Nearly 40 years ago, Kirk Kerkorian reached into his own pockets and paid out $69 million to settle all of the pending death and personal injury claims associated with the devastating fire at the MGM Grand in Las Vegas.
In the biography, “The Gambler: How Penniless Dropout Kirk Kerkorian Became the Greatest Deal Maker in Capitalist History,” author William C. Rempel spoke with longtime Kerkorian attorney and confidant Terry Christensen about the late billionaire’s reaction to the tragedy, which killed 85 people and injured 650, including guests, employees, and 14 firefighters.
“Kirk underscored his priorities in the difficult negotiations ahead,” Rempel wrote. Quoting Christensen, the author continued, “’The victims were our guests. We aren’t fighting them. We’re on their side.’”
It may not be fair to compare the MGM fire – the worst disaster in Nevada and third-worst hotel fire in modern U.S. history – with 1 October, the worst mass shooting in U.S. history. A gunman, perched from a 32nd floor suite at Mandalay Bay, opened fire on a country music festival across the Strip, killing 58, wounding more than 500, and leaving countless others suffering from emotional trauma.
There is a stark difference in perception, however, between Kerkorian’s actions and those earlier this month of MGM Resorts International, the company he founded, which owns Mandalay Bay and the festival grounds.
In the public eye, MGM Resorts grossly mishandled actions relating to lawsuits the company has filed against survivors of the shooting – including families of those who died. MGM is not seeking monetary damages. But it wants the federal court to protect the company from paying potentially millions of dollars to survivors and families. On social media, the hashtag #boycottMGM gained a following.
I’m not debating whether Mandalay Bay shares blame for the shooting – the gunman stockpiled nearly two dozen high-powered automatic weapons in his suite without being detected or questioned by hotel staff. I also won’t pass judgement on the legal maneuvering the company is undertaking by using a little-known federal statute – created after the terrorist attacks of Sept. 11 to protect corporations – to try and gain immunity from some 2,500 lawsuits.
The optics are simply horrible for MGM. Obviously, MGM’s lawyers drove this bus, and the company has decided to take its lumps now.
The lawsuits were uncovered by the media after dozens of survivors began receiving legal notices that they were being sued. Instead of being proactive by sitting down early and explaining the company’s reasoning behind the legal action, MGM took a reactive approach. In a statement, the company said, “Years of drawn-out litigation and hearings are not in the best interest of victims, the community and those still healing.”
On Monday, families of the shooting victims and survivors held an emotional news conference in Newport Beach, Calif., expressing disgust and anger over MGM’s legal actions. Coverage was carried in almost every major U.S. media outlet.
Consequently, public anger toward MGM Resorts has heightened. In a statement to CNN, the company said the shooting was “the despicable act of one evil individual.”
A crisis communications expert told the Nevada Independent MGM’s statements have come off as “tone deaf,” although he believes the shooting won’t completely damage the MGM brand.
Kerkorian’s actions 40 years ago only angered insurance companies. The self-made gaming titan, who built or acquired many of the Strip’s iconic resorts, planned to rebuild the fire damaged MGM Grand – now Bally’s Las Vegas – but he knew it was impossible while insurance carriers “dragged their feet” in settling with claimants.
“The insurance companies were stunned,” Rempel wrote of the $69 million Kerkorian paid in less than two years. “But when he billed the insurance companies for reimbursement, they paid about $11 million, then stopped and refused to pay more. They accused Kirk’s side of not playing fair, of settling too fast for too much.”
Kerkorian turned around and sued the insurance carriers, launching one of the most complex legal cases involving the insurance industry in US history.
Let’s remember, the time periods were quite different. Social media was non-existent in 1981, the 24-hour news cycle hadn’t been invented, Las Vegas was a much smaller and close-knit community, and Kerkorian owned the MGM Grand outright.
Most observers acknowledge that MGM Resorts has a fiduciary responsibility to investors. Since news of the legal action, the company’s stock price has seen little movement, hovering between $30 and $31 per share.
MGM Resorts reports quarterly earnings on Aug. 2. Company officials can anticipate a slew of questions surrounding 1 October and the legal maneuverings.
Billionaire Warren Buffett famously said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
I wonder if MGM officials could have learned something from Kerkorian’s leadership.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
