The Gambler

by William C. Rempel

  These were the relationships that spanned time and station—people who were loyal to Kirk as a struggling businessman, as a used plane trader, as a gambler with a modest stake, and were still close to him on the other side of vast wealth. These were the friends of a lifetime. Their deaths confronted Kirk with his own mortality.

  He tried to avoid it. He stopped going to funerals. He wanted nothing to do with celebrations of his birthdays. Terry Christensen said it tested the cleverness of his friends. “We had to come up with all sorts of ways to disguise that we were really trying to say ‘happy birthday.’”9

  It was a charming and amusing trait, but it also had a serious downside. Kirk was eighty and had something approximating a $5 billion estate before he finally drafted his first will. “He didn’t want to think about death,” said Christensen.

  Besides, Kirk was still feeling good and looking for adventures. At the conclusion of a business trip to London he boarded his plane and asked Falahi, his valet and flight attendant and sole companion on the return, “Ron, let’s go home the other way.” Instead of heading back over the polar route to North America, the flight crew had to recalibrate. They went home by way of China.

  One memorable stop was in Kuala Lumpur. Ron was making Kirk his morning coffee in the hotel. As usual, he was using ground Folgers coffee and brewing it in the 1950s percolator he’d brought from home. But when he plugged in the old coffeepot, electrical power went out instantly throughout the entire floor of the hotel.

  “That time we blew out the lights in Kuala Lumpur” became one of Kirk’s stock travel stories.10

  For all the healthy living, regular exercise, and good food, what really kept Kirk young and enthused was the big deal. And by the middle of 2004 he had two of the biggest deals of his big deal–making career in the works in the same summer.

  In Las Vegas, Kirk was too busy to think about his birthday. He turned eighty-seven making a $7.6 billion deal to buy Mandalay Resorts—the gold glass towers of Mandalay Bay, the great pyramid of Luxor, the castle turrets of Excalibur—completing his takeover of the south Strip. It made Kirk the undisputed king of Las Vegas. Steve Wynn received news of the transaction by inviting the Justice Department to investigate the deal’s antitrust implications. But he also joked that “life will be good in Kirkville.”

  The transaction put nearly half of all the Strip hotel rooms and casino space under Kirk’s control. His MGM Mirage owned and operated the town’s biggest, classiest, and most profitable casinos. Almost fifty years after losing $50,000 trying to make his first investment in the Dunes, Kirk was still standing. The Dunes wasn’t. It was long ago imploded and replaced by the Bellagio. And Kirk owned it.

  James Murren, Kirk’s handpicked president and the chief financial officer of MGM Mirage, handled most of the close-quarter negotiating. But it was Kirk who sealed the deal with a handshake.

  It was much the same in Hollywood a couple of months later when Kirk’s handshake sealed a $5 billion sale of MGM studios to Sony. Kirk’s man Alex Yemenidjian was his chief negotiator. Some called it “the deal of the century.” Andrew Ross Sorkin, writing the Dealbook column for the New York Times, said Kirk Kerkorian “should be anointed the god of all deal makers.”

  Each of the deals was a blockbuster in its own right. MGM Mirage stock was sent soaring—up more than 55 percent six months after the Mandalay Resorts deal. And in Hollywood, Kirk walked away from the Sony deal for MGM with about $2.6 billion as his share.

  Sorkin said it was time for Kirk to clone himself, take a vacation, and “write a book.”11

  40

  Breaking Bad

  March 2009

  Las Vegas

  Media helicopters circled above a cluster of unfinished high-rise buildings just off the Strip, a flock of noisy vultures. They jockeyed for camera position to record the end of Kirk Kerkorian’s amazing Las Vegas winning streak. By all accounts, Kirk’s ambitious sixty-seven-acre, $8.6 billion CityCenter development was going under—potentially the city’s biggest financial fiasco and the costliest construction loan default in U.S. history.

  Cost overruns, a cratering economy, and feuding partners had the project and its ninety-one-year-old financier within hours of unprecedented disaster. Security fences were being readied to wall off soon-to-be-idled construction sites.1 It looked like the town’s favorite gambler had just rolled snake eyes.

