(FORTUNE Magazine) – Lounging in a limo as it cruised through the streets of Las Vegas, Barry Sternlicht, the CEO of Starwood Hotels, picked up the phone. On the line was Arthur Goldberg, who had made his first fortune in trucking and wanted to make a much bigger one in gambling. It was April 25, 1999, and Goldberg was not happy: "If Sternlicht had been in front of me, I might have done something drastic!" he recalls. What was the problem? Well, Sternlicht had agreed to sell Caesars World to Goldberg, then reneged after what must have been an exceptional round of golf at the invitation of Steve Wynn, CEO of Mirage.

Although Goldberg was boiling, he played his hand with a croupier's sangfroid. Over the phone, he raised his bid and warned Sternlicht that when signing time came, Wynn would take only the marquee casinos and stick Sternlicht with the dogs (something Wynn denies). The blend of a little more money and strong selling--classic Goldberg--scored with Sternlicht. Goldberg won. Then he won again: By the time the transaction closed in December, Goldberg had clawed back more than $100 million of the sweeteners he had offered to win the deal. A year later, Wynn--who would have been the biggest gorilla in gaming if he'd bought Caesars--left center stage, selling Mirage to MGM. Goldberg, as CEO of Park Place, became the gorilla instead. One of every five dollars that America gambles in casinos now runs through his hands.

Arthur Goldberg, 58, has a flair for the dramatic, and he sees business as a kind of performance art. But that's not why he is on a winning streak of improbable proportions. The secret of his success is that he simply hates to leave dimes on the table. "The price is never low enough for Arthur," says Richard Nanula, who was Goldberg's adversary during his days as Starwood's president, "and I say that admiringly."

It's a trait that has marked Goldberg since he took over his father's grocery-trucking business in the late 1960s, when he would chase dawdling drivers out of diners. In gambling, an industry loaded with excess, Goldberg has brought to the table nitty-gritty concepts like measuring return on equity and fostering economies of scale. Although he entered the industry in 1990 with no great love for it and absolutely no experience, he has ridden a rigorously calculated hot streak to become the biggest player in America's three most lucrative venues--Las Vegas, Atlantic City, and Mississippi barges. Next up: a possible casino monopoly for virtually all of New York State on a site that is closer to New York City than any of his competitors.

The man certainly does not lack ego; it's just that he doesn't measure it by how much glitter there is per square inch. He is more apt to talk of the "beauty of cash flows" than of floor shows. That attitude has paid off for investors. Since Park Place went public at the end of 1998, its shares have risen 125%, to $14.50--easily beating the 75% jump in the gaming index--for a market cap of $4.4 billion. For every $1 investors handed Goldberg when he first entered gaming ten years ago, they have $9 today, a return of 25% a year, 7.5 percentage points better than the S&P 500. Personally, he hasn't done badly either. His stake in Park Place, including in-the-money options, is now worth $70 million. "He's simply the best in the business," marvels Saverio Scheri III, head of gaming practice at KPMG.

How does Goldberg do it? In a way, by countercasting. Unlike some other casino magnates, who shall be nameless, Goldberg stays in the background. He works his properties like a politician, always lunching in the employees' cafeteria, where he first-names dealers and secretaries. Sure, Goldberg revels in the flamboyant world of casinos, with its buzz, glamour, and overlay of naked greed. But what he brings to his investors is the opposite of glamour. "Arthur," says Jason Ader, an analyst with Bear Stearns, is "the most focused guy on shareholder value in the industry."

Toward that end, Goldberg scrutinizes details with a frightening intensity. On one occasion, for example, he chomped into a tuna sandwich. Stale. After bawling out the chef, Goldberg had the kitchen send samples of whole wheat, pumpernickel, and every other bread on the menu to the executive offices. He and his lieutenants immediately performed a high-level munch test. The bakery did not fail again.

Goldberg was among the first to recognize the perils of the "Vegas trap"--expensive, outrageous hotel complexes that sell lots of rooms, win "wows" from customers, and have high gaming margins--but still report low returns on capital. He also excels at intelligent growth, an important skill, given recent consolidation. (Today four operators--Park Place, MGM Mirage, Harrah's Entertainment, and Mandalay Resort Group--collect 70% of U.S. gaming revenues.) Remember how important it is in Monopoly to get all of the greens or yellows? Only then can houses or hotels be built and interlopers relieved of their money. Ditto in the real world, where the practice is called clustering. Most visitors to Las Vegas or Atlantic City scatter their gambling dollars through four to five different places that are all close together. Companies that assemble a cluster of eye-popping casinos in the same section of the Strip or Boardwalk can therefore expect to collect more revenues than if their operations were spread out.

