Dispute Between Hotelier’s Son, Charitable Foundation : Hilton Takes Stand in Trial Over Stock

Barron Hilton, chief executive of Hilton Hotels Corp., was the first witness Monday in a long-delayed trial over whether he or charity will benefit from the increased value of the hundreds of millions of dollars worth of the hotel firm’s stock accumulated since his father, Conrad N. Hilton, died at 91 in January, 1979.

The trial also is expected to decide whether Barron Hilton or the Conrad N. Hilton Foundation will end up owning the controlling 27.4% interest in the big hotel chain.

Among the complex issues raised by Conrad Hilton’s executor Monday is whether Barron Hilton, now 57, validly exercised an option in his father’s last will, written in 1972. He has claimed that it entitles him to buy the stock at the January, 1979, market value of about $24.18 a share, or about $140 million. The stock has been trading at about $73 a share recently, which would put its value at almost $500 million.

Los Angeles Superior Court Judge Robert I. Weil is to decide the probate issues without a jury.

Under questioning Monday by the attorney for James Bates, Conrad Hilton’s executor, Barron Hilton acknowledged that last August he actively sought to dissuade fellow directors of the Hilton Foundation from reclassifying itself as a “public support organization.”

The reclassification would enable the foundation to hold all of the Hilton Hotels stock without any or all of it being designated as “excess business holdings” for federal tax purposes. Such a designation could force the foundation to sell some or all of the stock.

Barron Hilton acknowledged, too, that as recently as February of this year, he and his brother, Eric, voted against the step, the only two directors to do so.

He took part in the debate, Barron Hilton testified, after his attorneys said he could do so. Previously, he had refrained from voting on foundation matters involving his claim to a right to buy the stock under the option in the will.

After much internal dissension, the Hilton Foundation itself has taken a strong position against Barron Hilton’s claims in the trial.

That puts the foundation in alliance with executor Bates and the California attorney general in the trial. Bates and Deputy Atty. Gen. James Cordi recently contended that foundation President Donald Hubbs should disqualify himself from considering the dispute because he was Barron Hilton’s personal lawyer for more than 30 years.

The foundation itself called Barron Hilton as its first witness and, in lengthy questioning, elicited from him that the hotel executive had sought to buy the stock from his father’s estate in 1979 and 1980 with a promissory note paying 5% interest. At those times, he acknowledged, he knew that the prime rate ranged from 11 3/4% to 14 1/2%.

Barron Hilton explained in answering that his father had intended to make it “convenient” for him to acquire the stock covered by the option.

Later, under questioning by the executor’s attorney, Myron Harpole, the hotel executive sometimes appeared to flush with anger.

Might Lose Control

He said that he opposed the foundation’s reforming as a public support organization because such a formation “took away certain powers” from the foundation and was not in line with his father’s intentions.

Also, he testified, use of the support organization device to keep him from owning the stock might cause eventual sale of control of Hilton Hotels to outsiders.

That, Barron Hilton said, was one of the chief things that Conrad Hilton was opposed to. He acknowledged, however, that his father never had discussed with him the possible loss of control of the hotel chain. Judge Weil observed at one point Monday that Conrad Hilton could not control affairs of the foundation from the grave.

Last spring, Golden Nugget Inc.--which, like Hilton Hotels, operates gambling houses in its Nevada hotels--offered Bates $72 a share, or $488 million, for the Hilton stock. Bates called the offer “inadequate.” The continuing court dispute had the effect of blocking further negotiations by Golden Nugget.

During Monday’s questioning, Barron Hilton acknowledged that he did not offer collateral in seeking to buy the stock on time from executor Bates. That was one of the points raised by Harpole in questioning whether Barron Hilton had validly exercised the option.