The Hiltons: The True Story of an American Dynasty (64 page)

“Eric and I are still friendly,” she allows. “After all, we have children, and family is important to the Hiltons. So we have always made a genuine effort for the children.”

Today, Eric Michael Hilton, who is eighty-one, sits as a director of the Conrad N. Hilton Foundation. In March 1997, he retired as Hilton Hotels Corporation vice chairman. “Eric’s contribution to the success of Hilton Hotels Corporation is significant,” said Barron at the time. “His accomplishments in the areas of domestic and international strategic planning and property development have been important to the continued growth of the company our father, Conrad N. Hilton, founded more than seventy-five years ago. Eric was involved in many of the corporation’s major transactions throughout his career, including Hilton’s reentry into the international market when the luxury Conrad International brand was introduced in 1985.”

Eric also serves on the advisory board of the Conrad N. Hilton College of Hotel and Restaurant Management at the University of Houston. Presently, he is married to Bitten “Bibi” Hilton. Eric also remains close to his four children by his marriage to Pat: Eric Jr., Beverly, Linda, and Brad, all of whom lead lives outside of the public arena.

Barron Is Denied

B
y the mid-1980s, Barron Hilton—who remained happily married to Marilyn—had begun to make quite an impact on the gambling business with the Hilton hotels. Whereas in 1970 gambling had accounted for none of the company’s operating income, by 1985 it was almost 50 percent, thanks largely to its Las Vegas holdings, the Las Vegas Hilton and the Flamingo Hilton. Recently, though, to add to his ongoing troubles with his father’s estate, Barron faced a major public embarrassment.

By this time, legalized gambling had taken off in Atlantic City, with most of Nevada’s major hotels—Caesars, Bally, Sands, Harrah’s, and the Golden Nugget—doing profitable business at the shore. To get in on the action, Barron spent $320 million building a majestic 614-room hotel and 60,000-square-foot casino on an eight-acre site in Atlantic City. It was the biggest undertaking in the Hilton Corporation’s history. But on February 28, 1985, the New Jersey Casino Control Commission surprised most industry observers when it denied Barron his application for a license to operate a casino in Atlantic City. It practically never happened that someone of Barron’s stature was turned down by the NJCCC. He was already licensed in Las Vegas, and he promised to bring big business to the city, as well as all of the goodwill of the Hilton name. Therefore it seemed inconceivable that he would be denied. He had to have the approval of four commissioners, and though he won a majority of three to two in his favor, it was still a loss, and an embarrassing one, too. Barron issued a statement saying he was “shocked and stunned.”

“This was a bitter pill for him to swallow,” said Tim Applegate, senior vice president and general counsel for the Hilton Corporation. “It was a surprise, hard to accept. Not a good moment for Barron… for any of us.”

“You have to remember that, for Barron, everything he ever did was measured by whether or not Conrad would approve of it,” said another of Hilton’s associates. “It was always about honoring his father. No matter how successful he became with it, it was still Conrad’s company, at least as far as he was concerned. Therefore, he felt a responsibility to keep it operating smoothly and to keep clean its image. When he and I met the day after his license was denied, Conrad’s name kept coming up.”

Barron and his associate were at Barron’s home on Brooklawn Drive in Bel-Air having breakfast with Marilyn and some other family members and a few others. Barron seemed disheartened, which was unusual for him. No matter how difficult things became in his life, he always managed to at least appear unruffled. But lately it had just been one challenge after another. Between his battles with the foundation over his father’s will and now with the NJCCC over his license in New Jersey, he had a lot on his plate. “We’ve been putting off building in Atlantic City since, what, 1981?” he asked his associate. “High interest rates, an uncertain market… I was just never sure about Atlantic City, was I?”

“Look, this is still a good idea,” the associate argued. He urged Barron not to doubt himself.

Barron sat back in his chair, tilted his head back, and stared at the ceiling. “Maybe we were a little too eager,” he said. He said he didn’t think his father would ever have put the cart before the horse. Probably Conrad would have gotten the license first, he mused,
then
built.