Park Place is the Boardwalk (with a hotel) of clustering. In Atlantic City, gamblers can stroll straight from Bally's Park Place through the kitsch-laden Wild Wild West to Caesars Palace--all Goldberg properties. In Las Vegas, Park Place dominates the most valuable gaming real estate on earth, the intersection of the Strip and Flamingo Road. Bally's and the immense Paris Casino stand linked at one corner; Caesars Palace and the Flamingo dominate two of the other three squares.

Size brings Park Place diversification and an element of stability. With $5 billion in revenues, it's 15% larger than its closest rival, MGM Mirage, and 50% bigger than No. 3, Harrah's. That makes Park Place less vulnerable to, say, the rise of Indian casinos in California or a recession in the Northeast--or a lucky strike by high rollers.

Put it all together, and Park Place's performance looks anything but lucky. In gaming, the best measure of success is free cash flow: the dollars left over after interest, capital expenditures, and everything else. Park Place expects to generate $525 million this year in free cash flow, a figure 30% higher than last year's, and Goldberg pledges to raise that another 14% in 2001. Those numbers are the best in the business. Goldberg is using the money wisely, to pay down debt and repurchase shares.

Still, Park Place is no sure bet. For a start, it is carrying $5.1 billion in debt, which is manageable given its cash flow, but still high. More worrying are the rumors about Goldberg's health. Although Goldberg is health-conscious and trim--he starts his days in Las Vegas with a 6 A.M. workout in the weight room--rumors keep arising that he may be seriously ill. Last year he spent a month at Johns Hopkins Hospital, a remarkably long period for this ferocious workaholic. On the subject of his health, Goldberg is terse: "It's okay. Things wear out as you get older." Whatever Goldberg's medical situation, he's finally addressing the problem of succession, a move that's overdue. He plans to name a president from inside the company in the next few months, most likely one of the executive VPs, Wally Barr or Mark Dodson, and step down as CEO by the end of 2001. Though Dodson and Barr are strong managers steeped in Goldberg's rigorous style, the master's departure will be a blow to Park Place.

Goldberg's career is a primer in how to stretch dollops of capital a long, long way. After graduating from Villanova University School of Law, he toiled as a litigator until 1969, when his father's heart attack imperiled the family trucking company. Goldberg took charge, proving a demon on costs and continuing his dad's tradition of driving old Chevies and lunching on sandwiches his mother made at home. He also installed devices in the trucks that recorded how many times a driver stopped each day and for how long, and hired off-duty cops to catch loafers.

Goldberg sold the fleet in 1986 to concentrate on his new specialty, greenmail. He targeted bloated businesses in grimy fields like marine dredging, cables, even bombs. He was the epitome of the big, pushy investor who won't go away. Sometimes a CEO bought him out just to escape the aggravation of dealing with him. But Goldberg also relished reviving corporate dogs. To contain costs, he might bid out every contract over $25,000--elevator maintenance, cleaning, fire alarm boxes. Or he might scour expense reports, phoning the guests his managers took to lunch to discover if the $30 tabs were worth it. "How'd the meeting go with Joe?" he would inquire. "Did you give him the order?" If the lunches didn't generate business, Goldberg made underlings pay the bills.

In 1990 he bought 5.6% of ailing Bally Manufacturing, an owner of health clubs, gaming-equipment manufacturing, and, yes, casinos, for $14 million. Goldberg reckoned the beaten-down stock was a bargain when he bought the shares at an average of $8. But he underestimated the scale of Bally's problems and the stock promptly fell to less than $4. To salvage his investment, Goldberg assembled a plan to save the company, then lobbied the directors and the CEO--"I drove them crazy"--until they grudgingly invited him to an emergency board meeting on Oct. 11, 1990.

At that gathering, the directors first fired Bally's CEO. Then they listened to this stranger named Goldberg offer his blueprint for a turnaround--and brazenly demand the top job for himself. "How can I vote for you? I've known you for four hours!" bellowed a crusty retired general. "You've known your CEO for 12 years," Goldberg shot back. "How could you keep voting for him?" He got the job. Goldberg stopped greenmailing and made Bally his full-time project.

