Nathanson Indicted in Extortion Plot

SACRAMENTO —  A federal grand jury on Thursday indicted California Coastal Commissioner Mark L. Nathanson on eight felony counts, charging that he attempted to extort hundreds of thousands of dollars from an A-list of Hollywood figures including actor Sylvester Stallone, former Fox Inc. Chairman Barry Diller, and “Rocky” producer Irwin Winkler.

The lengthy indictment charged Nathanson with extortion, racketeering, conspiracy, obstruction of justice and income tax evasion. If convicted of all charges, the 52-year-old real estate broker could face a maximum of 79 years in prison, fines totaling $1.5 million, and forfeiture of his Beverly Hills home and almost $300,000 in cash.

The Nathanson indictment springs from what has become one of the most wide-ranging political corruption investigations in recent California history. U.S. Atty. George L. O’Connell described Nathanson’s alleged conduct as “a profound abuse of public trust and a sale of this important office.”

The prosecutor said that on 10 separate occasions Nathanson demanded payments, in most cases from property owners with permits likely to come before the commission, which is charged with protecting California’s 1,100-mile coastline. Nathanson sought a total of more than $500,000 and received about $200,000.

Among those who allegedly paid Nathanson were Winkler, superstar Michael Jackson’s agent Sandy Gallin and San Diego hotel developer Jack Naiman. The indictment also charged that former car dealer Jerry Simms of La Jolla was pressured to give Nathanson a $100,000 loan.

Those who paid Nathanson are cooperating with authorities and will not be prosecuted, O’Connell said.

Those who were identified as being targeted for extortion but refusing to pay include Stallone, Diller, Disney studio chief Jeffrey Katzenberg, songwriter Carole Bayer Sager and businessman Bruce Nordlund of Newport Beach.

Nathanson could not be reached for comment Thursday. His Washington attorney, Stephen L. Braga, said that they anticipated the indictment and asserted that the government’s case was “flawed both factually and legally.”

“We expect him ultimately to be vindicated on all the charges,” Braga said. He said that Nathanson wants to tell his side of the story in court and “to test the credibility of the key government witnesses against him, like the admittedly corrupt former state Sen. Alan Robbins.”

Prosecutor O’Connell said Nathanson that will not be taken into custody and that he will be summoned to federal court for arraignment within a few weeks.

Nathanson was appointed to his post--described by O’Connell as one of the top appointive jobs in state government--by Assembly Speaker Willie Brown (D-San Francisco).

However, at a news conference following the grand jury action, O’Connell made a point of saying that there was no evidence that Brown “had anything to do with the charges that are alleged in this indictment.”

In recent months environmental groups have been calling for Brown to replace Nathanson because of reports of the ongoing criminal investigation of his conduct. But the Speaker has stood by his appointee.

On Thursday, Brown’s press secretary said the Speaker would have no response to the indictment.

A real estate broker and property developer, Nathanson built a second career as a public official by currying favor with elected politicians of both parties although he was Republican. In addition to Brown, he was appointed to posts by former Gov. Edmund G. (Jerry) Brown Jr., Los Angeles Mayor Tom Bradley and Los Angeles County Supervisor Mike Antonovich.

And they all did so despite his pleading no contest to a charge of attempted grand theft in 1974. In that case, he was caught taking a $2,500 cash payment from a Hollywood businessman seeking a zoning change. For that offense, he was fined and placed on three years probation.

In 1986, he was fined $13,400 for failing to disclose substantial business interests while serving on a state board.

A Los Angeles County grand jury is still investigating allegations that Nathanson failed to reveal income he received while on the Coastal Commission.

O’Connell said Thursday that his office, together with the FBI and the IRS, began investigating Nathanson 2 1/2 years ago. The indictment reveals details of payments that Nathanson allegedly extorted from some of Hollywood’s biggest names.

In one count, prosecutors allege that Nathanson extorted $50,000 from Oscar-winning producer Winkler in May, 1988.

Coastal Commission records show that Winkler and his wife needed a Coastal Commission permit to expand their beachfront home in Malibu. The commission staff recommended that final approval of the project be delayed until there were assurances from county officials that the property’s septic tank met health standards.

But Nathanson was among the majority of commissioners overruling the staff and voting to give the Winklers the needed permit.

According to the indictment, Nathanson on two separate occasions extorted a total of $85,000 from top agent-producer Gallin, whose clients include superstars Jackson and singer Dolly Parton and who was executive producer of such films as the remake of “Father of the Bride.”

The money was paid in connection with coastal permit applications filed by Gallin in 1988 and 1990 for homes in Malibu, the indictment states.

According to the indictment: Stallone was asked for and refused to pay $25,000 in connection with his plans to build a swimming pool at his Malibu home in 1988. Diller refused to pay $50,000 to Nathanson in 1989 to resolve a longstanding dispute over a deck on his beachfront property. Sager was asked for but did not pay $25,000 in 1990, although she never applied for a Coastal Commission permit for her Malibu home.

Katzenberg, the indictment contends, refused a demand for $50,000 in 1988 in connection with his Coastal Commission permit application.

