Jesus H. Jones Behind the Scenes

"The speed of communications is wondrous to behold. It is also true that speed can multiply the distribution of information that we know to be untrue."  --Edward R. Murrow

Musings about Media and Politics

During some of the scandals which erupted a few years ago I spent some time musing about how little has changed since the days of Plato's Republic in Greece when the Sophists helped to destroy their democratic government. I compared the Greek Sophists to the likes of Scooter Libby and explored the rise of political strategists such as Karl Rove and Jack Abramoff, tracing the roots back to the development of propaganda techniques during World War II by members of the newspaper, magazine, radio and television media and their adjunct advertising staffs.

Further musings along this line have taken me back into political management of the Democrats s as well, decades earlier. When businessmen and bankers are put in control of our government, they tend to see the national interest from their own slanted perspective--believing "what's good for General Motors is good for America," et cetera. As James Carville used to remind Bill Clinton ad nauseum, "It's the economy, stupid," and those in charge tend to have the most impact on the economy when working through the corporations over which they, or those who are backing them, have the most control.

In the late 20's and early 30's, not only was radio one of the biggest investment opportunities of that day, but its technology promised an ability to influence a wide-ranging audience of voters, as well as buyers of consumer goods. Retailers of goods and services were beginning to understand that radio could have a broader impact than newspapers and magazines. Politicians, and those who financed them, were eager to get aboard this new technology. Demographics, like democracy, is all about numbers.

President Roosevelt, a savvy politician, make great use of the new phenomenon in his "Fireside Chats."

Elliott's network would have made a third one, competing with CBS and NBC.

Lyndon Johnson's opportunity to rise in radio came simultaneously with Elliott Roosevelt's decline in that field, which may or may not be a mere coincidence, each resulting from the influence of Jesse Jones' network of Texans. In Jones' book, Fifty Billion Dollars, published by Macmillan in 1951, he disingenuously described the maneuvers of the Texas state Democratic convention of 1944:

the Regulars captured the convention from the pro-Roosevelt delegates, who then bolted to hold their own convention. Soon after these meetings certain troublemakers in Washington tried to make it appear to the President and others close to him that I had encouraged the action taken by the Regulars. This was due to the fact that George A. Butler, the husband of one of my several nieces, took a prominent part in the Regulars movement. In discussing this with the President, I told him that I had a good many in-laws, including several men who had married my nieces, and that I did not control them in their politics any more than he controlled his own family. I reminded him that his son Elliott, over my protest, had persisted in his purpose to second my nomination for the Vice Presidency at the 1940 Chicago Convention, after the President had chosen Henry Wallace, and of Elliott telling me that his father did not know what he was doing in wanting Wallace. Subsequent developments proved that Elliott was right about Wallace.

Being a member of the President's Cabinet, I was, of course, embarrassed by Mr. Butler's activities in the Regulars movement, but there was nothing I could do about it. [page 274]

Background of the "Texas Regulars" Movement

Spearheading the publicity for the "Regulars" was the eminent E.E. Townes, who had been closely connected to Jesse's financial network since at least 1917, if not much earlier, through Houston oil men made wealthy after the Spindletop boom in 1901.

Click to enlarge

Included among these businessmen were the founders of Humble Oil, which had been chartered in 1917 by none other than Houston attorney Edgar E. Townes on behalf of William S. Farish, Ross and Frank Sterling, Harry C. Wiess, Robert L. Blaffer, and W.W. Fondren. Jesse Jones, who was never an oil man, was strangely included in the original list of incorporators (possibly as a mere trustee who represented the financial interest of others who wished to remain unnamed, most likely Col. E. M. House, who had previously introduced Jones to President Woodrow Wilson).[1]

A few months after Humble Oil's corporate papers were filed, President Wilson appointed Jesse to head the American Red Cross, then active in World War I as a sort of "unofficial intelligence agency," before any official civilian intelligence service existed. Jones sold his stake in Humble Oil in 1918, after first introducing W.S. Farish to his "personal friend," Harvey Gibson, president of Liberty National Bank in New York City, which loaned Humble a much needed $250,000.[2]

Jones revealing model of San Jacinto Monument

E.E. Townes took Jones' place in 1918 on the board of directors of Humble Oil and thereafter devoted full time to the corporation's business.[4] Townes' brother, John C. Townes, Jr., was general counsel for the company for a ten-year period before going into partnership with E.E. Townes and his son.[5] For a number of years their law firm was located in the same building--Houston's San Jacinto Building--as Herman and George Brown's "Brown Foundation," not surprisingly since, according to Jesse Jones' own newspaper [Ralph Bivins, Houston Chronicle, Section Business, Page 6, 08/17/2003], principals of Brown and Root bought the building in 1940 from principals of Humble Oil:

In 1940, an investment group led by George Brown of Brown and Root bought the property for $1.35 million. The seller was a holding company led by R.L. Blaffer, former chairman of the old Humble Oil and Refining Co. In 1950, a redevelopment of the hotel became major news in Houston. The interior and exterior of the hotel were stripped away, architect Kenneth Franzheim [a New York and Houston architect who was awarded contracts from Jesse Jones' RFC subsidiary Defense Homes Corporation] redesigned it, and the hotel was transformed into an office building.

The Townes brothers also were assisted by attorney Frank Andrews, senior partner of Andrews, Kurth, the Houston firm which represented Standard Oil of New Jersey, which had a hidden 50% interest in "the Humble." Andrews, incidentally, was another very close friend of Edward M. House (the "Colonel," as he was called).[6] In fact, Andrews and House were partners in an unsuccessful venture in Spindletop with investors from Boston.[7]

The year FDR was first elected, 1932, Elliott was sales manager of the Southwest Broadcasting company, based within the Hotel Texas in Fort Worth, which handled the exclusive advertising rights of some of Texas' biggest corporations--Humble Oil and Duncan Coffee in Houston and Magnolia Petroleum of Dallas.

Those corporations' executives all had strong ties to the government's biggest banker of that day, Jesse Holman Jones, sometimes called "Mr. Houston." Jones not only headed the Reconstruction Finance Corporation, but he also owned the Lamar Hotel where the "Suite 8-F Crowd" would meet in Herman Brown's 8th floor suite. Originally appointed to the RFC by Herbert Hoover, Jones would remain in his important post throughout FDR's terms of office until frustration with the New Deal forced him out. Jones' arrogance jokingly earned him the nickname, Jesus H. Jones, among some of his detractors.

In January 1938, Elliott became president of Hearst Radio, Inc. after Southwest Broadcasting sold three of the companies it owned to Hearst. One of those stations--Station KUT (1300 kilocycles)--had been created in Austin, Texas in 1922 by the University of Texas which sold it in 1927 to Jesse Jones, under the corporate umbrella through which he owned Houston Station KTRH. Sold to the Hearst empire in 1932, the call letters were changed to KNOW while the station employed then-student Walter Cronkite. Intriguingly, KNOW would later broadcast from the Norwood Building, now owned by an LBJ subsidiary controlled by Lyndon's daughter, Luci JohnsonTurpin.

