On two occasions in 1985, prominent UCLA basketball booster and millionaire contractor Sam Gilbert told his son to deliver several large boxes to a bank president in Encino.
No words were exchanged in the parking lot when Michael Gilbert pulled the sealed boxes from the trunk of his BMW and loaded them into a Mercedes-Benz driven by Jules Huppert, the head of Valley State Bank.
Neatly stacked inside the boxes, court testimony would later reveal, was $1.8 million of Miami drug money, a commodity that the late Sam Gilbert came to call "Florida sunshine."
The transfers were subsequently found to be part of an international money-laundering ring. According to financial documents, memos, cashier's checks and transcripts of witness testimony made public during a recent Florida trial, the operation was organized by the elder Gilbert and his Miami associates, primarily to build the sprawling Bicycle Club casino in Bell Gardens.
The federal trial ended last month with the convictions of Michael Gilbert, 48, and three Miami associates, as well as an order to seize the Bicycle Club--the single largest asset ever forfeited to the U.S. government.
While the case offers a glimpse at how easily drug money can filter into the Southern California economy, it also provides a startling new portrait of Gilbert, the respected developer who would have stood trial had he not died in 1987.
For now, the story of Sam Gilbert is, in many ways, a story of intrigue as told by a diverse chorus of characters. They include federal investigators who explored Sam Gilbert's dealings from Los Angeles to Liechtenstein; the legendary UCLA basketball coach who was stung by Gilbert's fatherly intentions to his players; the son who ran his construction business; the lawyer who gave his eulogy; the bankers, the dentist and the coin dealer who helped him launder money in Los Angeles, and the courier who disguised a shipment of cash as a biopsy sample for an ailing dog.
According to federal authorities, the elder Gilbert was the "West Coast architect" for a scheme that funneled $12 million from Miami to Los Angeles through the tiny Central European nation of Liechtenstein and the British Virgin Islands.
For his efforts, he collected a commission on the laundered money and a $2-million fee to finance and build the Bicycle Club, according to court documents and interviews.
But federal agents could never nail "Papa G," as he was affectionately called by UCLA players. They indicted him on charges of conspiracy, racketeering and money-laundering on Nov. 25, 1987--three days after he died of heart failure in his Pacific Palisades home.
While no one was left to defend his reputation in a South Florida courthouse, longtime friends insist that Gilbert would not have associated with dope dealers. Why, they asked, would a man who successfully built a career as an inventor and who was a wealthy developer engage in illegal activities at retirement age?
"The last thing in the world Sam would have been involved in was drugs," said Hubert R. Sommers, the attorney who represented Gilbert for the last two decades. "No one is here to say that no, Sam wasn't involved. I hope everyone remembers Sam was not convicted of anything."
Michael Pasano, the Florida attorney for Michael Gilbert, said: "Sam turned out to be a Jekyll and Hyde. It's still an enigma why a Sam Gilbert late in his life, having accomplished everything he did, did what he did."
The forfeiture order of the club that Gilbert built clouds the future of the casino, which is worth an estimated $150 million, employs 1,900 people and provides nearly half of the $21-million annual budget for the city of Bell Gardens. A fierce legal battle looms over whether the casino should be returned to its private owners in Los Angeles or handed over to the government.
Among the casino's owners are Michael Gilbert and members of his family. None of the other Bicycle Club partners has been charged with laundering money or dealing drugs. Moreover, they said they were unaware that the financing furnished by the elder Gilbert came from drug profits.
Michael Gilbert, who was not available for comment, also said in court that he never knowingly handled cash from drug profits. He said he routinely followed his father's orders without raising questions. But he did not dispute evidence that Gilbert had laundered drug money.
"He has no basis to argue with it or challenge it," Pasano said. "It surprised him as much as anyone else.
After acquitting Michael Gilbert on seven of 11 counts, including a conspiracy charge, eight jurors requested leniency for him. He faces up to 35 years in prison and is free on bail in Sherman Oaks. Gilbert, who was convicted of four counts, including one racketeering charge, is not expected to be sentenced for several months.
