The Silberman Saga Rivals a TV Thriller : Once Sterling Image as a San Diego Mover and Shaker Tarnished by String of Charges

Recounting one of “the great events of my life,” Richard T. Silberman described the night that he and California Gov. Jerry Brown dined at Buckingham Palace: “We’re just about to get out of this place and Prince Charles put his hand on my shoulder and says, ‘Wouldn’t it be bloody nice if he was President and I was king?’ ”

Silberman, speaking at a 1987 college program about successful entrepreneurs, went on, “I think of all the things I’ve ever heard, this sort of just shook you up. There’s no question in my mind who was going to be king.”

Until two weeks ago, there was no question in anybody’s mind that Silberman was a man who hobnobbed at the level of presidents and kings. But then the man who had dined at Buckingham Palace was arrested by the FBI on charges that he had hatched a plan to launder drug money in meetings with a reputed mobster at a downtown Denny’s.

The circumstances that have kept his name in headlines shocked everyone who knew him or had heard of him.

The son of an immigrant rag dealer, Silberman had parlayed the millions of dollars he made in the hamburger business and his success at political fund raising into a calling card that provided entree to elite social and political circles in San Diego, California and, at times, the world.

Driven more by the thrill of high-powered deal-making than by ideology, Silberman rode his financial acumen and boundless energy to the rarefied air of multimillion-dollar business pacts and presidential politics. Though he displayed a chameleon-like tendency in his politics and occasionally trimmed ethical edges in business dealings, most simply saw those traits as evidence that Silberman, as one friend put it, “knows how to play big-league hardball.”

As a fast-food magnate, bank owner and state budget director under Gov. Edmund G. Brown Jr., Silberman, who turned 60 Saturday, gained a reputation as someone who could “make it happen.”

“To me, he seemed like a smaller-scale Donald Trump,” one politically active lawyer said. “He was one of these guys who could get it done, whatever it was.”

Boasted of Deals Completed

But, on the afternoon of April 7 in a San Diego hotel room, the FBI arrested Silberman, allegedly as he was negotiating to launder $1.1 million in what he was told was Colombian cocaine money. By that point, Silberman already had helped launder $300,000 in two earlier schemes, prosecutors allege in an indictment released Friday.

According to an FBI transcript of taped conversations, Silberman counted reputed underworld figure Chris Petti among his longtime associates, boasted of ways to hide income overseas and talked comfortably about deals worth tens of thousands of dollars being transacted with shoe boxes and the need to bring in mob “muscle” when one transaction went sour.

“Just for your background, this is not my first go-around, OK?” Silberman allegedly told an undercover FBI agent last November. “I’ve been here before.”

Silberman and his wife, San Diego County Board of Supervisors Chairman Susan Golding, have declared his innocence. But the accusations, backed up by a richly detailed federal affidavit quoting wiretap conversations of Silberman, prompted bewilderment from friends and enemies alike as they struggled to understand what could have happened to one of San Diego’s most prominent and powerful businessmen.

Since his arrest, San Diegans have wondered aloud whether Silberman could possibly have been involved in such activities for years, as suggested by his wiretapped boasts.

Is it possible that Silberman, a man often reported to be worth $25 million and thought to have the Midas touch, was forced into a foolish caper under pressure from recent financial reverses? Or, as some of Silberman’s defenders ask, could it be that he was the victim of government overzealousness?

Regardless, the accusations were especially surprising to those who knew Silberman’s early political work.

As a young businessman, Silberman had backed a series of reform candidates who toppled C. Arnholt Smith, a San Diego financier later convicted of grand theft and income-tax evasion, from power in the 1970s.

‘So Unexpected’

“To me, he always had that air of integrity and honesty about him,” said A. David Stutz, a deputy district attorney who has known Silberman for nearly two decades. “I could never conceive of him being other than honest and having integrity. That goes back 18 years. That’s always been my impression . . . until I picked up the newspaper.”