  In recent years, a nostalgic Kirk had told close friends that he sometimes wished he had time to start over—to give up his fortune and enjoy the thrill of making it all over again. It was a fantasy suddenly turning into a nightmare. “Honestly, I never thought I’d see this day,” he confessed to companion Una Davis.

  As the first default deadline neared, Kirk monitored news from home in Beverly Hills as his MGM Mirage team, headed by chairman James Murren, fought to keep the cranes and crews working. The key was loan restructuring in a time of ultratight money.

  Kirk had great faith in Murren, the creative force behind CityCenter. They spoke frequently by phone. Kirk’s calls rarely touched on business or the crisis at hand. As Murren recalled, the billionaire asked “‘How are you doing? Did you work out today?’ There was great empathy there.”2

  “The market could drop a thousand points. He could lose a billion dollars in a day and hardly blink,” says Alex Yemenidjian, by then a former Kerkorian executive.

  The editors at Forbes had most recently estimated Kirk’s personal wealth in the realm of $18 billion. Back home he was regarded as the richest man in Los Angeles. But the Great Recession of 2008–09 apparently spared no one, not even billionaires. East Coast billionaire casino owner Donald Trump had already been forced to resign as chairman of Trump Entertainment Resorts after the company filed for bankruptcy protection.3

  “Timing is everything,” Kirk was fond of saying. And making big financial moves into the teeth of an economic storm second only to the Great Depression served to emphasize the point. CityCenter was a visionary project designed as a “city within a city” of residential and commercial developments as well as casinos and hotels. The design emphasis was on architecture more than gaming resorts—less kitsch, more class. But the project Steve Wynn called “as ambitious . . . as this town has ever seen” could also have been a poster child for poor timing. It was conceived in boom times, delivered in a bust. And nowhere was the bust more brutal than in Las Vegas.

  Gambling revenues had plunged as much as 25 percent following the 2008 collapse of Lehman Brothers, and those numbers continued to drift downward into 2009. Unemployment in the region soared from a prerecession 3 percent to nearly 15 percent. Home prices fell 50 percent. And Las Vegas claimed the dubious record as America’s foreclosure capital. More than 70 percent of homeowners owed more on mortgages than their houses and condos were worth.

  The biggest casinos’ operators in town were hurting. Stock in Sheldon Adelson’s Las Vegas Sands Corporation, owner of The Venetian hotel, dropped from $144 a share to $1.38. Kerkorian’s MGM Mirage wobbled under nearly $14 billion in debt.

  But Kirk’s steady support, and a lifetime of reliable handshakes and sterling credit, helped pull MGM Mirage through the crisis. A consortium of U.S. and European banks agreed to rework loan terms. Arab investors decided to stick with the project. Even with most of the world gripped by a suffocating lending clampdown, major financial players everywhere still trusted Kirk and his organization.

  CityCenter officially opened later that year with a three-day extravaganza in December called “Wow Week.” It featured endless bottles of Dom Perignon in the biggest gala grand opening in Vegas history. Jim Murren presided.

  Kirk sent his friend Una Davis. He stayed home to avoid cameras, the press, and the embarrassment of public adulation. And no chance for a press conference appearance.

  Kirk’s interest in automobile manufacturing turned out to be undeterred by his failure to take over Chrysler a decade earlier. In fact, that bid had been such a lucrative failure that it reinforced his confide
nce that hidden value lurked throughout the industry.

  In 2005 Kirk had set his sights on General Motors, ultimately becoming the company’s leading stockholder with a 10 percent ownership stake. Again allied with Jerry York, his Chrysler adviser, Kirk warned that GM faced a difficult future unless it partnered with foreign rivals Nissan and Renault. Kirk’s team recommended GM sell off its underperforming Saab and Hummer lines.

  GM wasn’t interested in Kirk’s assessment or his recommendations. York quit the GM board of directors and Kirk sold off his shares. Again, though frustrated by his inability to move management, Kirk’s investment timing was excellent. He had bought shares when they were trading at a thirteen-year low. He sold out late in 2006 just ahead of the recession—also well before GM filed for bankruptcy in 2009. His estimated profit: about a quarter-billion dollars.

