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Best of Liz Benston

Gaming Guru

Liz Benston
 

Kerkorian Ruling Precludes Payout to Nonprofit Groups

13 April 2005

Billionaire investor Kirk Kerkorian wasn't the only loser to emerge last week from a long-running court battle with car maker DaimlerChrysler AG.

Las Vegas nonprofit organizations were among many charities that stood to receive a piece of an estimated judgment worth up to $1.2 billion should Kerkorian have won, his attorney said.

Kerkorian, the majority shareholder of casino giant MGM Mirage and a major shareholder in DaimlerChrysler, runs a charitable foundation that has in recent years doled out hundreds of millions of dollars to nonprofit groups nationwide.

He retained a tax attorney last year to obtain clearance from the Internal Revenue Service so that any potential court judgment could go directly to charity.

Kerkorian lost his lawsuit against DaimlerChrysler last week when a federal court judge ruled that Kerkorian wasn't duped into believing the $36 billion transaction that created the company was a "merger of equals."

Once Chrysler's largest shareholder, Kerkorian sued in 2000, contending the 1998 transaction was deceptively pitched as a merger instead of an acquisition by Chrysler and that he would have demanded a premium under an outright takeover. A judge said Kerkorian couldn't base his claim on a "promotional phrase."

Terry Christensen, an attorney for Kerkorian's Beverly Hills, Calif.-based investment company Tracinda Corp., said his boss brought up the charity question last summer and received an IRS ruling Dec. 15 that would have allowed 100 percent of the judgment to go directly to charity.

"He thought it would be a good thing to do with (the potential award)," Christensen said. "It turned out that we probably needed an IRS ruling to make it work so we hired a Washington, D.C., law firm and applied to the IRS for a ruling."

Christensen said the ruling required a lot of time and effort.

"There was no overwhelming resistance to it but it's rare and because it's rare it requires a lot of legal work," he said.

Las Vegas accountant John Wightman, who helps wealthy individuals with philanthropic efforts, said he isn't surprised by the IRS ruling.

Kerkorian's circumstances may be unusual but the arrangement makes sense, Wightman said.

"High net worth individuals donate all kinds of assets they own," he said. Kerkorian viewed the lawsuit "as another asset in his portfolio like anything else he has devoted time and money to."

"It's a pretty amazing gesture on his part," Wightman added.

Kerkorian's charitable organization, The Lincy Foundation, is named for his daughters Tracy and Linda and is managed by trustees.

Christensen declined to say which organizations had received money from the foundation or the amount of those donations.

Kerkorian's donations are generally made anonymously and without regard to recognition, Christensen said.

That approach mirrors his low-key approach toward management, which is to let trusted lieutenants run the business while maintaining a watchful eye on profits.

Kerkorian, whose company is taking over Mandalay Resort Group, is No. 41 on Forbes' list of richest Americans with an estimated net worth of $8.9 billion. Yet his low profile assures him virtual anonymity among the general public.

"There are no buildings that get named after him," Christensen said. "He has always done it out of pure charity."

One group that has publicized his largesse is the Nevada Cancer Institute, which received seed money of at least $5 million from the Lincy Foundation to build a state-of-the-art cancer treatment center in Las Vegas.

Kerkorian Ruling Precludes Payout to Nonprofit Groups is republished from Online.CasinoCity.com.