Gilbert's widow, Rose, an English teacher at Pacific Palisades High School, declined to discuss the case or her late husband.
Gilbert was perhaps best known as a controversial adviser to famous UCLA basketball players, including Kareem Abdul-Jabbar and Bill Walton. When UCLA was placed on probation for recruiting violations for two years in 1981, the university prohibited Gilbert from taking any further role in the basketball program.
John Wooden, the legendary basketball coach, said in an interview that he "worried" about Gilbert's influence on his team and warned his players against associating with him. Later, reports of Gilbert's involvement in laundering drug money came as "a complete surprise to me," Wooden said.
A successful developer, Gilbert was honored in 1985 for conceiving the landmark Trident Center, the $55-million twin 10-story office towers in West Los Angeles. The project also was selected as an attraction that year in the Los Angeles County Museum of Art's tour of architecturally significant buildings.
Gilbert was drawn into the Bicycle Club deal when George Hardie, the man who envisioned building the casino, sought financing. Hardie, who later became the casino's general manager, had a license but no money--until he was introduced to Gilbert.
To pay for the construction, Gilbert used $12 million in cash supplied by Miami drug smuggler Ben Kramer, according to witness testimony and financial records.
Gilbert first met Ben Kramer in 1980 shortly after Kramer finished serving a three-year sentence for a drug conviction. His father, Jack Kramer, who knew Gilbert from the construction business in Los Angeles, asked his old friend to help land a job for his son, Pasano said.
Within two years, Ben Kramer was dealing drugs again. Only this time instead of using speed boats to transport marijuana from Colombia, he obtained a shipping barge the size of a football field, court records show.
Ben Kramer took few steps to curb his flashy lifestyle. He became a world champion powerboat racer in 1984. The following year, police found $100,000 in cash when they pulled over his Porsche for speeding, federal prosecutors said.
The drug profits also bought the launderers a $3-million marina in south Florida, a racing boat factory, a Porsche, a Rolls-Royce and a helicopter used in a botched attempt to free Ben Kramer from prison, prosecutors said.
Between 1982 and 1986, Ben Kramer imported more than 500,000 pounds of marijuana and earned a net profit of about $50 million, according to court records.
The 35-year-old Ben Kramer is serving a life term on a 1988 drug-trafficking conviction in Illinois. He was convicted in the Bicycle Club case on 28 charges. His father, Jack, 60, was convicted on 20 charges. The third Miami man convicted in the case was the Kramers' lawyer, Melvyn Kessler, on 21 charges. All were found guilty of two racketeering counts each carrying up to 20-year prison terms. A sentencing date has not been set.
"Ben Kramer suffered the same dilemma as all other successful drug smugglers," Assistant U.S. Atty. Robert Bondi wrote in court papers. "What to do with all the cash? Ben Kramer's father . . . and co-conspirator Samuel Gilbert came to the rescue."
The plans to finance the Bicycle Club were drawn up on Nov. 17, 1983, at the L'Ermitage Hotel in Beverly Hills in a room occupied by Jack and Ben Kramer. Prosecutors alleged the meeting was attended by Sam and Michael Gilbert, but could produce no evidence to prove that. Michael Gilbert later denied being present.
After the Kramers checked out of the L'Ermitage the following day, U.S. Customs agents searched their adjoining seventh-floor rooms. In a wastepaper basket, they found three crumpled legal-size papers with circles, arrows and names of partners and foreign countries.
The discovery ultimately would give prosecutors their smoking gun. It was a "money-laundering map," Pasano said.
At first, the scribbling on the papers made little sense. Special agents for the Internal Revenue Service's Criminal Investigation Division and the Drug Enforcement Administration spent months pursuing a series of complex financial transactions before they cracked the case.
