Winner Takes All

by Christina Binkley

  “I was really surprised at the extremely low level of intelligence,” he said on July 12. “They were dumber than I thought.… It was very transparent. Everybody just had angst that the short term wasn’t going to be what they thought it would be.… Ninety days? What does that tell you about these guys? Excuse the expression, but fuck the market. They’re hysterical. I got better things to do with my time. I mean it.”

  So Wynn went hiking in Sun Valley.

  Wynn’s hubris was met with sadness by people who knew him well. “I sensed a transformation in Steve. Prior to Bellagio opening, he had his feet on the ground,” says Alan Feldman, his spokesman. “He was so stable. He knew that this was the show; we were the guys behind the stage pulling the ropes. When Bellagio opened, he was catapulted into stardom.”

  Suddenly, Bellagio was the “it girl” in style-conscious magazines like Vanity Fair and Town & Country. The strategy was working. Check-in lines at Bellagio were full of well-heeled guests in business suits and demure dresses. They had come to see Las Vegas’s first real luxury hotel. Wynn began asking Feldman to negotiate for magazine covers or big stories, rather than simply agreeing to be interviewed. “It went way beyond ‘Steve Wynn, developer of this hotel.’ It was ‘Steve Wynn, fine art collector.… Steve Wynn, purveyor of fine foods.’ It was heady stuff,” Feldman says. “He became the public persona.… After Bellagio, he became bored with all the mundane stuff.”

  Wynn wasn’t interested in operations problems. He wanted to design his next resort in Atlantic City. In July, as Mirage Resorts stock plummeted, Wynn huddled in his design office at Atlandia.

  One afternoon, he was followed through the offices by Bora, one of his German shepherds, into a vividly lit room fitted with a double-long drafting table and two tall stools. The table was covered with those plans that are called blueprints, despite being printed on large sheets of white paper. Wynn reached for a rack with a couple dozen colored markers. He grabbed a marker, spilling the rest, and impatiently swiped them aside with his forearm. He aimed his struggling eyes at the designs for a new casino resort.

  The Atlantic City casino was to be called Le Jardin. Wynn had completed the design five months earlier for a “souped-up Mirage—a tropical hotel with lots of gardens,” Wynn said. It would have 1,500 rooms and an estimated cost of $1.35 billion.

  “We had renderings. We had models. We were finished,” Wynn said.

  But Wynn had been unhappy. “I had this thing—I was around the house. I was, uh, uh, uh… I didn’t know what to do. So Elaine says, why don’t you call John Jerde?”

  Jerde, an architect who worked in Southern California, had designed the Wynns’ home at Shadow Creek as well as Bellagio’s low-rise lakefront and other projects. Wynn trusted him. “I think I sent out one of the jets for him,” Wynn said.

  “What’s bothering you is you’ve got a really nice hotel in a field,” Jerde told Wynn. “You’ve got no sense of place.”

  So Wynn tore up the “finished” plans and started anew, just as he had after deciding to turn the French Beau Rivage project in Las Vegas into the Italian Bellagio. Le Jardin would become the Trilogy. Aiming for intimacy, Wynn wanted fabulous gardens and three smallish high-rise hotels—one with 230 suites, and two 7-story hotels with 461 rooms each, leaving room on the land for two more hotels later. It would be “very petite, very lovely. It’s one hotel masquerading as three hotels,” Wynn said happily, seated at his drawing board with the colored pens strewn about.

  The age of huge casino resorts was over, Wynn said. He wanted to be in the forefront of a revolution—a return to small and intimate establishments. “If we’re right about this, there’ll never be another megaresort,” he said, looking pleased and excited. “They’re too awful. Too big.”

  So naïve.

  A midlevel financial manager at Mirage Resorts—a Mormon fellow, Wynn made a point of saying—notified Wynn one afternoon that Mirage Resorts had been providing financial estimates to Wall Street analysts before the company’s earnings were made public.

  This practice was common on Wall Street at the time. It enabled the analysts to publish extraordinarily accurate “forecasts” of earnings and to tip off their clients. This helped explain why stocks often traded up with uncanny accuracy shortly before a company released strong earnings—or down shortly before disappointing earnings.

