Odd Shifts Mark Career of Accused Money Launderer : Silberman Friends Shocked by Arrest; He Had Ties to Political, Social Elite

Describing what he called one of “the great events of my life,” Richard T. Silberman once recounted how he and former California Gov. Edmund G. Brown Jr. 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?’ ”

Two weeks ago, the man who took Jerry Brown to dinner at Buckingham Palace was arrested by the FBI, charged with hatching a plan to launder money he was told came from Colombian drug runners.

The news shocked and mystified those who knew Silberman as a hard driving financier who had parlayed the millions he made in the hamburger business and his skills as a political fund-raiser into a calling card that provided an entree to elite social and political circles.

Although he displayed a chameleon-like tendency in his politics and occasionally cut ethical corners in business dealings, many who knew him 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 Brown, Silberman gained a reputation as someone who could “make it happen.”

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

Talk of ‘Muscle’

According to an FBI transcript of taped conversations, Silberman counted alleged underworld figure Chris Petti among his longtime associates, boasted of ways to hide income overseas, and talked comfortably about deals completed via tens of thousands of dollars in 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 in November. “I’ve been here before.”

Silberman, who is free on $500,000 personal surety bond, 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.

Why would someone reported to have amassed a $25-million fortune have become involved in the kind of illicit activities suggested by his wiretapped boasts?

The FBI accusations were especially surprising to those who remembered Silberman as one of the San Diego reformers who in the 1970s had backed candidates that broke the civic grip of financier C. Arnholt Smith, who eventually was convicted of grand theft and income-tax evasion.

“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.”

The plaudits come from all quarters.

Rabbi Michael Sternfield, who has known the Silberman family for 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.”

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

Silberman also had what he called a “second father,” a man named LaMotte T. Cohu who taught him about life in the entrepreneurial fast lane.

Cohu inspired more awe than affection. A world-wise veteran of the corporate suites, Cohu was former president of American Airlines, TWA, General Dynamics-Convair and Northrop Aircraft Inc. He smoked a pipe, wore fancy blue suits and introduced his protege to fast sports cars and high finance.

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

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.

Silberman earned his physics degree from San Diego State College (now San Diego State University) and took a job with General Dynamics Convair after he was 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.

A Major Backer

In Cohu, Silberman found a major backer for his firm, which eventually became Cohu Electronics.

“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.

When Silberman left Cohu, he joined partner Charles Salik in starting Electronic Capital Corp., 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.

While 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 the co-founder of the Kohlberg, Kravis & Roberts buy-out firm. Kohlberg said Friday the pair “milked” the companies by charging exorbitant management fees.

Wealth in Hamburger

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 a 1987 lecture he gave to a group of entrepreneurs.

“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 stores.

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

Marred by Bad Loans

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. “The Bank of Tokyo paid them what they had invested,” said attorney E. Miles Harvey, who did legal work for the Southern California bank’s holding company.

Just how successful Silberman has been in recent years is unclear. His major venture has been Yuba Natural Resources, a gold-mining project in Marysville that has lost more than $6 million in the last five years.

Silberman and and his wife, Supervisor Golding, have sold much of their extensive real estate holdings. 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 raising or contributing several million dollars to that race.

“It looks like everything was closing in on the guy,” said publicist Jack Canaan, who has known Silberman many years. “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.”

Of the many ironies inherent in Silberman’s 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, he and a handful of other prominent businessman--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 an old-boy network that for decades had controlled San Diego.

Political Alliances

Silberman backed 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, a triumvirate that sat atop San Diego’s power structure.

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

That was only one of several times Silberman changed political allegiances.

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’s opponent, Golding. Golding’s campaign, appealing to San Diego’s heavily Republican electorate, lambasted Schenk for having served under Democrat Brown.

Defenders saw Silberman’s shifting allegiances as skillful political pragmatism. Others interpreted it as a lack of ideological commitment and loyalty, a sign that Silberman cared more about winding up with a winner than in the winner’s political 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.”

Many Important Jobs

In Sacramento, the black-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 was 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.

Silberman also knew how to tap business for big bucks to finance political campaigns, a talent he displayed as a fund-raiser for Brown’s belated 1976 five-primary presidential campaign that, although quixotic from the start, threw a serious scare into Jimmy Carter’s run for the White House.

Sufficiently impressed, Brown invited Silberman--then 48 years old--to run the state Business and Transportation Agency. “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.

Hints of Controversy

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 from two men with alleged underworld links to the unsuccessful 1978 reelection campaign of Lt. Gov. Mervyn Dymally: $10,000 from Las Vegas casino owner Allen Glick, of La Jolla, and $5,000 from Irv Roston of the La Costa Land Co.

Although Brown himself publicly chided Silberman for a lack of “prudence” in soliciting the donations, the controversy quickly dissipated and had been largely forgotten.

Silberman’s political star waned after he returned to San Diego in the early 1980s.

Then on April 7, he was suddenly back on the front page, this time as a suspect in a drug money laundering scheme involving Petti, the alleged underworld figure.

Petti’s attorney, Oscar Goodman, said his client’s relationship with Silberman was “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.

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

Worded Like a Script

Last October, Petti unknowingly approached an FBI informant and an undercover agent, telling them that he had a “wealthy associate” (Silberman) who perhaps could help launder money.

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.

On another occasion, when Silberman protested an undercover agent’s mention of “Colombian cocaine drug lords,” the agent drove the point home, saying, “It’s reality, I mean . . . if you’re gonna deal with me that’s what you’re into. If you don’t want to, then I’m not going to bother you.”

Although 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.

Questions Arise

“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.”

Also 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.