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July 24, 2014

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Cannery partners did it their way

Rising from humble roots, they took risks that paid off and always shared credit for their success

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Steve Marcus

Cannery Resorts partners Bill Wortman, left, and Bill Paulos attend the Aug. 27 grand opening of the $250 million Eastside Cannery at Boulder Highway and Harmon Avenue. Their company, which they’ve agreed to sell for $1.8 billion, also manages the Rampart and owns a lucrative “racino” in the Pittsburgh area.

In an industry driven by outsized egos, an equal partnership is a rare and wondrous thing.

Beyond the Sun

Bill Paulos and Bill Wortman, known to friends and colleagues at their Cannery Casino Resorts as “The Bills,” are interchangeable. If one Bill is busy and a decision needs to be made, the other Bill will make it for him.

To understand how these men who came from humble backgrounds built a company they will sell next year for $1.8 billion — an accomplishment even more notable in the gaming industry, known more for its family legacies and company men than self-made entrepreneurs — it helps to understand their relationship as much as their resumes.

“In all the years we’ve been partners we’ve never had a cross word with each other,” said Paulos, who considers their business relationship their biggest achievement. “We’ve disagreed. But we respect one another’s beliefs and ideas. If you don’t agree on something, you talk about it. You don’t let it fester.”

“One of the biggest mistakes people make is not keeping their ego in check. You’ve got to check it at the door before you go in to work. You can hurt the decision-making process and detract from your basic business premise.”

To understand their success, it also helps to understand the role of luck alongside skill and hard work. While other entrepreneurs in this high-risk game would roll the dice and lose, The Bills have beaten the odds at every opportunity.

Some of Wortman’s earliest memories are of broiling summers in a home without air conditioning in a well-worn neighborhood in East Las Vegas. He was working by age 11, compiling a newsletter for the Elks Club, and became a Teamster by 16, refilling vending machines around town by truck.

His future business partner began making real money at 13, washing dishes at a New Jersey hotel. A year later, Paulos moved up to the big time, operating an elevator at the Waldorf-Astoria in New York City.

Perhaps their ability to relate to each other is rooted in their working-class backgrounds.

The Bills seem to think alike, repeating similar phrases in separate conversations. Their wives also share the same name, Bonnie.

Paulos, 61, and Wortman, 62, also share a work ethic shaped by physical labor, experience that’s appreciated in the 24/7 casino business.

When they entered gaming, family or business connections could guarantee a job in Las Vegas’ homegrown casino industry. Instead, these men used hard-won college degrees to gain entry into that insular world.

Both started out as financial controllers and developed an expertise in casino operations, learning from the ground up how properties, big and small, made money.

In 1996, drawing on their experience in the industry, they started on a path to major wealth, and potentially, major ruin: They formed their own gaming company.

Along the way, they were accessible and inclusive. When he bought Nevada Palace out of bankruptcy, Wortman paid off all its creditors. Years later, the men guaranteed jobs to Nevada Palace workers when the Eastside Cannery replaced it this year. Both moves will be remembered in a town with a long memory for hardship and hardball management.

“This was the right thing to do,” Paulos said. “Any success we’ve had is absolutely the result of everyone in the organization.”

Wortman worked part-time while attending UNLV, graduating in 1971. He worked for accounting giant Laventhol & Horwath, which had several gaming clients. It was at this time that Wortman met Paulos as he was seeking clients on the Strip.

Wortman eventually got offers from the firm’s clients and made his choice, becoming in 1978 financial controller at Caesars World, which owned Caesars Palace.

Led by the visionary showman Clifford Perlman, Caesars was the first Las Vegas casino to market to Asian high rollers and had its own Grand Prix.

Five years later, Wortman became president of Caesars Tahoe. But being a suit at Caesars wasn’t Wortman’s idea of fulfillment.

“I loved Caesars, but I wanted to ultimately own my own casino and work for myself,” he said.

He returned to Las Vegas in 1984 and bought a stake in Nevada Palace, on Boulder Highway. (He bought out his partner in the Nevada Palace, Renata Schiff, in 2006.)

The Nevada Palace deal was the beginning of a plan to redevelop the aging property.

Paulos’ path to the executive suite in Las Vegas was even more unlikely. Aside from playing street games as a kid growing up in New Jersey, Paulos knew nothing about gambling.

Days before graduating with a two-year degree in applied science from State University of New York at Delhi, Paulos was approached by a professor who told him of a hotel management school opening at UNLV, then called Nevada Southern University. Two years later, in 1969, he was in the hotel college’s first graduating class.

The influx of college graduates would help transform a mob-ridden industry into a Wall Street investment sector. But jobs didn’t come easily to a man who relied on credentials that included, by graduation, an internship at the Riviera.

“In those days, these were patronage jobs based on who you knew,” Paulos said.