The papers contained references to Bicycle Club partners Hardie, David Pierson, Juliann Coyne and M. Dale Lyon and the phone number of a Los Angeles dentist whom Gilbert would use to launder drug money. They also referred to a "blind trust in Liechtenstein" and "Tortola," a small city in the Virgin Islands. These countries later would be used to launder $12 million to construct the casino.
As part of the scheme, Gilbert established CGL Investments Co. Inc., a California firm that was "nothing more than a repository for the Kramers' drug money," Bondi said at the trial. CGL stands for Coyne, Gilbert and Lyon, prosecutors said.
Only 11 days after the L'Ermitage meeting, Gilbert and Jack Kramer traveled to Liechtenstein to set up BTR Trust, the foreign account that would be used to fund the Bicycle Club. Gilbert brought along $1.3 million in cashier's checks that had been converted from cash at a bank in Los Angeles, prosecutors alleged.
With the network to finance the Bicycle Club's construction in place, the money started to flow.
On some occasions, Gilbert flew to Miami to pick up loads of cash, prosecutors alleged.
Mostly, money was transported by Charles Podesta, a courier who is now in a Texas prison on a related narcotics trafficking conviction. Podesta testified that he delivered up to $7 million from Miami to Los Angeles for Ben Kramer. He said that Ben Kramer gave him the telephone number of a contact in Los Angeles who would launder large sums of money.
The number belonged to Sam Gilbert.
Podesta said in an interview that he made four or five trips to Burbank Airport on the Kramers' chartered jet. Each time, Podesta said, he delivered cash directly to Gilbert.
The first trip took place in June, 1984.
Podesta said he packed about $800,000 in mostly $50 and $100 bills in a large Igloo cooler. He wrote "University of Florida Gainesville Veterinary School" on top and told the pilot that the cooler contained tissue specimen from his sick Rottweiler, Max. He claimed it had to be flown to UCLA for an urgent biopsy.
"The other times I took it in office file boxes," Podesta said. "It was really a piece of cake."
At Burbank, Podesta said, he jumped into a waiting limousine with the boxes of cash and was taken to the Beverly Hills Hotel, where he checked into the Perry Como Suite.
On one occasion, Gilbert came to the hotel to pick up the money, Podesta said. On the others, Podesta met him at the garage of his Encino office building on Ventura Boulevard.
"He would drive his car around next to mine," Podesta said. "He had a gray Mercedes 450SEL. Then I would transfer the boxes. . . . Because of his age I couldn't expect him to lift the boxes. They were pretty heavy."
Gilbert never indicated whether he knew the source of the money, Podesta said.
"Sam was a very nice, soft-spoken man. I got a great feeling from him. . . . I couldn't tell for sure that Sam knew the money came from marijuana. We never talked about it."
Once the cash was delivered to Los Angeles, records show, Gilbert laundered it through a variety of sources:
* He created Sam Gilbert & Associates Parking as "a checkbook for the Kramers," Bondi told the jurors. The prosecutor said that several hundred thousand dollars were cleansed through SGA Parking to "allow the Kramers to have houses, cars, appliances, pay electricity bills, buy Frank Sinatra tickets, a race team . . . and it was all being concealed by the Gilberts."
The account also paid $7,000 a month for Jack Kramer's younger son, Mark, enabling him to live in West Los Angeles and drive a Mercedes, prosecutors said.
Mark Kramer was one of four men convicted last year of planning the attempted escape of his older brother, Ben, from a Florida prison. Mark Kramer paid more than $100,000 to buy a helicopter, recruit a pilot and send him to flight school. But the daring plotwas foiled when the chopper hit a fence and crashed, breaking both legs of the amateur pilot.
* Gilbert filtered $936,000 of "Florida sunshine" through Dr. Max Moss, who gave up drilling teeth several years ago to run his own business, Commercial Factors, Moss said. Moss, whose Encino office was located one floor beneath Gilbert's 12th-story penthouse suite, testified that he went to Gilbert in 1982 in need of "capital" for his company.
