The Hiltons: The True Story of an American Dynasty

by Taraborrelli, J. Randy

  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

  Donald 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?

  Barron 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.

  Steve Wynn seemed to want to use the tide in the media against Barron to help plead his case to the Hilton shareholders, telling Fortune’s Terry Moore that it didn’t bode well for Barron that he was run out of New Jersey without a gaming license and without clearing his name in regard to his association with Korshak, thereby making the Hilton chain much more vulnerable to a hostile takeover. “Here’s a company that gets 40 percent of its income from gambling and has been adjudicated as unsuitable in one of the biggest gambling markets in the world,” Wynn told Moore. “As a shareholder, I would be concerned.” (Wynn owned about 1 percent of Hilton’s stock.) He also told the New York Times, “It’s a black mark on Hilton.”

  Then, much to the Hilton Corporation’s dismay, “John Van de Kamp, who was the California attorney general, took Steve Wynn’s side,” recalled Myron Harpole, “and tried to assist Wynn in his takeover at
tempt. Now there was an even greater chance that Barron could lose the entire pie.”

  “Look, I have no sympathy for Barron Hilton,” Steve Wynn said candidly. “I felt comfortable making this offer; it is not a personal attack. And I’m not taking advantage of a tax loophole to take the company away from some charity.”

  According to Myron Harpole, Barron Hilton was unhappy about some of the negative press and felt that Steve Wynn was at least partially responsible for it, even by just playing into it. Barron likely wasn’t sure what to make of Wynn. Wynn was slick and polished. Like Trump, he talked a good game. But he lacked Trump’s people skills. If he had that same skill set, he might have appealed to Barron on a more personal level and as a result might have fared better with him. “Barron was a lot like his father in that he was the type to sit down, make a call, shoot the shit, and find out what was what,” said one of his business associates at the time, “not just make a dramatic play for someone’s company. In that respect, Barron had more admiration for Trump. He appreciated Trump’s telephone call, for instance. Little things mean a lot, even in big business. The fact that Wynn was pushing so hard made Barron feel like, yeah, he’d probably rather to do business with Donald Trump.”

  Trump Meets Hilton

  In early March 1984, Benjamin Lambert, one of the Hilton board of directors with whom Donald Trump was friendly, suggested that Trump attend a party he was hosting for the Hilton board of directors at his New York home, just prior to its annual meeting in Manhattan. He suggested that Donald and Barron should take the opportunity to meet, and, he added, who knew what might result from such a meeting? “So I went to the party,” Trump recalled, “and I finally had the opportunity to meet Barron Hilton. Right away, I felt he was an amiable fellow, if not also extremely cautious. We went out onto the patio to chat.”

  During their conversation, Barron confided in Trump that he was still frustrated by the Casino Commission’s decision. Though he had considered reapplying for a license, he wasn’t yet sure how to proceed. “I think there was a little bit of, ‘Screw ’em if they don’t want me’ kind of thinking going on,” Donald recalled. “He was Barron Hilton, after all. As we spoke, I stood there wondering what Conrad would have done in that situation. I knew for sure what I would’ve done. I would’ve fought. I think that’s how Barron felt, too. But I also think his fighting spirit was compromised due to the fact that he was facing battles on more than one front.”

  “I’ve been squeezed in a vice a hundred times before,” Hilton told Trump, “but not like this.” He said that, on one side, he had his father’s estate fighting him “tooth-and-nail,” and on the other side, he had the New Jersey Casino Commission doing the same thing. Donald sympathized with Barron’s quandary. He asked exactly how much Barron had “soaked into this thing in Atlantic City?” Barron paused. “Three hundred and twenty million,” he answered abruptly. He waited for a reaction. Donald acted unfazed, but actually that was a lot of money at the time, even to Donald Trump. A year earlier, it had cost him $220 million to construct the Boardwalk, and that had been his biggest gamble to date. “Well, I would say that that’s a pretty good figure,” Donald remarked with raised eyebrows.

  “Yeah, tell me about it,” Barron agreed. The two men spoke for a little while longer before ending their impromptu meeting. “It’s a real honor to meet you,” Trump told Hilton, and he meant it. He added that he had a great deal of respect for both Barron and Conrad, and for what they had done for the hotel business. “I’m impressed with what you’ve done, too,” Barron told Donald. Shaking hands, the two famous hoteliers agreed to stay in touch.

  Many years later, Donald Trump would observe, “My experience is that sometimes in business it’s good to just sort of lay back and see where the tide can take you. So that’s what I did with Barron. Later, my friend Ben Lambert told me that Barron felt comfortable around me.

