Kirk didn’t see it that way. The company’s distribution operations could be outsourced on a per-movie or as-needed basis at a fraction of the cost. Besides, MGM also needed the cash. It was financing the twenty-one-hundred-room MGM Grand Hotel and trying to stay viable as a movie studio.
President Jim Aubrey continued to play the role of good soldier—and bad cop—as Kirk’s front man to the press and public, putting a positive spin on what was widely seen as the continuing liquidation of MGM. He said MGM would remain in feature film production by doing fewer but higher-quality projects. He also touted a shift to television production even as he blamed TV for radically changing the entertainment business. He repeated the new company mantra: diversification into the leisure field will help MGM.
He blamed a changing film market for MGM’s troubles, telling reporters that “the bottom has fallen out of the movie marketplace,” prompting collective skepticism. Charles Champlin, entertainment editor at the Los Angeles Times, said the only thing wrong with the market was bad movies.3 “The bottom dropped out of the marketplace for Edsels, not for automobiles,” he wrote. And Canby in New York said Aubrey had demonstrated to Hollywood how not to improve matters. “He made inexpensive films . . . but they were almost uniformly bad.”4
Behind the scenes, however, Aubrey had argued against selling off distribution assets, argued strenuously at times against the very strategies that he defended in public—especially the deal Kirk negotiated with United Artists. Aubrey was so unhappy with the domestic distribution deal that he told friends, “If I was a regular stockholder, I’d sue us.”
Kirk had been glad to hear Aubrey’s opinion in the privacy of the MGM boardroom. He valued pushback during the executive meetings. But when Bautzer reached the house in Benedict Canyon that late October evening, he found Kerkorian in a rare fury. Kirk wanted to talk about an unsolicited letter from Aubrey detailing the studio executive’s continued opposition to the sell-off of MGM divisions. It was a letter that Aubrey said pointedly he wanted “on the record.”
It was more than a “cover your ass” exercise for Aubrey. It was also direct criticism of Kirk’s judgment and an affront to his leadership. Under Kirk’s demanding code of conduct, the letter represented betrayal. A team, like a family, always pulled together once decisions were made. That is what Kirk expected and demanded. He was already disappointed in Aubrey’s feeble box office returns. The letter, however, was a capital offense.
Bautzer had persuaded Kirk to hire Aubrey in the first place. Now he had to play executioner. The next day in his law office, Bautzer greeted Aubrey with a polite round of drinks and then a blunt message: “Kirk wants you out. It’s over.”5
There would be no severance package. Their contract was a handshake, and it didn’t come with a golden parachute or any other postemployment promises. Aubrey would be allowed to resign, letting him write his own MGM epitaph. “The job which I agreed to undertake has been accomplished and I have other plans for the future which will be announced shortly,” he said in a prepared statement. Privately, he joked to friends he feared ending up a desk clerk at a Vegas hotel.6
His rocky four-year tenure was marked by thirty-five hundred layoffs, slashed expenses, canceled projects, and bruised egos. He was pretty much unchallenged as “the most hated man in Hollywood.” He had brought the studio back into the black after years of heavy losses, but he also left a box office legacy of cheap and forgettable films—such cringe-worthy offerings as My Lover My Son, Nightmare Honeymoon, and Lolly Madonna XXX. One noteworthy exception was Westworld, earning more than $7 million worldwide over two years and launching a franchise that would endure decades later.
Among Aubrey’s most expensive decisions was a veto with implications not yet apparent on his last day at MGM. Earlier in 1973 he had rejected a film project based on a popular novel by Peter Benchley. Too expensive and not much of a story, Aubrey had said then. Besides, he asked dismissively, “How do you get a shark to do all those tricks?”7
And that’s how the big one got away—the future box office monster Jaws slipped away from Kerkorian’s MGM to enrich Universal Studios instead.
As the MGM Grand neared completion in Las Vegas, the looting of MGM’s past continued in Culver City. Benninger dispatched a team of shoppers—what former studio executive Peter Bart called “Benninger’s marauders”—to scour what remained of the MGM back lots for artifacts to sell or display at the new hotel.