“Well, your father was a lot more conservative that you are,” the associate argued. He also noted that the competition in Atlantic City was so cutthroat, “you have to get in there quickly and do whatever you’re going to do.” He added that things were now very different in the hotel business. Back in Conrad’s day, the competition was somewhat in alignment with him, he observed. “You didn’t see guys like Henry Crown trying to undercut him,” he added. “Today, these guys are out there nipping at your heels. You got your Donald Trumps, you got your Steve Wynns… Why, it’s a different world.”

Barron agreed. Still, he said, he couldn’t shake the feeling that Conrad was looking down at them and asking, “What the hell were you guys thinking?”

Marilyn laughed. “Oh, Conrad would have
plenty
to say,” she concluded, smiling. Not about her husband either, she said, looking at him warmly, “but about those fools in the Casino Control Commission!”

The major reason the NJCCC rejected the Hilton Corporation’s application for a gaming license was the company’s relationship with a particular business associate. Conrad and Barron had made it a rule to stay clear of mobsters. It couldn’t always have been easy. After all, gangsters controlled many of the unions, such as those connected to the liquor industry and to other supplies or services the Hiltons needed to entertain guests in their hotels. Once the Hilton Hotels Corporation got into the gambling business, however, avoiding such shady characters would have become even more difficult. In fact, the company had a relationship with a Chicago attorney named Sidney Korshak who apparently had ties to organized crime figures. According to press reports at the time, the Hilton company had been paying Korshak $50,000 a year as a “special labor consultant,” and that’s the reason the NJCCC turned down the request for a gaming license in the Garden State.

New Jersey gaming official Joel R. Jacobson stated, “In my judgment, the relationship of the Hilton Hotels Corporation with Sidney Korshak is the fatal link upon which I primarily based the conclusion that this applicant has not established its suitability for licensure in New Jersey.” After that rebuke, Barron did what he probably should have done much earlier: He cut off his relationship with Korshak.

As Donald Trump sees it today, Sidney Korshak was only part of the problem the Hilton Corporation faced in New Jersey. “At the risk of sounding pejorative, I think another rather big issue was overconfidence,” he recalled. “There was a definite feeling that Barron deserved the license and that he was doing the commissioners a favor by applying for it. Of course, that kind of daring goes along with the Hilton brand, with being so successful. But the commission didn’t see it that way, and never does. It always thinks it’s doing you a favor by granting, not the other way around.”

Barron Hilton planned to open his grand hotel in May 1984, but now, just three months before that target date, he had no gaming license in New Jersey. It was a bad situation. This was when Donald Trump came into the picture.

Donald Trump Makes an Overture

D
onald Trump was thirty-eight years of age in 1984 and already well regarded as a real estate mogul in New York City before his entree into the Atlantic City gaming world with Harrah’s at Trump Plaza. He had a great deal of admiration for Conrad Hilton and for what he had done for the hotel industry. Zsa Zsa Gabor recalled that she was in New York in 1984, staying at the Plaza, when Trump—whom she had never met—telephoned her. “We ended up chatting for nearly an hour,” she recalled. “He was nice and I had the feeling he was quite wonderful. Above all, though, he wanted to know all about Conrad. He said that he admired him very much and had always wanted to be another Conrad Hilton.”

Trump recalled, “I admit that I wasn’t thrilled with the idea that Barron Hilton was building a hotel in town, especially since the Boardwalk hotel I owned [with Harrah’s] wasn’t performing as well as I would have liked. I knew that Barron was soaking a fortune into his new enterprise, and I also knew he was, like his dad, a tough competitor. But then one day [on February 14, 1984], I got a telephone call from a colleague who said, ‘You will never guess what just happened to Barron Hilton. He got turned down for his license in Atlantic City.’ My source said that Barron might now just try to sell the whole facility rather than go in for another hearing. That got my attention.”

