C. Arnholt Smith was the biggest player in the old boys’ network that ran San Diego between the 1930s and the early 1970s. The financier and industrialist rose from working-class roots in North Park to control the U.S. National Bank, with almost $1 billion in deposits, and the $200 million Westgate California corporate conglomerate that included National Steel and Shipbuilding, the Yellow Cab Company in major cities in California, an airline, a tuna fleet, canneries, ranches, the Kona Kai Club on Shelter Island, the San Diego Padres, and vast real estate holdings. He built one of the first modem skyscrapers downtown, and his Westgate Plaza hotel was recognized in the 1960s as one of the finest hostelries in the world.
Confidante of presidents, governors, mayors, and district attorneys, Smith held political influence unmatchable today. The San Diego Union once declared him “Mr. San Diego of the Century.” But in the early 1970s, Smith’s empire collapsed. He eventually spent a year in jail on grand theft and tax evasion charges, and his holdings were liquidated in a fire sale frenzy.
Today, Smith is 93 and living with his daughter Carol on a 23-acre spread in Rancho Santa Fe, which he built for her in the 1960s. Smith is completely broke and fending off foreclosure on the property. C. Arnholt Smith has been called both a crook who caused the then-biggest bank failure in the history of the country and a victim of a new political and economic order that swept into San Diego with the elections of District Attorney Ed Miller and Mayor Pete Wilson in 1970. Smith never testified at his own trial and has never spoken publicly about his ordeals.
After three years of refusing interview requests from the Reader, Smith has finally agreed to tell his story. He spoke in a ten-hour series of interviews conducted at the two-story mansion at Valley Lane Farms. He was paid as a freelance contributor. This is the first of two parts, which will conclude next week.
My family originally migrated in the 1870s from Nebraska, where they had been farming and had heard about all the glamorous, rich farmlands out in Washington. I was born in Walla Walla, March I3, 1899. As a kid, I thought it was a great big city, and I was awfully shocked when I went back some years later and found out how small it was — about 7000, 8000 people.
I lived there until I was seven years old. My mother was having trouble with the cold weather there, and my father came down to California and fell in love with the climate and everything, went back home and packed everybody up, and we followed him on down here in 1907. Actually, my father was in trouble up there in politics. He had signed some affidavits saying that people had been in office there for a certain period of time and in effect committed perjury and was facing a prison sentence. It was all a political campaign against him. That’s one other reason he wanted to get the hell out of there.
My father had bought a lot on Arnold Avenue, at the comer of Wightman, in North Park, a couple of blocks west of Texas Street. He built this house, and it was all in readiness for us when we arrived. There were three of us kids; I had an elder brother, four years older, and a younger sister, four years younger.
At the time, North Park was way out in the country. To get there you had to take a streetcar line running up Fifth Street that turned at Fifth and University and ended about where Vermont is. You had to transfer cars there to go on out the rest of the way to East San Diego. Pershing Drive wasn’t there then. That was all wild, wild sagebrush — no roads.
It was pretty dry and barren. There were no trees at all in San Diego. My mother was kind of shocked coming from the green fields and rivers and stuff. Actually, she was so damn unhappy she took us back up to Washington because she wasn’t sure she wanted to stay. But she wasn’t up there very long, and boy, she hurried back to San Diego.
San Diego was a very small city when we first arrived here. I think the population was about 24-, 25,000 people. First and Broadway was the hub of the city. B Street, going up the hill near 20th Street, that was the end of the downtown.
One of my first memories here, in about 1908, was the visit of the American Navy fleet. They called it the Great White Fleet. The harbor was too shallow, so they anchored off Coronado and came in in small boats. White boats, white uniforms. Everything was white. They docked at the foot of Broadway, and all the sailors marched up Broadway to Sixth Street, turned up Sixth, and busted up at Laurel Street. For sailors, that was a hell of a long walk. All the school kids in town were lined up along the road, the city turned out. It was very exciting and one of the great events of San Diego.
And about then was the first time I saw the Mexican border. My mother packed a big lunch. Dad rented a four-horse carriage at a livery stable around Sixth and A Street, just like renting a car today, and the family piled in. It took us a hell of a long time to get down there, of course, because my dad had to kind of wander around the roads. They were all dirt then, and there were no good directions. One time he got off the track and ended up by Sweetwater Dam and had to retrace his steps, but we finally got there.