Elliott Fades Out

The national network Elliott formed possibly with an eye toward helping FDR with the upcoming 1944 election had been financed by a group of men from Harry Truman's stronghold in Missouri, including Lester E. Cox, who established KGBX radio in Springfield, Mo. in 1931. Like the Fort Worth clique which favored the vice presidency of John Nance Garner, these Missouri Democrats likely hoped to influence Elliott's father's choice of a running mate by investing in the son's career. As Jesse Jones revealed also in his book, however, FDR welcomed the financial assistance but felt no obligation to those who showered Elliott with money. Cox sold KGBX to a newspaper company in 1944, just before FDR finally dumped Vice President Henry E. Wallace, replacing what the Regulars called the "Communist" candidate with Missouri U.S. Senator Harry Truman.

By 1944, however, Elliott Roosevelt, in addition to losing interest in the radio network bought in the name of his second wife, Ruth Googins, but he had also dumped Ruth, having left curmudgeonly Jesse Jones to clean up the radio mess abandoned by him shortly after Pearl Harbor. In a section of Jones' book, entitled "Bailing out Elliott Roosevelt," Jesse relates in great detail how he fixed the situation after receiving a call from FDR while Sid Richard and Charlie Roeser were in his office railing about their tanked investment in Elliott's radio network:

They told me that Elliott's radio company had lost its entire capital of $500,000, and that to buy his stock in the company Elliott had personally borrowed $200,000 from John A. Hartford, president of the Great Atlantic and Pacific Tea Company, $50,000 from David G. Baird, an insurance official of New York, and $25,000 from Judge Charles Harwood of New York, who subsequently, in the early part of 1941, had been appointed Governor of the Virgin Islands by the President. As collateral to these loans, Mr. Hartford had received $200,000 par value of Elliott's radio stock and Mr. Baird, I think, $50,000 of the same....The [financial] statement showed the company to be insolvent. Operating losses had exhausted all of its capital stock.... These debts did not include what Elliott personally owed for the money he had borrowed to put into the stock of the company. Messrs Roeser and Richardson advised me in writing that they regarded their stock in the company as then of no value....

At the time Mr. Hartford loaned the money his company was being sued by the Federal Trade Commission under the antimonopoly laws. This was of course known to the President but not to me. [pp. 294-295]

After FDR was elected to his third term, someone spilled the beans on the mess Elliott had made and an investigation ensued. Columnist Westbrook Pegler described part of that public airing as follows:

Hartford was asked why, when he went to see Jesse Jones, then secretary of commerce and chairman of the Reconstruction Finance corporation, at Jones' suggestion, he expected that he was going to get back his $200,000, with interest.

"I thought the President would pay his son's debts, just as any father would," Hartford answered.

At the time of the settlement, Sid Richardson and Charles Roeser, Ft. Worth oil men and friends of Elliott, who had been dined several times at the White House, wrote their opinion that the stock of Elliott's Texas state network, which Hartford had taken as collateral, was worthless. Richardson and Roeser were large stockholders and friends of Elliott and his wife at that time, a Ft. Worth girl. Jones was appearing in the deal as agent for clients, the President and Elliott. All concerned in the representations by which Hartford was led to believe that his collateral was worthless and that he was well rid of it at two cents on the dollar, had an interest in the company or, in the President's case, a paternal interest in his son's fortunes.

There were reasons at that very time, however, had Hartford taken the pains to inform himself thoroughly, instead of relying on his faith in the President and Jones, which might have persuaded him to hold his stock for a rise. The company's affairs were improving. 

"Jones," he said, "assured me that Elliott was broke and insolvent and the stock was worthless and, being a member of the cabinet and head of the largest bank in the world (the RFC), that was all the assurance I wanted."

He added that Jones told him Mrs. Elliott Roosevelt, too, was broke. The stock is now worth more than $100 a share. Hartford's 2,000 shares, bought back for $4,000 of Jones' money, by President Roosevelt's suggestion, now are worth more than $200,000 at that rate.

Apparently Jesse, whose own Station KTRH was part of Elliott's network, had no idea what the network was worth.


Elliott's marriage to rising movie starlet, Faye Emerson in December gave evidence of his new focus on creating a transcontinental airline company, if one can rely on the fact that witnesses at the wedding were Jack Frye, president of Transcontinental and Western Air, Inc. (TWA), and Johnny Meyer, a close friend of TWA's Howard Hughes from Texas (nephew and one-time son-in-law of two of W.S. Farish's in-laws). Meyer had allegedly introduced Elliott and Faye only a few months earlier. News stories of their wedding revealed that "Ralph Waldo Emerson, the poet, was her [Faye Emerson's] great-uncle," which, if true, made her a relative of Ruth Forbes Paine Young--daughter of William Hathaway and Edith Emerson Forbes--mother-in-law of future Oswald "friend" Ruth Hyde Paine.

Newlyweds Elliott and Faye (center) with M/M Jack Frye, Janet Thomas, Johnny Meyer, and Mrs. Joseph B Livengood, Faye's friend. Press Photo 1944

British Intelligence Planned Dump Wallace Campaign?

Instrumental in the campaign to dump Wallace was British Intelligence, which then had a very active role in spying on Vice President Henry Wallace--according to Jennet Conant, author of a most fascinating book The Irregulars: Roald Dahl and the British Spy Ring in Wartime Washington--with unwitting help from Lyndon Johnson's financial angel, Charles Marsh, a friend of Roald Dahl, the undercover spy:

It was a dirty convention and made for a lot of hard feelings all around. Roosevelt tried to be conciliatory and asked Wallace to remain part of his administration, telling him he could have his pick of jobs with the exception of secretary of state. That job was reserved for his dear friend Cordell Hull, his secretary of state for the past ten years, who was in his last stint of public service. Roosevelt hastened to assure Wallace that he wanted him to take an active role in postwar planning and to sit on "some international conferences." Wallace felt that as one of the strongest leaders in the Democratic Party, he should by rights have the State Department, the most important cabinet post. Out of deference to the president's wishes, however, he settled for secretary of commerce, the seat currently occupied by his bitter adversary Jesse Jones. The president had already indicated that after the election one of the first people he wanted to boot from his administration was the arrogant "Jesus H. Jones." The ambitious commerce secretary had been a thorn in Roosevelt's side as well, and it suited him to allow Wallace to replace him, thereby exacting a measure of revenge on both their behalfs. [pp. 267-268]

An intriguing detail about Henry Wallace's replacement on the Democratic ticket in 1944 harks back to the radio men from Missouri who financed Elliott's first move into national broadcasting. Lester E. Cox would move up the regional political ladder within Truman's political sphere. As the news article to the right attests, Cox was close to Sen. Prescott Bush's younger brother, James S. Bush, Prescott's best man at his 1921 wedding to Dorothy Walker of St. Louis.[8]

Both Cox and Bush were Democrats who were appointed in 1951 by Missouri's Democrat governor to the governing board of the University of Missouri as well as to its executive committee, which controlled the university's School of Mines and Metallurgy and its radio station. Bush would leave the governing board in 1957. In the meantime his nephew, George Herbert Walker Bush, Prescott's son, would have moved first to the West Texas oil fields and then to Houston, where he began hobnobbing with the same social set which had made up the Texas Regulars in 1944, and he would help them build the Republican Party in Texas, while always having nice things to say about his uncle's friend Harry Truman.

