RAMADA'S CRAPSHOOTNEW BOOK CHRONICLES DICK SNELL'S CASINO TAKEOVER IN VEGAS
Talking about his role as Don Corleone in The Godfather, Marlon Brando compared the "capo de tutti capo" to the chairman of General Motors. Business, Brando said, was business, and the real gangsters resided in the boardroom.
David Johnston, a reporter for the Philadelphia Inquirer, understands the analogy. Johnston, who served as the newspaper's Atlantic City bureau chief from 1988 until earlier this year, has written a book examining how corporate America has wrested control of the legal gambling industry from unsavory, mob-connected interests. He describes how, despite promises of intense regulation and advertising campaigns designed to market gaming as an all-American pastime, the new masters of the casinos--Hilton Hotels, the former Holiday Inn corporation, Donald Trump--still don't play by the rules.
Johnston's book surveys the history of gambling in America, with an emphasis on the excesses and shady business deals of "legitimate" business interests involved with casino gambling. He alleges that gambling regulators in New Jersey and Nevada routinely look the other way at abuses in casinos and that corporate owners are subjected to less scrutiny than the dealers, hostesses and waiters who work the casino floors. Johnston's book is filled with colorful characters such as Akio Kashiwagi, a mysterious Japanese businessman who wagered $14 million an hour for days on end until he was butchered with a samurai sword.
One of the less spectacular villains of Temples of Chance, which will be published by Doubleday later this month, is Phoenix attorney and businessman Richard Snell, now the president and CEO of Pinnacle West (the holding company of Arizona Public Service Company). Johnston alleges that Snell, as chairman of the Phoenix-based Ramada Inn motel chain, tried to weasel out of a deal to buy the Tropicana casino in Las Vegas. According to Johnston, Snell's ruthlessness backfired, eventually costing Ramada shareholders $35 million. At the same time, a chain of events set off by Ramada's refusal to live up to its agreement to purchase reduced the Tropicana's principal owner, an eccentric old woman named Mitzi Briggs, to a pauper.
Johnston, who was interviewed while in Phoenix to promote his book, contends that the fantastic profit potential of casinos caused Ramada to leap into the gambling industry despite a lack of expertise. He says Bill Isbell, the son of Ramada founder Marion Isbell, was so eager to get into the casino business he made several terrible deals. Snell, who took over the company when the younger Isbell was forced out, was left to cope with what Johnston says are two poorly managed, badly located casinos.
But even though Johnston claims Ramada never had much success with its casinos, the promise of gambling was so seductive that Snell eventually sold off all the chain's motels and created a new company, composed only of three casinos: the Tropicana, TropWorld in Atlantic City and the Ramada Express in Laughlin. Johnston says the new company, Aztar, has also been a disaster, noting that its stock plunged from $14 a share to around $4 a share within a few months of the company's creation. Johnston says Snell told him things were so bad at Aztar that employees began referring to the company as Ishtar, a reference to the flop movie. Within months after the creation of Aztar, Snell moved on, replacing Keith Turley as president and CEO of Pinnacle West Capital Corporation.
Johnston says that he interviewed Snell several times for his book, and that he denies any legal or moral wrongdoing in connection with the Briggs case. (Joe Cole, a spokesman for Aztar, says his company has no comment on Johnston's book. Paul Reynolds, a spokesman for Pinnacle West and Snell, says neither Snell nor anyone at Pinnacle West had had a chance to read Johnston's book. "I don't know if we'll be able to comment even after we look at it," Reynolds says. "I just got a copy of it.)
According to Johnston, Briggs was an easy mark who might have eventually ended up broke even if Ramada hadn't helped her along. A few years after buying the Tropicana in 1975, she was compelled to sell her interest when the FBI discovered that the Kansas City mob was skimming off her profits.
"She was an eccentric woman who looks like Norman Rockwell's ideal grandmother," Johnston says. "Everyone I know in law enforcement says Mitzi Briggs had no notion of what was going on. She was simply an innocent getting eaten up by the sharks."
