Merv (23 page)

Tom recommended that, first thing Monday morning, we should personally present this information to the Gaming Commission investigators in Trenton.

I didn’t want to wait. “Tell them we’ll be there on Sunday.”

Not given to theatrics, Tom said, “Merv, is that really necessary? One more day won’t make any real difference.”

This was probably the only time where I believed that my instincts were even remotely superior to Tom’s regarding a legal matter. Actually, this really wasn’t about the law; it was now a question of convincing the Gaming Commission that I was even more concerned than they were with both the fact and the appearance of propriety. I understood that the dramatic gesture of calling a meeting on a Sunday morning would accurately convey how strongly I felt about fixing this situation immediately.

“No, we’re going down on Sunday. Set it up, okay?”

The key issue at the meeting was what to do about Mike Nigris. Since the information we had developed was still preliminary, my lawyers believed that it was important not to rock the boat too early. They recommended that instead of firing Mike, I move him over to the other parts of my business, the Beverly Hilton, Teleview Racing Patrol, and my radio stations, at least for the time being while we continued to investigate.

Of course, I agreed to move Mike totally out of Resorts and I immediately informed the Commission of my action. The next problem was finding someone to see the deal through to completion and to oversee the casino business once it came into my hands. I needed a quick study, someone of impeccable integrity and tremendous ability who could hit the ground running.

I’ve said many times that I had to drag Tom Gallagher, kicking his feet and dragging his heels, into the gaming business. Poor Tom. When he left the Middle East, he had no idea that he’d soon find himself in a quagmire that would make the Saudi desert seem like an oasis of calm.

For the next few months we concentrated on getting all of the arrangements in place to complete the final purchase and the financing. The deal was scheduled to close in November 1988 in a very complicated series of transactions.

The last stage of any deal of this size consists of what are called “closing adjustments,” which meant that my accountants had to sit down with Donald’s accountants and hash out every tiny detail. Following that, there would be one last session to incorporate all those points. Out of that would come the language necessary to generate the final signature contracts.

In October, a few weeks prior to the closing adjustments, Tom and his team were reviewing all the files. It wasn’t a simple process. Trump’s people were still in control of the company, and all the deeds and documents had to come from them.

Tom Pennington, one of our young lawyers, flagged something that he thought might be important. He said, “They’ve screwed up the legal description of the land next to the Steel Pier. They left out the beach in front of the Taj.”

He asked Tom Gallagher what our side should do about it during the closing adjustments. His reaction was immediate: “We do nothing. Trump is going to try and squeeze everything he can out of the final adjustment. We’re going to hold this back. Knowing Trump, we’ll need it later.” Tom called and asked me if I approved of his strategy. I was delighted that our team had discovered a valuable ace to hold in reserve. I told him to play it however he thought best.

At the closing adjustments, Donald’s team tried to slip it in without a fight. They stuck in what’s called a “quit claim deed” for the beach and, of course, Tom spotted it immediately. Innocently, Tom asked, “What’s this?” One of Trump’s lawyers replied, “Oh, that’s just a formality. It’s language covering the beach in front of the Taj.”

Now, if you remember, I had specifically agreed to sell Donald the Taj Mahal and the Steel Pier during our meeting in his office. But he’d never asked to buy the beach. In his typically understated and gentlemanly way, Tom pointed that fact out to Donald’s people. He could sense the panic starting to break out across the table as they realized that if this situation wasn’t easily resolved, they would have to explain to Donald why this “detail” had been overlooked. They tried gamely to make the case for letting it slide: “Well, the beach
obviously
comes with the Pier,” was the Trump party line. Tom was unmoved. He calmly restated our position, “It’s not part of the sale. Of course, we’re willing to discuss a fair price for it. What do you have in mind?”

At the final adjustment meeting, held in the conference room of Gibson, Dunn & Crutcher’s New York office, we negotiated roughly $10 million more for the beach that Trump forgot to buy. Exiting the meeting, Donald shouted, “I’ve been out-lawyered!”

Want to hear a story about devotion to duty above and beyond the call?

The deal finally closed after midnight and Donald’s people turned over the check for the Taj Mahal at 2:00 A.M. With the check in his pocket, the newest member of my team, Larry Cohen, spent the next five hours sleeping fitfully on a couch in Tom Gallagher’s office.

Shortly before 8:00 A.M., Larry drove downtown to the bank and waited for someone to arrive. A dozen senior citizens were already lined up on the sidewalk, waiting to cash their monthly Social Security checks. He was struck by the surreal contrast. Their checks were for $400 or $500 at most, while Larry was about to deposit a check for $273 million. The interest alone was $50,000 a day. By arranging to deposit the check before the bank opened, Larry had managed to earn the company an additional day’s interest. Ten thousand dollars for every hour spent on Tom’s couch. That’s dedication.

To celebrate the closing, and as a thank-you to all the bankers, lawyers, and my management team for their incredibly hard work, I threw a big dinner at the Rainbow Room in Manhattan. Of course, the evening had to have a beach theme—umbrellas, palm trees, drinks with parasols. We had T-shirts printed up and given out to everyone as a memento of what Tom Gallagher still calls “the deal from hell.”

A single question was printed on the front:
“Where’s the beach?”

One of the major differences between Donald and me is I only buy things that I enjoy running. It has to be something that interests me on more than an investment basis or it wouldn’t be any fun. Then you’re only a trader. You’re out there buying up companies you never see. The only contact you have with management is to scream at them to get profits up. And if they do, you turn around and sell it out from under them.

I had always wanted to take a hands-on role in marketing both Resorts Atlantic City and Paradise Island in the Bahamas. That was the challenge for me, and I was eager to get started. It wasn’t going to be easy, especially not in Atlantic City.