James Bush's Skull and Bones class, 1922

Like Prescott, Poppy and Dubya Bush, James, whom Kitty Kelley in The Family: The Real Story of the Bush Dynasty called "the black sheep of the Bush family," was a member of the Yale secret society, Skull and Bones. Kelley also stated he was an alcoholic who, when drunk, beat his wife Janet. That fact never made it into the headlines, however.

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[1] Bascom N. Timmons, Jesse H. Jones, The Man and the Statesman (New York:  Henry Holt, 1956), p. 96.

[2] Henrietta M. Larson and Kenneth W. Porter, History of Humble Oil (New York:  Harper and Brothers, 1959), p. 72.

[4] Ibid., pp. 28, 55, 58.

[5] Committee on History and Tradition of the State Bar of Texas, Centennial History of the Texas Bar:  1882-1982, p. 94.  According to this account, Townes was a member of the Masonic Blue Lodge, Arabia Temple Shrine, and, after the death of his first wife, was married to Mrs. Browne Rice, Jr.

[6] Rupert Noval Richardson, Colonel Edward M. House: The Texas Years, 1858-1912 (Hardin-Simmons University Press, 1964), p. 201. 

[7] Ibid., p. 201.

[8] In 1948 James Bush made it into Walter Winchell's column with a one-sentence question: "Could James S. Bush (of St. Louis) be 'Mr. Next' for the lovely widder of Wm. Rhinelander Stewart?" The answer turned out to be yes. Bush married the beautiful Janet Newbold Ryan Stewart, whose son, Allan Ryan, Jr., was later in the same 1953 Yale/Skull and Bones class with Poppy Bush's brother, Jonathan J. Bush. James Bush had been a Lt. Colonel, U.S. Army Air Force in WWI. After working as an investment banker at Hayden, Miller in Dayton, Ohio, Bush moved to St. Louis to work for G.H. Walker and Co. (the investment bank set up by Prescott's father-in-law decades earlier), where his 503 Locust office was next to the Boatmen's Bank building. They lived at 36 Westmoreland Place in the city in 1939. Walker relative James H. Wear, Jr., also a banker, lived at 40 Westmoreland. Wear (Yale's class of 1934) was the son of Yale Alumni's one-time president of the St. Louis chapter, whose sister Loulie married George Herbert Walker. The Wears and Walkers all lived within walking distance of each other in the Central West End near Forest Park. By 1910 G.H. "Bert" Walker had bought a three-story Italian Renaissance home at 12 Hortense Place where the couple reared two daughters and four sons, with assistance from six live-in servants. George’s father, David Walker, lived nearby at 53 Vandeventer Place, and an elder brother, David Walker Jr. (a clerk in the Eli-Walker dry goods business), also lived at that address.

Is There a Houston Nexus to Newt's Sugar Daddy?

Does anyone besides me remember the rise and fall of Michael Milken--that epitome of Wall Street greed during the 1980s, the King of Junk Bonds? You can learn at Wikipedia, if so inclined, that 

"Milken was largely involved with kick-starting investments in Nevada, which for many years was the fastest-growing state in the United States. Milken funded the gaming industry, newspapers and homebuilders, and among the companies he financed were MGM Mirage, Mandalay Resorts, Harrah's Entertainment and Park Place."

Milken was busy cheating death by overcoming advanced prostate cancer at about the same time his friend and bond client, Sheldon Adelson, was creating the old Sands Exposition Center -- a venue in Las Vegas for Bill Gates to promote the idea of personal computers. More about that later. First we need to understand how money works in this type of business deal.

Kuffernan and Freedman

The Sands hotel was a rather small casino started by Jakie Freedman of Houston, Texas; his partner was Mack Kufferman. According to Marguerite Johnston, when he lived in Houston, Jakie Freedman--a professional gambler who had a huge casino on South Main near where the Astrodome would be built--was the largest depositor at Houston's City National Bank, founded by James E. Elkins, an attorney who was one of the named partners in Vinson and Elkins. Freedman was known to accompany Elkins and his friends, members of the Suite 8-F Crowd, to the Kentucky Derby every year.  Governor James Allred once said:  "Judge Elkins doesn't practice law, he practices 
influence." As proof of that, the Elkins firm would take influence peddler John Connally as a partner of the firm upon his exit from the Governor's mansion in Austin in 1969. Elkins died in 1972.

Quoting from Chapter 69 of Marguerite Johnston, Houston: The Unknown City, 1836-1946:

“By the 1930s, Judge James A. Elkins was a quiet power in Houston.  One of his admirers once said, ‘Judge doesn’t practice law, he practices influence.’…LBJ sometimes lamented the fact that he was often called a ‘tool of the oil industry’ outside of Texas and ‘a wild-eyed liberal’ when he sought campaign funds in some quarters of his own state.  The 8-F endorsement would help him, both in votes and in contributions.

“Johnson ran for the Senate with full 8-F backing. ‘One of his best fund-raising sessions was held on the top floor of the Kentucky Hotel in Louisville, as the group gathered for their traditional weekend at the Kentucky Derby,’ Dr. [Patrick James] Nicholson wrote.

“Judge Elkins was famous for putting a bet on every starter. He had just come out ahead after severe losses in the traditional crap game. When Jet Pilot won, Judge Elkins was so pleased that he gave all his winnings to Herman Brown for the LBJ war chest and promised a substantial contribution as well. Everyone else followed suit. Congressman Johnson became Senator Johnson in the famous eighty-seven-vote win over Coke Stevenson.

“ ‘Every year 8-F went to the Kentucky Derby,’ Posh Oltorf said, ‘Jim Abercrombie, Judge Elkins, Jesse Jones, Gus Wortham, Jakie Freedman, George and Herman Brown, Milo Abercrombie, Naurice Cummings, William Smith.  They would stay two or three days, and LBJ and Senator Russell and maybe one or two other senators would fly over and join them.’ "

When George and Herman Brown decided to buy the Big-Inch and Little-Inch pipelines from the government after the war, the plan was hatched in Suite 8-F, and all the members were in on it. The legal work was handled by Charles I. Francis of the Vinson and Elkins firm. 

Augie in later years

Financing was arranged by August Belmont IV of Dillon Read—no doubt working through contacts with N.M. Rothschild of London to sell the securities. It could have been at the same time that Rothschild's Five Arrows Group acquired an interest in Elkins’ bank, according to the 1976 Report issued by the House of Representatives Committee on Banking and Currency, which was investigating connection in of United States chartered banks to International Banking networks.

Now the connection between some of the owners of the Sands Hotel with bankers in Houston, Texas is fascinating, to say the least, especially given the fact that in the mid-1960s, Howard Hughes purchased the hotel and added a 500-room circular tower (pictured below) in 1967.

