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Gaming in Atlantic City..............
A History of Legal Gambling in New Jersey -
Part Three -- By Stephen Piccolo
In the spring of 1977, Clifford Perlman and other members of Caesars Board of Directors spent two days in Atlantic City meeting with state and county officials. Before long an announcement was made that Caesars would be coming to Atlantic City and would build a major new facility. This came just eight days after the state of Nevada passed a law allowing Nevada casino owners to invest in gaming outside the state of Nevada. I believe this rescinded the law passed in the late 1950's when Cuba was threatening to take business away from Nevada. Many operators were saved by this law as the revolution in 1960 would have cost them millions. Instead of starting from scratch, Caesars leased the eleven year old Howard Johnson's Regency Motor Hotel. Caesars then announced that it would re-model the existing 425 room structure into a modern facility and add 123 rooms in a new five story tower plus a 52,000 square foot casino with extensive recreation, convention and shopping areas. The cost to Caesars was between $50-$100 million. Caesars did save millions of dollars and precious time by being allowed to renovate and expand rather than start from scratch. The Commission cited the "relatively new construction" of the Howard Johnson's facility in allowing Caesars to renovate which was contrary to what the governor's office wanted. Once complete, the property was named Caesars Boardwalk Regency. In May of 1979, Caesars was granted a temporary license to operate after Clifford Perlman agreed to relinquish most of his New Jersey activities. Temporary licensing was granted to many operators in the early days to speed up the openings of the casinos before the long process of permanent licensing was complete. Now a little background into the beginnings of Caesars World.
In May of 1956, brothers Clifford and Stuart Perlman invested $12,000 in a Miami Beach hot dog stand and in five years had expanded it into a fast- food chain called Lum's. Eight years later Lum's bought out Caesars World Inc. And in ten years the company mushroomed into a half-billion dollar gaming empire. When the Perlman's first took over Caesars in 1969, the only casino it owned was Caesars Palace in Las Vegas which opened three years earlier in 1966. Caesars, at the time, had a savory past which seemed to continue under the Perlman's ownership. A few shady real estate deals involving the Perlman's would end up as their downfall in New Jersey. The Boardwalk Regency opened its doors on June 26, 1979 thus ending the monopoly Resorts had enjoyed on the boardwalk, and was an immediate success. Caesars operated for fourteen months on the temporary license when its hearings for a permanent license finally began in September of 1980. The hearings went on for six weeks with the DGE (Division of Gaming Enforcement) bringing up the Perlman's past dealings with "unsavory" characters and their possible mob connections while the attorneys for Caesars calling in witness after witness attesting to the excellent reputation and sterling character of the Perlmans. On the final day of the hearings, the state charged that four directors of Caesars World, Clifford and Stuart Perlman, William McElna and Jay Lishaw were unsuitable for licensing. Together these four individuals controlled twenty percent of Caesars stock. One week later the Commission rendered its decision.
Caesars Boardwalk Regency was granted a permanent license on the condition that Clifford and Stuart Perlman were placed on immediate, unpaid leave from any position in the company. They agreed to a one month leave and appealed the decision to the courts which upheld the Commission's ruling. McElna resigned and sold his stock to the Perlmans. The fight with the Commission dragged on till December of 1981 before Caesars and the Perlmans came up with a solution that the Commission found partly satisfactory. Caesars World agreed to buy back the Perlmans stock and Clifford Perlman was to be retained as board chairman and CEO of Caesars Palace in Las Vegas with an annual pay of $350,000. The Commission approved of the stock buy-back plan but denied the employment clause. The Perlmans were out and Caesars stayed in New Jersey. It's ironic that in April of 1983, the Nevada Gaming Commission found the Perlmans suitable for a gaming license when they attempted to buy the Dunes Hotel in Las Vegas. This was just one of the "differences of opinion" between Nevada and New Jersey Commission rulings.
Caesars also bought the old Traymore Hotel, raised it, and had plans to build another "Caesars Palace" on the site. This never came to pass. In 1987, the "Boardwalk Regency" part of the name was dropped and the property became known as just Caesars Atlantic City. In 1994, ITT Sheraton purchased all of Caesars World and had no problem in obtaining a New Jersey license. They have since announced a major addition to the Atlantic City Caesars to expand the number of rooms at the hotel. As we head into the late 90's, Caesars has firmed up its position as one of the top casino operators in Atlantic City.
In June of 1977, Bally incorporated a New Jersey subsidiary and later one in Delaware, both named Bally Park Place, with the parent company holding 83% of the shares in the new subsidiary offered by the end of 1979. Bally came to Atlantic City with the usual fan fare. Bally bought the old Marlborough-Blenheim hotel and leveled the place in no time. Hoards of construction workers were working around-the-clock to build what Bally's promised to be the most expensive and extravagant casino complex on the boardwalk. Again going against the state's mandate to build "new" hotels, Bally paid $4 million for the old Dennis hotel and spent another $7 million to restore 507 of its rooms to qualify for the 500-room minimum required by the state. To Bally's credit, the commission, after touring the complex before opening were extremely impressed with the renovation job Ballys had done on the old Dennis. The projected cost of the entire project was $160 million for the new casino, restaurants, theater and the restoration of the Dennis. What it ended up costing, according to Bally, was $300 million plus. All was ready in early December 1979. All Bally needed to do to obtain a temporary license was to have it's board chairman, William T. O'Donnell, step aside and sever all ties to Park Place and Bally Manufacturing and place his stock in a voting trust till the commission completed its investigation. Bally's European representative, Alex Wilms and his family were to do the same. Once again a company had to remove its chief executive to operate in Atlantic City.
Back in 1946, William O'Donnell became sales manager for Lion Manufacturing, a manufacturer of slot machines. In 1962, Lion became available for purchase so O'Donnell and six other `visible owners' each put up $200,000 plus they borrowed $1.2 million to close the deal. In March of 1968, O'Donnell and the others decided to go public with the company. To sever all ties to Lion's checkered past, the company name was changed to the Bally Manufacturing Corporation. After an investigation, the SEC reported Bally was free of mob money and approved its stock offering.
Over the next fourteen years - through alleged mob links and unscrupulous business practices - Bally took the old Lion company from the verge of bankruptcy to a giant, multinational corporation with annual revenues of nearly $400 million. Beside slots and pinball machine sales worldwide, Bally had an estimated 80% of the domestic slot market. By 1977, O'Donnell was the only one of the original investors on Bally's board of directors when it initially aimed for a spot on the boardwalk.
The DGE investigation took two and one-half years to complete. During that time, Bally began to do a few things to polish its image and garner some positive publicity by going out and hiring people who would make a difference. Bally also contributed to many charitable organizations that were in desperate straits, all highly publicized. Replacing O'Donnell as chairman and president of Bally was Robert E. Mullane. Bally's Park Place opened under its temporary license on December 30, 1979. It would be another year before hearings would begin on its permanent license. During the hearings, the state won out again as O'Donnell was forced to sell his stock back to the company and Bally received its permanent license. This made two of the first three companies that had to have its chief officer(s) sell off their stock and totally divest themselves from the company in order to do business in Atlantic City.
During Ballys initial construction, a number of design elements were included that would ease future expansion. Part of this expansion was the 1989 opening of the Tower at Bally's Park Place. The tower added 800 rooms to Park Place's inventory and made Park Place the first hotel/casino in Atlantic City to surpass 1,000 rooms. Just this year, Bally was sold to the Hilton Corporation. It will be interesting to see what changes/improvements the Hilton people will have in store for Bally's.
Next issue : The Brighton and Harrah's Marina - casinos #4 and #5.