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More challenges ahead for Park Place?

Nov 26, 2002 7:37 AM

   Thomas E. Gallagher is out as president and chief executive officer at Park Place Entertainment and it’s clear his departure wasn’t voluntary. The question is what are the reasons for the abrupt change of heart by his board of directors.

   Analysts have speculated that Gallagher had fallen out of favor with his board because PPE’s stock had fallen to all-time lows. Others have said the world’s largest gaming company had lost its direction, that all the effort that previous CEO Arthur Goldberg exerted in building the gaming conglomerate had gone for naught as the company lost its share of its strongest markets.

   In fact, Gallagher’s departure in favor of new boss Wallace Barr came a few days after a Las Vegas federal court handed down an $8 million judgment against Park Place stemming from a lawsuit filed by a California multi-millionaire gambler.

   Steve Mattes had accused the resort of fraud, defamation of character, breach of contract, slander and civil conspiracy stemming from a 1999 invitation to Paris Las Vegas for the casino-resort’s grand opening.

   Mattes argued that the hotel promised him a $2 million credit line, then reneged on the marker after losing millions of his own money and being asked to leave the Park Place property.

   GamingToday contacted Mattes at his office in his Tarzana, Calif., but he declined comment.

   “Perhaps I will be able to discuss the matter at a later date, but right now I have nothing to say,” Mattes stated. “I was aware of the (Gallagher) situation.”

   If Mattes, in fact, knew about Gallagher’s imminent departure, the lawsuit may have played a role in his board’s decision.

   “It was a stunning decision,” a source close to the case told GamingToday last week. “Mattes was a high roller and the Paris wanted to preserve the bottom line. Execs will quake in their boots over this.”

   The source added that Gallagher had a history of serving as corporate counsel, even though the case didn’t fall under his “watch.”

   Another analyst noted that when Gallagher took over, it was “evident that he was not the right person”for the job. “He was a corporate lawyer,” the source said. “He wasn’t a ”˜street’ person like Arthur Goldberg, who was also more Las Vegas oriented.”

   The analyst said he could foresee the selling off of some of Park Place’s assets. “They’ve got the biggest riverboat operation in the country. They could also sell off the Mississippi properties, as well as the Las Vegas properties.”

   So far, none of the Park Place brass has hinted at anything other than “full steam ahead” and shoring up the gaming giant’s operations.

   Stephen F. Bollenbach, chairman of the company’s Board of Directors, said in a news release that he was pleased Barr, “has accepted the challenge of leading Park Place to new levels.

   “His (Barr’s) accomplishments in the industry are many and well known,” Bollenbach stated. “The company’s dominant position in the Atlantic City market is a testament to Wally’s skill, ability and leadership. Wally takes on his new responsibilities with the full support of the Board.”

   Bollenbach noted that Gallagher made significant contributions to Park Place during his tenure.

   “He led the company through the difficult times that followed Sept. 11 and put in place a very capable and experienced management team,” Bollenbach said. “As a result of Tom’s stewardship, Park Place is financially strong and well-positioned to compete going forward. We thank Tom for his dedication.”

   Park Place Entertainment owns, manages or has an interest in 28 gaming properties operating under the Caesars, Bally’s, Flamingo, Grand Casinos, Hilton and Paris brand names. The corporation employs 55,000 people worldwide.