The Sands, as modified by Howard Hughes

K.J. EVANS in a Las Vegas Review-Journal article, using the CIA-connected Robert Maheu as his primary source, writes:



In 1966, the Desert Inn rented Hughes its entire top floor of high-roller suites, and the floor below it, for 10 days only. Check-out time came and went, and Hughes didn't move. Moe Dalitz and Ruby Kolod, co-owners of the Desert Inn, were furious. New Year's, one of Las Vegas' busiest holidays, was looming, and the suites had been promised to high rollers. The squeeze was on Maheu. 
      "Get the hell out of here or we'll throw your butt out," growled Kolod. 
      "It's your problem," Hughes told Maheu. "You work it out." 
      Maheu called in a favor from Teamsters Union President Jimmy Hoffa, who phoned the DI boys and asked them to leave "my friends" alone. The reprieve lasted into the new year of 1967, when Maheu told the boss he had played out his options with the DI guys. 
      "If you want a place to sleep, you'd damned well better buy the hotel," Maheu told Hughes. 
      To most investors, negotiating a purchase is the means to an end. To Howard Hughes, it was recreation. After months of arduous log-rolling, Hughes and Dalitz agreed on a price of $13.25 million....
      The next purchase was the Sands, then a Strip showplace. Dalitz was consulted, and allowed that it "would be a good acquisition." Hughes paid $14.6 million for the Sands, which included 183 acres of prime real estate that would become the Howard Hughes Center. That was followed by two smaller places, the Castaways and the Silver Slipper, then the Frontier. All three had one thing in common, they came with enormous parcels of empty land. He made a deal to buy the Stardust for $30.5 million, but was prevented from closing by the U.S. Securities and Exchange Commission, which was worried about Hughes holding a monopoly on Las Vegas lodging....
      "Once he was in both (the gaming and hotel business) he didn't want anyone bigger than he," said Maheu. "That's why he tried to stop Kirk (Kerkorian) from building the big place. But he was not willing to do it at the expense of himself continuing to build, or expanding the ground that he had. It doesn't make sense, but it happens to be the truth. He wanted to be the biggest; he didn't want Del Webb to ever be as big. When he bought a piece of land, he wanted all the land around it. He wanted to control. He would have been very happy to be the biggest if no one got bigger than that." 
      Kerkorian's International Hotel (now the Las Vegas Hilton) began to rise in early 1968. So did Hughes' anxiety. He announced plans for a $100 million "Super Sands," hoping Kerkorian would flee into the desert at the news. He didn't. 
      Hughes saw the solution to "the Kerkorian problem" in the Landmark. The tower, a fat concrete cylinder topped with an oversized saucer, rose in the early 1960s, but sat dark most of the decade. Its problem was its design. It had too few rooms, too little casino space. But at 31 stories, it was slightly taller than the International. For that reason, Hughes wanted it. 
      "A lot of people have given me credit for paying 100 cents on the dollar ($17.3 million) for it." said Maheu. "It wasn't my idea, it was his. He was on a public relations kick at the time." Hughes said he would personally direct planning for the grand opening. 
      "I knew from that point on that I was in trouble," said Maheu. "He was completely incapable of making decisions." 
      Kerkorian's camp had announced that the International would open July 2, 1969....
      But no one could quell his fear of disease and germs, perhaps his mother's most profound phobia. If Howard sniffled or coughed, he was rushed to a doctor, lavished with attention and sympathy. Allene Gano Hughes saw every playmate as a disease carrier, and discouraged her only son from socializing....
      During all his years as a recluse, there were only a handful of people who saw him personally each day. This was the so-called "Mormon Mafia," which took orders from Bill Gay, chief of Hughes' Los Angeles office. Its mission consisted of feeding Hughes occasionally and drugging him regularly. 
      On Nov. 5, 1970, Hughes was carried from the Desert Inn and put on a jet for the Bahamas. It was, according to Maheu, a coup. 
      "The reason I know, is that that they tried to get me to join on two occasions," said Maheu. 
      In April 1976, Hughes died at age 70 aboard a plane en route to Houston, ostensibly of kidney failure. However, his dehydration, malnutrition and the shards of broken hypodermic needles buried in his thin arms suggested other factors. 
      "If sheer neglect qualifies as a weapon," said Maheu, "they killed him." 
      Because no Hughes' will was ruled legitimate, his empire was divided among his many cousins. The company, now renamed Summa Corp., finally began to show a profit.

Mrs. Howard Hughes, Sr. before her marriage was Allene Gano, and her closest relative was a  sister, Annette, who married Dr. Fred Lummis. Dr. Lummis' mother had been born Minnie Rice, daughter of Frederick A. Rice, from an old established family in Houston closedly related to William S. Farish, one of the most important founders of Humble Oil Company, which eventually became Exxon. Howard Hughes, Jr.'s "cousins" mentioned above--who inherited his properties and control of his foundation when he was officially declared dead in 1976--were these Texans related to the Rice family, and primarily consisted of Annette's son, William Rice Lummis, an attorney and partner at Andrews, Kurth, the law firm which controlled the Hughes Tool drill bit patent. Lummis became chairman of Summa Corporation and moved to Las Vegas where he supervised the operation of the Hughes companies, including the medical research foundation he had set up for his cousin before his death.

***

All this brings us back to Newt Gingrich and Sheldon Adelson.


Thanks to Michael Milken's junk bonds, Kirk Kerkorian (MGM) had the funds to buy the Sands in 1988, transferring these funds to the beneficiaries of Hughes' estate. Then, only seven months later in 1989 the old hotel was purchased from Kerkorian by Sheldon Adelson's holding company, the Interface Group. According to Jeff Burbank in License to Steal: Nevada's Gaming Control System in the Megaresort Age, Adelson had a 58.8% interest in the holding company, and five other men involved in his businesses each had less than 15%.

The Milken Connection to Sheldon Adelson and The Sands

A FRESH STACK OF CHIPS 

Adelson bet on conventions just as that market exploded in Vegas. If the same happens in Macau, there's a pile to be made away from the tables there as well.

GAMBLING BIG ON MACAU 

By Rik Kirkland

Fortune, 10/17/2005, Vol. 152, Issue 8

Sheldon Adelson, the shrewdest investor in Las Vegas, has a new bet: turning Macau into the biggest, glitziest gambling mecca the world has ever seen.

Sheldon Adelson has made billions of dollars by seeing things others do not. But even he was stumped three years ago [2002] when he first laid eyes on the real estate that Chinese officials were offering him to build a new casino in Macau. "It's very nice, very picturesque," he thought. "But it's underwater! They've relegated me to the boonies!"

Like every other bigtime casino developer, he was well aware of Macau's potential: The former Portuguese colony south of Hong Kong is the only place in the Chinese-speaking world where betting is legal. It's located a short drive or plane ride away from a billion-plus Chinese--who, by the way, are the world's most ferocious gamblers. But out here? On a future landfill project several miles from the crowded downtown peninsula where the action had always been?

Still, the more Adelson thought about it, the more he became convinced that he had spotted something glittering beneath the blue water of the South China Sea. More than glittering: a gold mine. A bustling gambling boomtown. "What I saw was as plain as the nose on my face," he says.

And so he dove in. To grab a beachhead, learn the ropes, and--not the least of it--make some money, Adelson first cut a deal with the Chinese government to erect his "temporary casino." The $265 million Sands, a gleaming Vegas-style palace, opened downtown near the ferry terminal in May 2004. The traffic is so high--40% of the 16 million people who visited Macau in 2004 passed through here, according to the research firm CLSA--and the action so intense that Adelson recouped his initial investment in 12 months.

