Max Frumes & Sujeet Indap
342 pp., 2021, $28.99, Diversion Books
The subtitle is perhaps the best summary of this magnificent book: “How a Billionaire Brawl Over the Famous Casino Exposed the Power and Greed of Wall Street.” You cannot be in this industry and not have had some curiosity about the inner workings of Caesars during the last few decades. They were and are the largest casino operator in the world. Their roots were planted by the legendary William “Bill” Harrah, who built an all-star team and world class resorts in Reno and Lake Tahoe. It first transitioned to Holiday Inns and later Harrah’s Entertainment, expanding nationwide. Then began the age of Harvard professor Gary Loveman. His reign spanned from innovative marketing, additional acquisitions and frequent operational idiocy. But my view, and probably yours, was formed only by what we saw or experienced on Caesars’ surface. “Total Rewards,” immense scale, superb research and management consolidation were the elements that inspired awe from competitors. The almost-criminal lack of capital re-investment, deferred maintenance, price hikes and Harvard Supremacy were the elements that seemed self-destructive. If you read this book, some of the motives behind those moves become clear; even if the logic never will.
It’s hard not to reflect on the 1987 movie Wall Street, where fictional character Gordon Gekko infamously said, “Greed, for lack of a better word, is good.” The players in this real-life Caesars bankruptcy drama make Gekko look like Mother Teresa.
You have to admire the research that went into this work. It is the first book by authors Sujeet Indap and Max Frumes. Hopefully, it won’t be their last, because they make understanding the complex and confusing world of high finance and legal minutia as griping as a daytime soap opera. The Acknowledgments section at the end explains that many of the major players in the bankruptcy were willing to talk candidly about the process, but only once it had concluded (and all wanted anonymity). That gives the book the feeling that the authors were in the rooms transcribing the somewhat lively and profanity-laced debates between lawyers and financiers.
If I had any criticism of this book, it is that the case involved so many players, firms and complex strategies that it was often difficult to comprehend without frequently backing up a few pages for reference. However, by Part Three or Four, many of the names and key players became easier to put in perspective. On the plus side, you’ll get a primmer on financial maneuvers such as credit default swaps, REITs, distressed debt, exchange offers, derivatives, RSAs, PropCo & OpCo, leveraged buyouts, and voluntary vs. involuntary bankruptcy.
Here’s just a small sampling of juicy quotes in this text that help to understand some of the financial realities that prompted many of the curious operational decisions that everyone observed at Caesars properties:
- Page 126 – Interest expense of nearly $2 billion was double the size of cash flow (2007). Annual free cash flow was running at negative $1 billion.
- Page 141 – Unimaginable brazen looting and corporate abuse … devised a scheme to cheat creditors of their rightful recoveries … the fox has not only been put in charge of the hen house, it has barricaded the door and had even paid itself a salary.
- Page 163 – Gary Loveman had taken home more than a hundred million dollars in total compensation from Caesars over the years. ‘Why should my father (an 80-year-old retired Caesars host relying on a SERP company pension) be penalized because current Caesars executives have mismanaged funds and have not paid their creditors?’ …. Lawyers, bankers and other advisors got their millions in fees paid by the bankrupt company while executives often received retention bonuses; but creditors at the bottom of the totem pole (like retirees) often got wiped out.
- Page 200 – For the period between the bankruptcy filing on January 15, 2015 and the end of May, the firm (Kirkland) was asking for $21.4 million in fees … along with $800,000 in expenses.
While you’re probably familiar with the public faces of Caesars like Loveman, Mark Frissora and Tony Rodio, you’ll learn that others unknown in the gaming world played major roles in the financial drama. Just a few of those starring cast members were: Leon Black, Marc Rowan, David Sambur, Jim Millar, Bruce Bennett, Jim Millstein and especially bankruptcy judge Benjamin Goldgar. Perhaps unsurprisingly, these same players and several other firms like Apollo, TPG, Oaktree, and Canyon Capital involved in the Caesar’s bankruptcy are also major forces today behind many other corporate giants.
I had some personal conflicts while reading this. First there was the disgust that none of the characters involved seemed to have a shred of moral fiber. Lies, insults, betrayals, double dealing and backstabbing were standard. Maybe that goes with the stakes. Would I sell my soul for a few thousand dollars? Of course not! But what if the price were the multi-millions or billions that protagonists like Leon Black were throwing about? Who knows?? Our society values winning, and many could argue that Black was/is a winner, despite his and all the others’ Gekko-like behaviors. Thankfully (or maybe sadly) it’s a temptation that I’ll never face — along with the realization that a Tahoe lakefront villa is also not in my future.
While this book takes some determination to make your way through its intricate detail, it is definitely worth it to put this period in Caesars’ history in context. You need to read this. Try not to be too disgusted.
