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Business: Shootout at the Hughes Corral

17 minute read
TIME

A FEW minutes before 10 o’clock on Thanksgiving Eve, Howard Hughes pulled an old sweater over the white shirt that he wore open at the neck, donned a fedora and walked to the rear of the penthouse atop the Desert Inn in Las Vegas where he had lived for the past four years. Avoiding the private detectives who guarded the elevator around the clock, Hughes eased his tall, thin frame through a long-unused fire door and walked the nine stories down an interior fire escape to the hotel parking lot. He could be reasonably sure of leaving unrecognized. No one but his closest aides and his estranged wife had seen him in more than a decade.

Hughes was in good spirits, and appeared to be enjoying the escapade. Two autos were waiting to drive him and four aides to the North Las Vegas Airport, which he owns. There he boarded a Lockheed jet belonging to his Hughes Tool Co. and took off for the Bahamas. By the next day, Hughes was ensconced in a ninth-floor suite of the Britannia Beach Hotel on Paradise Island−with a 24-hour guard at the door.

The flight had been secretly planned for more than two months. The Paradise Island suite had been held for Hughes for more than a year at a cost of upwards of $1,000 a day. and equipped with a direct telephone line to the U.S. Back at the Desert Inn, 84 hours passed before the guards discovered that he was gone.

Mormon Mafia. From his tropical headquarters, Hughes kept watch over−while staying out of the direct line of fire−an epic struggle that broke into the open last week among his lieutenants in Las Vegas. At stake was control of Hughes’ $300 million Nevada empire, including five Las Vegas hotels−the Desert Inn, the Sands, the Landmark, the Frontier, the Castaways−and two other gambling houses, the Silver Slipper and Harolds Club in Reno. As with almost everything concerning Hughes, the fight was redolent with mystery, suspense and litigation.

At 64−he will be 65 on Christmas Eve−Hughes is quite possibly the richest living American. His holdings in oil-drilling equipment, aerospace, electronics, airlines, communications and real estate are worth anywhere from $1.4 billion to $2 billion. They are rivaled only by the sums amassed by Oilman J. Paul Getty, another notable eccentric. Hughes’ major holdings are entirely privately owned and thus exempt from the laws that require public reports. Hughes exercises his sole control in the manner of an autocratic ruler, telephoning his orders and never deigning to appear among his subordinates.

His obsession for privacy is all-devouring. In the 1950s, he stopped seeing anyone except a handful of business associates and his “Mormon mafia”−half a dozen men chosen by him because they do not drink, smoke, womanize or have liberal ideas. They act as combination nurses, cooks, bodyguards, advisers and messengers to the outside world. For the past four years, Hughes had never been known to move out of his Las Vegas aerie. Then he decamped for Paradise Island, leaving behind some of his executives to wield the knives in the messy corporate fight.

On the one side were three longtime and trusted lieutenants from the Hughes empire. They were Raymond Holliday, executive vice president of the Hughes Tool Co. of Houston, the castle keep of the boss’s corporate kingdom; Frank W. Gay, senior vice president of that company and a onetime member of the Mormon corps around Hughes; and Chester C. Davis, Hughes’ longtime lawyer. On the other side was Robert Maheu (pronounced May-hew), 53, a bulky, pink-cheeked man who, after only Hughes himself, had become the second most powerful figure in Nevada. Maheu, an ex-FBI agent, had worked for Hughes since 1953, when his own tough anti-Communism caught the eye of superpatriotic Hughes. He was assigned to several security and personal jobs, including keeping an eye on some of Hughes’ female acquaintances.

Since his promotion to head Hughes’ Nevada holdings. Maheu had become rich. Besides the $500,000 a year that he was paid by Hughes, he had an unlimited expense account and freely used company Cadillacs, helicopters and an airplane. He kept a $500,000 yacht on the Pacific, a French Regency home in Las Vegas estimated to be worth the same amount, and a $50,000 lodge at nearby Mount Charleston.

In recent years, Maheu had expanded on his own, buying into a $70 million housing development in Los Angeles, restaurants and an electronics company. Maheu and his security chief, Jack W. Hooper, a former Los Angeles cop, also had interests in a number of consulting firms. The Maheu firms hired the Hooper firms as security consultants, while the Hooper firms hired Maheu’s companies for advice on management.

