Strip abuzz with speculation on future of MGM chief Lanni

Gary Thompson

Wednesday, Sept. 29, 1999 | 11:51 a.m.

Terry Lanni, the patrician leader of two of gaming's most respected companies over the past two decades, may step down as chairman of MGM Grand Inc. before the end of the year.

Lanni didn't respond to requests for comment on speculation sweeping the Strip that his oft-rumored departure is imminent.

But gaming executives contacted by the Sun say Lanni is eager to spend more time with his wife and sons in California and is likely to announce he will be leaving the top post at MGM. The announcement could come within a month.

If Lanni does leave soon, his resignation would be the latest in a spate of recent departures affecting top casino operators, including Mirage Resorts and Aladdin Gaming, at a time in the industry's evolution when experienced high-level management is becoming increasingly harder to find.

Mirage lost Dan Lee, its chief financial officer, and Sandy Gallin, who headed an entertainment subsidiary, while James McKennon left as president of Aladdin Gaming's operating unit, all within the past few weeks.

Lanni's departure would be a huge loss for MGM Grand, despite the extraordinary depth of the company's executive talent, considered by gaming analysts and competing casino operators as one of the industry's elite.

Lanni, 57, built Caesars World Inc. into the best-recognized brand in gaming and led MGM Grand to a position of prominence in the industry after the company's flagship resort suffered a shaky opening in the early 1990s.

He also served with distinction on the National Gambling Impact Study Commission, which recently concluded a two-year probe into the industry's economic and social effects. Lanni drew praise from gaming proponents and opponents alike for his equanimity, eloquence, intellect and fairness, as well as his strong defense of the industry's positive impacts.

Lanni was president of Caesars World from April 1981 to February 1995, serving in Atlantic City and Las Vegas, where he assembled one of the best management teams in the business and was a pioneer in bringing upscale retail shopping here with development of the Forum Shops.

After Caesars was acquired by the old ITT Corp., Lanni resigned, unable to countenance interference with his successful management style and intimate knowledge of the industry by New York-based executives who didn't understand gaming.

A month after leaving Caesars, Lanni was hired as MGM Grand's president by billionaire Kirk Kerkorian, who currently owns about 60 percent of the company. By June 1995, Lanni was joined by Alex Yemenidjian, a top Kerkorian aide who had engineered several Hollywood deals for the reclusive investor and was involved in Kerkorian's unsuccessful bid to take control of Chrysler corp.

One month later, Lanni was named to replace Robert Maxey as MGM Grand's chairman and Yemenidjian took over as president. Together, the two began planning transformation of MGM Grand into the "City of Entertainment," a changeover designed to better capitalize on the casino company's links with the fabled entertainment company, Metro-Goldwyn-Mayer Inc.

Lanni often predicted that casino gambling's growing acceptance by Americans and the industry's historically high returns on investment would prompt a "pure entertainment" company to enter the gaming business soon.

"Entertainment will be the industry of the 21st Century, and casinos are an arm of entertainment," he said.

It was a viewed shared by his MGM Grand management partner, Yemenidjian, and by Kerkorian, who later bought a nearly 90 percent stake in the MGM-United Artists movie conglomerate and, last March, installed Yemenidjian as chairman of the Hollywood-based studios. Yemenidjian retained his position as MGM Grand president.

While Lanni and Yemenidjian always presented a united front, there were persistent behind-the-scenes rumblings that the MGM chairman felt slighted by Kerkorian, who stayed in daily contact with Yemenidjian.

Speculation Lanni might leave as early as two years ago was damped, however, by his appointment to the federal study panel, a move that would eventually consume as much as 25 percent of his time, far more than he'd originally anticipated.

The speculation heated up again this summer, when Lanni sold almost half of his 1.04 million MGM Grand shares. Almost all of Lanni's MGM holdings were represented by stock options awarded before last year. Lanni earned $1 million in base pay and a $500,000 bonus in 1998, but received no options.

Maintaining his post at MGM Grand and serving on the national commission made for a grueling schedule that kept him away from his family for long periods. Lanni was intimately involved in planning MGM's expansion into Detroit, which has proven to be wildly successful so far, and Atlantic City, which has been as wildly frustrating.

MGM has spent three years and $50 million on land acquisition and planning for its proposed Atlantic City hotel-casino. But the owners of a 1-acre parcel in the middle of MGM's 35-acre tract there have balked at selling, leading the city to begin prolonged condemnation proceedings designed to let MGM get the land at a fair price.

Lanni also oversaw MGM Grand's acquisition of Primadonna Resorts Inc., its joint venture partner in New York-New York and owner of three underperforming hotel-casinos on I-15 at the Nevada-California border. The new MGM management team installed at Primm has turned the three properties around.

And Lanni led MGM Grand's expansion into the lucrative South African market, where the company landed deals with local partners who take all the financial risk and pay MGM management fees and a percentage of the revenue.

One of Lanni's pet projects in Las Vegas was development of the Mansions at MGM Grand, a complex of 29 luxury villas costing $170 million to build and furnish. The Mansions, aimed at luring the lion's share of the world's super-rich high rollers to the MGM, have enabled the company to capture about a quarter of the high-end baccarat business in Las Vegas.

Lanni's efforts have helped MGM Grand's stock to be among the top performers among large-cap gaming companies this year. The stock closed Tuesday at $48.125 a share, near its 12-month high and more than double its low of $22.25 last year.

Lanni was recently named "Top-Performing Chief Executive Officer of the Year" by the Gaming Industry Annual Awards Inc., which monitors casino financial reporting and executive performance.

Early this year, Lanni irritated some gaming executives by proposing a hybrid "moratorium" on hotel-room construction in Las Vegas and suggesting slot-route operators be subject to the same state taxes as casino operators.

The latter concept was adopted by the State Legislature, but his proposal that casino developers be required to take rooms out of the local inventory before building new ones to avoid saturating the market has gone unheeded in the euphoria over soaring visitation to Las Vegas.

Lanni also differed from the American Gaming Association when he endorsed restrictions on casino industry political contributions in state and local races.

"When you have a privileged industry ... you are separate and apart from other entities," Lanni has said in explaining that position.

Lanni's expected departure as chairman won't end his association with the company. He still owns about 600,000 MGM Grand shares and will likely stay on the MGM Grand board.

If he does return to his permanent home in California, Lanni will have plenty of opportunities to stay occupied. He's been courted by California Republicans as a potential candidate for high office. The GOP is wooing him despite his recent comments that the country would be better off if Democrats controlled the House of Representatives because of the ideological intransigence of the Religious Right wing of the Republican Party.

And he's certain to be approached by companies in and out of gaming eager to land an executive with the vision, leadership qualities and stellar track record he possesses.

But friends say the financially secure Lanni is likely to spend a lot more time relaxing with his family, as the whirlwind pace of the past several years have taken a toll on his personal life.

As for MGM Grand, it's likely Kerkorian's trusted confidant Yemenidjian would ascend to the chairman's position if Lanni leaves, duplicating the post he holds with the MGM-UA studios.

Who would fill Yemenidjian's shoes as company president is uncertain. MGM Grand executives Bill Hornbuckle and Danny Wade are highly respected hotel and casino operators, while Chief Financial Officer Jim Murren has earned kudos from Wall Street.

Yet each has been in their position a relatively short period and currently play critical roles in the management structure. Kerkorian could opt to go outside MGM Grand, fearing the void moving any of that trio up could cause in the smoothly running company.

There's also some speculation Kerkorian, who recently bought a 4.9 percent stake in Mirage Resorts, might sound out that company's departed CFO Dan Lee about his plans for the future.

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