  Wynn must have been the last chief executive in America not to know of this wink-wink game, known euphemistically as “giving guidance.” It had a great deal to do with how well analysts were paid. Their accurate intelligence, provided ahead of the markets, was worth millions of dollars in salaries and bonuses. Analysts lived in fear of being cut off from the information flow that so richly fed them.

  The Mormon fellow correctly pointed out to Steve Wynn that leaking estimates of earnings per share to analysts technically amounted to illegally trading on insider information. Then, Wynn said, the fellow announced he could no longer work under those circumstances. “I left my office and went down two doors and took a left,” Wynn recalled later. That led Wynn directly into Dan Lee’s office. Wynn ordered Lee to stop giving “guidance.”

  Here is the way Wynn describes the scene:

  “So I say to Danny Lee, ‘You can’t do that, man. He’s right.’ And Dan Lee says to me, ‘Hey, uh, you’re tipping over the apple cart. You don’t want to be doing that. I’m going to object to this.’”

  “I’m telling ya, in a public company, an employee brought it to my attention, and he’s right. Stop doin’ it. And if any of those so-and-so and so-and-so and so-and-sos bitch at ya, send them to me,” Wynn countered. “How can they get angry at you if you’re obeying the law?”

  While he was at it, now that he’d gotten interested in financial reporting, Wynn decided to further cloud the analysts’ crystal balls by no longer providing financial results for individual casinos. This made it easier for him to hide the suffering of the Mirage and Beau Rivage.

  Wynn was right—ethically and legally. But analysts on Wall Street received this as a giant F-you. Cut off from the golden flow of information, they did what came naturally: They downgraded Mirage Resorts stock. Wynn realized later what he’d brought on himself. “Well, did I get it!” he said. “It was punishment time: ‘We’ll teach that son of a bitch.’”

  Wynn might have predicted the fallout if Dan Lee’s access to him hadn’t been curtailed since the move into the new offices at Bellagio. “He can be intimidating,” Lee said in 2005. “And at the Mirage, the offices were simpler. You’d run into Steve at the copy machine. At Bellagio, getting to Steve was like the opening sequence of Get Smart. You had to go through two sets of double doors, even after you were in the luxurious executive area. It was like going to see the Great Oz.”

  Lee was becoming increasingly distraught over Wynn’s spending, and not just on art. He told Wynn that the Walt Disney Company had two planes, compared to Mirage Resorts’ four. The company turned down an offer of $28 million for the MD-87, the plane that Elaine Wynn preferred to use when flying the family to Sun Valley, according to people familiar with the planes and their operations.

  “For months, I’d been telling him we needed to do something,” Lee said in a 2005 interview. “He had to cut costs. The art was out of hand.”

  Mirage’s board was made up of the Wynns—Steve, Elaine, and Kenny—Mirage insiders, and several of the Wynns’ friends, including Ron Popeil, the Veg-O-Matic mogul, and Melvin Wolzinger, a Las Vegas casino operator who had joined the board in 1973 along with Wynn. There was also George Mason—Kirk Kerkorian’s good friend and stockbroker.

  According to the company’s own proxy statement filed annually with the SEC, this friendly board allowed Wynn to decide his own salary, bonus, and stock options as well as those of his top executives. “[Wynn’s] recommendations in each case were based on his subjective evaluation of each officer’s [including his own] contribution to the Company and the level of compensation necessary to adequately motivate and rewar
d the officer,” the proxy said.

  Little wonder that Wynn was one of the highest-paid chief executives in America, even as his company suffered from overspending and Wall Street bumbling. Yet so much heat was being generated by Wynn’s art-buying that even this board of directors began to worry.

  “The board members didn’t want to say anything to Steve and get in trouble,” says one senior Mirage executive at the time. “Some of the board members went to Dan, and he kind of got caught as the fall guy.… Dan was under a lot of pressure. Beau Rivage was flailing in the wind, the stock price was down.”

  Wynn’s sales of his art to Bellagio raised questions about whether he was profiting at the company’s expense. Before a September board meeting, a member of the board’s audit committee asked Dan Lee about the people who were appraising Bellagio’s art. Lee’s response, distributed to the entire board, came in the form of a photocopy of a two-year-old article in The New York Times. It raised questions about the values being paid for paintings by art dealers in general.