Depth of Corruption. Maheu’s rise stirred intense envy and innumerable rumors in Las Vegas. In that gaudy city, where stuccoed pastel towers climb improbably out of the desert, a gambler’s distrust pervades everything, and almost everyone is thought to have his (or her) price. The entertainers often kick back part of their inflated fees to the producers, dishwashers pay their bosses for the opportunity to work, and waitresses pay off their captains. “There is a depth of corruption here that would leave even the Vietnamese breathless,” reported TIME Los Angeles Bureau Chief Don Neff. “A prominent banker, after his third drink, talks loudly about kickbacks: ‘$50,000, $75,000 off the top−so what’s that?’ A famous attorney declares in public: ‘If he doesn’t like it, I got friends who will take him to the edge of town and take care of him.’ Embezzlement, thievery, cheating−they are subjects as natural to Las Vegas as rosaries are to convents.”

Hughes, who is notoriously distrustful of everyone, became suspicious of some of his Las Vegas employees last February after a tip-off from federal investigators, who are investigating corruption in the Hughes Nevada operation. Huge kickbacks, it was said, were received on the purchases of old and largely worthless Nevada mining properties, for which Hughes had paid $2,000,000 more than they were worth. In another deal, one prospective seller was asked for a $250,000 payoff in return for persuading the boss to buy a piece of land on the Las Vegas Strip. Payments were demanded from entertainers who performed at Hughes’ hotels, and from others who were offered Hughes’ business.

There was evidence of skimming, the system used to siphon millions out of the casinos in order to dodge taxes. Last summer, state officials looking into the accounts of the Hughes-owned Sands Hotel turned up $186,000 in “markers,” some of which were lOUs signed with fictitious names. Hughes’ managers wanted to write off the $186,000 as bad debts, a request that the state officials bluntly refused. Mob-connected men settled down comfortably in the Hughes organization. One of them: John Roselli, who was imprisoned in the ’40s for shaking down Hollywood movie producers and later was convicted of conspiring to fleece wealthy card players in rigged gin-rummy games at the Beverly Hills Friars Club. Roselli, who holds a gift-shop lease at Hughes’ Frontier Hotel, boasts that he collected a large finder’s fee when the Desert Inn was sold to Hughes and recently dealt himself in on the kickbacks paid by entertainers at the Hughes casinos.

Many of Hughes’ Nevada enterprises were not paying off as handsomely as the owner had expected. Some were barely breaking even−or losing. That could be attributed partly to the nation’s economic slump. Still, the suspicion lingered that at least some of Hughes’ losses consisted of funds going into the pockets of his employees. All in all, the operating expenses of the Maheu-managed hotel-casinos were far higher than those in rival operations.

Private Eyes. Largely for those reasons, Hughes ordered a force of attorneys, auditors, and casino experts to look into his gambling operations. Separately, the managers of Hughes Tool Co. in Houston hired their own private investigators to check up on Maheu. Aware of the probe, Maheu brought in his own private eyes to delve into the affairs of his Houston rivals and to keep watch outside Hughes’ suite. At about the same time, various agencies of the Federal Government, the state of Nevada, Clark County and Las Vegas were all prying into the Hughes businesses. So many gumshoes were lurking around the Hughes operation that quite a few of them spent most of their time investigating one another.

Early this year, Maheu’s relations with Hughes started to cool. The handwritten memos from Hughes to Maheu became less frequent. Not until Hughes was on Paradise Island, though, did the Hughes Tool Co. (“Toolco”) executives from Houston−Holliday and Gay plus Lawyer Davis, who frequently act for Hughes on business unrelated to the tool company−make their move against Maheu.

They gathered at the Century Plaza Hotel in Los Angeles two weeks ago and summoned a Maheu aide from Las Vegas. They made no charges, but told him that they had a Hughes proxy and demanded Maheu’s resignation within four hours. Said Maheu’s aide: “Give us a bill of particulars. Show us your authority. How do we know you are speaking for Hughes?” To that, Toolco’s Holliday replied: “We are going to fire 155 people−all of the Maheu crowd, all of the Hooper crowd, and others.”