Both Donald and I had invested in the gaming business right before the end of an economic boom. In the next few years, the entire country would suffer through the recession and the Gulf War, while Atlantic City would be particularly hard hit by several very harsh winters that greatly diminished tourism.

One morning in early 1989 I woke up and found myself responsible for $925 million worth of debt. When I bought Resorts, it had about $600 million of debt. Added to that was the $325 million in bonds that we used to finance the purchase. As the economy grew worse, it became clear that we would have trouble paying the interest on the bonds and would need to restructure the debt. I know this sounds crazy, but it didn’t bother me. What were they going to do, put me in debtor’s prison? It’s a momentary shock to the system, and then you start to work through it.

Rolling up my sleeves, I went to work in the back of the house, meeting daily with my management team and planning ways to keep Resorts afloat. It had nothing to do with saving my own neck. But I felt a strong personal responsibility to the bondholders who had placed their confidence in me.

I told my team to figure out the best way to deal with both the debt and the hard economic realities created by the recession. They developed a business plan that restructured the whole company. Then we presented it to every bondholder. It was approved overwhelmingly, with over 95 percent of the bondholders voting to support the restructuring.

In 1989, Resorts was reorganized under Chapter 11 of the federal bankruptcy laws. We were the first company to propose the idea of a friendly “prepackaged” bankruptcy that didn’t require a judge to settle disputes between the different parties. Everything was agreed upon in advance for the benefit of the investors.

It was all accomplished in seven months, which was something of a record in the world of finance. Some reorganization plans take years to implement and produce extensive litigation, in which case only the lawyers win. (We reorganized a second time in 1994. As part of our new plan, I traded my debt for equity. In other words, I gave the bondholders 78 percent of the company, while I retained 22 percent. Then I invested additional money to keep the company going. Donald mockingly called the second reorganization my “Chapter 22.” Somehow he neglected to mention that in 1991 he did the same thing with his Atlantic City hotel-casinos, employing the same investor-friendly “prepackaged” bankruptcy technique that we had pioneered.)

With the restructuring complete, I could now give my full attention to the marketing aspects of the gaming business that had attracted me to Resorts in the first place.

Creative change had always been the hallmark of my television talk show. I approached the marketing of Resorts Atlantic City and Paradise Island with the same philosophy that had proven so successful during twenty-three seasons as a host. Other casino owners spent their time worrying about whether a high roller on a lucky streak should be eighty-sixed or if that day’s take was going to meet projections. I focused on ideas that would bring more people through the door.

I employed the “Field of Dreams” approach, with a twist. Unlike Donald, I had no desire to build a fabulous new casino to attract customers. I knew that if I created an atmosphere of fun and excitement within my
existing
casinos, they would come.

It was an incredible time. We did so many innovative things that had never been done before in Atlantic City.

One of the first calls I made was to Warren Cowan, my longtime friend and the man who invented modern Hollywood publicity.

“Warren,” I said teasingly, “you know a few Hollywood stars, don’t you? How about persuading them to come—all expenses paid—to Resorts Atlantic City or Paradise Island, where they aren’t seen very often?”

Warren immediately started recruiting people such as Burt Lancaster, Robert Wagner, John Forsythe, and Dinah Shore to participate in a number of big events. Resorts was the first hotel-casino in Atlantic City to have artists like LeRoy Neiman come and personally sign their reproductions. That was a huge draw, as were the bestselling authors who came in for autograph sessions. One summer I’d seen almost every woman on the beach reading the latest Sidney Sheldon novel, so I said to my promotions director, “Let’s bring him back here. Those women would love to meet him. And it will get them off the sand and inside the hotel along with their high-rolling husbands.”

Occasionally we’d do a private dinner party for a few hundred high rollers and their wives. I’d book singers like Tony Bennett or Roberta Peters, the great opera star, to come and perform in a very intimate setting.

I made some changes in the games themselves. I was the first to bring in a European-style roulette wheel (again with the wheels), which doesn’t have a double-zero, thus creating more favorable odds for the bettor. We also experimented with double-deck blackjack and changing the odds at the craps tables.

A world-class buffet was something that had been done successfully in Las Vegas but never in Atlantic City. I thought it would also be a huge drawing card at Resorts.

I was right. It went through the roof. In fact, the Beverly Hills-themed buffet became such a phenomenon that it created its own problems. Just as there had been mobs of people lining up for hours when we brought
The Merv Griffin Show
to Las Vegas, the buffet lines were so long that they would snake all the way in and around the building. Unfortunately, that also meant that people were spending hours in the buffet line instead of gambling. Necessity being the mother of all good inventions, I came up with a solution. We instituted an appointment system whereby someone standing at a certain point in line was given a ticket that told him to come back at, say, 12:06 P.M. We had measured exactly how long it would take to get from various points in the line to the buffet itself. Overnight there were no lines, but both the buffet
and
the casino tables and slot machines were now packed simultaneously.

Synergy also came into play. I decided to hold contestant searches for
Wheel of Fortune
at Resorts. The response was so overwhelming that the highway into Atlantic City was literally jammed with cars. Based on the success of the
Wheel
search, I subsequently added an open call for
Jeopardy!
contestants as well. Not only did the publicity attract a lot of new people to Resorts, we also recruited some pretty good players for both shows.

I used to do all my own TV commercials. If you lived in the Northeast in the late eighties and early nineties, you probably saw them. For those of you who didn’t, they showed me running around Resorts, doing every job in the hotel. I’d be answering the phones, delivering room service, or fluffing up the pillows. Johnny Carson used to kid me during his monologue by saying, “Merv puts two mints on your pillow every night. Unfortunately, he’s been eating them too.”