Bates Vows to Protect Hilton Estate : Says Foundation Should Have Voting Control in Firm
The executor of Conrad N. Hilton’s estate, which is valued at as high as $750 million, voiced a fierce determination Wednesday to see that a controlling interest in Hilton Hotels ends up in the hands of his charitable foundation, “as he intended in his will.”
James E. Bates, who was Conrad Hilton’s personal lawyer for 35 years, said in an interview that the hotel chain founder wanted voting control of his company, not merely the bulk of his wealth, to go to the Conrad N. Hilton Foundation.
This has put Bates (along with the foundation) in a high-stakes probate court battle with the founder’s son, Barron Hilton, whom he describes as his “fast friend.”
The 57-year-old Barron Hilton, who succeeded to the helm of the chain, is claiming a right to buy the entire 6.8 million shares (27.4%) of Hilton Hotels held by the estate. He contends that the stock constitutes an excess business holding for a private charitable organization under federal tax laws. He recently said the Internal Revenue Service tentatively ruled in his favor.
Barron Hilton seeks to buy the holding at $24 a share, slightly more than one-third of its present market value, under an option assigned when Conrad Hilton died in 1979. According to his attorney, Ron Gother, “Barron Hilton’s motivation is not so much economic (as to) make sure his father’s intent to keep Hilton Hotels intact is carried out.”
Bates, who will be 80 next month, discussed his position on the probate court dispute in an interview two days after he retired as a director. He was voted an honorary director following 11 years on Hilton Hotels’ board.
Coincidentally, Bates’ last major act while still a Hilton director was the casting of the estate’s 27.4% block in favor of management’s anti-takeover proposals.
Victory Hailed
The holding assured a margin of victory for the measures, with financial institutions holding a total of 50% of the shares split on the issues.
Barron Hilton, chairman and chief executive of the Beverly Hills-based hotel chain, hailed the result at Monday’s annual meeting as a victory over “the corporate raider who tried to gain control of your company by offering to buy 27.4% of the stock from my father’s estate”--an apparent reference to Golden Nugget Inc., the hotel-casino company that sought to buy the shares owned by the Hilton estate.
Bates, a tall and articulate man who has practiced law for 56 years in Los Angeles since he came here from Montana, spoke forcefully and sometimes passionately in describing his determination to fight to carry out his duty to Conrad Hilton’s expressed wishes for his estate.
As personal lawyer for Conrad Hilton from the time of his divorce from actress Zsa Zsa Gabor in the mid-1940s until his death in 1979, Bates said he drafted “all his wills and codicils--there have been 32 of them.”
Under the will, he said, there were specific bequests as big as $750,000 to Barron Hilton, but “he intended to give back to the public all the wealth” and control of as much of the stock as law permitted (20% under a 1969 tax law).
“Every word of his charitable disposition (in the will) came straight out of Conrad’s heart,” Bates said.
The will addressed the following “cherished conclusions” to the Los Angeles-based foundation’s directors and trustees:
“There is a natural law, a Divine law, that obliges you and me to relieve the suffering, the distressed and the destitute. Charity is a supreme virtue, and the great channel through which the mercy of God is passed on to mankind. It is the virtue that unites men and inspires their noblest efforts. . . .
“As the funds you will expend have come from many places in the world, so let there be no territorial, religious or color restrictions on your benefactions, but beware of organized, professional charities with high-salaried executives and a heavy ratio of expense. . . .
“Be ever watchful for the opportunity to shelter little children with the umbrella of your charity; be generous to their schools, their hospitals and their places of worship. For, as they must bear the burdens of our mistakes, so are they in their innocence the repositories of our hopes for the upward progress of humanity.
“Give aid to their protectors and defenders, the (Catholic) Sisters, who devote their love and life’s work for the good of mankind, for they appeal especially to me as being deserving of help from the Foundation.”
$94-a-Share Value
Bates said that Conrad Hilton picked the foundation’s directors and trustees from “members of his family, his longtime associates, those he had great confidence in carrying out the charitable purposes that he so eloquently provided for.”
He said he has long believed that the underlying assets of Hilton Hotels have been “very nearly double” the company’s stock market price. The executor noted that the company’s annual report considered the value to be at least $94 a share, compared to a market value in the $60s.
Bates also noted that a $110-per-share value was put on the assets a few months ago by Drexel Burnham Lambert, before the New York investment bankers represented Golden Nugget in its recent offer of $72 each for the estate’s 6.8 million shares.
Bates formerly was co-executor of the estate with Barron Hilton. According to Hilton Hotels’ latest proxy, Barron Hilton asked the court in 1983 to suspend his powers “to avoid any suggestion of conflict of interest” with the foundation.
“I’ve known Barron Hilton since he was 17 years of age,” Bates said Wednesday. “Over that period of time, I think we became fast friends. I like to think we are fast friends today, notwithstanding the contention he is making now and to which I am opposed.
“I have a great admiration for Barron and affection for him. I think he is one of the outstanding young chief executives in the United States today operating any corporation. . . . “There are some rough edges because we are contending over this matter. I am his father’s lawyer. I am committed to only one thing. That is to see that the Hilton estate is distributed as Mr. Hilton directed in that will, and I will contend with anybody, Barron or anybody else . . . to see that his will is probated and distributed as he intended.”
Could Be Protected
Bates said Conrad Hilton believed that, under the tax laws, 20% of Hilton Hotels’ stock could be accepted by the foundation and that any excess could be protected from dispersal by giving an option on it to his son, Barron.
Ron Gother, Barron Hilton’s attorney, said:
“We don’t disagree with the basic thrust of Bates’ feeling about Conrad’s desire and his thought about 20% (able to be accepted by the foundation). . . . It’s just unfortunate that that’s wrong. That’s what we’re struggling with here. The law is otherwise.”
THE CONRAD N. HILTON FOUNDATION
The foundation was organized in 1944. Grants fall into three general categories: education, health-care delivery and social services--many associated with work of Catholic sisters. Total grants paid in fiscal year ended Feb 28, 1985: $7.1 million.
“As the funds you will expend have come from many places in the world, so let there be no territorial, religious or color restrictions on your benefactions, but beware of organized, professional charities with high-salaried executives and a heavy ratio of expense.”
-- Direction to foundation executives in will of Conrad Hilton.
10 LARGEST GRANTS IN FISCAL 1985
1. Univ. of Houston, $2.2 million. Develop a college of hotel and restaurant management.
2. Rand Corp., $1.7 million. Test drug abuse prevention education in junior highs.
3. Loyola-Marymount University, $500,000. Business building and professorship.
4. Mayo Foundation, $500,000. Clinical education and research
5. St. John’s Hospital, $250,000. Child study center for outpatient care.
6. Culinary Institute of America, $100,000. Food service management education.
7. Estelle Doheny Eye Foundation, $100,000. Eye care in East Los Angeles.
8. Madonna College, Livonia, Mich., $100,000. Renovation of library.
9. Mount St. Mary’s College, $100,000. Scholarship fund.
10. New Mexico Institute of Mining & Technology, $45,000. Conference center.