Nathanson allegedly demanded $40,000 from businessman Bruce Nordlund, who was seeking to build a new home on his Newport Beach property in 1986.

The federal political corruption probe was launched by the FBI and the U.S. attorney’s office here in 1986. Using undercover agents and informants in an elaborate sting operation, the investigators initially zeroed in on legislators and their staff members.

The result has been convictions or guilty pleas from three state senators, three legislative aides and a lobbyist.

In one of those cases, state Sen. Robbins, a San Fernando Valley Democrat, stepped down from office and agreed to plead guilty to two felony counts of income tax evasion and racketeering.

The Robbins probe led investigators to Nathanson and to a number of wealthy property owners who had gone to the Coastal Commission to seek permits to build or remodel homes on beachfront property in Malibu.

When he entered his guilty plea last December, Robbins implicated Nathanson in a scheme to extort almost $250,000 from San Diego hotel developer Naiman. Robbins said that he and Nathanson split $238,000 in payments from Naiman.

In his court statement, Robbins said Naiman and a mutual friend, car dealer Simms, had talked to him about arranging to have Nathanson defeat a La Jolla Sheraton Hotel project that would compete with a hotel being built by Naiman.

Thursday’s indictment charges that extortion began on June 4, 1987, when Robbins and Naiman met in Sacramento. At that meeting, Robbins told Naiman that he and Nathanson had taken steps to defeat the Sheraton. For that help Naiman would have to pay $250,000.

It was Naiman and Simms coming forward after $238,000 payments were paid that led, in part, to the successful conclusion of the case against Robbins.

The indictment also charges that Nathanson extorted a $100,000 loan from Simms, who in 1987 required a Coastal Commission permit to build a pool at his La Jolla home. The staff recommended denying Simms’ application, but Nathanson voted with a majority of the commissioners in overruling the staff and allowing the pool to be built.

In two other counts, the grand jury alleged that Nathanson obstructed justice. On one occasion, Nathanson and Robbins met in January, 1990, “to devise a false explanation to give to federal investigators” to explain some of the payments that Nathanson received, the indictment stated.

Nathanson is also charged with three counts of falsifying his income tax returns for 1987, 1988 and 1990--in all allegedly omitting $97,200 in income.

Times researcher Tom Lutgen contributed to this story.

Political Probe

Following is a chronology of the federal probe into political corruption by state officials: Aug. 24, 1988: FBI and IRS agents with warrants raid the Capitol, searching the offices of Assembly members Pat Nolan, Frank Hill and Gwen Moore and of Sen. Joseph B. Montoya, plus two legislative aides. Sen. Alan Robbins is interviewed, as is Board of Equalization member Paul Carpenter, a former Democratic state senator from Norwalk. May 17, 1989: Montoya and aide Amiel Jaramillo are accused in a 12-count indictment. One of the charges is that the lawmaker took a $3,000 payment from an undercover FBI agent posing as a businessman in a sting operation. June 12, 1989: Montoya and the aide plead not guilty. But Jaramillo later admits guilt to a lesser, unrelated charge and receives a 90-day sentence. June 14, 1989: The Times reports that Robbins has become a subject of the FBI investigation. Nov. 28, 1989: Karin L. Watson, an aide to Nolan, pleads guilty to extorting $12,500 from an undercover agent and agrees to cooperate with authorities. Feb. 2, 1990: Montoya is convicted on seven of 12 counts. He is sentenced to 6 1/2 years in prison. March 15, 1990: Carpenter is indicted on four counts: extortion, attempted extortion, racketeering and conspiracy. Charges include the extortion of $20,000 in campaign contributions from an undercover FBI agent. Sept. 17, 1990: Carpenter is convicted and sentenced to 12 years, but he remains free pending appeal. Oct. 24, 1990: The U.S. attorney announces that Assemblywoman Moore will not be indicted; her former aide Tyrone H. Netter and a lobbyist, Darryl O. Freeman, are. Sept. 20, 1991: Montoya’s conviction on five counts is reversed; his convictions on two counts of racketeering and conspiracy are upheld. Oct. 9, 1991: Netter and Freeman are convicted on all counts. Nov. 19, 1991: Robbins is charged and quits the state Senate. U.S. Atty. George O’Connell announces that Robbins is cooperating and will get no more than 60 months in prison. Sources reveal that Robbins was wearing a hidden recording device for at least five months to help the FBI. Dec. 15, 1991: Robbins pleads guilty to two counts: racketeering and income tax evasion. He implicates California Coastal Commissioner Mark Nathanson and others in a series of extortion attempts. April 9, 1992: U.S. 9th Circuit Court of Appeals reverses Carpenter’s four felony convictions but allows him to be retried. U.S. Atty. O’Connell says he intends to retry him. May 1, 1992: Robbins is sentenced to five years in prison to be followed by two years probation, plus fines and restitution totaling $475,000. Scheduled to report to prison by June 15, Robbins is hoping for a reduction in his sentence in return for cooperation. May 7, 1992: Federal grand jury returns an eight-count indictment against Nathanson that includes charges of racketeering, extortion and income tax evasion.