Because Barron was scheduled to open his hotel imminently, he had already hired well over a thousand employees and intended to have more than four thousand by the time he opened. “It was a disaster in the making,” Trump recalled. “All those people working there with no money coming in? I felt bad for Hilton. I decided to give him a call. We had never met, so it was more like a friendly call from one colleague to another to commiserate over a dilemma.”

During the phone call, Donald told Barron he was both surprised and sorry that he had been denied a license in New Jersey. Barron said he appreciated Donald’s empathy. “I don’t know what you have in mind for that hotel in Atlantic City,” Trump told Hilton, “but if you ever decide you want to just sell it, I might be interested if the price is right.” Hilton thought Trump’s proposition sounded interesting. He didn’t yet know what he was going to do, he admitted. “Let me discuss it with the board and the family and get back to you.”

According to Myron Harpole, Barron was actually contemplating the notion of filing for a new hearing—he wasn’t just going to go away with his tail between his legs, and as he told Harpole at the time, “I believe my dad would fight this with everything in him.” However, Harpole recalls that most members of his board of directors felt this wasn’t the best strategy. After all, they argued, if Barron were to be turned down a second time, it could prove to be devastating not only in the company’s stock market showing but also in the court of public opinion. Moreover, a second rejection might make the property seem even less valuable to any prospective buyer—should that buyer even exist. No, Harpole says the board told Barron that the property should just be sold and they should cut their losses while they still had the opportunity to do so.

Sure enough, a potential buyer really was out there sniffing around—and not just at the new Atlantic City Hilton, but the entire Hilton hotel chain.

Hostile Takeover?

B
arron Hilton had previously argued that one of the main reasons his father had wanted him to have the option of purchasing any excess stock held by the foundation was in order to prevent anyone else from doing so and thereby taking over the Hilton chain. That’s exactly what seemed to be happening by the spring of 1985.

A few days after Barron was denied his license in New Jersey, hotel mogul Stephen Wynn—the then forty-three-year-old chairman of Golden Nugget, Inc., which owned two of the most profitable casino hotels in business in Atlantic City and in Las Vegas—launched a takeover bid for the Hilton Hotels Corporation by making a surprising bid to buy Conrad’s 27.4 percent block of shares, the same shares that Barron and the foundation had been fighting over for many years. Wynn offered to pay $488 million, or $72 a share. Barron’s top offer up until this point had been just $24 a share. Wynn’s probable intention was that if he should succeed in this bid, he would then attempt to buy out the other shareholders at the same price, at a cost of about $1.8 billion. Then the company would be all his.

Barron Hilton likely thought that Wynn was a young upstart who didn’t have nearly enough capital to pull off such a major and hostile takeover. At this point, Hilton Hotels had earned more than $100 million over its last four quarters and owned $1.2 billion in assets, whereas Wynn’s company had earned just $20.6 million in the same period with assets only two-thirds as big. Whether or not Barron had the full support of some of the other shareholders at this time was questionable because of the dispute over Barron’s Option. If those particular shareholders were annoyed enough with Barron, they could actually side with Wynn, and Hilton could end up losing his whole company. Given these possible scenarios, it was as if Steve Wynn had become a major threat overnight.

Another big problem for Barron Hilton at this time was that his image was taking a bit of a thrashing in the media. For instance,
Forbes
pointed out Barron’s role in the company’s divesting of its international chain—Nicky’s division—back in 1969. The magazine also reported critically about Barron’s handling of the Carte Blanche credit card business and the millions he had lost in that particular endeavor. (The publication neglected to mention that Barron sold the company to Citibank for a tidy profit of $16.5 million in 1965.) The press didn’t really have a lot to pick through in terms of Barron’s mistakes, though. If that was the best
Forbes
could come up with—two incidents in a career spanning almost forty years—then it could be argued that Barron was in pretty good shape. Still, because of his idea of building a hotel in Atlantic City before he had a license to open one there, Barron’s critics were eager to note that he could lose as much as $50 million in the summer of 1985 from revenues that might have been generated by the Atlantic City Hilton.