We were shocked when we looked out there. Here was a granite marker, the United States-Mexico borderline, and way across the valley or the river area was just one building. I later found out it was a curio shop. That was Tijuana around 1908. There must have been a lot of smaller shacks down in the canyons where people lived, but as far as the visible city, it was one building. I wanted to go over and see what the building contained, but the powers that be dictated no, so we stayed on this side. There were no border gates, no nothing.
I learned to swim in Glorietta Bay when my father threw me in the water. I didn’t know how the hell to swim, so I paddled like a dog, and he stood there on the float laughing at me.
At first I attended the old University Heights school, right near Vermont and Washington. But shortly after we got here, the school was torn down and Florence Grammar School was built on the comer of First and University. It was pretty far away from where I lived. When we could afford the five-cent tickets on the streetcar, we could ride. Otherwise, we’d walk. I was in about the third or fourth grade then.
The schools in Washington were a hell of a lot tougher than they were in California, scholastically. And when I got down here, I thought this was a breeze. I was just coasting along. Hell, I coasted so long I got into the habit of it and turned out to be a very poor student.
I graduated from Florence in the eighth grade. In those days, there was no junior high school. You jumped from grammar school into high school. The graduation ceremony was in the Hillcrest Theatre, near Fourth and University, a movie theater. Then I went to San Diego High School, the Old Gray Castle I believe they called it. That was the only high school in San Diego in those days.
In school I was very athletic — very active in field days, track, broad jumping, everything like that. Hell, I ran a couple of championship races for my class. I also got involved in dramatics. I finally wound up being the stage manager of the operation. My brother was very heavy into dramatics classes, and we both knew Harold Lloyd, the comedian, who went to San Diego High School at that time. This would have been about 1911, 1912.
We also had what was called an agriculture club, where the members would actually grow things and bring them down for exhibition. My family’s house was on a large lot with a great garden, and I used to get elected to hoe and plant and fertilize, so I thought it would be a natural to belong to the agriculture club. Anyhow, I won several exhibits and through that was given a trip up to Davis University, now UC-Davis. I think I was about 16 years old, and I still look back and think to myself, how the hell did my mother let me go up there by myself? We rented horses and buggies and toured the university and the town. It was very, very lovely. You’d think the livery people would have better brains than to rent a horse and buggy to kids, but they did.
By then my dad had sold the house down on Arnold Street and bought a lot on what is now Pershing Drive, at Upas, near Balboa Park. At that time, I think, Pershing was called Morgan Street. He built us a larger, nicer house, and some of our earnings went toward that. Both of our houses are still there. I go by every now and then and look at them.
Balboa Park didn’t really exist then. It was just a lot of scrub. George Marston’s the guy that kicked the park development off. And of course, the exposition of 1915 really started the improving of Balboa Park. I was curious and watched them put up the buildings and build the Laurel Street Bridge. It was a tremendous undertaking for a small city.
I worked after school pretty much all the time I was in high school. My dad was a contractor, and he did some jobs in the park and I worked as a helper. I worked on a bridge back in the canyons behind where the zoo is now. We didn’t have trucks then. It was all mule-powered, and they had run a loaded gravel truck out on the bridge and then hooked a team on the other end to pull it off, and I was standing there when the tongue swung around and just knocked me off the goddamned bridge. I fell about 15 or 20 feet into a culvert. I landed on my knee, and oh, jeez, it was terrible.
About that time I was also wrapping bread and doing gardening work and anything else that made money. It was to help the family and also to have some spending money myself, which, frankly, I didn’t have much time to spend.
World War I was breaking out about this time, and so I thought, well, what the hell, before I go in the service I’ll earn some money. So I quit high school about age I7 and went to work full time. I’d been working after school and Saturdays for Heller’s Grocery at Fifth and E and Heller’s Bakery at about 17th and E. It was the big market in the downtown area. But what a difference from the supermarkets of today. It had clerks behind the counters. You didn’t go grab stuff off the shelves; you’d get hold of a clerk and tell him what you wanted. Then he’d run around and gather it all up, pack it, give it to you, and off you went.
