HOWARD HUGHES -The History of Modern Gaming

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Texas millionaire Howard Hughes came to Las Vegas in 1966 and immediately began to purchase casinos. Hughes owned 100% of Hughes Tool Company, which was an oilfield supply company founded by Hughes’ father, who had patented a rotor bit used in the drilling of oil wells. Before coming to Las Vegas, Hughes had owned RKO Studios and a major interest in TransWorld Airlines. He was a well-known and respected businessman. His entry into gambling legitimized the industry and gave it a much-needed perception of respectability.

Hughes’ entry into the gaming industry began on April 1, 1967, with his purchase of the Desert Inn from reputed Cleveland mobster Moe Dalitz for $13.25 million (Goodwin, 1985). The purchase was not without some controversy, as Hughes became the first and only person to be granted a gaming license without appearing before the Gaming Control Board. With the assistance of Governor Paul Laxalt, who was anxious to improve the tarnished image of Las Vegas, Howard Hughes was able to move swiftly through the licensing process and continue to expand his ownership in the gaming industry.

In July 1967, Hughes acquired the Sands for $14.6 million and followed this with the purchase of the Frontier on September 22, 1967. Hughes continued his buying spree with the acquisitions of the Castaways for $3 million and the Silver Slipper for $5.3 million. In September 1968, Hughes purchased the partially completed Landmark for $17.3 million, but the gaming license was not approved until January 1969. Within a period of a little more than one year, Howard Hughes had spent $65 million and had acquired four of the top fifteen hotels on the Las Vegas Strip. The 2,000 hotel rooms he owned represented 20% of the total hotel rooms on the Strip.

The purchase of so many casinos by one individual concerned both the administration of President Lyndon Johnson and Nevada’s Gaming Commission. Fearing dominance in the industry was detrimental to free competition, the U.S. Department of Justice intervened when Hughes attempted to purchase the Stardust. After determining that the Department of Justice had no jurisdiction in the matter, Nevada’s Gaming Commission approved Hughes’ license for the Stardust on April 30, 1968.

Subsequently, the Department of Justice requested a 90-day delay in the acquisition so that they could investigate. Hughes’ plans to purchase the Stardust for $30.5 million were voluntarily terminated in August 1968. Harold’s Club in Reno, purchased in 1970, would prove to be the seventh and final acquisition in Hughes’ string of casinos.

After Hughes’ entry into gaming, a Corporate Gaming Act was passed in 1969 by Nevada’s gaming regulators. Prior to the passage of this act, every owner of a casino was required to be individually licensed. With public corporations, licensing of thousands of stockholders was impractical. The Corporate Gaming Act allowed publicly traded corporations to own casinos without requiring every single stockholder to be licensed.

The act was made retroactive to July 1, 1967, and was prompted by Hughes’ decision to divest ownership in Hughes Tool Company, which he had solely owned. The act opened the door for other public corporations to move with greater ease into the gaming industry. Today, the general rule applied is for a stockholder to own 10% of the voting stock in a public corporation before being required to obtain a gaming license.

 

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