November/December 2000 | Contents

BIG DEAL IN LAS VEGAS:
And How the Press Missed It

BY SALLY DENTON AND ROGER MORRIS

Worldwide headlines heralded the deal. On March 6, the MGM Grand mogul Kirk Kerkorian captured Steve Wynn's Mirage Resorts in a $6.4 billion takeover that created a vast oligopoly in the trillion-dollar casino industry. But in Las Vegas, headquarters of the oligarchs, the history-making buyout went largely unexplored by the local press, another sign of how much America's fastest-growing city has become hostage to the corporate lords of gambling.

The takeover left more than a dozen of the largest hotels on the strip owned by just two companies. Kerkorian's new MGM-Mirage colossus emerged with controlling interests in nearly half of gambling's global empire, which reaches forty-seven states, scores of Indian reservations, and dozens of foreign countries. The stakes are enormous. Thirty-four million people visit Las Vegas yearly, 127 million more frequent casinos nationally. By the year 2000, Americans were spending more on gambling than almost all sports and entertainment combined.

The deal was a resounding business story: the buccaneering Wynn -- prodigal son become reigning king -- now seen as one more profligate c.e.o. besieged by shareholders. His nemesis, the billionaire octogenarian Kerkorian, the "Lion of Las Vegas" to the local media, was known in the zoology of the national press simply as the "old jackal," or "Wall Street's nastiest raider." Behind the familiar profiles of the two men were richer, relatively untold stories. But in a city constantly reinventing reality, burying history, and throwing up glitzy new facades, Las Vegans found little of substance in the local coverage of the most important transaction in the annals of the Strip.

Las Vegas's latest coup -- bid per share replacing a bullet -- was seen by many as another cleansing of excess in a tradition begun with the mob execution of Bugsy Siegel in 1947. Readers of The New York Times, The Wall Street Journal, Business Week, and other business journals knew for months that Wynn's Mirage was "ripe for takeover," as one account put it, and that Kerkorian was jockeying to acquire it. Wynn, given to lucrative personal stock options, sweetheart corporate leases of his art, and the seating of his wife on the board; and with a $2.5 million annual salary, $1.25 million annual bonus, and $5.2 million leasing arrangement that made him one of the most lavishly paid executives in the U.S., had watched Mirage stock plummet from a high of $26.38 in May 1999 to $10.88 at the end of January. There had been reports of outbursts of Wynn's temper and bizarre behavior at an investors' gathering last winter. It all stoked shareholder unrest. "Why haven't they thrown the bum out?" the New York Observer's Christopher Byron asked two months before Kerkorian's move.

Just as Wynn was teetering on the corporate edge last spring, The Independent of London summed up his Nevada power with a candor unknown in the Las Vegas press. "Politicians jumped at his command, candidates prostrated themselves to seek his endorsement and his campaign contributions, city planners re-routed roads and sewers at his behest, water authorities allowed him to siphon off millions of precious gallons to feed his private golf course . . ."

Despite the national coverage, Kerkorian's takeover struck the Strip like a thunderbolt out of a clear desert sky. Neither the Review-Journal (circulation 214,000) nor the Las Vegas Sun (circulation 225,000) had reported how shaky Wynn's hold had become, leaving readers stunned by the purchase. "Las Vegans would have had to go to a library to find out what was happening in an industry that totally dominates their state," said one retired journalist. "I am still in shock," the Sun's owner, Brian Greenspun, wrote days after the takeover. "I just don't remember our coverage," said the Sun editor, Mike Kelly. Repeated calls to others at the paper, including publisher Greenspun, went unanswered.

The MGM-Mirage deal was a classic example of what much of Las Vegas journalism has become at the millennium -- euphemistically calling the hostile takeover a "merger," masking the humiliation of a tycoon who had been off-limits to critical reporting. Local stories attributed the decline of Mirage stock to Las Vegas competition, Wynn's "frustration with Wall Street," and losses at his Mississippi casino. The Review-Journal portrayed Wynn and Kerkorian as "both shrewd businessmen whose power is matched only by their fortunes," and praised Wynn as a "lofty visionary." For its part in the most important business story in the city's history, the Sun relied mostly upon The Associated Press. Its own reporters wrote a fluffy feature on how Kerkorian had "pumped life into MGM," and on how Wynn was known for "parlaying family contacts and a knack for smart investment." As if to sum up the blithe reporting in both papers, the Review-Journal blandly editorialized that Wynn was exiting "a winner."

"I think we could have done a better job, but we did a pretty good one covering the high points," said the Review-Journal's editor, Tom Mitchell. "It was a complex deal and I'm sure there were backroom deals we'll never know." Mitchell added that since the transaction the paper has hired three new reporters to cover the gambling industry.

