Dealmaking Era Ends
By Byron Craft
The brazen dealmaking that, at one time, led to the mammoth success for a generation of Las Vegas business tycoons, has become a thing of the past. It died this month, with the passing of billionaire Kirk Kerkorian, the Vegas mogul who built an empire on daring bets and gut instincts.
By the time he died at the age of 98, Kirk Kerkorian had amassed and lost huge fortunes several times over before settling in as a fixture in the Forbes lists that ranked him as the “41st Wealthiest Guy on the Planet.” In the process, the self-made billionaire helped transform Las Vegas into a colossal Disneyland for adults.
He was a Fresno-Armenian paperboy who rose to the top of the heap making billions on bold and audacious investments in Las Vegas. The ex-paperboy, ex-boxer, ex-pilot, eventually became the father of the Las Vegas mega-resort.
Kerkor “Kirk” Kerkorian was born in 1917 in Fresno, California to Ahron and Lily, Armenian immigrants. “Our first language, although we were born here, was Armenian,” Kerkorian recalls. “We didn’t learn the English language until we hit the streets.” His father, an illiterate immigrant whom everyone called Villa (as in Poncho) on account of his large mustache, had become a paper millionaire during the great San Joaquin Valley raisin boom of World War I. Then the recession of 1920-21 took hold and auctioneers liquidated his holdings.
The Kerkorian’s headed South, joining the Los Angeles’ urban poor, sometimes moving every few months when finances were short. The young Kerkorian grew into a street-smart ruffian. He was expelled from junior high for fighting, and then sent to a downtown school for delinquent boys, before dropping out in the eighth grade. Kerkor started helping his parents by assembling a hustler’s resume, working as a paperboy, a golf caddie, steam cleaner, car refurbisher, furnace installer and a bouncer in a bowling alley bar. Kirk, as his friends called him, eventually became a fairly skilled amateur boxer under the tutelage of his big brother Nish, a professional boxer. Fighting under the name “Rifle Right Kerkorian,” he won the Pacific amateur welterweight championship.
Around about the same time, the hardworking youth of seventeen lied about his age and joined the Civilian Conservation Corps. The Corps sent him to cut fire trails in Sequoia National Park. Prize fighting and tree falling kept him fairly occupied until 1939, when he decided to quit boxing and learn how to fly airplanes.
If Kerkorian had chosen to box professionally, he might have boxed himself into obscurity. Instead, he met Ted O’Flaherty. Kirk was earning 45-cents an hour helping O’Flaherty install wall furnaces. Some days Kerkorian would go with him to Alhambra Airport and watch him practice maneuvers in a Piper Cub. He consented one day to go aloft with O’Flaherty. As the plane rose and the Southern California landscape became visible from the mountains to the ocean, Kerkorian experienced a defining moment.
“He was sold on it right then,” O’Flaherty later recalled. “He had never been up in a plane before. But I’m telling you, after that first flight, he went right at it. The very next day, he was back out at the field to take his first flying lesson.”
Anticipating the advent of World War II and not wanting to join the infantry, he learned to fly at the Happy Bottom Riding Club in the Mojave Desert. Happy Bottom was adjacent to the Muroc Army Air Field (now Edwards Air Force Base). In exchange for flying lessons from pioneer aviatrix Florence (Pancho) Barnes, he agreed to milk and look after her cattle. Kirk was a quick study and in six months he earned his commercial pilot’s license.
When Kirk became 25, he lied again, this time about his education, and entered the Morton Air Academy in Blythe, California. At the academy he attained the rank of lieutenant and became an army flight instructor. Kerkorian learned that there were high paying daredevil flying missions across the Atlantic for the Royal Air Force. Missions many called suicide runs. The British Royal Air Force wanted to ferry Canadian-built de Havilland Mosquito bombers over the north Atlantic to Scotland. The Mosquito’s fuel tank carried enough fuel for 1,400 miles, while the trip directly was 2,200 miles. The Montreal-Labrador-Greenland-Iceland-Scotland refueling route was dangerous. The planes’ wings could be distorted by ice, causing them to fall out of the sky. The snowfields and forests around that frozen perimeter were strewn with downed Mosquitoes. Kerkorian preferred riding a west-to-east airflow called the “Iceland Wave,” which blew the planes at tailwind jet speed to Europe. Unfortunately, the tail winds weren’t constant, and that could mean ditching in the north Atlantic, which, of course, was certain death as well. The fee per flight was $1,000. The odds were that only one in four would complete the journey, but the money and the challenge was too good to overlook.
