Trial Offers Murky Peek Into World of Intrigue : Testimony: Presenting himself as a CIA operative, a mystery man sues the LAPD for alleged false arrest that he says cost him his gun permit and millions of dollars.

A tale of international intrigue is unfolding in a tiny Burbank courtroom where a San Fernando Valley man is seeking damages from the Los Angeles Police Department for allegedly ruining a multimillion-dollar deal to sell a high-tech, hand-held machine gun to foreign governments.

While most police abuse cases center on beatings or bullets, the Burbank trial focuses on the credibility of Robert Booth Nichols, a mysterious figure whose name first surfaced in a late 1980s FBI investigation of alleged mob penetration into the entertainment industry.

Again, last year, his name surfaced in a House Judiciary Committee report on possible malfeasance in the Justice Department during the Reagan era. The report also linked Nichols to an aborted business venture at the Cabazon Indian Reservation in Indio which, he said on the witness stand, dealt with the manufacture of machine guns to sell to the Nicaraguan Contras.

By taking the city to court for false arrest, Nichols, 50, could earn a multimillion-dollar damage award. But the lawsuit, stemming from a 1986 incident at The Palomino nightclub in North Hollywood, has also served to draw Nichols out of the shadows and onto the witness stand under oath for the first time.

Nichols says the Police Department caused him to lose his concealed weapon permit, which in turn cost him financing to manufacture the machine gun.

Nichols, who served as a technical adviser on anti-terrorism and had a bit part in the recent Hollywood blockbuster “Under Siege,” is a mustachioed 6-foot, 3-inch man who is often described as a Clark Gable look-alike. Beyond that, opinions about him sharply diverge.

During four days of frequently heated testimony last week, Nichols presented himself as a dashing, globe-trotting businessman and intelligence operative. Armed with letters on White House stationery and snapshots of himself posing with foreign political and military dignitaries, Nichols told jurors that he toiled quietly and selflessly for nearly two decades on behalf of shadowy CIA keepers in more than 30 nations from Central America to Southeast Asia.

However, a far different portrait of Nichols was painted by Assistant City Atty. Robert Seeman, who is fighting to save the city from a major payout for damages.

Seeking to portray Nichols as a phony, Seeman got Nichols to admit on the stand that he is not certain that the people who paid him for his “intelligence work” were employed by the Central Intelligence Agency. Seeman also sought to discredit Nichols’ stature as an entrepreneur by drawing out testimony that Nichols has never sold a gun nor made a penny of profit from his firms’ business ventures.

A CIA spokesman, in a telephone interview, would not comment on whether Nichols was employed or affiliated with the agency.

Nichols came under suspicion by the Federal Bureau of Investigation of international money laundering in 1978, according to a 1987 federal court wiretapping affidavit. The affidavit, prepared by FBI Agent Thomas G. Gates, states that “FBI investigative files further reveal that Nichols may have been associated with the Gambino LCN (organized crime) family in New York City.”

Nichols has never been indicted and has sued Gates for defamation. But his lawsuit has been dismissed twice in federal court.

More recently, Nichols became the subject of public scrutiny in the wake of the mysterious August, 1991, death of Washington investigative reporter Danny Casolaro.

A House Judiciary Committee report released in September said Nichols had frequent contact with Casolaro just before the journalist, who was probing a web of conspiracies ranging from the Iran-Contra affair to alleged Justice Department skulduggery, was found with his wrists slashed in a West Virginia motel room.

The report, titled “The INSLAW Affair,” said the Justice Department had failed to adequately investigate charges that high-level officials had stolen and misused a private firm’s sophisticated computer software designed to help track criminals. The report also called for further investigation into Casolaro’s death, which was declared a suicide by West Virginia officials.

Nichols acknowledged to committee investigators that he had spoken to Casolaro often and served as a sounding board for him, but would not provide a sworn statement to the House committee.

There has been no discussion about the INSLAW case or Casolaro in the Burbank courtroom. But in four days of testimony, Nichols has provided a colorful, complex and often conflicting portrait of his past.

The trial, which enters its second week of testimony Monday, stems from a 1986 incident in which Nichols, armed with a concealed pistol, was taken into custody by Los Angeles police at The Palomino.

Nichols said he and his brother-in-law, James Hopko, had stopped by the club after a business meeting on the production of machine guns. While seated at the bar and later at a table, Nichols said he drank two bottles of beer and caused no trouble before LAPD officers, responding to a complaint of a disturbance, burst into the crowded room.

Without warning, Nichols testified, he was flung to the ground and two revolvers were pointed at his head. Nichols, who was carrying a concealed weapons permit from the Santa Clara County Sheriff’s Department, was disarmed, handcuffed and transported to the North Hollywood LAPD station.

While in the police squad car, Nichols said he asked Officers Keith Wong and Israel Medina to loosen his handcuffs. In response, “they said they’d blow my f------ head off,” Nichols testified. The officers also threatened to shoot him, he told jurors, when he insisted that his weapons permit was valid.

Nichols, who has lived in Arleta and Sherman Oaks in recent years, was released from custody after several hours and never charged. His concealed weapons permit was revoked by Santa Clara officials after they received a report of the incident from the Police Department.

Nichols’ suit charges that the loss of the permit led to a withdrawal of Swiss financing for his firm, Meridian Arms Corp., to manufacture a new machine gun in South Korea.

According to Nichols’ court papers, the low-cost lightweight weapon, known as the G-77, was developed in 1977 in a Covina machine shop and was designed for use by U.S. allies “as an economical method of responding to Soviet efforts at arming their various insurgent clients.”

Nichols told jurors he demonstrated the G-77 first in Manila in 1977, and again in the early 1980s at the Cabazon Indian Reservation. There, he said, leaders of the tiny Indian band, in a joint venture with Wackenhut Corp., proposed manufacturing the weapon for shipment to Nicaragua to arm the Contras.