Within two weeks, Gilbert walked into Moss' office with a suitcase stuffed with cash.
"He came in and closed the door and he put the suitcase on my desk and he said, 'Here is your $200,000' " Moss testified. "After he counted it, he said, 'You understand that you can't take $200,000 in a lump sum to the bank.' And I said I understood, and we went over that. He said it would have to be in amounts lower than $10,000."
Government regulations require that cash deposits of $10,000 or more be reported to the IRS. Moss agreed to pay the government $500,000 and testified in the south Florida trial in exchange for immunity from prosecution.
Gilbert provided the money to Moss in the form of a loan at 15% interest. He also charged Moss a 1% laundering fee, Moss said.
Between May and September, 1985, Gilbert laundered more than $10 million in cash through Jules Huppert, president of Valley State Bank. For his efforts, Huppert received a $600,000 fee, prosecutors said.
Huppert, whose office was across the street from Gilbert's, is serving a two-year prison term for obstruction of justice. Records show he told two grand jury witnesses to lie about his role in the money-laundering scheme.
On two occasions in mid-1985, Huppert said, Michael Gilbert called him at home and said he had boxes to deliver from his father. The two met in the bank parking lot.
Huppert said he took most of the elder Gilbert's cash to Gordon O'Rourke, the president of Continental Coin of Van Nuys.
"Jules told me that he had a wealthy client who wanted to purchase some gold coins like Kruggerrands," O'Rourke testified in federal court. "He said it was a completely legitimate deal, but his client wanted to do it discreetly."
The next day, Huppert brought O'Rourke three or four large red Samsonite suitcases filled with $1 million in bundles of $10, $20 and $50 bills.
"It was strictly cash in and checks out," he said. "I knew the way I was going to structure the transaction was illegal."
O'Rourke, who pleaded guilty to one count of defrauding the IRS, testified under a grant of immunity.
Prosecutors said that O'Rourke earned a $150,000 fee for processing $7.3 million of Gilbert's money. For each delivery, Huppert would give O'Rourke the names and amounts to be listed on his company checks.
About $6.5 million in Continental checks were issued to Klaus Biedermann, an attorney in Liechtenstein who set up the Bicycle Club account.
The casino's partners said they relied on Gilbert's word that the offshore accounts used to finance the club were legitimate. And Michael Gilbert maintained throughout the trial that his father neglected to inform him of the laundering scheme.
"A lot of people inherit a lot of things when their fathers die," Pasano said. "Michael inherited this indictment."
Prosecutors, however, said that Michael Gilbert sought to blame his father for every piece of "incriminating" evidence they presented.
"To be sure, Sam Gilbert was an integral part of this conspiracy and if he was alive he'd be sitting there today as a defendant," Bondi said. "But Michael Gilbert is taking his own guilt for what he did here, and he is simply trying to lay it at the grave of his father."
Money-Laundering Cycle Maps trace the flow of cash in the money-laundering cycle that led federal authorities to seize the Bicycle Club, which they said was built with drug money. 1. Between 1982 and 1986, the durg-smuggling Kramer organization imports 500,000 pounds of marijuana from Colombia to Miami, New York, New Orleans and San Francisco. 2. From Southern Florida, a large share of the drug sales profits-about $12 million-is flown to Los Angeles and turned over to Sam Gilbert. 3. In Los Angeles, the Gilbert enterprise converts the cash into checks with the help of local businessmen, including a dentist, a coin dealer and a banker. From Los Angeles, the checks are shipped to Miami to verify the amount is the same as money sent. 4. From Miami, the checks are sent to Liechenstein and put into an account listed as BTR Trust. 5. From Liechtenstein, money is wired to Tortola in the Virgin Islands and put into an account known as the Troon Mortgage Account. 6. From Tortola, the money is wired to Los Angeles to finance a $12 million construction "loan" to build the Bicycle Club. Source: U.S. Attorney's Office, Southern District of Florida