San Diego Tycoon C. Arnholt Smith Dies

C. Arnholt Smith, the empire builder who dominated politics and business in San Diego for decades before being brought down amid bankruptcy and scandal, is dead at age 97. He died Saturday of congestive heart failure.

At his height, the grocery boy turned tycoon owned a bank, a showplace hotel, a fleet of taxicabs, an airline, a baseball team, a shipbuilding firm, a bus line, an insurance company, silver mines and a tuna cannery and fleet, among other properties.

His influence in his adopted city was nonpareil and his aggressive ways went largely unchallenged by the local news media. In a city that had long been saddled with a reputation for its boom-and-bust cycles, Smith used his bank to buy and expand existing businesses and to create thousands of jobs, for which he was lionized as a civic benefactor.

One measure of his power was that Smith ordered the block in front of City Hall shut down for months in the late 1960s while his Westgate Hotel was under construction across the street. No politician or bureaucrat dared ask whether Smith had received a permit.

“He was the rainmaker in San Diego in the 1950s and 1960s,” said Steve Erie, an associate professor of political science at UC San Diego and a specialist in urban politics. “Anything that happened in this town required his approval and blessing. A small group of six or seven men ran San Diego but he was at the top.”

In the early 1970s, however, Smith’s empire toppled. His bank, U.S. National Bank, which once had 62 branches and nearly $1 billion in assets, was declared insolvent in 1973, at the time the largest bank bankruptcy in the nation’s history.

Smith was indicted on a variety of charges, including bank fraud, income tax evasion and illegal campaign contributions. In 1979 he was convicted of embezzling $8.9 million from his companies. He fought a furious legal battle to avoid prison, finally serving eight months tending roses at a county honor camp in 1984.

Even in decline, Smith’s influence was felt.

As Smith’s power slipped away in the early 1970s, an eager young state assemblyman named Pete Wilson ran for mayor as a reformer and then proceeded to wrest power from the business community and transfer it to the mayor’s office. Wilson had returned a contribution from Smith, a move that marked his independence.

“When Smith fell, there was a powerful vacuum, and Wilson moved in,” said Erie.

With Wilson as mayor, the City Council adopted the toughest campaign contribution law in the nation to ensure that no one would again amass the influence that Smith had wielded.

In his latter years, Smith lived with his daughter in Rancho Santa Fe and then Temecula and spent his final month at an exclusive nursing home in Del Mar. Many old-time San Diegans continued to believe that Smith’s corner-cutting style of capitalism was not as sinister as prosecutors maintained even if he often used his bank to finance risky ventures.

“I’m not going to judge whether he was persecuted or whether the charges against him were proper,” the late Frank Curran, Wilson’s predecessor as mayor, said once. “It doesn’t detract from what he did for downtown San Diego. He gave to downtown a face-lift when it needed it badly.”

A die-hard Republican, Smith was an intimate of Richard Nixon and a frequent guest at the White House. In 1966 he was named by the business community “Mr. San Diego,” a title that came to have a sarcastic tinge after his fall and conviction.

Smith’s influence with Nixon was one of the reasons cited for San Diego to get the 1972 National Republican convention in 1972. The Republicans, however, changed their minds just weeks before the convention was to begin and switched the site to Miami.

Tall, regal in his bearing and courtly in his manner, Smith was occasionally seen at fashionable parties in La Jolla until very recently. He broke a long self-imposed silence in recent years to grant interviews and to protest that his indictment had been due to politics and that he could have kept his bank afloat if given time by federal regulators.

“For a man who was once the top citizen of the city, he could never understand why people got mad at him,” said John Beatty, a television reporter in San Diego for 25 years.

Born in Walla Walla, Wash., in 1899, Smith came to San Diego when he was 7 years old. He attended San Diego High School for a couple of years, but by the time he was 16, the lure of the business world grew too strong. He quit school, worked as a clerk for a time at Heller’s Grocery, then went to work for Merchants National Bank, a forerunner of Bank of America.

Smith was 34 and a Bank of America department manager in 1933 when he put together a deal to take over a bank of his own, U.S. National of San Diego.

In short order, Smith also acquired National Iron Works--later known as National Steel & Shipbuilding Co.--which mushroomed during World War II. Smith then turned his attention to building a fleet of steel tuna boats and became involved with other investments, such as his brother’s oil land in Kern County.

The 1940s also marked Smith’s initial forays into state and national politics. His strong support of Republican gubernatorial candidate Earl Warren in 1942 gained Smith a spot on the powerful state Highway Commission, where he served from 1943 to 1949.

Also, along with his older brother--Los Angeles-area financier and oil magnate John A. Smith Jr.--he became interested in the fortunes of a young congressman from Whittier, Richard M. Nixon.

He bought the Pacific Coast League Padres baseball team in 1955 for about $250,000 and later paid about $10 million for a National League franchise that retained the name San Diego Padres. Smith lost $700,000 a year on that major league investment and, as his empire was tumbling down in 1974, he sold the team to McDonald’s hamburger chain magnate Ray Kroc.

Despite occasional forays into the social scene, Smith was never invited back to the political and business circles he had once dominated. His final years, Beatty noted, were spent “as an unforgiven has-been.”

Twice-divorced, Smith is survived by his daughter, Carol Smith Shannon, two grandchildren and three great-grandchildren. His son died of a heart attack at age 36.