WHY IS HOWARD HUGHES BUYING UP LAS VEGAS?

LOOK MAGAZINE / JAN. 23, 1968

The marimba player at the Tropicana, a big hotel-gambling casino on the Las Vegas Strip, currently gets only a polite laugh from Follies Bergere audiences when he jokes in mock anguish: "Thirty years in show business, and now I'm out of it. Howard Hughes just bought my ma-. rimba!" This is not too funny to most listeners. Odds are they heard a similar joke at one of a half dozen other Las Vegas night spots in the past few days. Anyway, it just might be true.

Billionaire Hughes, one of the world's richest men, has long owned about 27,000 acres of cheaply bought desert on the outskirts west of town, which makes him the largest private landowner in Clark County. But in recent months, he has won a commanding position in the gambling capital by committing over $115 million to buy control of three-quarters of a mile of the neon-splashed Strip (including the famous casino hotels, the Desert Inn, Sands and Frontier), the entire North Las Vegas airport plus 1,300 adjoining acres of valuable land, a CBS-affiliated television station, a showplace ranch, an airplane charter service, more Strip land, etc. etc. His aides confirm that he's not yet finished buying and still has millions of dollars worth of options that may soon be picked up.

In the process of spending all this money, Hughes has become the town's leading citizen, a position achieved without making a single PTA speech, appearing at a solitary Chamber of Commerce dinner or shaking a lone hand. He apparently didn't even show up in person to close one of the big deals, delegating the chore to a few tight-mouthed lawyers and business types he had shipped in to Nevada. "I don't believe Howard Hughes exists," suggests a cynical gambler who deals 21 in one of the casinos. "Name one person--just one--who can prove he's seen Hughes in the past year," he challenges.

In the last 15 years or so, not too many people have seen "The Man," as some Las Vegans call him. These days, he hides out, perhaps, in a $325,000 rented house not far from the Strip, or maybe on his 518-acre desert ranch, bought recently for $625,000 from the late Vera Krupp, ex-wife of the German industrialist.

His aides claim that Hughes lives on the ninth floor of the Desert Inn, where he has taken over all five deluxe suites. The draperies remain tightly drawn at every window. Telephone calls to Hughes are shunted to a special operator, and the messages are handled by a Hughesman. A visitor immediately discovers that there is no button in the elevator for the ninth floor; you need an escort with a special elevator key to get up there.

"I haven't seen him since I became manager," confesses Walter Fitzpatrick, who was named managing director of the hotel by Hughes.

Not even the Nevada Gaming Control Board, the state's powerful monitor of gambling activities, can swear that Hughes exists. When Frank H. Johnson, now board chairman, showed up at the ninth-floor suite last March to pick up Hughes's application to operate a gambling casino, he didn't get to look over the applicant. A lawyer emerged from behind a closed door with a power of attorney authorizing him to act in Hughes's behalf. The long application forms were scantily filled out in places. A favorite answer to a number of questions was: "not available."

About all that I could glean from one probing questionnaire I saw was that Hughes is still married to former movie actress Jean Peters, his wife of ten years, that he has been married once before, that he is six feet two inches tall, weighs a scarecrow 150 pounds, has brown eyes, black hair, has just turned 62, and that his Social Security number is 466-09-2281.

The gaming board didn't even bother to fingerprint Hughes, a usual requisite for checking on an applicant. However, board officials say that a federal agency that had already fingerprinted Hughes, a top defense contractor, can testify to his probity.

The gaming board's chairman, a former Reno newspaperman who once specialized in reporting gambling activities, says: "Frankly, we waived things for him....There is only one Howard Hughes who ever came to Nevada to invest in gambling, and I'm certain he got concessions that would not have been given to Joe Zilch of Detroit."

Hughes goes to great lengths to preserve his privacy. In 1966, when he sold his 78 percent holdings in Trans World Airlines for $566 million, the New York Times commented "that he apparently preferred to lose control of TWA by default rather than go through the ordeal of making a personal appearanee.... Even the men who run his. . .empire never lay eyes on on him. One of his general managers not long ago testified that he had not seen Mr. Hughes for five years."