They found original scripts, cartoon cels, old promotional posters, sketches of costumes and set designs, historic photographs, and more. Souvenirs for the gift shop or, as Benninger described them, “trinkets for the tourists.” One of those “trinkets” ending up in an MGM Grand gift shop would turn out to be legendary director William Wyler’s personally annotated shooting script of the Academy Award–winning movie Mrs. Miniver. The price tag on that priceless piece of history: $12.8
A few days before the MGM Grand Hotel was scheduled to open, the board of directors agreed to the special dividend first imagined by Kirk’s inner circle. It was late November. Aubrey’s replacement as president, MGM attorney Frank E. Rosenfelt, presided over the vote and then met the media.
He said the dividend was made possible by sales of “no longer necessary” assets and that the company was now “revitalized, compact (and) commercially viable.” He also defended MGM against claims that cutbacks and corporate reorganization may have muffled the roar of MGM’s lion. “Leo the Lion will not be reduced to a weak meow,” he insisted.
News coverage focused primarily on the hefty dividend. The Wall Street Journal called it “an early Christmas present” for Kerkorian.9 The Los Angeles Times called it “a whopping” amount at $1.75 per share.10
Within ten days of the dividend announcement, the first shareholder complaint was filed in a Delaware court. By the end of December five lawsuits were pending, each asserting in some form—as in the case of Harff v. Kerkorian—that the dividend was “declared improvidently and for the financial benefit” of Kirk. No fraud or wrongdoing was alleged, simply unnecessarily risky action. An early chancery court ruling sided with Kerkorian, dropping some claimants and treating allegations of potential harm to shareholders as debatable. The ruling guaranteed the legal squabble that Christensen anticipated would go on for years.
With Kirk’s German bank debt settled thanks to a timely MGM dividend, he had once again stepped back from a precipice unscathed. Now, freshly invigorated and feeling flush, the gambler was heading back to Las Vegas for his biggest wager yet.
24
Extra Risk Factor
December 5, 1973
Las Vegas, Nevada
Opening night at the glittering MGM Grand Hotel brought celebrities and VIPs to the main entrance in fleets of limousines and vintage cars, greeted by flashing strobes and paparazzi under an eight-lane porte cochere. It seemed ablaze with light. No place on the Strip was brighter. A two-month-old Arab oil embargo had dimmed the rest of Las Vegas, but on this special night the Grand had official dispensation from the State of Nevada to amp up to maximum wattage.
There was star power, too. Cary Grant was there again to support his friend Kirk and to introduce Dean Martin, the night’s opening act in the twelve-hundred-seat Celebrity Room. The singer-actor’s drunken comic bit spoofed Grant’s role as a consultant for Fabergé, the makers of colognes and aftershaves. “I like mine on the rocks,” he quipped.
Former tough-guy actor George Raft, who attended the 1946 grand opening of Bugsy Siegel’s Flamingo twenty-seven Decembers earlier, was there and looking more dapper than dangerous. And there were beautiful women—Shirley MacLaine of Irma la Douce, Jane Powell from Royal Wedding, and television’s genie Barbara Eden from I Dream of Jeannie.
But the real star of the evening was the MGM Grand itself. It was big. It was gaudy. It was magnificent—the “most spectacular achievement” by MGM in its storied history and “a monument to . . . Hollywood’s golden era,” proclaimed the Chicago Tribune.1
It recalled the grand hotels of Europe as portrayed in the MGM classic film. Its fifty-thousand-square-foot casino, longer than a football field, made it the world’s biggest gaming floor. There was also a posh penthouse casino for members only and high rollers where the wagers started at $50.
Downstairs was a three-hundred-seat theater for watching old movies. For $2.50 the feature classics came with newsreels and cartoons enjoyed from the comfort of blue leather love seats. The Ziegfeld Room could seat about nine hundred and stage lavish revues big enough for a Busby Berkeley production. Even the gourmet restaurants came with movie themes. Gigi’s offered French cuisine amid scenes from the 1957 romantic musical, and Barrymore’s served steak and lobsters beneath portraits of Ethel, John, and Lionel.
Shops in the lower level offered fine jewelry, trinkets, and memorabilia from the MGM back lots. Sandals worn by Charlton Heston in Ben-Hur were on sale for under a thousand dollars. Jack Benny’s first violin required a good night in the casino. It was priced at $20,000.