In the year ahead the gambling operation at the Sands is on track to generate north of $320 million in pretax cash flow. That's more than Adelson made last year from the 4,000 hotel rooms and the restaurants, showrooms, shops, gaming tables, and slots at his highly profitable Las Vegas flagship, the Venetian.

But the real money spinner, Adelson believes, will be on that lonely expanse of freshly poured landfill. It's the only spot in Macau--the most densely populated place on earth--with enough room for what Adelson has in mind: a brand-new Chinese Vegas, complete with a long boulevard of casinos, hotels, shops, deluxe theaters, the works. The first big development on the Cotai Strip (the name was concocted from Coloane and Taipa, the two former islands that border it) is Adelson's $2 billion Venetian Macau, now under construction. It will boast the world's biggest casino (some 600,000 square feet of gambling space, about five times the size of your state-of-the-art Vegas gaming floor), 3,000 hotel rooms, acres of pools, 850,000 square feet of shopping, a 15,000-seat showroom, and a 1.2-million-square-foot convention center. Beyond that, Adelson intends to invest another $2 billion or so to put up hotel-mall-casino complexes that will open alongside the Venetian around the end of 2007 and be run by leading hotel operators, such as Four Seasons and Shangri-La. (He will retain control of their showrooms and casinos.) And although it took at least 30 years for Vegas to become Vegas, he figures it'll take about five for Cotai to become Asia's--and thus the world's--biggest gambling and entertainment mecca.

ODDS ARE you've never heard of Sheldon Adelson, 72, chairman and CEO of Las Vegas Sands Corp. (You may not even be too sure about Macau--except maybe as one of the locales in the James Bond movie The Man With the Golden Gun.) In the creation myth of modern Las Vegas, mobsters Meyer Lansky and Bugsy Siegel get credit for building it. Then comes Steve Wynn, 63, the dashing dream merchant who reinvented Vegas as an adult Disneyland by developing the casino-as-destination--places like the Mirage, Treasure Island, and the Bellagio. A low-profile newcomer, Adelson didn't even own a casino until 1989. But within the industry, he's known as the man who, more than anyone, made Vegas boom as a destination for conventioneers and business travelers--a less sexy but even more lucrative market. He's right up there in the pantheon alongside Wynn. But unlike Wynn, the pugnacious Adelson isn't trying out for the role of industry statesman.

"I was never part of the old-boy network," he says. "I wasn't swaddled in green felt cloth."

And there are a few other things Sheldon Adelson would like you to know. First, this whole recreating-the-Vegas-Strip-in-Macau thing is going to be far bigger than anything he's ever done before. "I've never been involved in something like this," he says. "I don't know of any entrepreneur who has."

It was his idea: "It was my dream. My vision. When I laid it out for [Macau's chief executive] Edmund Ho, he said, 'If you do this, you will put us ahead 20 years.' "

And it cannot fail: "This is the best bet I've ever made in my life--the best. It's a no-risk, no-brainer bet."

COMMAND CENTRAL of Adelson's empire is a sunlit, spacious, but sparely furnished office on the third floor of the Venetian hotel, right on the Vegas Strip. Part of one long wall holds blow-up pictures of his family: his second wife, Miriam, an Israeli internist whom he married in 1991 (her specialty is treating drug addicts), and their two young sons.

Closer to his oval-shaped working table hangs his gallery of fame--some 25 magazine covers, mostly from the likes of Computer Reseller News, Casino Journal, Travel Agent, Meeting & Conventions, Expo, and other trade publications. They capture the decidedly non-glitzy career that propelled him into the celebrity- and power-laden world he now occupies, a world reflected in the photos on the wall across the room: Sheldon (and Miriam) with George Bushes 41 and 43, with Ariel and Bibi, with Rudy and Arnold, and with other notables.

We're lunching at his table, and I'm wrestling with first impressions. Pale, balding, a barrel-chested 5-foot-7, Adelson has been plagued for the past four years by plexitis, a rare nerve inflammation that has temporarily left him unable to walk. (He gets around in a motorized chair and uses a walker for short distances.) Taking two unaided steps, he observes, "That's the most I've done in a long time," but then insists that through daily physical therapy he's going to lick this thing. He dotes on Miriam and her two grown daughters by a first marriage; they wander in and out of our meetings. He tells some touching stories about his father and a fascinating tale about going bust in his late 30s and getting depressed. Contemplating people jumping out of buildings, he looked out the window of his Boston estate, imagined himself "lying scratched in the shrubbery," laughed at his self-pity, and got back to work. The force of his personality has long since dispelled any notion of frailty.

As lunch wraps up, Adelson is getting increasingly frustrated. He wants to show me what he's doing in Cotai, and no one can find the right map. Aides rush in and out. Are we about to witness an explosion? No. An assistant walks in with a cup of forbidden ice cream. (Miriam has been getting him to improve his diet.) He smiles, says thanks, and lifting his spoon, looks over at me with a smile: "Like the little boy said, 'I can resist anything except temptation.' "

I've heard too many stories about Adelson the over-the-top battler to doubt that reality. But the truth, as usual, is more complicated. Is he a tough, demanding boss with a healthy ego? Yes, but he's not driven by Trump-like self-absorption so much as by a desire to get things done yesterday. "My objective," he says, "is singular: Win." He has had a loyal team around him for years. He can be funny and charming. (Accused of being a micromanager, he replies, "My job now is producing strategy. They lock me in a room at nine in the morning, give me a Ouija board and a crystal ball, feed me lunch through the mail slot--I insist on a hot lunch!--and at five o'clock they unlock the door and say, 'Okay, where's your vision for the day?'")

Most of all, what I'm struck by is the truth of something real estate investor Tom Barrack of Colony Capital told me before I flew out to Vegas: "This company runs above all else on the stupendous size of one man's gut."

LIKE MANY golden guts, this one started out hungry. Adelson grew up in a poor Jewish neighborhood near Boston, where his Lithuanian immigrant father drove a cab and his mother (her parents were from Ukraine) ran a knitting shop in the living room. He got beaten up as a kid by the Irish from South Boston; sold newspapers and ran his own business, the Vend-a-Bar candy company, while still in high school; skipped college to learn a trade (court reporting) before serving in the Army; moved rapidly through a series of jobs as an executive assistant, ad salesman, investment advisor; and finally emerged in his late 30s as a low-tech venture capitalist with a $5 million net worth. Still, there was little to suggest that Adelson would ever become anything more than another successful, small-time multimillionaire.

But five decades of hard-knock entrepreneurship taught him a couple of key lessons. Unlike a certain type of company founder who feels he is born to launch only a biotech or a publishing or a software firm, Adelson early on figured out that for him the bottom line on building a company was, well, the bottom line. On a road show in the mid-1990s to raise money to build his first hotel, an analyst asked what the theme of his new place would be. "How about 'making money'?" Adelson replied. "Where does it say in the Bible 'Thou shalt have a theme' when you build a Vegas hotel?" (Later, at Miriam's suggestion, he settled on Venice, where they had gone on their honeymoon.) "I've started more than 50 businesses," Adelson says. "For me, businesses are like buses. You stand on a corner and you don't like where the first bus is going? Wait ten minutes and take another. Don't like that one? They'll just keep coming. There's no end to buses or businesses."

