The Hiltons: The True Story of an American Dynasty

by Taraborrelli, J. Randy

  Frances closed the door behind her.

  * * *

  Mary Frances Kelly Hilton, Conrad’s third wife, would survive her only husband, Conrad, by twenty-eight years. She would die of lymphoma on May 30, 2006, in Santa Monica, California, at the age of ninety-one.

  “Frannie” would be survived by her brother, William P. Kelly—Bill—as well as his wife, Stella, and many nieces, nephews, and close friends, including her best friend, Helen Lamm, and her former personal secretary, Phyllis Davis Bradley.

  “Frances became quite ill in the last years of her life,” recalled her sister-in-law, Stella. “When she was ill, we wanted her to move to Illinois to live with us, but she was independent. She loved her little apartment and wanted to stay in California. However, the money Conrad had willed to her was running out fast. My husband, Bill, wrote to Barron to say we were having problems supporting Frannie. Barron didn’t hesitate for a second making sure Frannie was taken care of for life.”

  “The Hiltons all loved Frannie very much and treated her like a member of the family until the day she died. She was one of the loveliest human beings I had ever known,” concluded Stella Kelly. “Not a day goes by that we don’t miss her.”

  A memorial mass for Mary Frances Hilton was set at St. Paul’s the Apostle Church in Westwood, the same church at which she and Connie attended mass every morning. Frances had originally intended to be buried next to Conrad in Dallas. However, her family convinced her to be buried in the family plot in Lake Forest, Illinois, so that they could visit the grave.

  Judge’s Decision

  The case of Francesca Hilton v. The Estate of Conrad N. Hilton would not end up before a jury. Instead, Los Angeles Superior Court judge Jack W. Swink granted the defendants what is called a “summary judgment,” a decision based on legal issues without a trial. “In other words,” explained Myron Harpole, “we, as Hilton’s lawyers, presented our evidence to the judge to prove that there was no need for the matter to go to trial, that the end result was obviously going to be a determination in our favor. Meanwhile, Francesca’s side appealed to him that the case had not been proven by us at all, and that it should go before a jury [for a trial that was slated to take place on May 16, 1980]. After both arguments were presented, we moved for summary judgment. The judge ruled in our favor.”

  Neither Francesca Hilton nor Zsa Zsa Gabor was in court for the two-hour argument by both sides, on March 28, 1980.

  In his decision, Judge Swink ruled that Conrad Hilton knew exactly what he was doing when he wrote his will of 1973, given that it so closely mirrored the many wills he had written prior to that time; he had never given a great deal of money to any family member. In Francesca’s case, Hilton had actually increased the amount of her inheritance from virtually nothing (in wills from 1947 to 1955) to $50,000 (in wills from 1955 through 1960) to, eventually, $100,000 (in wills from 1960 through 1973). In all of those wills, he also gave the great bulk of his estate to charity.

  It had been Francesca’s attorneys who had turned the case into one about her paternity. As far as the Hilton estate was concerned, Conrad had publicly acknowledged her as his daughter to the world, and privately acknowledged her as his daughter in his will, and that should have been the end of it. However, Francesca’s attorneys sought to prove that even though Conrad had done so, he harbored a secret, unreasonable doubt as to whether or not he was her father. As to this nagging question, the judge ruled that Conrad had not suffered from any “insane delusion.” Rather, his doubts about her paternity were based “on logical suspicions,” which he had entertained for many years as a result of the shadowy circumstances of Francesca’s birth. In the end, the conflicting testimonies of Zsa Zsa Gabor and Willard Kramer only went toward convincing the judge that Conrad had good reason to wonder. “It would still come down to not whether he was the father or wasn’t the father,” the judge wrote in his ruling, “but what his belief was. Was his doubt a figment of his imagination? And the Court would answer no to that. Was it a belief that came out of thin air? And the Court would answer no to that, as well.”

  Most persuasive to the judge was the letter Conrad Hilton had dictated to his assistant Olive Wakeman and lawyer G. Bentley Ryan in August 1971 in which he specifically stated that he had not believed from the beginning that Francesca was his daughter. This was the letter he had his attorney put away for safekeeping, “just in case.”