But a look at his fat clippings file in any newspaper library proves that Hughes has not always been like this. After he inherited the Hughes Tool Co., a relatively small Texas enterprise that manufactured oil-well equipment, he seemed to enjoy having his picture in the papers. A pioneer aviator, he made the front pages regularly: In 1935, he set a world speed reeord; in 1937, he flew Coast to Coast in an unbelievabe7 l/.2 hours.

Iin 1938, he flew around the world in the then record time of 91 hours. Hughes didn't even rnind the pictures in the papers and the items in the gossip columns when --for nearly three decades between marriages--he was seen with dozens of girl stars and starlets, from Lana Turner to Ava Gardner to Katharine Hepburn. As a successful film producer he made the late Jean Harlow a star with his great World War I aviation movie, Hell's Angels. He also hired the unknown Jane Russell and with hoopla made her famous in a nothing movie, The Outlaw, that took in over $5 rnillion.

The Hughes sensitivity to the public eye apparently developed right after World War II. First, he went through the ordeal of a senatorial ininvestigation into his woes over the development of a flying boat. Then, he became a major aerospace contracter; a maker of missiles, communication satellites, secret electronic gear, helicopters, a cannon firing 4,200 rounds a minute and the Surveyor moon vehicle. I)efense contracts kept most of the 50,000 Hughes employees busy, even as some critics said that Hughes was too erratic for such responsibility.

Ironically, Hughes's attempts to wrap his activities in secrecy ineviably create even greater curiosity. His move to Las Vegas in November, 1966, received the enthusiastic attention of local reporters, who wrote that Hughes and his entourage arrived aboard a special three-car Union Pacific train, getting off at four in the morning at a lonely crossing a block from the nearest house: "One member of the party was on a stretcher, and placed in the back of a Ford station wagon, made over into an ambulance...." People said that Hughes was crippled by arthritis and/or becoming even more of a recluse because of deafness.

According to local lore, Hughes then moved into his present quarters at the Desert Inn, but after a couple of weeks there was asked to leave and make room for the Christmas rush of "high rollers ". the heavy gamblers who are customarily given the choicest accommodations. Rather than do so, the stories go, Hughes started negotiations to buy the hotel.

"That's all nonsense," says a top Hughes aide who is adamant about remaining anonymous. "The threat to evict him just speeded up the negotiations. Mr. Hughes decided... about 15 years ago . . . that he wanted to come here and live." Furthermore, says the aide, Hughes never acts impulsively: "We had already started negotiations . . . research on the lands . . . growth studies. We do more homework than anyone else; we're not smarter, we just work harder." As a clincher, he adds: "For your information, Mr. Hughes is in good health."

Perhaps there's something to all these stories. Hank Greenspun, publisher of the Las Vegas Sun., who sold Hughes his TV station for $3,650,000, says: "Hughes always liked Vegas. He was a familiar sight here through the years÷in his seersucker suit, tennis shoes and open-collared shirt with his jacket over his arm "

(In 1943, Hughes crashed nearby while testing an experimental aircraft and was severely injured. In 1949, he came to Vegas to shoot the action sequences of a movie called Jet Pilot. During the Korean War, it was rumored he intended to build a rocket plant outside town on the 27,000 acres he acquired in a most favorable trade with the Federal Government by giving up land in north. ern Nevada bought for $2.50 an acre.) "Just before Hughes eame here, more than a year ago," Greenspun recalls, "he was in Boston--the papers said he was there for medical treatment. The Boston reporters were driving him nuts--they turned in a fire alarm so they could follow behind the firemen into his hotel suite." Greenspun's lawyer was doing some legal work for the Hughes interests at the time, and Greenspun remembers telling him: "Why doesn't Hughes come to Vegas? He loves it in Vegas." Greenspun then pointed out the tax advantages:

Nevada has no personal or corporate income tax, no inheritance tax, no franchise tax, no warehouse tax. The sales tax is only three per cent, and real estate taxes are limited by the state constitution. Gambling pays 30 percent of the state's bills. The state is a sort of free port, with no tax on products stored, assembled or processed in Nevada that are destined for other states.

For an enterprising man with millions to invest ("Why, the interest just from Hughes's sale of his TWA stock amounts to $85,000 a day," says Greenspun), there were other advantages that Greenspun left unsaid: Las Vegas was in trouble.