I started out working in the back, trucking supplies — a roustabout, you might say. Deliveries arrived in an old truck from the foot of Broadway, where the Santa Fe used to haul their freight in, and we’d have to break those larger sacks up into small one-pound or two-pound bags. Sugar, flour, beans, tapioca, tea, coffee, all that kind of stuff.
Johnny Alessio had a shoeshine stand right at the back door of Heller’s store when I was working there. And of course, as I was hauling stuff in and out I was bound to talk to the guy, so we became friends. Eventually, he would be very successful in town, but he was just a kid then. He was younger than me by quite a few years.
When I worked in Heller’s bakery, I used to fill chocolate éclairs and cream puffs. That was kind of grueling detail because I had to be there at two o’clock in the morning. I had to ride my bicycle from out there at Upas and Pershing into downtown. Coming home, we’d hitch a ride on the streetcar — grab the handle on the last rung so you’d get a pull up the hill rather than try to pedal up the hill. The conductor’d come and try to beat us off.
Ultimately, I got promoted to a job up in Heller’s offices as a cashier. Each grocery clerk would write up his ticket, take the money, and fire it up to the second floor office in a little conveyor basket. I’d open it up, check it out, make the change, and send the empty car and the change back.
I was making $20 a month then. A dollar was a hell of a big unit in those days, but that wasn’t a lot of money. I think that actually it would be the equivalent of $40 or $50 a month today. I kept some, of course, but mostly it helped the family.
Finally, I was mustered into the Army, and we were corralled together there on Point Loma, just ready to go to boot camp in Texas. We were all set to say good-bye to everybody and — hello! The war was over, so we never went. I was glad of it, I’ll tell you that.
At that point, I don’t think I knew what I wanted to do as a career. I think I just fell into things while I was at Heller’s. I got some amount of accounting training in the cashier’s office. I used to make up the bank deposits and take them across the street to the First National Bank, where Andy Borthwick was a teller. Eventually, he’d be president of the bank, but at that time, he was about my own age — about 18. And he used to rib me when I came in there. “Why the hell don’t you get an office job and quit fooling around in that goddamn grocery store?”
So about that time I heard the Merchants National Bank was looking for somebody. The men, of course, had largely been drafted out, so they were looking for men, somebody with pants on, to help. So I finally screwed my courage up and went to the Merchants and made an application for a job. And — surprise— they put me right to work.
I started out keeping books, and in those days everything was posted by hand in great big ledgers. They had adding machines but not any posting machines, and it was a very laborious job. Over the course of years, I was promoted, developed into a teller at the window, and finally was made chief clerk actually running the inside mechanics of the little bank. It wasn’t very big. It only had deposits of three to four million dollars.
Paul Granger owned the bank and the building it was in. The Granger Building is still there, at Fifth and Broadway. The bank was up about six feet off the sidewalk, so you had to go upstairs. I remember the Charles Oesting Insurance Company was down below. And then when the bank was remodeled, they lowered it all down to the ground floor.
At that time I was so busy clerking and working that I wasn’t thinking about hustling new business for the bank, but I think there was quite a bit of competition in San Diego. There was the Merchants National Bank, the Southern County, the Southern California Trust Company, the First National Bank, the Marine National Bank, I think it was, and then another small bank called the Union Bank. They were all very small.
Most of our customers at Merchants were working people, contractors. We had a big dairy account, Producers Mutual, I think, at Fifth and K. They actually bottled milk. I remember they used to bring in a whole bale of currency every day. And at that time the banks had a clearing house where they exchanged their checks. Say Bank A owed Bank B so much, and Bank B owed Bank C. We would actually settle those debts by carrying currency or gold coin among the banks. If we owed you $25,000, we’d rack up $25,000 either in gold or currency and lug it over and give it to you. Nobody thought about getting knocked off. I remember in later years there was a holdup of a money truck coming from the races in Tijuana, and the guys got shot and killed. But I don’t remember any gun battles or holdups in town.
I think my salary with Merchants was 40 bucks a month. Jeez, I was really living high; boy, oh boy, that was great. Andy Borthwick and I were in the San Diego Rowing Club together then. That was the social center of the city about that time. It was a very inexpensive place to eat, so at lunchtime we’d all head for the rowing club at the foot of Fifth Street. We’d take a swim, have a lunch, and come on back up.