  “His foresight in dictating this letter was quite prescient,” wrote the judge. “ ‘If this matter ever comes to court,’ he had written, ‘I am asking you two dear friends, who witnessed this dictation, to testify to the reasons why I have permitted the relationship to exist between Francesca and myself.’ ”

  Moreover, many people testified that Conrad was of sound mind when he signed the will. Therefore, there was no question about it, the judge decided: Conrad Hilton knew exactly what he was doing when he wrote his will and he bequeathed Francesca an amount of money he decided was appropriate. The judge then ruled in favor of the Conrad N. Hilton estate.

  “This case was an attack on the moral values and work ethic of Conrad Hilton,” Hilton attorney Ralph Nutter then declared. “He believed his children and grandchildren should work for a living and that was a virtue, hardly an insane delusion.”

  Obviously, Francesca Hilton was disappointed by the judge’s decision. She took it hard. “For years, she had fought for recognition, and that’s what this case was really about—recognition and acknowledgment,” said one close friend of hers. “But, in a sense, the judge ruled that she had been recognized in the will. She had been acknowledged in the will. She just hadn’t been given a lot of money, and that was Conrad’s right. You can imagine how she felt about that. You can also imagine how Zsa Zsa felt about it.”

  Unsurprisingly, Zsa Zsa was quite upset. Taking a very theatrical turn, she told the attorney Myron Harpole, “We haven’t even begun to fight yet. You just wait and see.” It was a sunny California day and the two were sitting poolside on the patio of Zsa Zsa’s sumptuous estate, under an oversized umbrella As the attorney presented her with a stack of documents requiring her signature, Zsa Zsa spoke about her daughter’s difficult legal battle. “Francesca says she wants to appeal,” she observed. “And I think she should,” she concluded. She said that even though she was angry that Francesca had lost her case, she was gratified to know that the estate had not been able to prove that she wasn’t Conrad’s daughter. “And they tried, too, didn’t they?” Zsa Zsa asked bitterly. “Embarrassing me with their questions about my sex with Connie. But the truth is the truth.” When the lawyer reminded Zsa Zsa that the fight really hadn’t been about paternity, but rather about Hilton’s will, Zsa Zsa scoffed. “Yes, it was about Francie’s inheritance,” she agreed, “but please don’t be naïve,” she added. “For years, the Hiltons have been whispering amongst themselves that Francesca is not Conrad’s daughter, robbing her of her true heritage.” She added that when Francesca had children, it was inevitable that the battle for recognition would be passed on to an entirely new generation, “and I simply won’t have it,” Zsa Zsa concluded. “I am not going to have my grandchildren go through the same thing my poor daughter has gone through all of these years. So, yes! Francie should definitely appeal.”

  In fact, Francesca agreed with her mother; she had come so far, she felt she had no choice but to take it all the way. Therefore, in the spring of 1982, she mounted an appeal.

  Unfortunately, she would lose on appeal as well.

  Then, as if to add insult to injury, Francesca would also be forced to forfeit the $100,000 Conrad Hilton had bequeathed her. As per the terms of his last will and testament, any unsuccessful contester had to sacrifice any inheritance. “Jim Bates insisted that we put that provision of the will into effect,” Myron Harpole recalled. “Therefore, Francesca Hilton was deprived of any inheritance. She didn’t get any money at all.”

  PART FOURTEEN

  Heir Apparent

  Barron’s Option />
  Doubtless, one of the primary reasons James E. Bates, coexecutor of Conrad Hilton’s estate along with Barron Hilton, was adamant about enforcing the clause in Conrad’s will that would disinherit Francesca for contesting it was because of the complications her legal action had created for Barron and the Conrad N. Hilton Foundation. Francesca wasn’t entirely responsible for the ensuing chaos—but she certainly hadn’t helped matters. As a result of her contesting of the will, it could not immediately be admitted to probate. It wouldn’t be until March 1983, when Francesca lost her appeal, that Barron’s concerns were finally able to be fully considered.