When Maheu heard of the firing, he refused to give in. Six hours later, Davis and Gay were in Las Vegas. They took over the 18th-floor penthouse of the Sands Hotel and sent auditors elbowing into the counting rooms of Hughes casinos to check the evening’s take. They publicly announced Maheu’s firing. Maheu got a court order preventing the Toolco group from taking control of the hotels, casinos and other properties. Maheu argued that their power of attorney had been forged, that only Hughes could fire him. He contended that Hughes had fallen ill in September and “thereafter his medical condition became progressively worse.”

Maheu also maintained that if the Toolco people took over, Hughes’ casino licenses might be endangered, since none of the outsiders had been approved by the state gaming-control board. Finally, Maheu got Undersheriff Lloyd Bell to raid Hughes’ quarters at the Desert Inn on suspicion of “foul play.” The undersheriff found an empty apartment. Maheu’s allies openly speculated that Hughes was incapacitated−or dead. There was even one story that Hughes had been lowered on a stretcher the nine stories from his apartment to the ground to start the trip to Paradise Island.

Total Surrender. Somehow, Davis and Gay had to convince the Nevada authorities and the public that Hughes was alive and well on Paradise Island, and that they were indeed acting on his orders. Their solution: a 1:30 a.m. phone call from Hughes to District Attorney George Franklin and Governor Paul Laxalt, a friend and tennis partner of Maheu’s. Hughes, as Laxalt later told it, joked that reports of his death were “exaggerated.” He said that he was vacationing and planned to return to Las Vegas. He assured Laxalt that he wanted Maheu fired. “There is no doubt it was Hughes,” said Laxalt, who has never met the man but had previously spoken to him on the phone. “He made too many personal references to things we had talked about before.” As he hung up, Laxalt said: “Well, Las Vegas isn’t Mr. Maheu’s town any more.”

Davis, a portly and emotional man, gloated in triumph. He suggested that his friends find a bookmaker and “ask him what the odds are on Maheu hanging on.” At one point he glared at the ceiling, and shouted at any electronic bugs that might have been planted by Maheu’s men: “If you’re up there, you son of a bitch, you’re going to jail.”

In private meetings, Maheu sought to salvage what he could. Davis demanded total surrender: Maheu’s banishment from the Hughes empire, from his houses, from Las Vegas and from Nevada. Maheu demanded concessions: protection against any future suits charging mismanagement, a fat severance check, and assurance that Toolco would take over the commitments that he had assumed over the years in Hughes’ name. Nevada businessmen were worried about who would pay off the many Hughes obligations−Maheu, Toolco or Howard Hughes. They were not alone in their concern; employees chose up sides and wondered who would pay them. State, county and city officials audibly fretted about licensing and other legal problems and possible losses of revenue. In fact, until the whole affair was settled, a substantial part of southern Nevada’s economy faced financial chaos.

Why hadn’t Howard Hughes simply told Maheu that he was through? “Hughes was so mad at Maheu that he wanted to embarrass him,” said one insider. Another suggested that “Hughes is furious with Maheu, and in his imperial manner he wanted to show that he did not have to bother with him.”

Harlow and Hepburn. For Howard Hughes, things have always come easily; it is people that have been difficult. “I suppose I am not like other men,” he remarked while he was still in high school. “Most of them like to study people. I am not so interested in people as I should be, I guess. What I am tremendously interested in is science, the earth and the minerals that come with it.” Hughes’ father invented and patented the modern oil-drill bit−a device with 166 cutting edges−and rented it for $30,000 a well, or dry hole. The bit is still the base of the Hughes fortune. “We don’t have a monopoly,” Hughes once remarked. “Anyone who wants to dig a well without a Hughes bit can always use a pick and shovel.”

At 19, when his father died (his mother had died earlier), Hughes inherited a majority interest in the company. That holding was worth $500,000. Hughes bought the rest of the shares from his relatives, moved to Hollywood and broke into moviemaking. After some early failures, he began producing hits, including Hell’s Angels, Scar face and The Outlaw, which made Jane Russell a national pinup girl. His pictures introduced, among others, Jean Harlow, George Raft, Pat O’Brien and Paul Muni.