Today, however, Silberman is in jeopardy of joining Smith, J. David Dominelli and Roger Hedgecock on the roster of prominent San Diegans whose high esteem was transformed into ignominy through public or private transgressions.

“This was so unexpected, so out of the blue, so out of character, that the shock was total,” said Jack Canaan, a publicist who has known Silberman 20 years. “This is like somebody telling me that Steve Garvey--Mr. Clean, Mr. Nice Guy--was going out and getting a bunch of girls pregnant. This is like the Steve Garvey of the political and business world.”

“We met people that he knew and, all of a sudden, I saw people in the world who did nothing but traded money. They didn’t build amplifiers or TV sets. . . . In that process, LaMotte kind of opened my eyes to the world.”

--Dick Silberman talking about business mentor and “second father,” LaMotte T. Cohu, during a November, 1987, lecture given as part of a UC San Diego lecture series about entrepreneurs.

Dick Silberman was the son of two fathers.

The first was Isadore Silberman, a Soviet immigrant who settled in San Diego in the late 1930s, collecting scraps of discarded clothing as rags for industrial use.

Isadore Silberman inspired a special closeness with his only son. After Silberman separated from his first wife in 1973, he moved into an apartment down the hall from his father. For a vacation, Silberman once took his father on an excursion down the Yangtze River in China.

Rabbi Michael Sternfield, who has known the Silberman family 16 years, said, “Dick treated his father with such tenderness and such respect, you don’t forget something like this because you see it so rarely.”

Dick Silberman’s second father inspired more awe than affection.

Sold Newspapers

LaMotte T. Cohu was a world-wise veteran of the corporate suites--former president of American Airlines, TWA, General Dynamics Convair Division, and Northrup Aircraft. He smoked a pipe, wore fancy blue suits and introduced his protege to fast sports cars and high finance.

The introduction to Cohu came during the mid-1950s, a time when Silberman had already cut his entrepreneurial teeth on a number of home-grown business ventures that centered on his fascination with electronics.

As a Hoover High School student and valedictorian during the waning days of World War II, Silberman would sell newspapers at 5th and University avenues to buy radio parts to support his habit of tinkering with the sets.

When the first television sets came out, he made a deal with a San Diego appliance dealer to demonstrate the novelty by driving around town in a truck equipped with an antenna.

Silberman and a friend started a “video service club,” which charged television owners a $10 membership fee for a maintenance contract on the new appliances. Silberman said his company sold 2,000 memberships in one week after advertising on San Diego’s first television station.

“That was one of the most important experiences of my life because I learned that, if you advertise something, there’s a lot of people who believe it,” Silberman said during the UCSD lecture.

Degree in Physics

Silberman earned his physics degree from then-San Diego State College and took a job with General Dynamics Convair Division after he graduated in 1950. The Atlas missile program was beginning, and Silberman cashed in on the Cold War defense boom by manufacturing small parts for the missile program.

In the mid-1950s Silberman met Cohu, who had moved to San Diego for a restless retirement. In Cohu, Silberman found a major backer for his firm, whose name was eventually changed to Cohu Electronics. He also found a man he would call his “second father.”

“LaMotte helped, I guess in ways I can’t even describe, in sort of giving me a view of the world,” Silberman said. “The fellow knew everybody, and I knew nobody.”

Cohu’s world featured a network of businessmen who traded money--buying companies, merging them with others, taking private firms public.

Silberman’s next move was further into that world. He left Cohu and started Electronic Capital Corp. with partner Charles Salik, an investment firm that was a precursor to today’s venture capital funds. Silberman also established an offshore company for the purposes of investing in European electronics companies.

Though some of the investments made money, a series of losses prompted disgruntled board members to oust Silberman and Salik.

The man who led the ouster was Jerome Kohlberg, who later became co-founder of the Kohlberg, Kravis & Roberts buyout firm. Kohlberg said Friday that Silberman and Salik “milked” the companies by charging exorbitant management fees.