At that time, the city’s sewage pipe dumped into the bay at Seventh Street. Boy, the raw sewage would flow. We’d have to swim breaststroke. And there were piers and freight unloading docks there too.
Often we’d take our canoes from the rowing club and paddle across the bay, over to Tent City along the Coronado shore, near the Hotel del Coronado. We’d sit in the canoes and hear the band concert or tie them up and dance a while and then paddle home. We’d get back to the rowing club about 10:30, 11:00 at night, and we’d have to walk back up Fifth Street in all that miserable area down there, but I never thought of anybody bothering us. Later, when I grew up and had more sense, I wondered what the hell those girls’ fathers must have thought about their daughters walking in that area. Actually, Second and Third streets was a red-light district, but they just stayed on their own side. As I look back on it, there just wasn’t any crime. It was a different world, that’s for sure.
While I was working for Merchants, I rented a tent for the summer at Tent City. I think it cost about $I0 a month. It had a thatched roof of palm leaves, with canvas wrapped around it. There was no way to lock it up, of course. Anybody could walk in, but we never lost anything. To get to work, I’d take the streetcar in Coronado, go across on the ferry, get the streetcar on the other side, and go up to the bank. I had a permanent room then at the YMCA, but Tent City was the headquarters. This was before I was married.
I met my first wife Lois in about 1917, I guess. We were in the group that used to go to dances and boating parties. There was powerboat over at the Hotel del Coronado that used to take people aquaplaning. An aquaplane was a big board about six or eight feet long, about two feet wide, very thin. It had a rope tied to the boat, and you would stand up on it and steer the damn thing with your ropes, swing way to one side, make it dive and pull up. The trick was to keep your footing while you went through the waves. Sometimes you’d put somebody up on your shoulders and try to be real smart and fall on your can. Sometimes we would go all the way out to the Coronado Islands and back. It was really a lot of fun.
I stayed very active in these years. I liked to do outdoor things. About 1919 I started rowing competitively. We had great support from the city, and the newspapers were doing everything they could to promote the sport. We had regattas up in San Francisco, Seattle, Victoria, and Vancouver. It was a big sport then because we didn’t have much else to do, though we did have amateur baseball teams. Each bank or business had its own team, and we’d compete among ourselves. I was an outfielder.
I rowed four-man crew and single. We won several championship regattas and were state champions around 1919, early 1920. I had a good chance to go to the Olympics then, but I couldn’t afford the training, the cost of going back, having to give up my job. I had a hell of a time talking myself out of the Olympics. But I really did rowing more for fun than anything else.
San Diego’s growth was pretty slow around this time. Nothing spectacular was going on. The tuna canneries were probably the main industries in the city. They were strung out along the bay, starting at the foot of Fifth Street and going south. And there was one over on Point Loma. I was just busy rowing and playing and working. I never dreamt about owning any businesses until after I took over U.S. National Bank. Then it all just followed.
Lois and I got married in 1922. We lived in a very nice little apartment at the corner of Fifth and Kalmia. We thought we were pretty smart. Actually, Lois also worked in the Merchants Bank for a while. She was a friend of Helen Rogers, a daughter of the bank’s president, and Helen and Lois and I teamed off quite often with other people.
Then shortly after that, about ’23 or ’24, I think, the Bank of Italy came in and bought the Merchants National Bank, the Southern Trust and Commerce Bank, and the Union Bank. They just mowed them down. Then they consolidated them together as the 50th branch of the Bank of Italy. They kept everybody on from Merchants Bank, and I had the good fortune of being able to manage the consolidation of all those banks. It was a great experience for me.
Armando Giannini used to be the boss man at the Bank of Italy. Up in their home base of San Francisco, they were a cosmopolitan bank, but down here they were just a neighborhood bank. Giannini would come down and visit the branches, and I used to marvel at him being able to come into the bank and say, “Well, Amholt, how’re you doing? What’s going on?” How the hell would he remember my name? Later we found out he’d sit outside in his car and have all the names of everybody, where they worked, and be coached. But he had a hell of a memory to begin with. Boy, that made great points for him with the troops, I’ll tell you. He was a great man, I’ll always say that.