In public, Hughes was often seen with the stars of the day−Billie Dove, Lana Turner, Linda Darnell, Katharine Hepburn, Ginger Rogers, Ava Gardner, Ida Lupino. In private, he visited many others−young, eager, and not too prudish unknowns. Hughes called them “crows,” but he feared rebuff even from them. It was the job of one of his public relations men to see that the green light was up before Hughes ever appeared on the scene. He once boasted that he had deflowered 200 virgins in Hollywood; the wonder was that he could find so many.

Big Flop. Hughes’ other passion was airplanes. He set a world speed record of 352.39 m.p.h. in 1935 in an aircraft of his own design. He was named the world’s outstanding aviator for the year, and President Roosevelt later presented him with the Harmon Trophy. In 1938 he flew around the world in a record 91 hr. 14 min., was given a ticker-tape parade on Broadway that surpassed Lindbergh’s. Hughes’ big flop of World War II−a 200-ton, eight-engine plywood flying boat dubbed the “Spruce Goose,” which was only 11 ft. 4 in. shorter than today’s 747 superjet−led to a celebrated joust with Maine’s Senator Owen Brewster before a congressional committee. Brewster demanded to know why Hughes had spent $18 million in Government funds and produced no flyable plane. Hughes won the publicity battle when he flew the plane for a mile at 70 ft.−the only time it has ever been in the air. After that, Republican “Hughes for President” clubs sprang up across the country (he simply ignored them).

Hughes was nearly killed in 1947 while test-piloting a new plane of his own design. It crashed in Beverly Hills, and he suffered extensive fractures and burns. He grew a mustache to cover some of the scars, and gradually became more reclusive.

Investing the Winnings. In his corporate enterprises, it was somehow always others who got hurt. Under his stewardship, RKO Radio Pictures lost $20 million between 1948 and 1953, but Hughes sold out at a profit. In his greatest legal battle, he lost control of Trans World Airlines, and in a later suit was ordered to pay the company $136 million on grounds of mismanagement and breach of antitrust laws (the case is still being appealed). Hughes abruptly sold his TWA shares in 1966, when they had reached $86 each; he collected $546 million. TWA stock closed last week at 121.

Hughes invested his TWA winnings in Nevada, which has no inheritance taxes. Besides the hotels, casinos, mining properties and airport, he bought a regional airline, now named Hughes Air West, which serves Las Vegas and other cities. Las Vegas, he declared, would some day be as large as Houston.

Hughes has grown progressively richer largely because the companies he ignored−and left alone under competent manager−prospered mightily. Hughes Tool Co. still holds about 60% of the world market for drill bits. Hughes Aircraft, an electronics-and-satellite company, has also thrived. It is controlled by the Hughes Medical Foundation, of which Howard Hughes is sole trustee. All together. Hughes companies employ about 65.000 people. It is a weakness of free enterprise that such large and varied holdings are subject to the whims of one capricious man. There are disturbing questions for the future. As Hughes grows older, he can hardly help coming increasingly under the influence of the few intimates who act as his Seeing Eyes to the world. To avoid federal inheritance taxes, he has presumably willed his estate to a foundation. But who would be the trustee? Perhaps his second wife, former Movie Actress Jean Peters, his only known heir, who is living alone at 1001 Bel Air Road in Los Angeles and awaiting divorce. Or someone cut from the same cloth as Maheu?

New Adventures. Howard Hughes can−and probably will−embark on new adventures. Last September, Hughes Aircraft and TelePrompTer. in which Hughes has an interest, jointly applied for permission to launch a private communications satellite. He might intend to combine the satellite, his extensive CATV facilities, his sports network that packages shows for independent stations, and his Las Vegas entertainment resources into one huge television production package. Or he could be planning to invest in the Bahamas. Nearly all of Paradise Island is owned by Resorts International, which he reputedly tried to buy for $85 million last year. Bahamian Prime Minister Lynden Pindling is willing to reconsider his plans for nationalizing the casinos if Hughes takes them over.

The hottest speculation among the Las Vegas oddsmakers centers on the company that Hughes said he would never sell but then had to give up−TWA. Since its shares are now worth one-seventh of their value when he sold out, he could buy them back for $80-$100 million. That could be raised by selling a few Las Vegas hotels and Air West, which he would have to give up anyway to comply with Civil Aeronautics Board regulations. After that, he could again be boss of his own major airline.

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