Silberman, he said, was “a very personable, bright, facile, articulate person. I trusted him in the beginning and would never trust him again.”

Important Business Ally

In the early 1960s, Silberman found his most important business ally in Robert O. Peterson, founder of the Jack in the Box hamburger chain.

“Within about 33 seconds, when Bob asked me what I did and he was telling me what he did, we developed a very long and deep and probably the most significant business relationship I’ve ever had,” Silberman said in his lecture.

Before long, Silberman was working with Peterson to find the right financing for the chain of 15 fast-food restaurants. Silberman urged Peterson to talk to Wall Street brokers about making a public offering. The result: Peterson sold 13% for $7.5 million.

“I always used to describe Jack in the Box as a human vending machine,” Silberman said in his lecture. “Basically, it allowed us to sell food for cash, have no accounts receivable and have no mechanical problems to fix with the vending machines because you have these humans there who are handing out the food.”

In 1968, Peterson and Silberman sold Jack in the Box to Ralston-Purina for $58 million after the hamburger chain grew to more than 500 outlets.

Peterson and Silberman went on to engineer an unfriendly take-over of the Southern California First National Bank by acquiring a 22.8% controlling interest in stock. The coup was accomplished, in part, with the cooperation and money from banker C. Arnholt Smith, whose political lock on San Diego would later be broken by the pair.

Their seven-year reign at the bank was marred by millions of dollars in bad loans. In the end, the banking venture wasn’t the windfall that Jack in the Box had been; the pair basically broke even.

Federal regulators were displeased with how Silberman and Peterson handled the sale of their federally chartered bank to the Bank of Tokyo in 1975, the first such sale to the Japanese.

Called by Regulators

To avoid the scrutiny of federal regulators, the pair merged the bank with a state-chartered financial institution owned by the Japanese buyers. That would make the sale exempt from federal regulation, prompting a call from Federal Reserve Board officials.

“They called us in and said, ‘You know, this isn’t illegal, but it’s improper,’ ” Silberman recounted in his UCSD lecture. Then, he added with a wave of his hand: “Well, we gave it a lot of thought, and we sold the bank.”

In 1971, Silberman struck a deal with the state to renovate a rundown motel on the state’s Old Town park. He and interior decorator Diane Powers were the only bidders for concession rights on the structure.

With Silberman’s money and Powers’ decorating know-how, the motel was transformed over a decade into the Bazaar del Mundo tourist attraction, four restaurants and 16 shops so popular that it surpassed the Hearst Castle in San Simeon as the state’s most lucrative concession.

Yet the lease remained tiny, only $3,600 a year, giving Silberman and Powers a windfall on a project that by 1979 grossed $10 million. To avoid a possible conflict, Silberman sold his interest in the Bazaar to Powers before going to Sacramento in 1977 to join Brown’s cabinet.

Powers retained Silberman as a consultant and continued to make installment payments to him for his share in the business, even when he served as state business and transportation secretary--a post that gave him authority over the bazaar’s four liquor licenses.

Silberman failed to disclose his financial ties to Powers while lobbying state legislators on her behalf in mid-1981, after he left state employ.

“This is an insult to me because he specifically told me . . . that he had no interest in this whatsoever,” one lawmaker said.

The state renegotiated Powers’ lease so she would pay 4.5% of the Bazaar’s gross, a figure that translated into more than $500,000 in 1982.

In recent years it is not clear that Silberman has repeated his financial success of the 1960s and 1970s. His major venture has been Yuba Natural Resources, a gold-mining project in Marysville. Among the partners in the project were hotelier M. Larry Lawrence, former national Democratic Party Chairman Charles Manatt and J. David Dominelli, the La Jolla financier who was convicted of running a Ponzi scheme.

Under Silberman’s direction, Yuba has lost more than $6 million in the last five years. Federal securities reports and state court records show that Yuba faced lawsuits from creditors and a $515,000 judgment from the federal government for dredging for gold on land it did not own. In his scramble for new investors and capital, Silberman, one lawsuit alleges, raised money by selling off mining equipment that Yuba actually had leased from another company.

