Summa Comes Back from Debacle

By Edward E. Scharff

Howard Hughes'cousin tackles a tangled financial empire

The resemblance is eerie, down to the gangling walk, the tight-lipped smile and the soft Texas accent. William R. Lummis, 51, is almost a double for the middle-aged Howard R. Hughes Jr., the eccentric billionaire who died on April 5, 1976, aboard a jet that was flying him from Acapulco to his native Houston. Lummis, Hughes' first cousin, is now standing in as head of most Hughes enterprises, a chaotic financial empire once estimated to be worth $2.3 billion. Lummis last week took another major step toward straightening out the family business when he sold Hughes Airwest, the West Coast carrier, to Republic Airlines for $38.5 million.

Ironically, Lummis (pronounced Luhmiss) did not even know Hughes, who lived the last 15 years of his life in seclusion and deprivation. A partner in one of Houston's most prestigious law firms, Andrews, Kurth, Campbell & Jones, Lummis saw his cousin alive only twice, the second time when Lummis was nine years old. Four years ago, when he went to the Texas Medical Center to claim Hughes' body, Lummis was shown an ugly, wasted corpse and had to ask with consternation, "Is this Mr. Hughes?" When it became apparent that Hughes had died without leaving a will, Lummis, whose mother was Hughes' closest living relative, was named the representative for a group of distant Hughes relations.

At his death, Hughes' financial empire was nearly as wasted as his body. His holdings ranged from a major aircraft company and a helicopter manufacturer to casinos in Las Vegas, Reno and the Bahamas, ranches in Nevada, a magazine (Football Today), a television station (Las Vegas' KLAS-TV), mines in Nevada and vast amounts of undeveloped land. Most of the interests were grouped together in the Las Vegas-based Summa Corp., which, Lummis concluded, was run by a group of Hughes lieutenants of dubious ability and honesty. These included Chester C. Davis, Summa's general counsel; Frank William Gay, a onetime errand boy who became a board director; and Nadine Henley, once Hughes' stenographer.

After studying Summa's hard-to-find financial records, Merrill Lynch estimated that between 1970 and 1976 the corporation had lost $131.7 million. The company, for example, spent about $50 million to maintain the legendary Spruce Goose, the huge, 400,000-lb. wooden flying boat with a 320-ft. wingspan that Hughes had piloted once for a distance of a mile in 1947 and then stored away in a Long Beach, Calif., hangar. Other losses flowed from the hotels that Summa owned but managed haphazardly, a company formed to promote blood-analysis devices, Football Today, and a worldwide fleet of 34 aircraft ready to answer the whims of Hughes and his staff. Said Lummis last week: "Hughes was a lightning rod for every disaster imaginable."

Lummis' housecleaning began with the ouster of many old Hughes aides. Using his court-appointed power as sole stockholder, Lummis fired three company directors, including Davis, whom he also dropped as general counsel. Last year Lummis filed a suit against Davis and eleven other former Hughes employees, charging them with bleeding $50 million out of Summa through extravagant salaries, interest-free loans to themselves, questionable investments and perks like company-built homes. Robert Maheu, Hughes' chief lieutenant until 1970, says bluntly: "There has never been any doubt in my mind that Davis and Gay were trying to steal an empire."

After ousting the cronies, Lummis moved to stop the excesses that were squeezing Summa dry. He has sold off Hughes' personal fleet of planes and several holdings, including the Landmark Hotel in Las Vegas, the Xanadu Beach Hotel in the Bahamas, the TV station in Las Vegas, the ranches, Football Today and 3,000 inactive mining claims. Summa has even been able to unload the Spruce Goose without having to break it in pieces, as once threatened. This week the plane will be given to the Aero Club of Southern California, which will put it on display in Long Beach next to the once glamorous Queen Mary ocean liner.

Summa's new boss has organized the remaining properties in three broad groups--hotels and casinos, aircraft construction and real estate. Lummis hired Phil Hannifin, former chairman of the Nevada gaming-control board, to run the company's hotels and casinos. Hannifin's first project: to finish a $55 million overhaul of the dilapidated Desert Inn, where Hughes had lived as a recluse for four years. Jack Real, a former Lockheed executive, was put in charge of Hughes Helicopters. The company, which lost money in the early '70s, is now in the black, and Real expects it to be twice as large as Summa's hotel and casino business by 1985. The Summa real estate holdings are a potential jackpot. The company owns 29,000 acres in Nevada; only the Federal Government has more land in the state. Summa is about to sell 12,000 acres in Tucson and is sitting on an additional 1,200 acres in the affluent Playa del Rey section of Los Angeles.

Lummis, who favors Brooks Bros, suits and Dunhill Montecruz cigars, lives in a three-bedroom condo in the fashionable Spanish Oaks section of Las Vegas. He drives his own 1975 Chrysler New Yorker. He often lunches alone, reading a newspaper at the Desert Inn and Country Club or in the coffee shop of the Sands Hotel, which Summa owns. His $225,000-a-year income derives from his position as court-approved administrator of the Hughes estate. Lummis has no plans to expand Summa into new fields, seeing his job as one of pulling the company together. Said he last week: "We don't have a charter to build a big empire. Our job is to conserve."

Summa under Lummis has changed its style. Gone is the compulsive secrecy that once enveloped Hughes' vast and tangled affairs. Recalls William Rankin, a longtime Hughes employee who is now No. 2 at Summa: "Everything was secret unless we were told otherwise. We hired a p.r. agency to say, 'No comment.' " Top executives no longer have to punch a code into an elevator in the parking garage before they can enter the firm's unpretentious headquarters two miles from the Las Vegas strip. Company officers now work in fourth-floor offices rather than the windowless basement rooms that Hughes' aides occupied.

The most important change, though, is that Summa is making money. In 1978 the company earned $30.9 million before taxes on sales of $762.3 million. Last year earnings dipped to $13.5 million, although sales rose to $869 million. The main reason for the lower 1979 profits: a strike-induced loss of $26.2 million by Hughes Airwest. Last year the hotel-casino group was the largest moneymaker, earning $38.7 million. The aviation group, on the other hand, made only $5.9 million. Says Rick Harrison, a Texas lawyer close to the protracted Hughes estate-tax fight: "Lummis has done a very good job. He's flat turned the company around."

The struggle for Hughes' fortune, however, is not over. The IRS has just filed a $275 million estate-tax ruling against Summa, which the corporation is contesting. Moreover, the biggest and presumably most profitable Hughes venture, the Hughes Aircraft Co., the nation's eighth largest defense contractor (with more than $2 billion in sales last year), is not controlled by Summa. Since 1953 it has been the property of the Miami-based Howard Hughes Medical Institute, a nonprofit foundation that is dominated by Lummis' old antagonists Davis and Gay. Hughes' former henchmen have filed suit against Lummis, claiming that Hughes intended all his holdings, including Summa, to go to the Medical Institute. Lummis has countersued, challenging their control of the Medical Institute. But while that battle continues through the courts, at least part of Hughes' flamboyant empire has been turned into a less colorful, but more profitable, enterprise.

--By Edward E. Scharf. Reported by Michael Moritz/Las Vegas

With reporting by Michael Moritz

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