While his face was being saved at home, national coverage of Wynn was less indulgent. "The most powerful man in Las Vegas is fighting a rising chorus of investor discontent over spiraling costs and the timing of financial disclosure," said Business Week in December 1999. The Independent of London revealed that Wynn had nearly lost his license in Atlantic City "after a Mafioso called Tony Castelbuono was caught recycling the profits of heroin trafficking at the gambling tables." The March 9, 2000, article referred specifically to a lengthy, 1983 Scotland Yard file alleging Wynn's "links to the Genovese Cosa Nostra family." Scotland Yard had investigated Wynn when he sought a gaming license in Great Britain, and Wynn had subsequently withdrawn the license application. But that famous decision had never made it in any detail into the Las Vegas newspapers.

Apart from that murky history, The New York Times reported the deal as less the result of Wynn's dissatisfaction with Wall Street than Wall Street's skepticism about Wynn. Time similarly noted in its March 6 issue that "hours after Kerkorian launched his offer, five Mirage shareholders brought class actions in Las Vegas to demand that Wynn and his board seriously consider all bids." Another report in Mergers and Acquisitions Journal cited the departure of a top Mirage executive, Dan Lee, who had been highly critical of Wynn's management style. Among the intriguing stories after the deal was an April 10 piece in the New York Observer describing "a cozy agreement . . . for Mr. Wynn to purchase masterworks at below-market-prices -- and sell them again to interested parties." One buyer was the media magnate S.I. Newhouse, a longtime Wynn friend, who boarded his corporate jet the night before Wynn's exit from Mirage to dine with the casino kingpin as part of Newhouse's effort to acquire a 1942 Picasso. But little of this colorful by-play was elaborated or analyzed in Las Vegas.

"I long ago learned that if I wanted to know what was happening in Las Vegas I had to read the Los Angeles Times," a local historian says in reflecting on the Las Vegas coverage of the buyout.

Las Vegas journalism was not always so tame. Nevada was once known for its courageous and independent press. Mark Twain had made history taking on the mining, railroad, and cattle barons from his pulpit as writer for the Virginia City, Nevada, Territorial Enterprise. A century later, the Sun's founder, Hank Greenspun, was briefly one of the nation's publishing legends -- a lone voice against Nevada boss Pat McCarran and Wisconsin demagogue Joe McCarthy. But if he once took on tyrants and even prominent Strip gangsters like the Cleveland thug Moe Dalitz, who owned the Desert Inn and whose philanthropy made him a civic hero, Greenspun also yearned to be an inside player. "Greenspun's substantial holdings
... have made him so rich," Time reported in 1975, "that he may be losing his maverick feistiness."

The abdication reduced the Sun to the paleness of the older Review-Journal, which took a diffident view of the Strip's powerful masters. "From this day forward, Mr. Siegel of the Flamingo will never be referred to as 'Bugsy,'" read a 1946 posting in the R-J newsroom. A longtime R-J editor, Al Cahlan, himself owned a piece of a casino. By the 1990s, the substantial kinship between the Sun and Review-Journal was sealed with a joint operating agreement, and Las Vegas's gambling empire was safer than ever from prying local journalism.

Notably missing from local coverage of the Kerkorian-Wynn deal was the Wynn biographer John L. Smith. Smith's 1995 biography, Running Scared: The Life and Treacherous Times of Las Vegas Casino King Steve Wynn, had detailed accounts of Wynn's continuing proximity to organized crime, and promptly drew down a sweeping libel suit in which a Las Vegas jury found for Wynn in August 1997, bankrupting the publisher, Barricade Books. Though Smith was personally dismissed as a defendant and his book itself judged libel-free -- the litigation was over the wording in the publisher's catalogue -- the suit made it awkward if not impossible for the city's most respected journalist to write about Wynn lest it be perceived as a vendetta.

While Smith keeps turning out his enormously popular column, and insists that he's never had a story killed by Review-Journal editors, he rarely mentions Wynn. But the impact of what he and others refer to as the libel suit's "big chill" is not always visible. What happened to Smith as the author of a meticulously researched book on the premier businessman and political patron, is illustrative of the fate of Las Vegas journalism.

"John L. is one of the two or three all-time best reporters in Nevada and maybe in the entire American West," says a competing editor who asked not to be identified. A fourth-generation Nevadan whose family has been in the state since 1881, Smith was one of six children of a hard-working union painter and his political-activist wife in the sprawling Las Vegas suburb of Henderson. After graduating from Western Washington University, he began as a sportswriter at the Sun in the early 1980s and soon graduated to a daily opinion piece at the Review-Journal. "I saw him as the rocket here and tried to open doors that had long been shut," Smith says of covering Wynn. "Other reporters were afraid to upset him because they wanted access to him as a source for stories. I knew he couldn't be a source for a story because he was the story."