However, the proposed business deal, which was briefly referred to in the INSLAW report, fell through because State Department written approvals for exporting the weapon could not be obtained, Nichols said.

To buttress his client’s credibility as a businessman, Nichols’ lawyer introduced in court a flood of paper indicating that he had worked on numerous ventures with prominent individuals. They included Robert A. Maheu, Howard Hughes’ former right-hand man; Michael A. McManus, an aide to President Ronald Reagan; Clint W. Murchison, then the owner of the Dallas Cowboys, and George K. Pender, an executive with a worldwide engineering company.

Nichols testified about discussions he had with a White House aide on the rebuilding of Lebanon while he was affiliated with Meridian’s predecessor firm, Santa Monica-based First Intercontinental Development Corp. That firm supposedly specialized in secret foreign construction projects for the U.S. government.

On cross-examination, however, Nichols admitted that his firm never completed a deal to sell a single G-77 or other products.

While Nichols’ suit against the police was wending its way toward the courtroom of Superior Court Judge Thomas C. Murphy, the FBI bumped into Nichols during an aborted investigation into alleged mob infiltration of Hollywood.

Gates’ wiretapping affidavit states that during a July 15, 1987, stakeout on the Sunset Strip, agents saw Eugene Giaquinto, then president of MCA Inc.’s Home Video Division, who was under investigation, hand a box to an unidentified man--later identified as Nichols.

Appended to Gates’ affidavit was an Oct. 8, 1987, document stating that the FBI was investigating whether Giaquinto, Nichols and others were “buying and/or selling stocks by the use of manipulative or deceptive practices.”

In 1988, after reports of the FBI’s Hollywood investigation surfaced, Giaquinto resigned from the board of the Nichols-controlled Meridian International Logistics Inc. MCA subsequently placed Giaquinto on leave of absence and he later left the company.

Giaquinto was never charged with a crime.

Giaquinto introduced Nichols to Jack Valenti, president of the Motion Picture Assn. of America, and suggested that Nichols could help the industry in its effort to combat piracy abroad.

In a telephone interview from Washington last week, Valenti said that he met with Giaquinto and Nichols for about 20 minutes in his room at the Beverly Hills Hotel. “Nichols said he was part of the CIA, that he had done all this work in Asia,” Valenti said.

But Valenti did not hire him.

“My instinct was I didn’t feel comfortable about some of the things he was saying,” Valenti said. “When a fellow tells you a lot of things are top secret . . . well I know a lot about the CIA from my time in the White House” as a special assistant to President Lyndon B. Johnson.

In June, 1989, Nichols went on the offensive against the FBI.

On behalf of his company, Meridian International, he filed an $11-million damage suit alleging that Gates libeled the company and illegally interfered with potential business ventures. The suit alleges that Gates made slanderous statements to Australian law enforcement accusing Meridian and its officers of involvement with organized crime and a stock swindle.

U.S. District Judge Richard Gadbois in Los Angeles dismissed the case twice. Nichols is appealing the ruling.

In the current case, the most intriguing testimony last week concerned Nichols’ claims of taking part in intelligence gathering.

Nichols cited a plethora of details about decade-old meetings with leaders of Third World nations and aides to Reagan. But time and again, he swore he had no recollection of how much he was paid for his intelligence or the names of those he worked for.

Nichols also testified that he had no visible income for more than 15 years except for the living expenses he claimed he was receiving from his unnamed CIA keepers.

The Los Angeles native, who has used the aliases Robert Summers and Robert Chabray, said he was first approached by a CIA officer while living in Hawaii in the late 1960s. Nichols testified that he could recall only the man’s first name--Ken--and that Ken told him that instead of joining the U.S. military, he could serve his country in other ways.

Nichols said his first assignment was to “to associate with a foreign female in Honolulu” for two days. Ken then instructed him to take a job with a Hawaiian security firm and later to move to Glendale to operate a construction company. Nichols testified that he was paid no money by either firm, living instead on funds provided by Ken.

Nichols said that he “participated in gathering information” for Ken and his associates until 1986 in nations including Nigeria, Saudi Arabia, Thailand, India, Japan, Mexico, Costa Rica, Haiti, Norway and France.

The work, Nichols claimed, was dangerous. He said in 1972 he was stabbed in the left hand in Australia. In a mission to remote regions of Cameroon, Nichols said he was shot in the left leg after gathering intelligence on sawmills.

Seeman repeatedly objected to Nichols’ vague answers concerning his employers and payments. Seeman asked: “Are you sure the CIA was paying you all these years?”

Nichols replied: “I’m not sure, no.”

As in the courtroom, widely contrasting views about Nichols persist elsewhere.

INSLAW owner William Hamilton said that he had dozens of conversations with Nichols and considered him “extremely knowledgeable” on intelligence matters.

“I have not found that he overstates things to you,” Hamilton said.

The first time he spoke to Nichols in May, 1990, Hamilton said, Nichols discussed the FBI allegations of his ties to the Gambino family and denied them. “His suggestion was that (government) agents were out to get him because he had stopped working for them,” he said.

Soon after, Hamilton said, he introduced Casolaro to Nichols. Hamilton said that Casolaro learned during his reporting that “Nichols had contact with intelligence agencies in 80 countries.”

But Maheu, a former FBI agent who also worked with the CIA, presented a very different view.

Maheu said he first met Nichols while he was serving on the board of First Intercontinental Development Corp. “He told me he had access to funds, presumably limitless, and he was going to make it available to me to take back my position . . . in the Hughes empire.

“But after one session with him (Nichols), it was obvious to me he had no knowledge at all of the Hughes world,” Maheu said. “My reaction is he is a 14-carat phony.”