  During his run at GM, Kirk also sued German carmaker Daimler-Benz, asserting that Tracinda lost a billion dollars in potential profit in the Chrysler deal. He complained that the Germans lied about what was supposed to be a merger of equals that ended up a takeover, relegating Chrysler to a mere division of Daimler-Benz.

  A federal judge in Delaware rejected Kirk’s claim. He ruled that Kerkorian had failed to prove significant damages. Attorney Terry Christensen, who argued Kirk’s case, acknowledged that “we had a hard time” showing damages with a $2.7 billion profit.4

  Kirk made one more bid for Chrysler when Daimler decided to dump its North American “division” in 2007, but his $4.6 billion offer lost out to Cerberus Capital Management. It was another lucky loss. A year later, hit by recession, Chrysler would be in Chapter 11 bankruptcy.

  His last run at a Detroit blockbuster was especially ill timed. Kirk started buying Ford Motor shares. It was the winter of 2007–08 and the Great Recession was already making its statistical debut—ultimately breaking out into an epidemic of mortgage foreclosures, threatened bank failures, and a nationwide lending freeze.

  If Kirk missed some of those early economic warning signs, maybe it was predictable. He was at the time seeing the world through the lenses of a love-struck romantic. The ninety-year-old bachelor had just proposed marriage to Una Davis. The younger woman was fifty-four, a close friend and companion for more than a decade.

  In the spring of 2008 Ford shares were priced around eight dollars. In a short time, Kirk was the largest stockholder outside the Ford family. He had fully a billion dollars riding on the company by late September 2008 when the Dow Jones Industrial Average dropped a record 777.68 points in one day.

  This time the gambler blinked. Kirk decided he had to stop chasing the carmaker’s plunging stock prices. He would fold ’em and walk away somewhere around $2 a share. His losses at the end of 2008: about $800 million.

  “I made a mistake,” Kirk would later concede to Bloomberg News.5

  But former MGM and Tracinda executive Yemenidjian blamed “bad timing.” Kirk’s instincts were right and he was making the right moves, recalled Alex, crediting Kirk with an unerring knack for spotting corporate value missed by others. Forbes magazine called Kerkorian “the raider who woke up Detroit.”6

  As history would show, Ford was headed for a strong recovery and double-digit share prices on the other side of the recession. “Timing,” repeated Yemenidjian with a shrug.7

  One reason Kirk couldn’t afford to wait out the recession holding on to his Ford shares was the pending critical condition of CityCenter. It was already a threat to his MGM Mirage holdings late in 2008. But there were also mounting personal issues that likely affected Kirk’s mood and judgment, by some accounts a greater distraction than his business setbacks.

  By late summer 2008, Kirk’s top lawyer and closest confidant was facing federal felony charges. Years earlier, Terry Christensen had hired celebrity private investigator Anthony Pellicano to help debunk false claims by Lisa Bonder that Kirk was the biological father of her baby.

  That was before dental floss finally settled the question. He wasn’t.

  But when it was discovered that Pellicano had used illegal wiretaps to snoop on Bonder, Christensen and the private eye ended up indicted as co-conspirators. Pellicano would later swear under oath that he had lied and misled Christensen into believing that inside sources, not tapes, were behind salacious tips he passed along to the Kerkorian side.8 Christensen’s defense team, led by Patty Glaser, argued that he neither authorized nor knew about the wiretaps.9

  Kerkorian volunteered to make a rare court appearance and testify to his friend’s character. He attracted a crowd of journalists and paparazzi. The Hollywood Reporter described Kirk’s “blue sports jacket, red tie and loafers” and said the ninety-one-year-old “stood upright when walking and looked spry and alert” during his twenty-six minutes on the witness stand.10 LA Weekly called Kirk “the unsmiling tycoon” who testified “in measured, sepulchral tones.”11

  He told the court his longtime adviser “has just been excellent—honest, straightforward and a true friend.” Kirk also denied knowledge of Pellicano’s wiretapping. A week later, Christensen was convicted.

  Soon after, U.S. District Judge Dale S. Fischer imposed a three-year term in federal prison on the sixty-seven-year-old lawyer. It turned out to be a major blow to Kirk, too.