Four times married and divorced, Briggs had once written and self-published a book, Naked Before Thee, that detailed her intimate, extremely personal relationship with the Lord. In it, she described the intensity of her sex life with God. A decade before she sold the Tropicana to Ramada, she was briefly committed to a mental institution after she donated $5.5 million to the Catholic Church and gave away $600,000 worth of real estate to a group purporting to be militant Native Americans with a plan to blow the faces off Mount Rushmore.
Even though Briggs was compelled to sell out, Ramada was so eager to buy the Tropicana, it agreed to terms it would later find onerous. Instead of agreeing on a fixed price, Ramada agreed to a complex formula based on the casino's profits over an 18-month period.
"Ramada made a down payment and was going to make a series of installment payments," Johnston says. "But when the installment payments came due, Ramada refused to pay."
Johnston says Ramada refused to shell out the initial $2.7 million installment payment simply because it didn't have the money. In Atlantic City, the chain was building TropWorld, a hotel-casino that was on its way to becoming the most expensive hotel in the history of the world. Cost overruns on the $400 million project had already forced the chain to sell off 90 motels, according to Johnston.
When Ramada defaulted on the installment payment, Briggs and her partners sued. According to Johnston's book, Ramada's board considered various ways to settle the suit and eventually offered a flat $14.2 million, in addition to the down payment, for the casino. After some negotiations, the deal was accepted. All that Ramada required of Briggs was that she secure signed and notarized releases from the casino's creditors, declaring that they had been paid or that they would not sue Ramada.
Briggs' lawyers hustled to obtain all the releases from the Tropicana's creditors. A few were impossible to obtain, including a $4.96 bill from a typewriter repairman who was impossible to locate.
"In January 1981, Mitzi's lawyers came down to Phoenix," Johnston says. "They met with Dick Snell, who had taken over the company. According to the lawyers and the testimony in the trial, Snell insisted they produce every single shred of paper, every single release."
When Jay Brown, a lawyer representing one of Briggs' partners, told Snell a few of the releases were impossible to obtain, Snell told him the deal was off.
"By that Snell did not mean 'here's your casino back, give us our money back,'" Johnston says. "Snell meant 'we're keeping the casino and we're not paying for it.'"
In his book, Johnston alleges that Snell was looking for a loophole to allow Ramada to escape from a bad business deal. He writes that Jay Brown heard Snell say, "We made a bad deal for ourselves. I'm looking for a technicality to get out of it." (Under oath, Snell would later deny making the remark.)
More than eight years later, the lawsuit brought by Briggs and her partner Ed Doumani over Snell's actions was heard in Nevada District Court. In May 1989, Judge Earle W. White awarded Briggs and Doumani more than $34 million--every penny they asked for plus 14 percent interest. At the time, the judgment was the largest in the history of Nevada courts.
Adding insult to injury, the judge called Ramada's executives "jerks" and in one of his 54 findings of fact on the case held that Snell's insistence on having each and every release "was in violation of the intent and understanding of the parties." He also said Ramada was guilty of "corporate arrogance."
"Ramada responded by saying, 'This is ridiculous,'" Johnston says. "They said they were confident they'd be vindicated."
But when Ramada appealed the case to the Nevada Supreme Court, the justices unanimously rejected the motel chain's appeal, issuing a two-word opinion: "We disagree."
Although Ramada finally paid the judgment, Johnston says, the ruling came too late to benefit Briggs, who had sold out her interest in the suit to her partner Doumani.
"Mitzi got nothing out of this. For her, justice delayed was justice denied," Johnston says. "When I interviewed her, she was a hostess in a coffee shop. She's a secretary to a Catholic priest now."
Johnston says the most alarming part of the case is that gaming officials in New Jersey--where Ramada built the $600 million TropWorld Casino and Entertainment Center--were uninterested in the Briggs case.
"In New Jersey, unlike Nevada, you must prove you have the integrity, character and business ability to run a casino," Johnston says. "Yet the regulators never held a hearing, never conducted an inquiry and never asked a single question about what happened to Mitzi. The corporate owners are not subject to the same level of scrutiny as casino employees. If integrity means you conduct business in a straightforward and honest manner, on the face of it, it would seem that Ramada didn't meet the criteria.
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