  It’s commonly believed in the business world that Conrad Hilton’s will did Barron a great disservice. Even Donald Trump—a good friend of Barron’s—noted in his book The Art of the Deal, “The assumption had been that Conrad Hilton would pass on his near-controlling interest in the company to Barron—or at the very least that he’d spread it among family members. Instead, Conrad Hilton used his will to disenfranchise his children. He just left Barron a token number of shares of stock. The result was to make Barron just another high-level corporate manager who lacked the power of a major stockholder.”

  Trump’s assessment was at least partly accurate. However, the situation wasn’t quite so cut-and-dried, luckily for Barron Hilton.

  Conrad Hilton owned the largest block of stock held by the Conrad N. Hilton Foundation, a controlling amount of 27.4 percent, or 6.78 million shares—which was worth about $500 million at the time of Conrad’s death. The rest was divided among board members, with Barron holding just 3.6 percent. Hilton’s will granted Barron an option to purchase a described portion of stock in the estate “at the values as appraised in [Conrad’s] estate.” These assets were, basically, anything above that which a charitable corporation (in this case the Conrad N. Hilton Foundation, the beneficiary of most of Conrad’s assets) was permitted to hold, as defined by the Tax Reform Act of 1969. According to that act, the estate was only allowed to hold 20 percent of Conrad’s Hilton Hotels Corporation stock. If Barron could pull together the money, he would be allowed to purchase any excess stock, which was the remaining 7 percent and was worth millions of dollars. He had, according to the will, ten days to exercise this option. However, there were some immediate questions about this particular option (which, incidentally, became known amongst the players in this case as “Barron’s Option”).

  The board of directors of the Conrad N. Hilton Foundation and its lawyers—such as Myron Harpole, who was hired by James E. Bates to defend the foundation—maintained that Conrad Hilton’s intentions were clear not only by virtue of what he stipulated in the will, but in large part because of what was widely known about him. He was someone who never intended for his family members to attain great wealth by virtue of their lineage to him, and that much was generally agreed by all. Therefore, when he bequeathed $750,000 worth of stock to Barron, that was his sole intention—or so the foundation argued. Beyond that, they maintained, Conrad had no further intention where Barron was concerned.

  Another opinion also held by some of the foundation’s attorneys, and one that was not so openly stated at the time, was that James E. Bates—who was Conrad’s personal attorney and friend from 1944 until his death, and who drew each of Conrad’s wills and codicils since 1947—had made a serious error by even including Barron’s Option in the will. “Jim Bates was an excellent lawyer, but not a tax attorney,” Harpole allowed. “He also did not allow a review of the will by any of us who actually were tax attorneys. Therefore, Barron’s Option was a serious error on his part. We argued that Jim Bates—according to his own interpretation of the Tax Code of May of 1969—had ill-advised Conrad. We believed that Conrad was led to believe that there would be no excess stock at all, and thus there would be nothing for Barron to purchase. That scenario was much more in line with Conrad Hilton’s personality and with what we believed was his intention where his son was concerned.”*

  A Windfall for Barron?

  Things got worse for the Conrad N. Hilton Foundation and much better for Barron Hilton when he was finally able to fully exercise that option in November 1983, four years after Conrad’s death. It was then that he and his lawyers fired the first of a few surprising salvos.

  First, Barron’s team argued that because of various tax code complications arising from Barron’s position as both a shareholder of Hilton and a director of the foundation, the amount of excess stock now available to him had been ratcheted up to a full 100 percent—the controlling interest—of Conrad’s stock in the company. He could buy it all if he wanted to—and he most certainly did want to—and he could make a profit on it too. Within that four-year period, the stock’s value had skyrocketed.

  Barron’s attorneys then fired their next salvo. They argued that not only did Barron have the right to purchase all of the stock in question, but that he should be able to buy it at its so-called date of death value as of December 1979, meaning what it was worth when Conrad died ($24⅝ a share), not what it had appreciated to by 1983 ($72 a share). The result? Barron would be paying $170 million for $500 million worth of stock, a profit of $330 million. The actual payment for the stock would go back to the foundation, but the profit would be Barron’s and Barron’s alone. “It’s called a great deal,” Donald Trump observed. “It may also be called trying to rewrite your father’s will.”