Under Goldberg, the company quit making slot machines and exercise equipment in order to focus on casinos and health clubs. The strategy proved a royal flush. In 1996, Goldberg spun off the health clubs as Bally Total Fitness; its stock has since jumped from $6 to $26. In gaming, Goldberg focused on reviving a couple of pivotal properties--without, of course, spending too much money. One such place was Bally's Las Vegas, which in 1990 was a ghastly white elephant crammed with polyester-suited conventioneers who did little gambling. Walk-in traffic was minimal.

Goldberg spotted the problem. To enter the hotel from the Strip, customers had to weave their way through a treacherous parking lot. No wonder they stayed away. For less than $15 million, Goldberg built automated walkways out to the Strip, framed by giant speakers that blared rock music, and, at night, lit up like pinball machines. The number of walk-in customers rose from 1,000 to 10,000 per day. By 1994 the white elephant had become a cash cow.

In Atlantic City, too, Goldberg spotted an opportunity others had missed. On his morning jog in Atlantic City in 1995, Goldberg eyed an empty lot next to Bally's Park Place. Before he had even cooled down, he imagined filling that space with a splashy, low-cost casino. Result: the Wild Wild West, a Gold Rush travesty featuring mechanical hookers who lure tourists from the balcony of the town saloon; a giant, animated prospector sifting for nuggets by a waterfall; and, believe it or not, talking vultures (why not?). "It was the first themed casino in Atlantic City," says executive vice president Barr. Goldberg "was able to connect it directly to Bally's, which attracted lots of extra gamblers." Wild Wild West cost $110 million in 1997; it now rakes in $35 million a year in gross profits, a 32% return.

Bally soon began to attract suitors. In 1996, Hilton paid $2 billion ($29 a share) for Bally, more than eight times the share price when Goldberg became CEO in 1990. The merger boosted Hilton's small casino business. But inevitably, Goldberg, who joined the new company as gaming chief, chafed at answering to a boss, in this case Hilton CEO Stephen Bollenbach. Goldberg believed casinos were vastly undervalued. He therefore wanted to spend, spend, spend, buying them up. That ambition clashed with Bollenbach's policy of keeping a fifty-fifty balance between gaming and hotels. In 1998, Goldberg convinced Bollenbach that the best way to enrich Hilton shareholders was to spin off the casinos into a freestanding company that could feast on the bargains. That became Park Place, and he was back as CEO.

Free from Hilton, though loaded down with $2.5 billion in debt, Goldberg went shopping: "I knew I could buy $3 to $4 billion in gaming assets at 60 cents on the dollar." Bingo. The day Park Place went public in December 1998, it bought Grand Casinos, owner of three big gaming barges in Mississippi, for $850 million. By slicing costs and adding hotel rooms, Goldberg raised Grand's gross profit from $150 million to $190 million, increasing the returns to 22% from 18%. By comparison, a nearby rival--the MGM Beau Rivage, a Steve Wynn monument in Biloxi, Miss.--reports returns of around 9%.

Goldberg quickly followed the Mississippi coup with the deal that made him No. 1: Caesars. When he bought Caesars, the casinos yielded about $337 million in cash flow. Because he bought Caesars relatively cheap, Goldberg was getting a decent 12% return the day he made the deal.

It gets better. Park Place already boasted a huge presence in Las Vegas and Atlantic City, where Caesars has just one hotel each. By adding Caesars to this base, and taking over its back office, Park Place is ringing up big savings. The list includes $5 million in corporate overhead, $6 million in health insurance, and $15 million for bulk buying of food and toiletries. Park Place is already more than halfway toward achieving Goldberg's goal of around $50 million in lower costs and another $50 million in revenue from wooing high rollers culled from its rich databases. If he hits his target, Goldberg will be able to raise Caesars' return to 16% by year-end. It could be more. "Goldberg always underpromises and overdelivers," says Ader of Bear Stearns. By contrast, MGM is earning around 13% on its $6.4 billion purchase of Mirage.