  Later that Thursday, September 2, Lee was in his office, meeting with Robin Farley, an analyst from Deutsche Bank, when his phone rang. It was Wynn, screaming so loudly that Farley could hear. Wynn was furious that he hadn’t been warned. Wynn later stomped into Lee’s office. “You don’t have to work here anymore if you don’t want to,” he announced, according to Lee. Then he stomped back out.

  Bobby Baldwin heard this stomping back and forth from his office—a plush sanctum much like Wynn’s, only smaller. “Dan Lee is a wonderful character. He’s kind of an exotic bird,” Baldwin says. “You didn’t always like what he said, and you didn’t always know what he was talking about.”

  Wynn called Baldwin that day for “a last-minute gut check,” Baldwin says. “Have you seen this?” Wynn asked, brandishing Lee’s statement.

  “No,” Baldwin responded.

  Wynn shot the article across his desk. “Take a look at this,” he said.

  Baldwin probably could have saved Lee’s job at that point, but he chose not to.

  “Do what you need to do,” Baldwin says he advised Wynn. In two hours, Lee was gone. “Steve does not equivocate,” Baldwin says. “When he’s done with you, he’s done.”

  It took a few days to negotiate Lee’s stock options. He wisely wanted to keep them.

  Time would tell, ultimately, that Wynn was his own victim that day, not Baldwin or Lee, whose careers would benefit from Lee’s firing.

  Wynn immediately entrusted Bobby Baldwin with the CFO job in the interim until he could hire someone better qualified. Baldwin was virtually unknown on Wall Street and lacked credentials and contacts to raise money there. “If they don’t know Bobby, they’re not worth knowing,” Wynn blustered.

  Investors responded to Lee’s departure from Mirage Resorts with abject shock and grief. Lee had been responsible for Mirage’s major land transactions, and he had restructured the company financially. “This is sad to see,” said Ken Londoner, chief executive of the hedge fund Red Coat Capital, the day the news got out. “This is an industry leader going through some tough times. Dan Lee will be missed.”

  “He was as big an asset to Mirage from the financial end as Steve Wynn was to the creative side,” said Jason Ader, still with Bear Stearns at the time. “It’s a huge loss overall.”

  Curiously, despite the strong sentiment among investors that Lee’s departure was bad news, the company’s stock didn’t spin into a free fall that day. On September 8, the first chance investors had to trade on the news, 11.4 million Mirage shares were traded—at least six times the normal volume, at around $12 a share. Someone was out there buying Mirage shares as fast as frightened investors could sell them. There can be little doubt that this person was Kirk Kerkorian, the hungry alligator.

  Kerkorian later divulged that he had bought about ten million shares of Mirage at an average of $12 per share. Kerkorian has never revealed exactly when he bought the shares. But given the narrow window of time that Mirage shares traded at that price, it’s clear that Kerkorian was buying like mad on the news of Lee’s departure.

  At about that same time, Kerkorian asked Terry Lanni, MGM Grand’s chairman and chief executive, a seemingly casual question: “What do you think of Mirage?”

  “Well, I don’t think Wynn would ever let it go,” Lanni replied.

  Wynn soon heard that Kerkorian had taken a stake in Mirage. His conclusion was that Kerkorian was preparing for a takeover—much the same way he had done a few years earlier at Chrysler. Wynn attended a political fund-raiser at the MGM Grand’s Mansion the following Wednesday. Kerkorian was there too, and Wynn marched over for a chat. According to Wynn and two witnesses, their exchange went like this:

  “I have no interest in having you take over my company,” Wynn told Kerkorian.

  “How can you not buy the stock at that price?” Kerkorian asked Wynn.

  “Are we going to do something unfriendly here?” Wynn asked.

  “Absolutely not,” Kerkorian responded.

  Kerkorian stepped away, walking over to Terry Lanni, who had overheard the conversation from about three feet away.

  “Steve isn’t interested,” Kerkorian said. “I’m just going to sell my stock.”

  “It was very clear to him that he was not a welcome investor,” says a person close to Kerkorian. “He was surprised at how strong the reaction was.”

  Hours after his conversation with Kerkorian, Wynn wanted this information broadcast to the world. “I asked him about it today,” Wynn said, recalling their long-ago games of tennis when Wynn had first come to Las Vegas. “He’s not putting the stock in play. We used to be tennis partners.”