His first casino employer was Recrion Corp., a mob-controlled entity, now lost to history, that owned the Stardust, Fremont and Hacienda casinos. While silent partners were wheeling and dealing, Paulos put his schooling to use in the human resources department. He later became one of the industry’s first food and beverage controllers, managing purchasing costs at the Fremont.

Paulos joined Bill Bennett’s Circus Circus Enterprises in 1980, and played a key role in marketing Las Vegas to the masses. While Wortman was watching over Caesars’ high-roller business, Paulos was running the first casino to welcome middle-class families on a large scale. Circus Circus’ big profits became known after the company went public in 1983.

In the early 1990s, Paulos opened and ran the Excalibur and, later, the Luxor. He worked for Australian casino giant Crown Ltd. for a few years, then returned to Las Vegas to work for Primadonna Resorts, which had three casinos in Primm.

Paulos was fired over disagreements with Primadonna’s owners. Looking back, he said, “it turned out to be the best thing they could have done for me.”

Wortman and Paulos had become fast friends since that chance meeting in the mid-1970s during a sales call. Now Wortman, who had approached Paulos about a resort opportunity for Primadonna, had another idea for his friend.

“He said, ‘You’ve been making a lot of money for a lot of people for a long time. Why don’t you make a lot of money for yourself?’ ” Paulos said.

They formed a partnership, Millennium Gaming, in 1996.

Paulos’ reputation for running profitable casinos, such as the Excalibur and the Luxor, led to an offer from investment bank Donaldson, Lufkin & Jenrette to run a casino in Detroit. Lawsuits protesting the process by which Michigan awarded three coveted casino licenses delayed the Greektown casino for several years. Paulos and Wortman survived on Wortman’s 40 percent stake in Nevada Palace and the consulting fees for Greektown.

When Greektown opened, in 2000, it was a smashing success. The casino captured a third of the Detroit market, more than the 22 percent Wall Street had expected.

Around the same time, Paulos and Wortman took on a third partner, Guy Hillier, and were independently approached about a long-shot opportunity for a casino on the northeast edge of North Las Vegas.

They broke ground on the 1940s-themed Cannery days before the 9/11 attacks. Bank lending dried up overnight, nearly killing the project. They turned to hard-money lender Vestin Group for startup cash at an interest rate that, according to Paulos, “nobody in their right mind would have paid.”

They were under a now-or-never deadline: They had to open the property by January 2003 or, under a law restricting suburban casinos, risk losing the right to build there. The men maxed out credit cards paying for incidentals.

“We were truly under the gun,” Paulos said. “It was day by day.”

They were able to refinance the more than $50 million they had borrowed from Vestin. Through Vestin, they began talking with an investment group planning to bid on the Resort at Summerlin at a bankruptcy auction. The group won the bid in November 2001 and tapped Paulos and Wortman to run the property, which was renamed Rampart Casino at the JW Marriott Resort. They needed that consulting income to support development of the Cannery.

Banks and casino peers thought the Cannery’s remote location, at Craig and Losee roads, spelled disaster.

But the Cannery’s relative isolation would become its strength. Open desert in North Las Vegas would soon be carpeted with thousands of homes, and nearby industrial parks were growing as well.

The Cannery opened on Jan. 3, 2003. Despite its small scale, the casino with a 201-room hotel is one of the most profitable in Las Vegas, generating well above initial earnings projections of $5 million a year and becoming a brand known across the valley. It has since expanded twice at a cost of $150 million.

Entertainment is a major draw for customers as these ex-Strip executives have translated their knowledge of centerpiece entertainment at properties such as Caesars Palace and Circus Circus to a neighborhood casino with a lineup of golden oldies that appeal to Baby Boomers.

The Rampart was another marketing success for Wortman and Paulos. Under previous management, it had performed poorly, catering to well-heeled tourists staying in the suburbs. Paulos and Wortman marketed to a much bigger crowd, well-to-do locals.

Once again, a potential drawback — in this case, a small casino tucked away in a 541-room resort — turned out to be a boon. Residents flocked to the cozy, laid-back gamblers’ oasis amid elegant surroundings.

Investors worth $28 billion came knocking in 2005, ending forever The Bills’ maxed-out credit cards and sky-high interest rates. Oaktree Capital Management’s ownership stake in Cannery Casino Resorts allowed the company to acquire a racetrack in Pennsylvania — a financial gold mine that’s the only slot machine casino in the Pittsburgh area — and buy the remaining interest in Nevada Palace, paving the way for the $250 million Eastside Cannery, which opened last month.

Before Crown offered to buy their company last year, Paulos and Wortman had planned to expand the Cannery brand, building more casinos. But the offer, and the chance to spend more time with their families, was too good to refuse, they said.

“It seemed like the right thing to do at the right time,” Wortman said. “None of this has been easy ... Anyone who thinks they haven’t been lucky in the process and done it with the success of so many other people is kidding themselves.”

Paulos added, “Probably 90 percent of life is being at the right place at the right time.”

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