Alleged Extortion Attempts by Nathanson Investigated : Development: U.S. grand jury probes whether coastal commissioner sought payments from Hollywood figures.

A federal grand jury is investigating whether California Coastal Commissioner Mark L. Nathanson tried to extort payments from actor Sylvester Stallone and other Hollywood luminaries seeking permits to improve their beachfront homes in Malibu, The Times has learned.

According to several sources familiar with the investigation, Stallone, Fox Inc. Chairman Barry Diller and producer-agent Sandy Gallin sought commission permits to make additions to their houses during Nathanson’s six years on the powerful coastal panel, entrusted with protecting California’s 1,100-mile coastline.

Federal investigators and the grand jury are looking into allegations that Nathanson demanded as much as $50,000 for helping these and other applicants obtain permits needed for coastal property improvements.

Nathanson’s attorney, Robert L. Shapiro, emphatically denied that his client had done anything illegal.

“There is no substance to any of the allegations,” Shapiro said, later adding: “Mark was never paid nor did he ask for any money regarding any projects.”

Stallone, Diller and Gallin, whose clients include superstar Michael Jackson, declined to comment. However, sources say that all three are cooperating with federal authorities in the investigation of political corruption.

These sources say that Stallone and Diller refused to make the payments that Nathanson demanded for his help, but that Gallin complied.

Generally, prosecutors conducting the 6-year-old corruption inquiry have treated those who have gone along with demands for payments as victims and not as criminals.

U.S. Atty. George L. O’Connell refused to comment.

However, a number of people with knowledge of the investigation--including witnesses who have been interviewed by the FBI or the grand jury--have provided details to Times reporters, but only with the promise of anonymity.

The Nathanson probe grew out of an investigation of former state Sen. Alan Robbins, who pleaded guilty in December to racketeering and tax evasion charges. In a statement to the court at the time of his plea, Robbins implicated Nathanson in a scheme to extort $250,000 from a San Diego hotel developer.

A year earlier, FBI and IRS agents armed with warrants searched Nathanson’s Beverly Hills home, seizing calendars, business ledgers and other documents. Nathanson has not been charged with any crime stemming from the investigation.

A real estate broker, the 52-year-old Nathanson has carved out a special niche in the world of California politics because of his extensive Hollywood connections.

The Nathanson investigation has added a new dimension to the federal government’s probe of political corruption in California--taking investigators from the corridors of the state Capitol to the beaches of Southern California, where homeowners, including celebrities, often find themselves bound in the red tape required for even the simplest of property improvements.

The Coastal Commission was created to referee the battle between those who want to preserve the natural beauty of the coast and ensure public access to beaches, and those who want to build along the coast. The stakes are especially high on prized shoreline property in places such as Malibu, which still has room for growth. Nathanson is generally regarded as a pro-development vote on the commission.

The federal grand jury is trying to determine whether Nathanson violated federal extortion and racketeering laws, using his office for personal enrichment, according to sources familiar with the investigation.

One case centers on a long-standing dispute over the Malibu home of Fox Inc. executive Diller, one of Hollywood’s most powerful figures.

In 1987, Diller bought a beach house that had once belonged to singer Kenny Rogers. Several years before, Rogers had built a tramway to carry family and guests down a steep hillside from his bluff-top home to a wooden deck on the beach. But the construction was done without a permit, prompting legal action against the entertainer. Rogers struck a compromise with the commission. He agreed to pay a fine but was allowed to keep the tram, if he reduced the size of the deck and removed other alterations he had made on the beach.

Rogers sold the house in 1984. Three years later, Diller bought the property and in 1988, his attorneys went to the Coastal Commission for a permit to repair storm damage. But the agency’s staff discovered that the settlement order was not being complied with.

That discovery led to a protracted legal fight between Diller and the commission, which continues.

Sources familiar with the criminal investigation said that the grand jury is looking into allegations that Nathanson offered to aid the studio executive in exchange for a sizable payment, but that Diller refused.

Shapiro said that Nathanson “was never paid, nor did he ask Barry Diller for any money.”

Diller and his attorneys have refused to comment.

The FBI has also been looking at difficulties that Stallone encountered gaining permits to build a swimming pool, spa and deck at his home in the Broad Beach section of Malibu.

After preliminary approval by the county and Coastal Commission, Stallone and his contractors were surprised to discover that they could not get the final go-ahead from the county.