  Still, this is the moment when Wynn’s and Kerkorian’s relationship turns from rivalry into a deadly race to the finish. Wynn was ever more on the defensive, with Kerkorian more in control of his stock price—and Wynn’s personal wealth—than Wynn himself.

  When Kerkorian’s stock purchases were revealed in a tiny news brief in The Wall Street Journal the following day, September 16, Mirage Resorts’ stock price spun upward to $15 a share. Bear Stearns’s Jason Ader upgraded the company’s stock. He said something was bound to happen now, if an investor of Kerkorian’s caliber was involved. He didn’t know that Kerkorian had decided to sell his Mirage shares.

  Among Kerkorian’s devotees, there is no one who has been more faithful than Alex Yemenidjian. His loyalty to Kerkorian was akin to a Doberman pinscher.

  If Yemenidjian were a movie star—and he has the jaw and cheekbones for it—he could play the fastidious dictator with the flinty eyes. When Kerkorian found him, Yemenidjian was a Los Angeles tax accountant, married to his eighth-grade sweetheart. Yemenidjian and Kerkorian bonded through their Armenian heritage. Yemenidjian’s Armenian parents had come to California by way of Argentina.

  Yemenidjian’s bachelor’s degree in business administration and accounting was awarded by California State University, Northridge. He then earned a master’s degree in business taxation from the University of Southern California. He was a partner in an accounting firm when Kerkorian invited Yemenidjian to be his accountant in 1989.

  Thereafter, his capable but unspectacular career took on aspects of a fairy tale. Despite not making a success of Kerkorian’s bid for control of Chrysler Corp., Yemenidjian landed at the MGM Grand. There, he obsessed on renovating the place. He worked all hours and rode an exercise bike for several more hours every day, dieting on cooked egg whites until his body appeared skeletal under the drapery of his custom haberdashery. He designed his own starched white shirt collars—a peculiar pairing of overlapping arcs that hide the knot of his ties.

  Yemenidjian, part of Kerkorian’s coveted Saturday tennis circle, considered himself the son the billionaire never had.

  In April 1999, Kerkorian moved Yemenidjian to Los Angeles, making him chairman of the Metro-Goldwyn-Mayer film studios. Yemenidjian remained employed as MGM Grand’s president. This put Kerkorian’s former accountant knee to knee
with Sharon Stone to arrange the details of her appearance in Basic Instinct 2. (Yemenidjian was captivated by her legs during one meeting in his office—could not stop thinking about that scene in the original movie.)

  Kerkorian might prefer a sandwich at his desk, but Yemenidjian was soon being seated at his very own table in the well-known courtyard at Spago’s. Wolfgang Puck, the celebrity chef, would stop by Yemenidjian’s table to say hello. One of Yemenidjian’s peculiar habits, for a time, was to carry in his jacket pocket a jar of Lawry’s seasoned salt, which he sprinkled on almost everything. Puck, on one occasion, picked up the small jar and turned it over, reading the label with an expression of puzzled amusement. The chef handed the jar back to Yemenidjian and offered to procure some Lawry’s seasoned salt and to provide it in the future “in a nice shaker” for Yemenidjian.

  Kerkorian and Yemenidjian appreciated the same things about the film and casino industries, the protégé said. As investments, they were more fun than raising corn. Las Vegas and Hollywood for Kerkorian were “the sizzle on the steak,” Yemenidjian said. “And the women. Oh, the women,” he added.

  Yemenidjian’s polar opposite was Terry Lanni, who had interviewed for a job with Kerkorian by telling him that the MGM Grand was poorly designed. Lanni is a conservative sort of fellow, both politically and socially. He says, quite seriously, that he considers Southern California to be practically a socialist state. He once told a Volvo-driving friend that he considers Volvo automobiles to be Communist vehicles.

  Lanni’s sense of humor is self-consciously self-deprecating. He raises thoroughbred horses as a pastime, for instance, and says, “Unfortunately, I run faster than my horses.” (That is actually not true. At the moment he made this joke, Lanni was part owner of Sinister Minister, a bay colt who broke from the starting gate and easily won the Blue Grass Stakes at the blueblood Keeneland Race Course in Kentucky, collected $450,000, and went on to run in the Kentucky Derby in 2006.)