“The fact is that you couldn’t make a deal with the guy that was fair,” said Herbert Caplan, president of U.S. Machinery Co., which owned the mining equipment. “He had to get that extra inch. He had to feel within himself that he had gotten the better of you.”

In recent years, Silberman and Golding disposed of much of their extensive real estate holdings. Moreover, with Golding seriously contemplating a campaign for lieutenant governor next year--plans that most political observers now expect to be dropped--Silberman faced the prospect of probably needing to raise or contribute several million dollars to that race.

“It looks like everything was closing in on the guy,” publicist Canaan said. “He’s got a mining operation that’s like something out of Abbott and Costello, his wife wants to run for lieutenant governor, he’s selling off his property. . . . And, all of a sudden, everything just blows up.”

“My life (has) given me a rare opportunity to manage $30 billion, and I really understand the arrogance of power. When I was the (state) director of finance, it was fabulous. . . . Being in government and signing off on $30-billion budgets and having discretionary accounts that you have to approve and being involved in negotiations with the federal government where you tell them you will or will not take their $2 billion--the zeroes are fabulous! It’s an incredible experience.”

--Richard Silberman, Nov. 12, 1987, lecture to UC San Diego program.

If Silberman ended his most active political days marveling at the “zeroes” that he controlled with his pen, he was first drawn to politics for quite different reasons.

Indeed, of the many ironies inherent in Silberman’s current situation, perhaps none is greater than the fact that he entered politics as a good-government crusader determined to clean up local government and, as one associate put it, “sweep out the crooks.”

In 1970, Silberman and a handful of other prominent businessmen--among them Peterson, who later would become the husband of San Diego Mayor Maureen O’Connor--helped Edwin Miller Jr. win the district attorney’s office in a bitter race that marked the beginning of the end for the old-boy network that for decades had controlled San Diego.

‘Expose It’

Around the same time, Silberman and Peterson approached A. David Stutz, now a deputy district attorney and then a young Treasury agent, with an unusual proposal to leave his government post and become a San Diego “ombudsman” responsible for publicly exposing corruption. They offered to pay his salary, supply an office and a staff and guaranteed him the freedom to investigate even the most sacred cows of the San Diego Establishment.

“What would happen if I found something about you two?” Stutz recalled asking. “Both of them, without hesitation, said, ‘Expose it.’ ”

That plan fizzled, but Silberman continued dabbling in local politics, backing candidates ranging from his good friend Jack Walsh to then-Democratic City Councilwoman O’Connor and Republican Mayor Pete Wilson. Silberman himself served in a variety of appointed positions in local government, including the city school board, the Stadium Authority, the downtown redevelopment board and the transit authority.

Silberman became one of Wilson’s closest confidants, forming, along with newspaper publisher Helen Copley, the triumvirate that sat atop San Diego’s power structure.

But in the mid-1970s, Silberman abruptly broke with Wilson to help Gov. Brown, whom Wilson hoped to unseat as governor in 1978.

For Silberman, it was only one of several notable changes of political allegiance that led to inevitable questions about his motives.

In one particularly messy shift that left hard feelings on all sides, Silberman pushed his political protege Lynn Schenk into a 1984 San Diego County supervisorial race, then married and bankrolled Schenk opponent Golding, whose campaign lambasted Schenk for having served under Brown--ironically, in the position for which Silberman had recruited her. A slander lawsuit that Schenk filed shortly after Golding’s victory was settled out of court last fall with Schenk agreeing to accept $150,000 from Golding’s insurance company.

Glitzy Winners

Though defenders saw the ease with which Silberman moved between parties and individuals as skillful political pragmatism, others viewed it as a lack of ideological commitment and loyalty, an interest more in being associated with glitzy winners than in their philosophy.