The three local savings and loan associations had attracted millions of dollars from all over the country: the result was serious overbuilding and collapse of the real estate market. Thousands of mortgages were foreclosed. The continuing presence of crime-syndicate figures in Vegas, with reports of illegal "skimming" of profits, brought a burst of unfavorable network-television programs and national-magazine stories. It also brought a massive concentraof Federal law-enforcement officials. There were foreboding rumors.

This troubled atmosphere made for good business prospects. "And Hughes certainly took astute advanof it," says a leading real estate man. "His people didn't overpay on anything. Why they tied up one $2.5 million deal with only a $10,000 opIncredible? Fantastic!"

The negotiations were so skillful and so secret that Hughes owned a large chunk of Las Vegas before anyone was the wiser. To help him, he assembled ten aides, most of whom he had known for a long time.

The chief of them is Robert A. Maheu, a 50-year-old onetime FBI counter espionage expert who is technically not even a Hughes employee but runs his own consulting firm with Hughes as the sole client. The others include a Maheu employee who was once an Internal Revenue agent; another who was comptroller for the Small Business Administration, a Maheu classmate at Holy Cross who had just retired as an Air Force major general; and Hughes's former personal pilot. who used to ferry him around the country in old Army Air Corps B-23 and A-20 bombers.

Sheer stamina is a rquisite for the Hughesmen, who make up for their boss's reclusiveness by turning up everywhere. At 7 a.m., a half dozen of them usually breakfast with Maheu in the Desert Inn coffeeshop. There, after a brisk discussion of the upcoming day's skirmishes, they fan out: one to look over a new electronic gadget that its inventor claims will do away with casino cheating; another to work over a realtor whose client is stubbornly demanding $2.5 million for some choice Strip acreage the Hughes people think he'll let go for $2 million; a third to have another breakfast with a county official who needs to be convinced that the jet airport will soon be inadequate.

Thirteen hours later, they start homing back to the Desert Inn dining room, all displaying 8 p.m. shadow and all in need of a drink and some food. "This is the wheelhouse," a Hughesman told me as he relaxed with a martini. "Here's where you get the word; here's where you find out who's been up in the tower." He nudged me as a loudspeaker paged a Hughesman. "You can pretty well figure out what's going on by who's being paged." Presumably, it was Hughes doing the paging.

Another Hughesman leaned over "We get calls from him at all hours, even two, three and four in the morning. He's a fantastic man--involves himself in details. Nothing escapes him. He checks blueprints, estimates, contracts--sometimes, the want ads in the local papers to see what's going on. We had better have done our homework when he calls."

Oven the atomic bomb is a concern of Hughes's. When he read, a year ago, that the Atomic Energy Commission was going to set off an atomic device underground on the Nevada test site, 70 to 100 miles from Las Vegas, Hughes worried that the ground shock might damage the city's buildings. Some bombs exploded previously beneath the desert have had the force of a million tons of TNT, and Hughes told his aides that he wanted to be absolutely certain the test would not cause a disastrous earthquake.

The AEC confirms that it immediately convened several of its top scientists to brief the Hughes people about what to expect, so they could allay Hughes's fears. Although the ground shock is quite noticeable in Las Vegas, says the AEC, atomic damage claims have never had to be paid --in contrast to sonic-boom damage a frequent occurrence because supersonic military jets are based nearby.

Hughes is also said to worry about the comfort of his more than 4,000 new Hughes Tool Co. employees in Las Vegas, who include cocktail waitresses, card dealers, busboys, chambermaids, stagehands and bartenders. "I want to make sure that they get a hot meal at work," a man close to Hughes quotes him as saying. "And I want them to have a choice of food. If they want ice cream on top of their apple pie, and that counts as two desserts. let them have two desserts." Besides rich desserts, the usual Hughes company benefits--free life and health insurance and a pension plan--also boost morale.

The absence of Hughes from the public arena focuses attention on the ten Hughes executives who, understandably, provide much of the daily conversational grist for theLasVegas wise guys. "A lot of people expected us to fall flat on our face," says Maheu, who has been with Hughes for 14 years. "We didn't know anything about the hotel business and even less about gambling. But we do know business."