By the late 1970s Adelson had developed a clear vision of what all successful businesses have in common--and more important, a growing belief in his own knack for spotting such opportunities. Call them Adelson's Rules: "It isn't enough to have a good product. The most important thing is to understand the direction of the industry." And "Study any industry, and you inevitably hear two things: 'I've always done it this way,' or 'Everybody does it this way.' When you hear that, know there's an opportunity to do something different and add value."

Adelson's first big score came as he approached 50. He had gotten a whiff in the late 1970s of an industry changing direction: 

Computers were starting to go personal, and sales were shifting from direct salesforces to new third-party channels. "It was a very, very strong fragrance," he says. "It smelled to me like the early auto industry, where no company had the scale to set up national distribution, so they invented a distribution system called dealers." 

His idea for breaking the industry pattern: Start an independent trade show to bring together buyers and sellers at a time when only industry trade associations ran such things. He launched Comdex (for Computer Dealers Exposition) in Vegas in December 1979. Comdex exploded from 157 exhibitors and 4,000 attendees that year to 2,200 exhibitors and 225,000 attendees by the mid-1990s.

Bringing Comdex to Las Vegas generated another big contrarian insight: The town's establishment, by focusing mainly on drawing high rollers and Middle Americans out for a few nights on the wild side, was missing a huge opportunity. Why not lure even more conventions and corporate meetings to Fun City? The suits would fill the hotels and casinos from Sunday to Thursday, while leisure travelers would pile in on weekends.

In 1989, Adelson paid $128 million for the old Sands hotel, the only place in town with enough room to build what he was really after--America's largest private exhibition center. This approach is now conventional wisdom in Vegas, which welcomed fewer than 300 conventions in 1970 and today hosts more than 4,000 a year. But when he first built his 1.2-million-square-foot Sands Exposition Center, it was revolutionary. "What Sheldon did by seeing what the convention center could do for the hotel was unique in my 30 years of doing business in Vegas," says Michael Milken, who raised junk bonds to finance the deal.

A few years later Adelson concluded that he could use his rising tide of business travelers to fill a far larger, all-suites resort. So once again he rolled the dice.

He blew up the Sands, sold Comdex in 1995 to Japan's Masayoshi Son for $862 million, borrowed up to his eyeballs, and at age 66 opened his first luxury hotel, the $1.5 billion Venetian, across the Strip from Steve Wynn's Bellagio.

"People didn't just think I was nuts--they knew I was nuts!" Adelson recalls. Today the Venetian is consistently the first- or second-most-profitable hotel in Vegas, with the first- or second-highest occupancy rate--alongside the Bellagio.

Even as he built his fortune, Adelson's combativeness--especially when he feels wronged--maintained his outsider status. The man can hold a grudge the way Dean Martin held liquor, and he's got tenacity to match. He engaged in a bitter fight with the Culinary Workers to win the right to open the Venetian in 1999 as a non-union shop, which didn't go down well in this strong union town. Later he battled the construction company Bovis for half a decade over costs at the Venetian. Most of all, he has fought with Steve Wynn--his next-door rival in Vegas and the other foreigner with casino rights in Macau.

In those verbal duels, Wynn deploys a rapier; it's sharp but so smooth you barely feel it going in. "I took the long-term view and decided not to compromise the brand by confusing people," says Wynn, whose $1.1 billion copper-sheathed twin of his new $2.7 billion Wynn Las Vegas won't open in downtown Macau until mid-2006. "It was costly in the sense that you could've done something like the Sands and made $300 million or $400 million more. But I'm not there for that kind of money. By having the discipline to wait and make sure we expand, enrich, and deepen the market by delivering a higher-quality building, a higher quality of service, we'll be rewarded with a better reputation."

That kind of talk exasperates Adelson, who wields the rhetorical equivalent of a lead pipe. "Wynn is very good at creating mystique," he says. "He's in it for fun and design gratification. My creativity extends to matching my tie to my suit. But I'm very good at making money, and that's what an economic enterprise is all about. I'm simply a much better businessman."

On this, the points on the scoreboard back up Adelson. Based on his 86% ownership of the Las Vegas Sands, which he finally took public last December in one of the year's hottest IPOs, Adelson today has a net worth of more than $10 billion, which makes him much richer than Wynn (whose estimated fortune is just under $2 billion). His company also plays in a different league. With only two casino properties and one expo center, some 11,000 employees, and projected annual revenues of roughly $2 billion next year, Las Vegas Sands enjoys an $11 billion market capitalization, which is more than twice as big as Wynn's and just behind that of the two much larger, merger-fattened industry giants: Harrah's and MGM Mirage.
Which brings us back to Macau, where, if Adelson is right, the biggest bus of his career is about to barrel into his stop.

IT'S A SAFE BET THAT Broken Tooth Koi isn't reading Austrian economists these days. Koi, a notorious Macau mobster, helped lead a 1930s-style gangland war during the run-up to Macau's handover by Portugal in 1999. More than 30 people were killed in the fighting among the triads, criminal secret societies with deep roots in China. (One of the great moments in PR: A police official reassured wary tourists by noting that the city had "professional killers who don't miss their targets.") The arrest of Koi, a notorious triad kingpin who was sent to prison for 15 years, signaled that Beijing was in charge and that Macau's Dodge City phase was over.

But if Koi wants to grasp why Macau will look so radically different when he gets sprung a decade from now, then Joseph Schumpeter's famous concept of "creative destruction" provides the answer. That's the process the Communist Party has repeatedly unleashed in recent years by inviting foreign capitalists to spur innovation--and inspire local champions--in industries ranging from semiconductors to autos to big-box retailing.

Now it's gambling's turn.

Until the Americans appeared, the standard in Macau had been set by Stanley Ho Hung-sun, an 83-year-old homegrown multibillionaire who for 40 years held the local monopoly on gambling--and who also owns the ferry, the largest department store, a bank, luxury hotels, acres of real estate, and stakes in the local airline, airport, racetrack, and TV station. That empire, which generates two-thirds of Macau's tax revenue, explains why no one was shocked that the old lion landed one of the government's three new gaming concessions.

At Ho's flagship Lisboa, low-ceilinged VIP rooms that cater exclusively to "whales" (high rollers) are sprinkled along winding hallways that vibrate with enough glass, jade, colored tiles, pink and black marble, and twinkling lights to make St. Vitus jitterbug. The place hasn't changed in years. In many of these rooms and others like them, triads still extend--and collect--credit, an important function, since the legal limit for bringing in currency from the mainland, $5,000, is about the minimum bet in such spots.