According to sources familiar with the investigation, Nathanson met with the actor at Stallone’s Malibu house in May, 1988, and offered to help him with his bureaucratic problems for $25,000. But the star of “Rambo” and “Rocky” films rejected the offer.

Stallone could not be reached for comment. His attorney, Philip Scott Ryan, said: “It would be manifestly unfair and inappropriate for Sylvester Stallone to comment on a current political investigation.”

However, Stallone’s contractor, Frank D’Annibale, confirmed that FBI agents interviewed him about the pool project, which was approved and completed.

In 1987, another influential Hollywood figure, Gallin, ran into trouble gaining approval to remodel his home on Pacific Coast Highway in Malibu.

Gallin is executive producer of such recent movies as “Father of the Bride” and “Shining Through.” He has represented an impressive constellation of celebrities, including Dolly Parton, Neil Diamond, and the lip-syncing duo Milli Vanilli.

The Coastal Commission agreed to issue a permit for Gallin’s remodeling project, but wanted assurances that the house met county septic tank standards. Sources familiar with Gallin’s permit dispute say that Nathanson placed calls to county officials about the issue. The project won all needed approvals, though whether Nathanson had a role in getting the approvals is unclear.

Sources also alleged that Gallin paid Nathanson for his help. One grand jury witness told a reporter that Nathanson sometimes asked Gallin to contact celebrities and movie executives with pending Coastal Commission permit applications to let them know that Nathanson was available to help.

Another source said that Gallin referred Diller to Nathanson.

Gallin and his attorney did not return reporters’ calls.

As a coastal commissioner, Nathanson is generally required under California law to report any source of income of $250 or more. Nathanson did not report any income from Gallin on his annual disclosure statements for the years 1986 through 1990.

In 1986, Nathanson was fined $13,400 for failing to reveal personal income as a member of the state Little Hoover Commission, a panel that evaluates the operations of state government.

Through much of his public life, Nathanson has capitalized on ties to top Hollywood figures. He first gained entree to the entertainment world as a boy, hanging around a popular Palm Springs tennis club.

Sometimes dating stars--among them actress Victoria Principal--he has lived on the edges of celebrity. He made hundreds of thousands of dollars by buying, remodeling and reselling expensive houses and by consulting for producer Aaron Spelling, financier Burt Sugarman and others, records show.

He carved out his special niche in Hollywood circles by reaching out to the world of politics--forging alliances with elected officials such as Los Angeles Mayors Sam Yorty and Tom Bradley, Gov. Edmund G. (Jerry) Brown Jr., Assembly Speaker Willie Brown and Robbins.

Nathanson gained a reputation as “a bundler”--someone who legally solicits campaign contributions from friends and business associates and then presents the money to the political candidate.

His reward has been a series of bipartisan political appointments at the city, county and state level. Bradley appointed him to the Metropolitan Water District board; Gov. Brown to the state Little Hoover Commission; Los Angeles County Supervisor Mike Antonovich to the county’s Small Craft Harbor Commission, and Speaker Brown to the Coastal Commission.

Nathanson has repeatedly been appointed to public posts despite past problems with the law.

Besides the 1986 fine for failure to disclose income, Nathanson in 1974 was charged with accepting a $2,500 cash bribe from a Hollywood businessman seeking a zoning change. Nathanson pleaded no contest to attempted grand theft and was sentenced to three years probation for a misdemeanor.

In a December court appearance, Robbins contended that in 1987 Nathanson agreed to help La Jolla hotel developer Jack Naiman defeat a competing hotel project that was pending before the Coastal Commission in exchange for $250,000. Sources familiar with the incident say that when Naiman tried to back out of the arrangement, Robbins and Nathanson insisted that he make the payments anyway.

Nathanson’s lawyer has attacked the reliability of Robbins’ statement, made as part of a plea bargain with federal authorities.

“Alan Robbins’ credibility is in question,” Shapiro told a reporter. “He has described himself as one of the most corrupt politicians in California. The government should be looking at him closely, whether to embrace him as someone with any credibility left whatsoever.”

Robbins’ attorney, Michael L. Lipman, said that Robbins was telling the truth.

“Sen. Robbins has candidly acknowledged his wrongdoing,” Lipman said. “He has taken responsibility for his misconduct and he has been providing the government with candid and straightforward testimony that has been largely substantiated by other witnesses and documentary sources.”