One of the Hughes innovations is to feed all the facts about his Vegas operations into a rented computer that reminds his people when it's time to replenish liquor stocks, keeps track of hotel reservations, generally watches over the cash flow--which amounts to millions and millions--and looks hard for inefficiency.

"Gambling is a very precise accounting and finance business," declares Maheu's old college friend, Maj. Gen. Edward H. Nigro, 49, who recently retired from the Air Force with 10,000 hours of flying time and experience as an aide to the chairman of the Joint Chiefs of Staff. Nigro is now the Hughesman in charge of the Sands Hotel. After a long day of staff meetings and the usual administrative chores, the General stands watch over his gambling casino from 9 p.m. to 2:.30 a.m.

"It's a real trick," he says, "to learn when it's desirable, and for whom, to authorize credit while a man's gambling. You can't call his bank at midnight to see if his check is any good. If you're too strict, you lose a good customer."

The general's mentor is an oldtime Sands executive named Carl Cohen, who got nationwide publicity last September by punching Frank Sinatra in the mouth when the singer threw a tantrum after his casino credit was cut off at $200,000. (Sinatra had owned a nine percent share of the hotel until four years ago, when the state made him sell out because he was accused of playing host to Sam Giancana, a notorious crimesyndicate figure. )

Walter Fitzpatrick, a hotel amateur installed by Hughes as manager of the Desert Inn was an Internal Revenue agent and chief planner for an aircraft plant before joining Maheu in 1960. One of his major assigments was to defend Hughes's interests in the suit by TWA stockholders. Fitzpatrick says that the atmosphere has improved greatly because of simple, businesslike methods. "Before, the hotel had 10 or 12 owners; each had influence and overlapping authority. Now, the department heads report directly to me, and nobody else can overrule them."

Like the other Hughesmen, Fitzpatrick is becoming a wheel in the community, serving on the Board of Advisors of Nevada Southern University.and the United Fund. He has also been asked to move his family to Las Vegas and build a home there. (Maheu, another new settler is on the executive board, among other things, of the Boy Scouts Boulder Dam Council.)

This growing concern with so munity relations is prompting Hughes to come up with $300,000 a year for 20 years so Nevada can start a medical school. It also goads him to take a role in solving some of state's problems. Hughesmen are represented on a number of the governor's problem task forces, including those dealing with gambling, corn puters and electronies.

Federal accusations of skimming resulted in Gov. Paul Laxalt's naming two of the Hughesmen to a committee to see what new controls can be applied to gaming. "We wouldn't have been able to afford such a systems study if Howard Hughes weren't doing it for us," says Robert K. Mulligan, an enforcement agent for the Gaming Control Board. "What we're looking for is a gaming table at which the dealer could drop a bill through a slot and scan it electroncally, without slowing down the game, and immediately, automatically record it in a central place--maybe in a computer at the Gaming Control Board's office. Of course, this does not preclude a cheating dealer, but the ceiling television cameras that some casinos already use could easily record on video tape everything that takes place."

Governor Laxalt is a No. 1 fan of Hughes's. "His coming here did things for our state image that a multimillion-dollar public relations campaign couldn't have achieved," says the Governor. "He has given Nevada gaming instant respectability."

'I'hc Governor wants out-of-staters to take notice that Nevada has for several years been making a shift from the old methods of financing gambling casinos through an assemblage of partners to the corporate way with open bookkeeping and open methods. The Del E. Webb Corp., a Phoenix construction company, has moved into Nevada gaming, and so have several other corporations. Last spring, the Nevada legislature made it possible for the first time for a corporation, and not just individuals, to get a license to run a casino.

Federal authorities concerned over crime-syndicate influence in Nevada gambling, cautiously share Laxalt's optimism. "We can see a change already," says a top U.S. enforcement official. "A number of the old-timers are still around, hut, increasingly, untainted investment money is being attracted here." It is noteworthy that after Hughes took over the casinos, employees had to fill out personnel questionnaires, while thorough investigations were made of key people.