Everywhere throughout its twenty-six floors under its eleven-acre roof were touches of class and elegance, mixed with excess—six hundred crystal chandeliers, plush carpets, polished mahogany, brass stars on the doors of all twenty-one hundred rooms and suites, and marble, marble, and more marble.
It was, of course, over budget. And not all the voices cheered.
Gossip columnist Joyce Haber seemed to be in a particularly disparaging mood. It was as if she disliked the very idea of the MGM Grand Hotel. She was a friend and fan of Jim Aubrey, the recently booted president of MGM. Since his “resignation,” she had devoted hundreds of words to predictions of the film studio’s pending ruin. She regarded Kirk as a scavenger picking the bones of a dying movie company. And on that grand opening night, she was picking at . . . everything.
She didn’t like Dean Martin’s opening act. She was unimpressed by the VIP list of Hollywood stars arriving in their minks and vintage cars. Where were the big names from the past? The hallways were hot; the rooms were cold. There was plaster dust everywhere. Oh, and on the life-sized photos of Cyd Charisse and Lena Horne displayed in the lobby—their names were misspelled.
Haber repeated rumors that Kirk was trying to sell the hotel even before it opened. She exaggerated the cost overrun by more than $50 million. But she offered a backhanded compliment to Kirk. He “may have ruined . . . MGM,” she wrote for the Los Angeles Times, “but he certainly knows how to go all the way when he builds a hotel.” She said it looked like the most lavish of MGM movie sets, suitable for The Great Ziegfeld.2
Kirk never paid much attention to gossip columnists. But these were difficult times. The embargo-caused oil shortage was driving up gas prices, shutting down gas stations, and discouraging tourist travel. A national recession was looming. He needed nice words. Lots of them.
So much more was riding on the MGM Grand’s success than on the performance four years earlier of the International Hotel. That roll of the dice was a straight money bet. This would test Kirk’s fundamental belief in the future of a leisure industry. It would settle his big bet that a diversified MGM could thrive, that MGM’s Grand Hotel could actually bolster the studio’s profitability.
It was that extra element of risk that made this the biggest chip Kirk had ever played.
The suspense didn’t last long. As the International Hotel did in 1969—but without a Streisand or Elvis on its marquee—the MGM Grand rocketed to unprecedented numbers in its showrooms, the casino, and the hotel. The big returns persisted all through 1974, which happened to be MGM’s golden anniversary year.
Never in those fifty years, not once since 1924—when a seven-year-old Kirk Kerkorian was still learning English on the streets of Los Angeles and a trained lion named Slats represented the newly merged film company of Samuel Goldwyn and Louis B. Mayer—did MGM earnings ever show such excellent numbers.
For the fiscal year that ended only nine months after the hotel opening, MGM reported net earnings of $26.8 million, nearly triple its profits the previous year. It blew away the studio’s old record of $18 million set in 1946. The hotel and casino produced $22 million in nine months, doubling the film side’s $11 million accumulated over the full year.
A headline in the Los Angeles Times business section delivered the verdict in 48-point type: “Grand Hotel Gamble Pays Off—MGM Has Best Year Ever.”3
It started with the showrooms. Performers including Mac Davis, Engelbert Humperdinck, Rich Little, Johnny Mathis, and Donna Summer filled the Celebrity Room every night. And “Hallelujah Hollywood,” a $3 million musical stage extravaganza that opened in the Ziegfeld Room in April, managed to average just over one thousand patrons per show in a nine-hundred-seat venue—a standing-room-only miracle.
Siegfried and Roy, then–rising star illusionists with a big cat act, were vaulted to fame in the “Hallelujah Hollywood” show. One night Kirk visited the boys after a show and said they were backed by “three magical letters . . . M-G-M. You just keep polishing them.”
Especially impressive was the massive hotel’s occupancy rate. The twenty-one-hundred-room “world’s biggest resort hotel” hovered throughout the nine months at or above 90 percent full.
Though overshadowed by the hotel, MGM’s film studio had one of its better years—thanks to its golden past. The release in May of That’s Entertainment, a collection of footage from the studio’s classic musicals, met with instant success and suggested that nostalgia still had commercial value, too. Box office for that film alone doubled the studio’s pretax earnings for the previous year.