According to several accounts, when Wynn learned that Smith was writing Running Scared, he called the reporter's bosses demanding to know what the paper was "going to do" about the writer. Editors told Smith not to mention the book in his column, but before the biography was even completed, Wynn filed a multimillion-dollar action against Smith and his publisher, Lyle Stuart and Barricade Books. The suit was directed not at Running Scared, but at the catalog copy written by Stuart. Paraphrasing the Scotland Yard file that Wynn had "been operating under the aegis" of organized crime, Stuart used the term "front man" to describe Wynn because he thought "aegis" would not be commonly understood. The Review-Journal reported the case on page 5B, under the headline wynn sues local writer, an inside-page obscurity Smith has never forgotten. "That's when I knew I was on my own," he says. Las Vegas's most powerful businessman was suing its pre-eminent journalist over issues at the heart of the history and legitimacy of the state's ruling industry, and the story was treated as a relatively minor dispute.

When Smith was dropped from the case before the trial began in July 1997, Wynn went to the Nevada Supreme Court to appeal his removal. "He wants to bust you out," Stuart told Smith, using casino parlance. Meanwhile, lavish character witnesses appeared for Wynn, including Governor Bob Miller of Nevada and Mayor Jan Laverty Jones of Las Vegas, both of whom had received contributions from Wynn and, in Jones's case, transportation on the Mirage corporate jet. "Las Vegas is the quid pro quo capital of the world," Smith says of the politicians. "It hurts, and reminds you of how small you are in the system. Steve Wynn's influence in our society has been great and deep. It's hard to sit there and watch as your side catches the frowns from the judge and the other side gets all the smiles and accolades." A Las Vegas jury initially awarded Wynn $3.1 million for punitive and compensatory damages. As the verdict came in, Wynn was at the Mirage hosting President Bill Clinton, himself a recipient of Wynn contributions.

By the time of the Kerkorian buyout last March, Stuart's appeal of the verdict was before the Nevada Supreme Court, where Wynn's lawyers still sought to restore Smith as a defendant. At a June 16 hearing, a judge pointed out that all seven justices of the highest court had received contributions from Wynn's empire, though none regarded the money as disqualifying. (A decision is expected later this year.)

"Did they let me keep my job despite every effort by Wynn to fire me? You bet they did," Smith says of the Review-Journal editors after the explosive revelations of Running Scared. "Did they assign a team of investigative reporters to check out the facts? No." His disappointment is plain. "It gets pretty lonely when no one else wants to rock the boat. It's not that you can't write critically about Wynn, but if you do you get the whining, threatening, and cajoling that comes with it. It's not that editors are killing stories. Reporters just don't want the hassle. They're terrified of getting sued. And I can see why. I had sources who were themselves worth $300 million afraid to go on the record about Wynn."

Geoff Schumacher, editor of Las Vegas's lively if lower-circulation alternative weekly, City Life, whose relatively penetrative coverage of the deal included major feature stories as well as much commentary, echoes the theme of suppression by default. "There's not a restriction at the Sun or R-J against criticizing Wynn or the industry," he says. "They either self-censor or they're just not very good, aggressive reporters. It's a built-in lazy culture."

Local critics point to several reasons for the unevenness of the Las Vegas press, though typically not for attribution in a town where few are willing to speak openly. Las Vegas reporters, they say, have been notoriously underpaid for decades. Like many cities its size in the American West, Las Vegas was both journalistic waystation and backwater. "If you were aiming to move up and get out of town and wanted to do good reporting, your editors would be leery," says a University of Nevada professor. "But if you hoped to stay in town, you didn't want to piss off anybody in the casinos who you might want to hire you later." The judgment seems borne out by the number of reporters who, like elected politicians and other public officials, tend to end up on the public relations staffs of casinos. There are literally dozens of examples of the revolving door.

The cost of all this in public policy terms, as well as in the integrity of the press, is difficult to overestimate. The MGM-Mirage deal was a once-in-an-era opportunity to examine the inner reality of a massively powerful business. Local papers might have dealt with crucial bread-and-butter issues of their rapidly growing city -- what the deal held for labor where the notoriously anti-union MGM is now the state's largest employer, and where the worldwide gambling oligopoly is in even fewer hands.

Some in Las Vegas seem to understand that as the headquarters of an international empire, the city has become a kind of shadow capital of the nation, and that coverage of its enormous power is as much the responsibility of the local press as of any outside media. But reporting on a shadowy world capital is an imposing task for a journalism become cautious, if not compromised and captive.

 

Sally Denton and Roger Morris are the authors of The Money and the Power: The Making of Las Vegas and Its Hold on America, forthcoming in February.

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