  Glaser and Kirk’s team of advisers told him he would have to avoid all contact with Christensen. Kirk’s gaming license in Nevada—the key to his corporate empire and vast wealth—could be in jeopardy if he associated with a convicted felon.12

  Kirk resisted at first but then, with great sadness, eventually acceded. He also withdrew from social engagements, becoming uncharacteristically reclusive, much like his reaction when his first wife, Peggy, left him a half century earlier. He was moody, had trouble sleeping, and cut back on visits to Las Vegas. Particularly noticeable were abrupt and repeated cancellations of dinners set with friends. He stopped going to movies and spent evenings in seclusion at home.13

  At the same time, his relationship with Una Davis hit a rough patch. As was Kirk’s practice, he tried to mend hurt feelings with a big trip—this one to Maui on his private jet. It was just after Christmas, barely a month after Terry Christensen was sentenced to prison.14

  About two hours out over the Pacific, Kirk abruptly changed his mind about the trip. He summoned Ron Falahi to advise the flight deck: “Turn around; we’re going home.”15

  He had canceled the trip midocean without consulting Una or anyone else on board. A few months later, their wedding engagement was also canceled.

  By the end of 2009, it was clear that no other billionaire in the country had suffered so much financial damage from the Great Recession as Kirk Kerkorian. The Forbes 400 list of richest Americans tracked Kirk’s fall from twenty-seventh richest person to ninety-seventh. His net worth had fallen from an estimated high of $18 billion to $3 billion. CityCenter’s struggles took a heavy toll.

  Fellow billionaire Trump was sympathetic in his own way. “I love Kirk and I hope it works out for them,” he consoled.16 But the rival casino developer also called Kirk’s CityCenter project “an absolute catastrophe” during an interview on CNN’s Larry King Show. Later Trump went further.17 “It will be the biggest bust in the history of real estate . . . too bad.”

  Murren was optimistic. He predicted that CityCenter would be Kirk’s “crowning achievement” in a career that transformed Las Vegas. “By design he gets little recognition for what he’s done here,” Murren told the newspaper.18

  Kirk had already moved on. He ended 2009 buying an expensive diamond ring for his latest love, Joan Dangerfield, a glamorous blond businesswoman and the fifty-seven-year-old widow of comic Rodney Dangerfield. She told friends she was Kirk’s fiancée.

  41

  After “the Fall”

  Spring 2010

  1014 N. Roxbury Drive, Beverly Hills

  The hushed house was dark when Kirk roused in the middle of the night, threw back his blankets, and swung his legs out of bed. The soft rustle of sheets and his shuf
fling feet made enough sound to alert the new night nurse. Kirk was surprised to find her at his side when he reached the open bathroom doorway—surprised and annoyed.

  He didn’t want her assistance. He didn’t want her company. For that matter, he didn’t want her sitting awake outside his bedroom all night, either. He thought he had made that clear in discussions with his staff. He was especially annoyed to be ignored. His minders—his doctor, the security team, lawyers, his valet, concerned friends—they all worried about the potential disorienting effects of the pills he took for sleep. And, at nearly ninety-three years old, Kirk wasn’t as nimble at any time of the day or night as he used to be. They were concerned he might trip and fall. He was concerned they were treating him like a child, or worse—some old invalid.1

  He wasn’t the least bit fearful, or even tentative, about maintaining his balance. His normal stride was as confident as ever. A few times he’d fallen hard on the tennis court suffering nothing worse than scrapes and bruises, even when he was well into his eighties. He credited his weight-lifting regimen. Sure, his vision continued to deteriorate. And he was slowing down. He was the first to notice.

  “Everything started to fall apart when I hit ninety,” he told a friend. After a lifetime of healthy eating, regular and rigorous exercise, a conservative schedule of early-to-bed and early-to-rise, faithful visits to the doctor, and timely medical treatments, Kirk seemed surprised to find himself in physical decline.

  But, thank God, he still didn’t need a nurse to take a pee. Kirk growled orders for her to get out, go away. There may have been a slight push or a shove for emphasis. But as Kirk moved away, he lost his balance.