  “I understood Barron,” Trump continued. “I know that kind of guy because I am that kind of guy. For Barron, personality and character are important. It’s not just the deal that matters, it’s the people in it. In fact, the best of deals fall apart because the people in them have a deficit of character. Barron and I were on the same page in that regard, and I also felt that this was probably how Conrad Hilton did business as well.”

  Trump to the Rescue

  Many industry observers believed that Steve Wynn had a hidden agenda, that he didn’t really want the entire Hilton company but rather just Barron Hilton’s Atlantic City property. It was thought that maybe by making preliminary moves toward a hostile takeover, Wynn was hoping to set the stage for a negotiation somewhere along the lines of, “I’ll set aside my offer to move in on your company if you’ll just sell me that one valuable hotel in Atlantic City.” It would seem that Barron Hilton was one of those who sensed this agenda. It wasn’t long before he decided to do something about it. Donald Trump recalled, “I got a call from Barron’s people saying, ‘Guess what? Barron is interested in selling the Atlantic City property to you.’ I was delighted.”

  Trump’s first offer was about $250 million. Barron had already told him that he’d invested $320 million in the hotel, so Donald didn’t really think he would go for the offer; he wasn’t going to take that much of a loss. Trump then did the sensible thing—he raised his offer to a full $320 million. In cash. Manufacturers Hanover Trust would lend him the money; he would have it in hand in a week.

  Maybe the Atlantic City property really was on Steve Wynn’s mind, because the day after he learned that Hilton was considering selling it to Trump, he filed a lawsuit against Hilton charging securities violations. Meanwhile, one of Wynn’s Golden Nugget executives stated to the press that “Hilton is putting his tail between his legs and running away from New Jersey without vindicating his name.” Then Wynn made an offer for the Atlantic City Hilton—$344 million. That was even more than Trump’s bid! Maybe not surprisingly, Barron rejected it. Beyond any personal feelings, Trump’s offer was all cash, whereas Wynn’s was a package of promissory notes and an undeveloped parcel of land in Atlantic City. Barron wasn’t that impressed with it. One thing was also certain—Barron knew that, sans the valuable Atlantic City property, the Hilton company had just become a little less attractive to Steve Wynn. Wynn’s attorney Bruce Levin confirmed that Trump’s purchase, if consummated, would most definitely force Steve Wynn to reevaluate his offer.

  “I like this guy, Trump,” Barron told the foundation’s attorney, Myron Harpole. “He reminds me of my father. He’s a salesman, like Conrad Hilton, isn’t he?”

  “I agree,” said Myron. “I think maybe he’s got something Wynn doesn’t have. I don’t know what it is…”

  Both men had been influenced by Conrad’s credo that relationships, as well as business, mattered. Many in the Hilton group sensed that Donald Trump was of a similar philosophy. Trump, for all of his well-known braggadocio, seemed like an upright man.

  The next day, Barron Hilton accepted Donald Trump’s offer. Trump then had no trouble getting a license for his new hotel and casino, which was called Trump’s Castle and would open on June 17, 1985. “I bought Barron Hilton’s Atlantic City hotel sight unseen, meaning I didn’t do the usual walk-through to see what I was getting myself into. The good Hilton name of quality workmanship is what I was counting on, and I was not disappointed.

  “What I remember most was that first inspection after it was truly mine. I was amazed at the quality of the work Barron had put into it. Everything was tip-top shape, the best of the best, money being no object. It was spectacular. I remember thinking, ‘All right, I get it, now. What I am seeing here is the Conrad Hilton influence, and it’s impressive.’ All of those many years later, you could still feel the presence of the old man.” (In March 2006, Donald Trump paid what might be considered the greatest of compliments to his friend, Conrad’s son Barron. He named his third son after him—Barron Trump.)*

  On April 25, 1985, the threat of Steve Wynn’s takeover of the Hilton company
receded when James E. Bates and a majority of other foundation board members rejected his bid, calling it “inadequate.” There was never much of a groundswell for Wynn, anyway. He had never mounted a successful public relations program, other than one that involved making critical pronouncements about Barron. Therefore, the other Hilton board members didn’t see how he could do much better with the company; he never laid out a good strategy for them. The bottom line was that it had been a red-hot matter for a few weeks, and then, just as quickly, it cooled.

  Barron Hilton had managed to avoid a hostile takeover of the company from someone who at the time apparently didn’t have the financial wherewithal or the persuasive power to pull it off. But who knew what the future might hold with a more influential opponent? As long as the in-house battle existed over Conrad Hilton’s stock in the Conrad N. Hilton Foundation, there was always a chance that someone else could enter the picture, attempt to purchase that block, and also entice a majority of shareholders with a better offer, thereby managing a complete takeover. Barron realized that in order to protect his (and his father’s) best interests, he needed to find some way to end his battle with the foundation as soon as possible.