But to meet the new competition, even Ho has been forced to play a new game. Across the Avenida da Amizade, near where Wynn's place is rising, MGM Mirage has begun building a 600-room, $1 billion resort-casino in a joint venture with Ho's daughter Pansy. Behind the Lisboa is a hole in the ground where Ho is erecting a more lavish whale catcher, the Lisboa Grand. Down by the Sands, construction is well along on his new Fisherman's Wharf joint venture--a mass- market attraction that will feature replicas of the Forbidden City, a Portuguese fort, a Colosseum, a giant volcano ride, and of course lots of gaming tables and slots.
How big can the market get? This year Macau will surpass the Vegas Strip and generate more than $6 billion in gambling revenue. That's with 1,400 gaming tables and just under 10,000 hotel rooms (vs. 2,600 tables and 135,000 hotel rooms in all of Las Vegas). Aaron Fischer, an analyst at CLSA, projects Macau's gambling revenue could top $12 billion by 2010, as the number of tables rises to 4,000 and hotel rooms roughly triple. By then Macau could be attracting 37 million visitors a year (up from ten million in 2003)--about the traffic Vegas draws today. If all goes as planned, this mostly Chinese crowd will also be sticking around longer (the average overnight stay in Macau today is barely one night, vs. nearly four in Vegas) and spending a lot more on shopping, eating, and shows. To grease this red-hot engine, the government is spending billions on infrastructure, including a second ferry terminal and a new light-rail system. Later this fall should come the biggest announcement yet: a $4 billion, 18-mile bridge that will link Macau, the mainland, and Hong Kong's Lantau Island, where the new Disneyland just opened to overflow crowds.

The bedrock of this market's bright future, everyone agrees, is the Chinese passion for gambling. Last year, with just 4% of the slot machines in Vegas and 40% of the gaming tables, Macau generated roughly the same gambling revenue. (That also reflects the difference in risk-taking propensity between a market currently reliant on high-rolling whales and one dominated by blue-haired ladies pulling slots.) What explains this intensity? You hear the same answers again and again--luck is a central concept in Chinese culture; look at all the ways they try to shape and discern fate through lucky numbers, feng shui, I Ching, and the like. (Navigating a street near the Lisboa, I'd nearly tripped over a woman who had arranged a roast pig, a raw chicken, flowers, and an urn of burning incense outside a new jewelry store--offerings for a truly grand opening?) But until you walk into a place like the Sands, you can't fully grasp what one Asia hand told me: "The difference between Westerners and the Chinese is that for Westerners gambling is about entertainment and calculating probabilities. For the Chinese it's a battle with destiny."

THE SANDS BUZZES with a good vibe on a Saturday night. Its cavernous main floor is stuffed with baccarat tables, the game the Chinese favor. Here the typical minimum is just $40. The goal in baccarat is to see who gets closest to nine (face cards and tens count as zero) with a maximum of three cards. At the first table, I watch what I assume is one player's unique style. While the dealer waits, he's slowly peeling back the corner of one card until…ahhh, the eight of clubs. He then repeats this ritual with his second card. Hardly anyone drinks anything stronger than the tea served up in highball glasses from carts pushed by ladies in brown and gold Mao jackets. But you could cut the cigarette smoke with a bent Jack of diamonds. I watch for a few minutes. Suddenly I look up and realize the exact same battle with destiny, including the card-bending routine, is going on at every table. There's nothing like this in Vegas.

The only real debate about Macau's future is over how quickly the market evolves. Skeptics think the new boys are getting way ahead of themselves. "This is not Las Vegas; Asians want to gamble, not go shopping or see Celine Dion shows," insists Anthony Carter, a Brit who's spent 35 years in the region and is CEO of Hong Kong's Galaxy casino group, itself a recent arrival in Macau. "That will come in due course. But right now I just don't see that the demand for these new facilities the Americans are building will meet the cost."

To which both Adelson and Wynn--and here we finally discover a point they can agree on--reply, Nonsense. "To look at the high level of shopping and consumer taste in Shanghai and Hong Kong and still suggest that the Chinese won't care about luxury is a ridiculous denial of reality," says Wynn. "The transformation of Macau in the next 60 months will be the most remarkable metamorphosis in modern history." Told that Galaxy's Carter believes the correct "Asian price point" for a hotel room is under $100, Adelson snorts, "I'm going to have five price points in Cotai! I want the mass market and the high-roller market. My target is to maximize every opportunity." That includes MICE--as in meetings, incentives, conventions, exhibitions (a.k.a., the group-travel business). "My guy just came back from ten days on the mainland checking out the MICE market," Adelson continues. "The words he kept using were 'mind-blowing' and 'blown away.' It's like a firecracker. They've lit the fuse, and it's ready to explode."

What's also certain to explode is the Cotai Strip, whose virtues Adelson has championed louder and longer than anyone. Among the prominent recent converts: Stanley Ho. Ho's youngest son, Lawrence, heads a new family joint venture with Australia's richest man, Kerry Packer. Ho and Packer's project in Cotai, the $1 billion City of Dreams, will be designed very much with Adelson in mind. Rather than go "head to head" with the neighboring Venetian, Lawrence has dropped a convention center and large retail complex from his original master plan to focus on building "a special casino" that will sit beneath a giant aquarium.

"In conventions, Sheldon Adelson is the master," Lawrence Ho says.
"Why would we want to compete with him?" Wynn told me he too will soon be announcing plans to add to his Macau stake with some major new projects in Cotai.

Might there be something a bit bubbleicious about this stampede--which is driving property prices into the stratosphere and causing labor shortages and infrastructure bottlenecks? Maybe. There's also the "anchovy theory" espoused by a top American financier with China experience. "In a Caesar salad," he warned me right before I flew out to Macau, "the anchovy is the first thing to get chopped up. That's what we foreigners are in China: the anchovy." The major blow would come if gambling, which was everywhere in China until the Communists took over in 1949 and promptly banned it (along with prostitution, private property, and other capitalist vices), were suddenly made legal on the mainland. But that strikes most analysts as a bridge too far for the current leadership, who seem happy for now with a dynamic, growing, cleaned-up Macau. The more pressing problem is the kind of regulatory confusion that has swirled up in a recent dispute between Adelson and one erstwhile partner, Hong Kong's Regal Hotels group. Regal is now petitioning the government to develop a site that Adelson claims as his own. He says he's "completely certain" he will prevail.

At our final dinner Adelson waves a hand to dismiss once and for all the "naysayers" I keep bringing up who question his vision. He then mentions he'd just that day seen a June 1955 Life magazine cover. Over a photo of showgirls ran this headline: "Las Vegas: Is the Boom Overextended?" Point taken. We're not talking, after all, about the late, great Internet boom, where a Pets.com or Webvan spent billions to meet needs no one had. We're talking about investing multiples of that to soak up travel dollars and leisure spending in the middle of the richest region in the fastest-growing part of the world. Barring catastrophe--war in the Taiwan Straits, some horrific new plague--how can it not work?

IN THE YEARS AHEAD, Adelson expects to put a lot of miles on his personal Boeing 767. (He upgraded earlier this year from a 737, and now that he's public, only charges the Las Vegas Sands for the cost of a first-class ticket.) Beyond Macau, gambling seems set to go global--just as it exploded out of Nevada and across the U.S. Singapore, Thailand, Britain, and Korea are among the countries that once banned casinos and are now either taking bids on new concessions or considering doing so. Like his rivals, Adelson is chasing hard after every opening.

What drives a guy entering his eighth decade to place the biggest bet of his career? Adelson's old friend Mike Milken answers by putting him in context with other aging megamoguls he's known. "I didn't even meet Dr. Armand Hammer until he was 80," says Milken, "and we raised more capital for him after that than we did for anyone in the world. John Kluge was 70 when we did the biggest financing ever up until then so he could take his firm private. Kirk Kerkorian just did the biggest deal of his life at 87." That's the kind of eternally energetic, entrepreneurial company Adelson has bulled his way into.