Besides helping the moral tone, the Hughes presence has visibly shored up sagging property values. "Rents are being raised, and that's a good sign," says Thomas A. Campbell, a real estate man in Las Vegas for 28 years. "Hughes was bound to have an effect, committing himself to a hundred million dollars worth of real estate in a little place like this."

Who knows but his new position as the No. 1 Las Vegan may prompt Hughes to become visible. Recently, he issued his first public statement in many years and followed it up with two more after getting into a hassle with aviation officials.

Besides taking over the North Las Vegas airport, Hughes has established a beachhead at the town's big jet airport, McCarran Field, where he bought 48 acres of land, negotiated a lease for a lot more and committed $2 million to acquire an airplane charter and maintenance company based there.

Hughes said surveys showed Las Vegas had to choose between spending $25 million to enlarge McCarran Field--which he felt was being choked off by the expanding metropolis--or build a new giant airport that would serve as a supersonic-jet terminal for all southern Nevada, California and Arizona. Later, Hughes announced he would build such a field, and offered to sell it interest-free to the county. He envisioned that deplaning passengers (presumably after dropping a few dollars at the gaming tables) would "be flown by new and thoroughly proven helicopters and other VTOL (Vertical takeoff and landing) designs to many landing terminals which will be closer to the passenger's ultimate destination--on top of buildings downtown, on top of hotels and in residential areas."

Hughes doesn't say if he thinks of his big desert landholding just west of town as a proper place for the SST field--probably not--but his aides make no bones about their interest in ultimately buying up McCarran Field. A look at the map shows that the two airports, where the Hughes aviation companies are based strategically, serve all of the vacant Hughes land that awaits development.

What is Hughes up to? A casino owner with just a touch of paranoia retorts: "Who knows what he has in mind? He may really want to do away with all gambling, and he's powerful enough to put it over." But another casino executive, Alex J. Shoofey, president of the Flamingo, says: "I don't believe it. Sure you hear that the Government is backing him to come here and make the town respectable. You also hear that he wants to build a kind of Disneyland here, making Las Vegas the amusement center of the world."

The word along the strip is that Hughes intends to install large new industries--having something to do with electronics, aviation or missiles--and hire thousands of workers. These rumors irritate civic planners like County Superintendent of Schools James Mason, who recently warned that any influx of new workers would flood the school system.

Mason said that he had to know Hughes's plans well in advance because "schools aren't built overnight, and we have to be prepared." This helped to prompt Hughesman Robert Maheu to make a speech at a civic dinner in which he cautioned:

". . . I have nothing to say about our plans for the future since we have no plans at this time!" Maheu added that the Hughes organization had been in Nevada only a short while: "We beg of you to give us an opportunity to move within the realm of sound business procedures."

Governor Laxalt says: "I'm in almost constant communication with the Hughes people. They're very candid. When decisions are made as to the long-term future of Nevada, we'll be consulted....We're at the erossroads. We're being converted overnight from an essentially rural state to a metropolitan state. I don't see how a small state like Nevada could do anything but welcome that."

As for Hughes attaining too much influence by buying up the state, the Governor pooh-poohs this: "Other people have tried in the past and failed." Laxalt says he has been trying to induce Hughes to spread his operations around the state. He forecasts: "The probability is substantial industrial development."

Hughes's operations in Las Vegas have been so swift they leave even the telephone company confused. The newest local directory, printed last July, lists on page 81 the Hughes Tool Co. number as 734-6661. "If no ans. call 878-7949." There was no "ans.," so I called the second one. A woman who sounded harassed answered; I thought I heard a child crying in the background. "No, this isn't the Hughes Tool Co.," she declared, rather politely under the circumstances. "My husband used to work for Hughes but now he doesn't." It took another call to extract a new number, for a small downtown office used by the Hughes people. It turned out that the first number belonged to the company making oil-well drills. "You know," I told the Hughesmen, "now that you're the town's biggest employer, you should have your telephone listed." They agreed.

In the desert outside town, on the huge plot called Husite, the yucca and the century plants have not been disturbed since Hughes foresightedly acquired this land. Who could have known that within a few years, the county's population would quintuple to 268,500, that 13,956 slot machines would be clanking away, that 14 million visitors would leave behind nearly a half billion dollars a year? The answer, class, is Howard Hughes.