“What happened with that Jerry Brown-Pete Wilson thing was that Dick simply decided that he’d rather have the governor of California as a friend than the mayor of San Diego,” said former state Sen. President Pro Tem James Mills (D-San Diego). “He was a political celebrity freak to a certain extent. He wasn’t very interested in helping anyone who wasn’t a big fish. I think he approached those decisions, not out of principle, but in terms of what it meant for Dick Silberman.”

In Sacramento, the dark-haired, mustachioed Silberman moved quickly through a series of posts in the Brown Administration, where he came to be seen as an island of steady calm in a sea of chaos.

“He brought a little sanity to the place,” recalled B. T. Collins, himself one of Brown’s top advisers. More importantly, no other adviser--not Collins, not longtime chief of staff Gray Davis, not gubernatorial guru Jacques Barzaghi--came close to performing the role for Brown that Silberman did.

“Jerry was out of it concerning the way the world worked,” remembered another confidant. “Dick was mature, sophisticated and could open major doors to the business community, which thought Jerry was from Mars.”

In Brown’s eyes, Silberman represented something that he himself was not but very much needed: a trusted counselor who understood the concerns, needs and agendas of business people and--equally important--the nuts and bolts of how to make things work. As a bonus, Silberman also knew how to tap business for big bucks to finance political campaigns.

Silberman displayed those talents as the fund-raiser for Brown’s belated 1976 five-primary presidential campaign that, though quixotic from the start, threw a serious scare into Jimmy Carter’s run for the White House. The week that Carter was inaugurated, Silberman assembled 35 major corporation executives in New York for a luncheon with Brown aimed at turning around his anti-business image.

Named Finance Director

Sufficiently impressed, Brown asked Silberman--then 48 years old--to run the Business and Transportation Agency in early 1977.

“There was a little bit of senior gray hair in Dick that Jerry could bounce things off of, as opposed to the ‘Brownies’ who were young and inexperienced,” one close aide recalled.

After serving briefly as Brown’s chief of staff during the governor’s successful 1978 reelection campaign, Silberman was appointed state finance director, the person in charge of preparing the state budget.

During his Senate confirmation hearings, Silberman weathered mild controversy stemming from his role in arranging contributions to the unsuccessful 1978 reelection campaign of Lt. Gov. Mervyn Dymally from two men with alleged underworld links: $10,000 from Las Vegas casino owner Allen Glick, of La Jolla, and $5,000 from Irv Roston of the La Costa Land Co.

Though Brown himself publicly chided Silberman for a lack of “prudence” in soliciting the donations, the controversy quickly dissipated and had been largely forgotten until the FBI affidavit alleged longtime ties to Petti.

Petti’s attorney, Oscar Goodman, describes his client’s relationship with Silberman as “not as much a social friendship as a case of two guys sharing the same company frequently . . . in excess of 10 years.” However, in more than a dozen interviews with people close to Silberman, none was aware that he even knew Petti.

“That’s the kind of thing I find it hard to believe you wouldn’t have heard gossip about,” said local banker Murray Galinson, a longtime political activist who was a top national staffer on Walter Mondale’s 1984 presidential campaign. “But there was never a whisper, never a rumor.”

As often happens in the wake of such a stunning development, Silberman’s political image already has undergone some preliminary historical revisionism. While claiming not to be trying to distance the party from Silberman, many Democrats nevertheless have gone to lengths to point out that the “major Democratic fund-raiser” description that usually preceded his name in news stories overlooks the fact that he also has been a prominent supporter of Republicans such as Wilson and Golding.

A Selected Few

“I always thought Dick Silberman was less of a major Democratic activist than he was an activist for a selected few candidates,” said Phil Connor, former local Democratic Party chairman. “His style was to pick his horses carefully and then ride them.”

Silberman seldom contributed to the local and state Democratic candidates, and party leaders were privately chagrined that Silberman usually failed to do some of the perfunctory things expected of high-rollers, such as buying tables at party fund-raising functions.