After I got into the Bank of Italy, Johnny Alessio was still shining shoes and doing everything he could to make money. I was handling the banking relationships between the Banco Nacional in Tijuana and the Bank of Italy, and I knew the Banco Nacional was looking for someone who could speak Spanish and English. So I told Johnny to go on down there and apply. I don’t know if he knew any Spanish, but Italian and Spanish are similar. So I said, “I’ll give you a letter, and maybe you can get a job in the bank.” Oh, boy, his eyes went blink-blink-blink. It was heaven-sent for him.
So the Banco Nacional in Tijuana hired him, and he worked out beautifully down there. He started as a messenger and got into the bank just like I did — became a clerk, a teller, an officer.
After I consolidated all those banks for Giannini, I caught someone’s attention up there in San Francisco, so they invited me to go up to Ventura and be a manager of the Ventura branch. Jesus, Lois liked to die. She didn’t want to go up into that country and leave her friends, so I turned it down. That made the bank management very angry. So a year or two later, they invited me to come up to Los Angeles as the head of the commercial banking department, which actually handled the activity of the banks who did business with the Bank of Italy. So I moved to L.A. by myself at first and lived at the Jonathan Club, a men’s athletic club that is still there, I think.
Working in L.A. was a wonderful experience for me, because I didn’t know too damn much about making loans on cotton or cattle or anything like that. I was handling pretty big loan work and commodities, so I just had to feel my way along. I covered the territory from west Texas, Arizona, Southern California, and Nevada and actually did a lot of the bank work in the building of the Hoover Dam.
These independent country banks had to have some help from a city bank in clearing checks and where they had Hoover loans they couldn’t handle, so they’d farm them to us and my department would take care of them. My department was really their city banker. That was in 1925, maybe ’26. And that was how I learned real banking. A few years after that, the Bank of Italy became the Bank of America.
I remember Richard Nixon from those days out at Whittier, during the time my family lived in La Habra, which is right close by. My father knew Dick’s father; he ran a service station and a little store there. Nixon and I personally hit it off together. I’ll never forget his younger brother Donald, who was a completely different character; he once said to Dick, “Dick, for chrissake, get off your bandstand and get down with the rest of us.” You know, Dick was a funny guy. When he was in public, he was an actor, just standing around like Napoleon. Yet when he was with only a few people, he was just as jovial and as easygoing as an average, everyday guy. He’d loosen up.
I was still in Los Angeles during the stock market crash in ’29. Oh, brother, do I remember Black Friday. Oh, it was a terrible shock. The big shock came to the banks on the East Coast, where they were dealing and making loans on securities and things like that. We were just doing house loans and regular community activities. We didn’t get into such scary or frantic positions as New York and Chicago and Pittsburgh banks did. The Bank of America came through it in pretty good shape until towards the end of it, and then they really got into trouble themselves. But they pulled out of it.
Lois finally joined me in L.A., and we had an apartment up there, but she didn’t like it. She kept grousing and grousing and grousing. She kept crabbing so damn much — and in my position of taking care of a lot of little banks, I recognized all the mistakes they were making in their management; some of them got in trouble and closed — so I thought, goddammit, if I owned a bank I’d know better and be smarter. So I got the wild idea I’d try to buy a bank if I could, a small one, and started looking around.
MR. SMITH BUYS A BANK
I went to Riverside and talked to Jonas Killian, who owned the First National Bank of Riverside. I was toying between the U.S. National Bank in San Diego and the Riverside bank. The one in Riverside was a little larger, but I didn’t like the town so well because of my love of water sports, and Lois wanted to be in San Diego.
The U.S. National Bank at that time had $800,000 in deposits, that was it. James Russell was president and a minority shareholder. He had about 30 or 40 percent of the stock. The bank had been in operation for quite a long time, and James Russell desperately wanted to sell it. He had lost his shirt on it. He’d done some financing with National Iron Works, got into trouble with that, and he had the Crystal Pier that was a sorry sight. He’d made bad loans, and the bank was hopelessly insolvent.
When I went in to see Mr. Russell in his office at Second and Broadway, I told him I was looking to buy a bank. I had met him, of course. We were down soliciting his bank for Bank of America, and we talked about it then; and he said, well, he’d like to sell.
I cautioned him, I said, “Now, look, Mr. Russell, I’m an employee of the other bank, and our conversation has to be kept very, very confidential, because if it leaks out, the bank would kick my fanny right out of the office up there.” He said, “Oh, yes, yes, I understand.”
