Hilton exec named CEO at Park Place

David Strow

Monday, Oct. 23, 2000 | 11:18 a.m.

In a surprise move, a top Hilton Hotels Corp. executive today was named the new president and chief executive of Las Vegas gaming giant Park Place Entertainment Corp.

Thomas Gallagher will replace Arthur Goldberg, who died Thursday. Gallagher was executive vice president, chief administrative officer and general counsel of Hilton since 1997.

"The reason for the speed of action by the board was to avoid a period of uncertainty," Gallagher said. "Employees were already worried about what would happen, and there was speculation already starting that there would be a sale of the company. The board wanted no delay, no potential for the loss of our momentum, and that's really the key issue.

"It's a bittersweet time. I'm excited about the opportunity here, but deeply saddened by the circumstances in which it arose."

Gallagher said the board vote to name him CEO was unanimous.

The move surprised many in the industry, who had expected a Park Place insider to be named to the top post. Speculation had centered on Goldberg's top lieutenants, including Wallace Barr, executive vice president in charge of Eastern operations; Mark Dodson, executive vice president in charge of Western operations; and Scott LaPorta, chief financial officer.

"It's disappointing that they didn't choose a successor from inside the company," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown. "A LaPorta-Dodson co-presidency would have been my choice. They're both terrific executives who have lots of experience and who were trained under the guise of Goldberg."

Still, Zarnett added, "Gallagher has a long track record of experience in the gaming industry."

The appointment of Gallagher is widely viewed as a signal that Hilton and its CEO, Stephen Bollenbach, are reasserting their influence on the company Hilton spun off in 1998. Bollenbach is chairman of Park Place, but the company had operated independently under Goldberg.

"This might be Bollenbach moving into a position of more power," said Shannon Bybee, executive director of UNLV's International Gaming Institute. "It certainly looks like a Bollenbach choice, since this is someone within the Hilton organization."

William Barron Hilton, the chairman of Hilton, is the largest shareholder in Park Place, with 7.5 percent of the company's outstanding stock as of March 2000. A. Steven Crown, a Hilton and Park Place director, controlled an additional 1.2 percent of Park Place.

Gallagher has experience in the gaming industry going back more than a decade. From 1992 to 1997, Gallagher was president and CEO of the Griffin Group Inc., Merv Griffin's hotel, gaming, entertainment and media company. During this time, the Griffin Group had controlling stakes in Griffin Gaming and Entertainment and Players International Inc.

Gallagher also served as president and CEO of Griffin Gaming from 1995 to 1996, until the company was sold to Sun International in December 1996. Gallagher left the Griffin Group to join Hilton in 1997, and represented the hotel chain in its vicious, losing battle for control of ITT Corp. with ITT management and later Starwood Hotels & Resorts Worldwide.

"He was the point man on the first aborted attempt to acquire ITT-Sheraton," said Steve DuCharme, chairman of the Nevada Gaming Control Board. "He made the presentation (to the board) during the three-way struggle. While we haven't seen a lot of him, we're not unfamiliar with him."

Following the ITT war, Gallagher was heavily involved in the 1998 spin-off of Park Place and the simultaneous acquisition of Grand Casinos Inc.

"It's important that people understand that I'm somebody with deep roots in the business, very focused on creating value for the shareholders," Gallagher said. "I've had a great relationship with senior management teams (at Park Place), and known heads of property. It's not getting newly acquainted, just reacquainted.

"I was the logical candidate, because of my background, and because everyone knows me."

Gallagher has never held a gaming license in Nevada, but DuCharme said the board has no areas of concern with Gallagher at this point.

Gallagher believes his task is to continue the path blazed by Goldberg -- continuing the integration of Park Place and Caesars World Inc., continuing to pay down debt and buy back stock with cash flow, and to search for "additional strategic deals." Prior to his entry into the gaming and lodging industry, Gallagher worked as an attorney in the field of mergers and acquisitions.

"Basically, my job is to make money for our shareholders, and complete the task of building the biggest and best company in the industry," Gallagher said. "We're building on a terrific base that's already in place."