Just as Silberman found it difficult to duplicate his early business success, so too did his political star wane after he returned to San Diego in the early 1980s. Other than lending $243,000 to Golding’s 1984 campaign against Schenk--nearly half of her total contributions--Silberman has maintained a relatively low political profile over the past 6 1/2 years.

Silberman provided perhaps the best description of his “life after Jerry Brown.”

“When you have been supposedly the czar of roads and S&Ls; and banks and corporations and houses, and you come back to earth and you come back home to San Diego, it’s amazing how seldom your phone rings,” Silberman said in his 1987 UCSD lecture. “It’s amazing how unimportant you are, and it’s amazing how fast the reality hits you.

“Thank God, I generally look at life as something you should laugh (at), and for four or five or six months, I laughed about the reality that all of a sudden not being in Sacramento sort of took the veneer off. And I was back to who I was, and that did not involve all those zeroes.”

“In the age of being careful of who you quote and what you say and where you went to school and who your father was, and whether you did or didn’t work in the coal mine, one has to be particularly careful. I must say, I have a great deal of security in my past life because I love living in a country where the FBI can’t find marijuana on Harvard’s campus. I feel much safer now after the Ginsburg affair.”

--Silberman, UCSD lecture, speaking about U.S. Supreme Court nominee Douglas Ginsburg, whose 1987 nomination was withdrawn after it was learned that, while on the faculty of the Harvard Law School, he had smoked marijuana.

Of course, Ginsburg never lit up with an FBI agent in the room, which is tantamount to what Silberman allegedly did in the money-laundering case.

According to the FBI, Silberman stumbled into an undercover sting set up during the latter stages of the agency’s 2 1/2-year investigation into organized-crime operations in Southern California and Nevada.

Last October, Petti unknowingly approached an FBI informer and an undercover agent, telling them that he had a “wealthy associate”--Silberman--who perhaps could help launder money. Over the next six months, prosecutors allege that Silberman either used or discussed various methods--among them, a stock swap involving a mining company he controlled, the purchase of U.S. Treasury bonds and wiring cash to foreign banks--to launder money that he was told originated with Colombian cocaine dealers.

In a 76-page affidavit, federal prosecutors portray Silberman’s alleged role in those schemes with vivid details that sound as if they were drawn from a Hollywood script: cash stuffed in shoe boxes, Swiss accounts, clandestine meetings in hotels and restaurants, transactions recorded by concealed cameras, and threats of bringing in Petti’s “muscle” when a deal went sour.

“Part of this, believe it or not, is . . . as much for your protection as mine,” Silberman said in one taped conversation, explaining why he preferred to use couriers to pick up the money. “There’s no place I can walk and not believe that someone might recognize me. . . . As I say, I’ve done it 15 or 20 times, it works like absolute, clean, uninterrupted, greased lightning.”

The affidavit also alleges that undercover agents repeatedly talked about the source of the money being Colombian drug traffickers and that Silberman was uncomfortable when the words were used. “Let’s not even, uh, use any of the words anymore, OK?” Silberman allegedly said at one point.

‘You Always Wonder’

Though Silberman’s friends note that only one side of the story has been heard to date, even some of those closest to him admit that they are shocked by what the FBI tapes are reported to contain.

“I guess you always wonder about entrapment in a case like this,” one lawyer said. “But the question in my mind is, even if that happened, why didn’t he just walk away from the thing? Some of the most damning words come out of his own mouth.”

Were those the words of a man who, as one friend termed it, “put on moral blinders” because of dire financial difficulties? If so, was it an isolated misstep or simply the only one uncovered?

“A shock like this forces you to reevaluate everything,” said longtime political activist George Mitrovich. “Yesterday’s truth becomes today’s question mark. . . . Dick Silberman has done a lot of terrific things for this community. Even if any of this is true, that doesn’t change. But it makes you wonder about things you didn’t wonder about before.”

Contributing to this report were Times staff writers Jenifer Warren, Richard A. Serrano and Chris Kraul in San Diego and Daniel M. Weintraub and George Skelton in Sacramento.