de Puerto Rico, Firstbank Puerto Rico, Banco Santander de Puerto Rico and others, allege that Betteroads was moving its assets to other connected entities and transferring several of its plants to third parties to make it harder for the creditors to recover what they were owed.
Another of Betteroads creditors is Sargeant Maritime Inc., a Florida-based maritime transporter of asphalt that was sold last year to a Dutch energy firm after a nasty family court battle that pitted brother against brother.
Empresas Diaz joined forces with the Trump Organization in 2008, paying royalties for the use of Donald Trump’s name, offering him a percentage of the profits — as high as $600,000 in 2012 according to an annual report — and hosting a Trump management company on the premises.
The golf course near the El Yunque National Forest outside the capital of San Juan still went belly up. The Coco Beach Golf & Country Club, as the Trump course was known in legal paperwork, filed for bankruptcy protection in 2015 as Trump ran for president.
Trump plans to visit Puerto Rico on Tuesday to see first hand the extent of the storm damage.
Some $32 million of the project’s debt passed to Puerto Rico’s tourism board, which had vouched for the project, allowing it a stronger investor rating than its junk-bond status. It was a move that eventually put Puerto Rican taxpayers on the hook for the golf course’s collapse.
The property was sold in bankruptcy proceedings in late 2015 to Puerto Rican investor OHorizons Global LLC for just $2 million — over objections from the U.S. bankruptcy trustee and the Puerto Rico Tourism Development Board, who complained the price was far too low given that the property had been valued at $50 million in recent annual reports.
With the sale, Empresas Diaz lived to fight another day.
And that was largely thanks to Betteroads Asphalt LLC, which Caribbean newspapers regularly describe a top roadbuilder. On its website, Betteroads boasts having the Caribbean’s largest asphalt terminal.
With an outpouring of federal aid about to come Puerto Rico’s way, Trump’s Puerto Rican partner would have been poised for a windfall. But it is mired in bankruptcy proceedings, trying to restructure its massive debt.
McClatchy attempted to reach Empresas Diaz and Betteroads at more than a dozen numbers listed across Puerto Rico, but damage to the telecommunications infrastructure from Hurricane Maria made it impossible. Lawyers for creditors told McClatchy they were unsure of the company’s operational status. A source close to Betteroads, not authorized to speak for the company, said it has leased its facilities and Puerto Rico should still be able meet roadbuilding needs quickly.
Some media accounts have tried to pin the blame for the golf course’s failure on Trump. It’s an unfair charge, insists Craig McCann, a lawyer who has worked with bond holders to recover some of their losses in the course.
Facing big debts, the golf course development issued new debt in 2011, but it was to cover existing debts and did not end up with Trump or Empresas Diaz, McCann said in an interview.
“Proceeds from that bond issue paid off the 2004 bonds,” he said, noting that for much of its existence the project steadily lost about $5 million a year, before and after Trump’s name was affixed.
The Trump management company, Trump Golf Coco Beach LLC, filed a bankruptcy claim of more than $900,000 against its Puerto Rican partner.
Betteroads made headlines in 2015 when it blew the whistle on two Puerto Rican contractors who were fined a combined $7.2 million and barred by the Federal Aviation Administration from future contracts.
The U.S. Department of Transportation’s inspector general found that the two firms — BTB Corporation and R&F Asphalt — used a substandard asphalt binder during a runway upgrade funded by taxpayers.
Betteroads has been cited for numerous violations by the Department of Labor, as recently as February 2017.
Update and correction: An earlier version of this story misstated Betteroads role in an FAA investigation. Betteroads was a whistleblower in the case. Also, we have updated the story to indicate that Puerto Rico should be able to meet its roadbuilding needs.