To be fair to history, the 1946 profits adjusted for inflation would have been a record-holding $46 million in 1974. Nonetheless, Kirk was on a roll. Again. He doubled down—boosting his personal investment in MGM to 50.1 percent.
He also made the decision to finally let go of airline ownership, selling back to the company his 17 percent controlling interest in Western Air Lines. The block sale would be $30.3 million in cash and bonds. He explained that he wanted to devote more time to MGM “in which I have a substantially greater investment.”4 And by selling back to the company, he allowed Western to avoid the potential disruption of taking on a new controlling stockholder. Rather than setting off a more lucrative bidding war, Kirk departed something of a hero to Western management and a majority of its stockholders. His seven-year investment in the airline had benefited from stock splits, dividends, and improved economic conditions throughout the aviation industry.
Kirk used the Western proceeds to pay down what remained of his Bank of America loan—the credit line that had leveraged him into control of MGM in the first place. That, in turn, released his MGM shares from liens securing that loan. And Kirk’s net worth resumed its climb, heading again for realms around $200 million. So, of course, he had another gamble in mind.
The “grand old lady of the lake” was a long shot, a 1923-vintage lodge and casino that had seen better days. Shuttered and padlocked, the Cal-Neva Lodge on pristine Lake Tahoe’s north shore was in the care of a court-appointed receiver when Kirk offered $2 million and a plan to renovate the seedy beauty.
The resort was a throwback to the days of Prohibition and then illegal gambling, and it came with a history of ownership failures. It was built straddling both sides of the state line—coffee shop in California, casino on the legal gambling side of Nevada. It had once been the state’s biggest casino, but that was long before Kirk came to Vegas.
Judy Garland performed at the Cal-Neva in the 1930s as part of the Gumm Sisters’ vaudeville act. The lodge was destroyed by fire in 1937 and hastily rebuilt. Frank Sinatra owned it in the early 1960s but lost his state gaming license over a friendship with former Chicago mob boss Sam Giancana.
When Kirk bought the place in the mid-1970s, he was planning ahead, as usual. His motives mirrored strategies behind his purchase of the Flamingo a decade earlier. He needed a training school for managers and staff of another massive hotel project—this one about forty mile
s away in Reno, Nevada’s second city, touting itself as “the Biggest Little City in the World.” The future MGM Grand Reno was to start construction on the site of an old gravel pit near the new interstate as soon as Kirk could arrange a $115 million financing package.
Renovations began along the Lake Tahoe shore as Kirk steeled himself for another round of meetings with bankers and a new line of financial campaigning—reminding Wall Street that he had delivered on his promises, “that what we’ve said in the last few years happened just the way we said they would.”
Some of Kirk’s advisers believed that investor confidence in MGM was undermined by perceptions that he was aloof, even reclusive. Investors wanted to hear from him, “see him in the flesh,” as MGM president Rosenfelt urged. Kirk hated such perceptions, chafed at how false and superficial they were, but at the same time he recoiled from anything smacking of self-promotion.
He didn’t like publicity events any better, even those benefiting his hotels, and looked for excuses to be otherwise occupied. Kirk sent his brother Nish to formally open the refurbished Cal-Neva Lodge on April 1, 1977. Nish was happy to cut the ceremonial ribbon at a craps table, restoring the casino to full and immediate operation. The Reno Evening Gazette reported that Kirk was in London on “pressing business.” No further details were provided. But he was at the time engaged in his second-least-favorite activity—getting dressed to meet bankers. At the end of the month he flew into the Lake Tahoe resort for an official grand opening with Dean Martin performing and Cary Grant introducing.
By that summer, the MGM Grand Reno was off the drawing boards and under construction. Kirk and Cary Grant returned together for the groundbreaking “Hard Hat Party” in July. With a thousand rooms, it would be half the size of its Las Vegas sister Grand—but the biggest hotel and casino in Reno.
The MGM special dividend of 1973, the $5.25 million that rescued Kirk from default on a German loan and saved his kingdom, remained a legal point of contention into 1977. Sporadic settlement talks had come down to one issue: How much was Kirk going to pay to end the lingering litigation? Lawyers for the plaintiff shareholders suggested that Kirk pay back some of the corporate fees he received as MGM vice chairman, director, and executive committee member.
The Gambler Page 19