Now that he's the biggest--"He put on 600 pounds from the Caesars deal!" raves general counsel Clive Cummis--Goldberg is focusing on "same-store sales"--that is, generating bigger and bigger cash flows from his casinos. In managing, as in negotiating, Goldberg is ruthless. His rants are legendary, even when it comes to saving nickels. Hilton managers recall with a shudder when Goldberg unloaded on them in 1996 after walking into his suite at the Waldorf-Astoria for a board meeting and found--horrors!--a fully stocked bar. "This is outrageous!" Goldberg fumed. When lieutenants spout generalities over the phone, Goldberg has been known to snap, "Tell me how you're going to deal with it, or I don't need you here," and then hang up.

The reflexes are straight from the truckyard. "He runs giant casinos like 7-Elevens," marvels Dean Harrold, manager of Caesars Palace in Las Vegas. "He asks questions like 'Why's the milk been on the shelf so long?' " Each week Goldberg gets two dozen printouts, one for each property, listing every check over $5,000. If he finds three or four payments from Las Vegas casinos to different vendors of meat or uniforms, he'll call the manager in charge. "'Why not buy all the beef from the same company? It's probably a lot cheaper,' he'll tell me," says executive vice president Mark Dodson. "Now, we've all learned the same mindset."

He's just as mind-numbingly meticulous about things like quality control. Goldberg will have a secretary order lunch in one of the restaurants, then march in and eat the serving himself to check how it tastes. One more example: Two years ago Goldberg wooed the legendary Alain Ducasse of France to serve as chef and owner at his Eiffel Tower restaurant at the Paris. When Ducasse demanded too sumptuous a package, Goldberg walked, finding a moins cher American restaurateur instead.

Not all the angles are harsh. Goldberg's spontaneous acts of generosity inspire fierce loyalty in a small circle of friends. In the Rutgers weight room, Goldberg met Vaughn McKoy, an ambitious football player from a poor family. In 1990, Goldberg loaned McKoy the money for lodging and books while he attended Rutgers law school, on the condition that McKoy--now an Assistant U.S. Attorney--phone him every Monday so that Goldberg could keep fatherly tabs on his grades and choice of courses. That's about it for the fuzzy stuff.

But what about the "Wow!" factor? At his spectacular Paris Las Vegas hotel, Goldberg showed that he could do that too. In 1995, Goldberg was mulling what kind of casino to build next to his Bally's. There was a site available, a shabby strip mall. His architects pitched Disney-style ideas that would appeal to kids--motifs based on Richie Rich, say, or an over-the-top concept called the Lost City of Vegas, a sort of southwestern Pompeii. Goldberg turned them down: "Kids don't gamble," he sniffed.

"To me, Vegas is romance and fantasy for adults," Goldberg erupted. "And that's Paris!" He and his team toured the city, choosing parts of evocative landmarks and quartiers to mold into an original, operetta-pretty vision of the City of Light. Forming the facade of the 3,000-room Vegas hotel are look-alike sections of the Louvre, the Musee d'Orsay, and the Paris Opera Garnier. A two-thirds scale version of the Arc de Triomphe occupies the traffic circle. A replica of the Eiffel Tower bursts through the casino roof. Inside, gamblers clatter over cobblestone streets reminiscent of Montmartre, under hand-painted ceilings depicting an azure late-afternoon sky. Tourists munch on croissants at a shop run by Lenotre, Paris' most famous pastry emporium. The staff brims with bon soirs and bienvenues, Edith Piaf purrs in the elevators. Sure, it's Vegas, but it's also surprisingly Gallic.

And pure Goldberg: Every element is orchestrated to maximize profits. Most top hotels, like the Bellagio and Venetian, feature fancy stores that create returns of only 10% or so. At the Paris, there are no tony retailers and only one fancy eatery. Space that could have been used for, say, a Dior outlet is instead devoted to gambling, which makes double the return of retail. The idea is to pack in the absolute maximum of high-profit casino space.

At the Paris, Goldberg is aiming for the upper-to-middle market, charging about $125 a night, while the Bellagio and Venetian, its two most recent rivals, want higher rollers, and charge $175 to $185. But the Paris is more profitable for two simple reasons. First, it collects about 80% of its revenues from high-margin gaming. And second, it cost a lot less to build. Goldberg spent $785 million on his French fantasy--a pittance compared with the $1.6 billion Wynn poured into the Bellagio or the $1.2 billion Sheldon Adelson lavished on the Venetian. Now, less than a year after it opened, the Paris is generating $135 million in cash flow, a return of 17%. That is higher than either the Bellagio or the Venetian, although the Paris is younger than both. Goldberg relishes that one of his Eiffel Tower restaurant's big attractions is its free view of the Bellagio's spectacular water show. (Wynn generously praises Goldberg: "He's an aggressive guy who put together a big company lickety-split.")