In May 1944, Kerkorian and his Wing Commander, J.D. Woolridge, rode the “Wave” and broke the old crossing record. Woolridge got to Scotland in six hours, 46 minutes; Kerkorian, in seven hours, nine minutes. In two and a half years Kerkorian delivered 33 planes, logged thousands of hours, traveled to four continents and flew his first four-engine plane. On one memorable flight, the “Iceland Wave” died halfway across. The sun had set. The reserve tank ran empty and Kerkorian prepared to ditch. His navigator begged Kerkorian to drop low just once. As they broke through the cloud layer, the lights of Prestwick, Scotland twinkled ahead. Kerkorian made a perfect landing.
After the war, Kirk Kerkorian became a soldier of fortune, scouring the globe for surplus planes, some of them less airworthy than others, and personally transporting them to the highest bidder. Acquiring a tidy sum of money from his adventures and his wages, Kerkorian purchased a Cessna airplane for $5,000. “I used that same plane to fly charters,” Kirk Kerkorian once said. “That’s what got me into the transportation end of the business.”
A Los Angeles scrap iron dealer by the name of Jerry Williams hired Kerkorian’s plane two or three times a week to fly to Las Vegas. “I was just overwhelmed at the level of excitement in this little town,” said Kerkorian.
“ The best times of my life were in Las Vegas."
One morning, Kerkorian and Williams emerged into the Vegas sun after a fruitless night at the tables. They had $5 between them and Williams suggested they save it for breakfast. “What good’s five dollars going to do?” asked Kerkorian, and headed back to the craps table where he won seven hundred dollars. Kerkorian was well known as a high roller in Las Vegas during the 1940s and 1950s. Many called him “the Perry Como of the craps table,” for the unruffled way he could win or more often lose, $50,000 to $80,000 per night. He eventually quit gambling entirely.
His work as a general aviation pilot and his frequent visits to Las Vegas during the 1940s gave Kirk Kerkorian a grand idea. In 1947, at the age of 30, Kerkorian sank everything into the Los Angeles Air Service, a small charter business that cost him $60,000. Californians were just awakening to the allure of Las Vegas and Kirk hit it big by shuttling celebrities, high rollers, elopers, and the occasional mobster to the 24-hour wedding chapels and casinos. He renamed the company Trans International Airlines, turning it into the first U.S. charter service with its own jet. Increasing the size of his fleet, he purchased some war surplus bombers, using money on loan from the Seagram’s family. Gasoline and especially airplane fuel was in short supply at the time. He sold the fuel from the planes’ tanks, paid off his loan and still owned the airplanes.
Kerkorian took the company public in 1965. The results were astounding. Armenian-Americans knew of Kerkorian and bought his stock. It rose from a low of $9.75 to a high of $32. “It brought the stock up to begin with and then our earnings were great too and it kept going up until we sold to Trans-America,” said Kerkorian. It was in 1968 when he sold out to the Trans-America Corporation. In that deal, Kerkorian received approximately $85 million worth of stock in the Trans-America conglomerate, making him its largest shareholder.
In 1962, Kerkorian pulled off what Fortune magazine once called “one of the most successful land speculations in Las Vegas’ history.” He bought 80 acres across the Strip from the Flamingo for $960,000. Kirk collected $4 million in rent before selling the land to Caesars for another $5 million in 1968. The rent and eventual sale of the land made him nine million dollars.
