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Best of Liz Benston

Gaming Guru

Liz Benston

Gaming Executives Top Highest Paid List

3 June 2005

LAS VEGAS -- Casino bosses cashed out a large number of stock options last year, boosting their total compensation packages to historic highs and easily topping the list of highest-paid local executives in 2004.

Last year minted a record number of executive millionaires and blew past record compensation packages earned in 2003, according to a list of executives working for local public companies published in the June 3 edition of In Business Las Vegas, a sister publication of the Las Vegas Sun. Sixteen executives reported eight-figure compensation packages -- $10 million or more -- last year, compared with only four who earned that much the previous year.

Sales of stock options vaulted Station Casinos Inc. Chief Executive Frank Fertitta III to the top of the executive pay list last year and his brother, Station Casinos President Lorenzo Fertitta, to No. 2 on the list.

Frank Fertitta III reported total compensation of $94.7 million last year, including $89.6 million generated in part from the exercise of 2.4 million stock options. Lorenzo Fertitta reported compensation of $48 million, including $44.8 million generated from stock sales.

Frank Fertitta had options remaining to be exercised worth $55.5 million as of year-end and Lorenzo Fertitta had remaining options worth $39.5 million. Top executives still have a sizable stake in the company in spite of recent stock sales, officials say.

Station Casinos executives made up four of the top 10 local executives ranked by total pay.

In an interview last week with In Business Las Vegas, Lorenzo Fertitta said company executives "have created a lot of value for shareholders."

"My compensation is set by an independent group of the board of directors who go out and hire a compensation consultant who gets information on peers within the industry. They come up with what they think the compensation package should be," he said.

Shares of Station Casinos -- one of the highest-ranked performers on Wall Street -- rose 79 percent last year and profit grew by 50 percent.

Those gains came amid record price increases for the big Las Vegas gaming stocks. Shares of Boyd Gaming Corp. rose 158 percent last year while MGM Mirage stock rose 93 percent, Harrah's Entertainment Inc. increased 34 percent, Caesars Entertainment Inc. jumped 86 percent and Wynn Resorts Ltd. rose 139 percent. Las Vegas Sands Corp. went public in December, rising 66 percent that year in the biggest casino IPO in history. Even smaller companies like Shuffle Master Inc., bouyed by record tourism to Las Vegas and the expansion of gambling nationwide, had a banner year last year.

Executive pay has been a controversial issue nationwide "for about the past decade," triggered in part by former Disney Chief Executive Michael Eisner's cashing out of hundreds of millions' worth of stock options amid questions about company performance, said David Hames, an associate professor of management at UNLV's College of Business.

"This isn't a new issue but it's new for (Las Vegas) to have numbers that high," Hames said of the pay list.

Shareholders usually don't make a fuss so long as their investment is strong, though "the numbers are sometimes outrageous even for (companies that) are performing well," he said. If performance dips, watch out, he said.

While Frank Fertitta's 2004 salary and bonus of $4.8 million may seem like a lot, "that seems normal by today's standards," he said.

On the other hand, the $31.6 million salary and bonus earned by Las Vegas Sands Chief Executive and majority shareholder Sheldon Adelson, No. 3 on the list, appears "out of line" with other executives, Hames said.

Adelson, who owns 88 percent of Las Vegas Sands' outstanding shares, did not receive any options or stock grants last year.

Boyd Gaming Corp. Chief Executive Bill Boyd was No. 4 on the list with $28.8 million in total compensation.

MGM Mirage Chief Executive Terry Lanni was No. 5 on the list with $21.8 million.

Station Casinos Chief Operating Officer William Warner was No. 6 with $20.5 million and Station Chief Development Officer Scott Nielson was No. 7 with $16.1 million.

Sierra Health Services Inc. Chief Executive Anthony Marlon, No. 8 on the list with $16 million, was the only non-casino executive to make the top 10.

Las Vegas Sands Corp. President and Chief Operating Officer William Weidner and Executive Vice President Bradley Stone were tied at No. 9 with $14.5 million.

Sands Senior Vice President Robert Goldstein was No. 10 with $13.5 million.

Only two women made the list of highest-paid executives in 2004, which ranked 75 officials who made over $700,000 that year.

They were Angela Frost, senior vice president of operations at Ameristar Casinos Inc. and Linda Chen, president of Wynn International Marketing LLC, a Wynn Resorts subsidiary. Frost earned $2.2 million in total pay last year including stock-based compensation and Chen earned $810,200.

Mandalay Resort Group officials Michael Ensign and William Richardson topped 2003's list. Each racked up $46.8 million in total compensation primarily from the sale of about 6.8 million Mandalay shares each. That was well before MGM Mirage made its $8 billion offer for Mandalay in 2004 and each official departed with more than $20 million in cash payments.