One last thing: Despite his congenital focus on the bottom-line, Adelson is playing for more than just the bucks. What he's really burning for is a little credit. Does he feel he doesn't get enough acknowledgment, certainly compared to Wynn, for his role in reinventing the business model in Vegas? "Absolutely." Does he worry the same thing could happen again in Macau? Damn right. "Nobody had ever thought of recreating Las Vegas in Cotai," he says. "Nobody. They all decried it. Ho and Wynn dismissed it. Now they're all coming out of the woodwork to be part of it." So take a note, you future historians: Mr. Sheldon Adelson respectfully requests that you put this caption next to his photo: The Man Who Built the Las Vegas Strip--in China. If he delivers on all or even most of what he's promised, he deserves it.

Saudi Owners of American Bank Stock

Barnes family stock in Bank of the Commonwealth, Detroit, Michigan:

United Press International, April 3, 1972

DETROIT (UPI) - James T. Barnes & Co., a Detroit-based mortgage investment firm, announced today it had options to purchase controlling interest in the financially-troubled Bank of the Commonwealth from the Chase Manhattan Bank of New York. James T. Barnes Jr., president of the mortgage firm, said the Barnes family had agreed to purchase 1,780,435 shares of the common stock of Commonwealth from Chase Manhattan. The New York bank acquired the stock more than a year ago in public auction after it had foreclosed on two notes totaling $20 million owed the bank by the prior controlling group interest, Donald H. Parsons [former chairman of the Bank of the Commonwealth of Detroit and owner of a Pittsburgh hockey team, the Penguins, and the Ford and Dime Buildings in Detroit] and his associates. [Parsons and his group, mostly University of Michigan alumni in their mid-thirties, took over Bank of the Commonwealth in a proxy fight in 1964.] The Barnes family also said it had arranged to purchase the 65,000 shares of preferred stock held by Chase Manhattan, as well as an additional 100,000 shares of preferred stock held by two California real estate men, Donald Kaufman and Eli Broad.

The combined total gives the Barnes family 53 per cent of the preferred stock and 39 per cent of the common stock, effective control of Commonwealth, Detroit's fourth largest bank. However, ultimate control remains with the Federal Deposit Insurance Corp. (FDIC) which was given broad powers in agreeing to loan Commonwealth $60 million to strengthen the bank's capital. The FDIC loans, the largest of its type ever extended, was approved by the stockholders last month.

The purchase price was not disclosed, but Commonwealth stock, traded over-the-counter, closed at 7% on the last trading day, Thursday. The acquisition of the Commonwealth stock by the Barnes family, which last fall bought 85 per cent of the Peoples Bank of Port Huron, another ill-fated Parson's venture, was praised by Robert P. Briggs, commission of the Michigan Financial Institutions Bureau. He called it "good news to all who have worked to bring about the reorganization of the bank."

John E. Thompson, president of Commonwealth, praised Chase Manhattan for its role in strengthening the bank but said it was "in the best interest of everyone" that a local family now has control. Barnes told a news conference that John A. Hopper, a Chase Manhattan vice president sent in as chairman of the Commonwealth, would remain as chairman "for as long a period as possible consistent with his intention at a later date" to return to New York.

United Press International, April 3, 1972

DETROIT (UPI) - James T. Barnes & Co., a Detroit-based mortgage investment firm, announced today it had options to purchase controlling interest in the financially-troubled Bank of the Commonwealth from the Chase Manhattan Bank of New York. James T. Barnes Jr., president of the mortgage firm, said the Barnes family had agreed to purchase 1,780,435 shares of the common stock of Commonwealth from Chase Manhattan. The New York bank acquired the stock more than a year ago in public auction after it had foreclosed on two notes totaling $20 million owed the bank by the prior controlling group interest, Donald H. Parsons [former chairman of the Bank of the Commonwealth of Detroit and owner of a Pittsburgh hockey team, the Penguins, and the Ford and Dime Buildings in Detroit] and his associates. [Parsons and his group, mostly University of Michigan alumni in their mid-thirties, took over Bank of the Commonwealth in a proxy fight in 1964.] The Barnes family also said it had arranged to purchase the 65,000 shares of preferred stock held by Chase Manhattan, as well as an additional 100,000 shares of preferred stock held by two California real estate men, Donald Kaufman and Eli Broad.

The combined total gives the Barnes family 53 per cent of the preferred stock and 39 per cent of the common stock, effective control of Commonwealth, Detroit's fourth largest bank. However, ultimate control remains with the Federal Deposit Insurance Corp. (FDIC) which was given broad powers in agreeing to loan Commonwealth $60 million to strengthen the bank's capital. The FDIC loans, the largest of its type ever extended, was approved by the stockholders last month.

The purchase price was not disclosed, but Commonwealth stock, traded over-the-counter, closed at 7% on the last trading day, Thursday. The acquisition of the Commonwealth stock by the Barnes family, which last fall bought 85 per cent of the Peoples Bank of Port Huron, another ill-fated Parson's venture, was praised by Robert P. Briggs, commission of the Michigan Financial Institutions Bureau. He called it "good news to all who have worked to bring about the reorganization of the bank."

John E. Thompson, president of Commonwealth, praised Chase Manhattan for its role in strengthening the bank but said it was "in the best interest of everyone" that a local family now has control. Barnes told a news conference that John A. Hopper, a Chase Manhattan vice president sent in as chairman of the Commonwealth, would remain as chairman "for as long a period as possible consistent with his intention at a later date" to return to New York.

WISCONSIN STATE JOURNAL, 
SATURDAY, FEBRUARY 1, 1975

DETROIT (AP) - A Saudi Arabian financier has reached agreement with the Bank of the Commonwealth, Michigan's sixth largest bank, to buy 40 per cent of its stock. The agreement, announced Friday, must be endorsed by the Federal Deposit Insurance Corp., which holds a $35-million note on the bank.

Ghaith Pharaon said he agreed to purchase most of the Commonwealth stock now held by the James T. Barnes family. Arab sources said Pharaon, 34, has close ties, to the Saudi Arabian ruling family. He attended the Harvard Business School and is a director of the Jezirah Bank of Jedda.

One segment of the Barnes family stock in Michigan's Commonwealth Bank had previously been owned by Chase Manhattan Bank, a member of the New York Federal Reserve, whose interest had been derived through foreclosure of loans made to Donald H. Parsons.

The other segment was purchased by the Barnes family from Detroit real estate men, Kaufman and Broad, creators of the first publicly traded (NYSE) home-building corporation. Thus, we can surmise the Federal Reserve was well aware in 1975 that a Saudi citizen was approved to controlling shares of the Commonwealth Bank in Detroit.

He was also happy, along with Khaled bin Mahfouz and John Connally, in 1976 to invest in the Main Bank of Houston, conveniently located in the historic Humble Oil Building on Main Street, which had become vacant after Humble Oil revealed its ownership by Exxon and moved into its new building a few blocks away. 

It was not until a year later the Saudis' investments in American banks became an appalling crime when they began to consider buying bank stock from Jimmy Carter official Bert Lance.

Associated Press - December 1977