Twice married, Kerkorian met his second wife in Las Vegas. She was Jean Maree Hardy, a former dancer at the Thunderbird. The marriage produced Kerkorian’s two daughters, Tracy and Linda. Kerkorian named his personal holding company Tracinda Corp. With the money in hand from the Caesars sale and his Trans-America stock, Kirk Kerkorian was ready to build his first Las Vegas mega-resort.
In early 1967, Kirk bought 82 acres on Paradise Road for $5 million, and along with architect Martin Stern, Jr. and Fred Benninger, they built the International Hotel. “I’m not a firm believer,” said Kerkorian at that time, “that you have to have 30 years of experience if you’ve got good common sense. I knew he (Benninger) could cut the mustard, and he did. He helped, no, he built, the International. He built the old MGM and he built this MGM. It was all Fred Benninger.”
“I can’t take much credit except for seeing the big picture; the amount of rooms, what kind of showrooms, I’m into that part of it. But when you get the nitty-gritty, I don’t have the education to really get in there and dissect it.” Benninger suggested that, given the size of the International, they should buy an existing hotel, and use it to train staff. The Flamingo hotel fit the bill. Benninger installed Sahara hotel Vice President Alex Shoofey as Flamingo president. Shoofey then stole the cream of the Sahara’s executives, a total of 33, including casino manager James Newman and veteran entertainment director Bill Miller.
In February 1969, Kerkorian’s International Leisure was given the go-ahead by the U.S. Securities and Exchange Commission to offer the public about 17 percent of the company’s stock at $5 per share. This was not an easy move. The Justice Department was investigating the Flamingo’s previous owners. They had identified Meyer Lansky, Bugsy Siegel’s old partner in Murder Inc., as a hidden partner in the Flamingo. Skimming was suspected, and Kerkorian more or less proved it. “The reason, I think, that they allowed us to go public,” said Kerkorian, “was that I don’t think the Flamingo ever showed anything more than $300,000 or $400,000 in profits. In our first year we showed about $3 million.”
The location they chose for the International was criticized. It was off the Strip and at 30 stories and 1,512 rooms, the biggest hotel in the world. “Too big and too far out,” they said. “We had the same doomsday people when we were building the MGM Grand, same people, same doomsday,” Kerkorian recalled. “You have to ask a lot of questions and listen to people, but eventually, you have to go by your own instincts.”
The International had a youth hotel, where kids could play and swim while their parents were off doing grown-up stuff. The hotel organized field trips for the kids to Lake Mead, Mount Charleston and other local nongaming attractions. The International was the first to offer this service.
They opened the hotel with Barbra Streisand in the main showroom. The rock musical Hair was in another showroom and the opening lounge act was Ike and Tina Turner. Elvis followed Barbra in the main showroom. Presley brought in some 4,200 customers (and potential gamblers) every day for 30 days straight, breaking in the process all attendance records in the county’s history. None of the hotels back then were that big on entertainment.
One month before the hotel opened, International Leisure common stock, which had opened at $5 per share, was selling over the counter for $50. While Kerkorian was making his splash in Las Vegas, he was studying the Hollywood film industry. By 1969 he began buying stock in the ailing MGM studios. By the end of the year, he would have working control of MGM, which he would operate, reorganize, merge, sell and resell over the years.
Kerkorian was at the helm in 1971, less than a year after the sale of the International, when MGM announced it would “embark on a significant and far-reaching diversification into the leisure field by building…the world’s largest resort hotel in Las Vegas.” Now known as Bally’s, it was originally known as the MGM Grand. Today’s MGM Grand is a different property.
At the 1972 MGM Grand groundbreaking ceremony, champagne flowed, celebrities mingled, and executives networked. In a corner, nursing a J&B Scotch and trying not to be noticed, was the man whose project was being celebrated…Kirk Kerkorian. The new $107 million mega-resort was named for a 1932 MGM film, Grand Hotel. 26 stories high, the MGM Grand had 2,084 rooms, a 1,200-seat showroom and amenities like a movie theater and a shopping arcade. When the MGM opened in July 5, 1973, it was the largest hotel in the world, just as the International had been. Some saw a pattern developing, but Kerkorian denied he had ever built a hotel just for the sake of size. His hotels, he once explained, were built on a grand scale to house a variety of diversions for guests.