What next? Try the Catskills, the famous Borscht Belt area north of New York City known for summer camps, mosquitoes, and comedians. And soon, perhaps--casinos.

Once a prosperous vacation playground for New Yorkers--only about a two-hour drive from Manhattan--the Catskills lost its customers to Florida years ago. It's now a land of crumbling hotels and rampant joblessness. For years, politicians and businessmen dreamed of bringing casino gambling to the region in the hope of revitalizing it. The problem was that New York State laws make it almost impossible to win approval for a casino except on Indian land. And there were no Indian tribes in the area. Then a group of investors including Alpha Hospitality, a New York-based hotel and gaming operator, came up with a simple plan.

The investors, who called themselves Catskill Development, bought the Monticello Raceway harness track in the rural heart of the region along with the surrounding land. To become eligible for a gaming license, they agreed to donate 29 acres to the St. Regis Mohawks, a tribe with a reservation near the Great Lakes more than 200 miles to the north. Four years ago, Catskill Development signed an agreement with the tribe to become its partner in opening a casino on the land. By early April 2000, Catskill Development had plowed through most of the approval process. The governor was poised to sign. The final step was in sight: Getting approval for the agreement from the National Indian Gaming Commission.

But Goldberg wasn't sitting still. Instead of fighting the Catskills' casino like Donald Trump was doing, he watched for an opening to snatch the project for himself. Late last year he found one. The Mohawks own an ailing casino on their reservation in Hogansburg, N.Y., near the St. Lawrence Seaway. Serendipitously, the casino manager, Ivan Kaufman, called former U.S. Senator Al D'Amato asking if he could recommend a big casino operator who could help turn the place around. D'Amato steered Kaufman to his friend and client Arthur Goldberg. Goldberg and his team swooped down on Hogansburg.

Meanwhile, relations between the tribe and Catskill Development were souring. The Mohawks discovered that Alpha had a checkered record with Mississippi casinos and that its partners, Ralph and Joseph Bernstein, had served as front men for the Marcos family in the 1980s--an unsavory little tidbit that Goldberg kept waving in front of the tribe. Park Place, he urged, was a better bet, offering financial strength and stability.

On April 11, lightning struck. Goldberg signed an exclusive agreement with the tribe to manage any St. Regis Mohawk casino in New York State. The price: $3 million. While his competitors sat around with their jaws on the floor, Goldberg kept dealing, taking an option to buy the 1,450-acre Kutshers resort, five miles from the Monticello Raceway. Goldberg intends to give a piece of the land to the Mohawks and develop the entire property as a giant resort dotted by golf courses and lakes. (The original racetrack idea is probably out, unless Goldberg can make a deal to run a temporary casino there until Kutshers starts up.) Ultimately, he can imagine the Catskills operations becoming bigger than Foxwoods in Connecticut, the Pequot-run casino complex that generates $350 million a year in gross profits.

Goldberg has the tribe's blessing, which is key. "Here's a man who took a near-bankrupt company and made it into the biggest gaming outfit in the world," says Chief Paul Thompson, a member of the tribal council that governs the St. Regis Mohawks. "Who wouldn't want to be his partner?" But he still needs approval for gambling at Kutshers, a process that could take two years. If he succeeds--and the odds are good that he will--the potential is stunning. The casino would sit 90 miles from New York City, 45 minutes closer by car than Atlantic City or Foxwoods. And if he loses? Well, for $3 million, he at least killed a threat to Atlantic City.

Goldberg left wildly different impressions on the players in the Catskills drama. Kaufman, the former Hogansburg casino manager, whom Goldberg no longer needs, is angry. He is suing Park Place on the grounds that it agreed to pay him millions for introducing Goldberg to the Mohawks. "He seemed down-to-earth and sincere," says Kaufman. "I took his word and got burnt." But Chief Thompson, whom Goldberg needs badly, knows another man: "He's from the old school, where a handshake means something." "Old school" to Goldberg means doing whatever it takes to win. Just ask those beefy fellas he shooed out of those diners and back into their rigs.

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