  There was just no way, the foundation argued, that Conrad Hilton ever intended for Barron Hilton to make hundreds of millions of dollars in profit, especially on excess stock he didn’t even realize would exist. The foundation argued that Barron was taking advantage of the huge windfall he was able to make because of a big mistake—or at the very least, a big loophole—in the will. In other words, they charged that he was undermining the intent and purpose of his father’s will.

  “I knew Conrad pretty well. I was his lawyer for thirty years,” said Myron Harpole, “and I spent a great deal of time sitting behind my desk, staring at the ceiling and just asking myself, ‘Is this really what Conrad would have wanted?’ And the answer that kept coming back to me was, ‘No way. Not Conrad. No way. I knew Conrad. We all knew Conrad. No way.’ ”

  James E. Bates’s deposition went a long way toward supporting Myron Harpole’s theory:

  QUESTION: Describe Conrad Hilton’s motivation where his will was concerned.

  ANSWER: One of his objectives was to not leave unearned wealth to relatives and members of his family. He believed in a strong work ethic. His desire was to have all of his relatives, his children, get out and go to work and earn their own living. He thought that and discoursed many times about the destructive effect that unearned wealth might have if it was inherited by young people before they had learned to work and understand how to handle it. So throughout all this period of time one of his objectives was to leave a minimum amount of wealth and to leave the entire residue of his estate, that was all this period of time getting ever greater and greater, to charity, and he wanted the bequest to charity administered through the foundation that he had set up for that purpose and incorporated for that purpose.

  QUESTION: Had that ever changed?

  ANSWER: He never to my knowledge ever changed the primary objectives which was not to leave inherited wealth to the destruction, possible destruction of members of his family, but to give everything that he had accumulated back to the public through the charitable bequests that he had described time and time again in his series of wills.

  James E. Bates also suggested in his deposition that, like Francesca, Barron was really just angry because he hadn’t gotten as much money from his father as he had hoped. Barron said that theory was hogwash. He stated that he “never for a moment questioned my father’s interest in leaving his wealth to charity instead of to family. Indeed, my father instilled those same values in me.” That said, he also believed that Conrad would never begrudge him the opportunity to make a profit if that opportunity presented itself.

  Barron’s attorneys further
theorized that Conrad was afraid that if Barron didn’t have the option provided in his will, an outside buyer could come in and try to purchase any excess stock, thus making the company vulnerable to a hostile takeover. Indeed, Conrad had frequently stated to friends and associates that he did not want his hotels to go the way of the Stevens Hotel and the Statler hotels, which lost their continuity and identity after the deaths of their founders.

  Since the foundation felt that James E. Bates had botched things up for them, it moved to reclassify itself as a so-called supporting organization, also known as a public support group, in accordance with the Internal Revenue Code. This step was a means of avoiding having to sell all or part of its hotel stock as “excess business holdings” under that troublesome federal tax law. If it were forced to sell any of those shares, the will gave Barron the option to buy them—and that’s exactly what they were trying to avoid. As a public support group, the foundation argued that it was now entitled to use its “power of sale” to buy back from itself the entire amount of stock—including the part Barron wanted to purchase at a profit. The result would be no stock for Barron, and, thusly, no profit for him either. In other words, it seemed—at least in Barron’s view—that the foundation was doing everything it could think of to defeat Barron’s Option.

  Barron Hilton’s deposition:

  QUESTION: It is your opinion that your father knew what he was doing?

  ANSWER: He would not have given me an option if he didn’t intend that I be able to use it.

  QUESTION: How do you know that?

  ANSWER: Because I know my father. He would not have structured it that way. He would have found another way to structure it. He would not have given me an option if he knew that the Foundation would find a way to work around it, thereby depriving me of the option. It’s clear to me that instead of accepting gratefully that it will receive from my father all of his wealth which existed at death, the Foundation wants to destroy the option my father gave me for no reason other than the fact that the option has turned out to be worth a good deal of money due to the delay in closing the estate. The Foundation wants all the money.