The biggest hotel in Las Vegas was the site of the city’s biggest disaster in November 1980, when a fire ignited by an electrical problem raged through the casino and upper floors of the MGM. The Clark County Fire Department reported 85 deaths and hundreds of injuries. The great poker face softened when the catastrophe was mentioned. “It’s something I rarely ever talk about, because how do you talk about it?” he quietly reminisced. “I was in New York in a meeting with people from Columbia Studios, and I had an emergency call telling me that the hotel was on television, on fire, and in less than two hours I was at the airport and on my way to Las Vegas. The two people I really felt for at the time were Fred Benninger and Al Benedict, because they were on the frontlines through everything that happened.” Benedict was president of the MGM Grand.
Fred Benedict later told a reporter that when Kerkorian arrived a few hours after the blaze, his first question was, “‘Where do we start?’ “I figured there was no way we could come out of this,” said Benedict. “I think the idea of walking away and forgetting about rebuilding the property was in the back of everybody’s mind. That’s what most people would have done.” But that was not the Kerkorian way. Eight months later, the MGM Grand re-opened. “How could I walk away while that whole team was out there, taking the brunt from everybody?” In 1986, Kirk Kerkorian sold the Las Vegas and Reno MGMs to Bally Manufacturing Corp. for $594-million. The Las Vegas property was subsequently renamed Bally’s. The current MGM Grand that opened in 1993 has 5,000 rooms, eight restaurants, a health club, a monorail, the 15,000-seat MGM Grand Garden Arena and a theme park as big as Disneyland was, when Disneyland opened in 1955.
As for the health of the Las Vegas resort industry, Kerkorian remained as bullish as he was back in 1945. “Personally, I wouldn’t say it’s headed for a fall,” said Kerkorian upon retiring, “except that there will be a leveling out time, and the best hotels and the best operators are going to suffer less than the others.”
Kerkor “Kirk” Kerkorian sold newspapers and hustled odd jobs. Fondly referred to as Rifle Right Kerkorian, he built three hotels that were the largest in the world in their time and proved that, contrary to the wisdom of the day, courting the convention and family travel markets could be profitable. He was a perfect example of the American dream: a first-generation American and the son of Armenian immigrants, who became one of the great dealmaker capitalists of the past century. He did more than anyone else to create the neon-lit fantasyland that is Las Vegas today. He once tried to buy Chrysler, and at another point in his high roller/high finance life was a big shareholder in Ford and General Motors. Kirk Kerkorian led a truly mogul lifestyle: a lavish estate in Beverly Hills, friendships with Frank Sinatra and Cary Grant, three wives and a legendary divorce battle. Yet Mr. Kerkorian was a very private man who shunned the Hollywood social scene, and after he hit 50, he focused obsessively on playing tennis.
More typical of Kirk Kerkorian’s life was the quiet manner in which he engaged in philanthropy. His Lincy Foundation, also named for his daughters, was founded in 1989, initially to aid victims of a devastating earthquake in Armenia. Over the years it donated more than a billion dollars to various causes, including about $270 million to UCLA.
Decades before his death, money ceased to have much personal importance to Kirk Kerkorian. “I have made enough to retire, but that would be a pretty dull life for me, wouldn’t it?” he told The Times in 1969, when he was 52 and worth about $250 million. Instead, friends agreed, he did deals for them, to stay in the game…to beat the odds. “He was one of the most generous people I’ve ever met, and one of the quietest about it,” Lee Iacocca, former Chrysler chief executive, said in a statement.
“Sometimes you lose,” Mr. Kerkorian once said after one of his occasional setbacks, “but that’s the nature of the game. There’s always another game.” Let’s all roll the dice and bet that Saint Peter will find something to fulfill Kirk’s talent for gamesmanship.
(1917 – 2015)