Russell was president of the bank and a minority stockholder. He had about 30 or 40 percent of the stock. But, you know, with 40 percent of the bank stock, you can pretty much kick the thing around to suit yourself.
My deal with Russell was worked out in a rented house in Del Mar made available to us for a meeting. I don’t even know whose house it was. For one thing, we didn’t want to be seen in San Diego haggling over a table because, as I said, I wanted to be sure I had a deal before it became public knowledge. And then I hustled to buy the controlling capital in the bank.
I got the money just by talking to my friends. Of course, I’d covered all Southwest banks and bankers, and I’d helped them when they were in many, many tight pinches. So when I had a chance to buy this bank, I went to them and said I needed to borrow some money — me, individually — from them. They loaned it to me to buy the bank. I had to get about ten separate loans, I think, for a total of $50,000. I didn’t have any money; it was all borrowed. I had a lot of guts, no brains.
Well, word began leaking out that I was talking to Russell about buying his bank, and I found out that it was getting back to the bank in San Francisco. So I marshaled up my guts and courage and went in to see Dr. A.H. Giannini, Armando’s brother, who was in charge of Southern California, and I said, “I want you to know what I’m doing.” He looked at me and he said, “You goddamn fool! You’ve got a great future here in this bank. Why the hell do you want to own a goddamn little bank? What do you think you’re going to do with it?” I said, “Well, for better or for worse, I’ve always wanted to own a bank.” So then he said, “Shall we go count the money in the bank?” to see if the Bank of America’s money is buying it. I said, “No, you don’t have to do that.”
When the Bank of America’s stock went completely to hell, I owed them quite a bit of money on stock purchases. My brother stepped in and helped bail me out of the debt I owed the bank, because I was coming down here to the U.S. National Bank. And of course, they didn’t like that very well, my walking away and leaving the debt with them and starting a teeny bank down here in competition. And that’s the only time my brother had to bail me out.
Anyhow, I get down to San Diego and find out that Mr. Russell — he was a pretty bad guy, really — he had hocked the USNB stock I was buying from him at the Farmers and Merchants National Bank in L.A. He’d borrowed money on it, so it was already encumbered and he couldn’t deliver it to me.
I had already bought some USNB stock, quite a bit of it, and I was already working there as executive vice president, but I needed his stock to give me control of the bank. So I went in to L.A. to see Mr. Rosetti, who was president of Farmers and Merchants, and told him about my predicament, and he said, “Why, that old son of a bitch!” I remember him saying that. But Russell had gotten somebody to go into the Farmers and Merchants, pay off his loan, and pick up the stock. So he had the key to the control of the bank. We had a hell of a to-do, a hell of a row.
I think he saw that he had realized quite a hit of his investment in the bank, and there might be a chance for him to go back in and throw me out and wind up with the bank after having his loan paid in the Farmers and Merchants Bank. I was afraid he was going to bring the stock he had and transfer it on the books of the bank, so one afternoon I piled the goddamn USNB stock records in my car and just took off.
To be sure that he wouldn’t get back in control, the key was a man back in New England, a Dr. Forbes. Russell had been talking to Forbes and had told him that there was a young guy down here trying to buy the bank from him, and he told Forbes not to pay any attention to me. Russell was just giving me a bad time. So I called Dr. Forbes on the phone, and he said, “I’ve nothing to talk about with you, young man.” And I said, “Well, I want to come back and see you. I don’t think you’ve got the right story.” “I don’t want to see you,” he said.
Nevertheless, I got on the train — didn’t have any planes then — and I went back to Westborough, Massachusetts, punched his doorbell, introduced myself. “What in the world are you doing here? I told you I didn’t want to see you.” I said, “I’m here. I just want you to listen to my story.” I went and told it to him, and I had documentary proof to show him I was in the right. And he said, “Well, I’m leaving for South America tomorrow on a trip, but I will give you my proxy to vote my shares.”
Well, he had quite a block. After Russell, he was the largest stockholder. So he gave me his proxy, and he said, “If you’re successful, I’ll sell the stock to you when I get back.”
Well, I came back to San Diego and called a shareholders meeting. Old man Russell was licking his chops like a Cheshire cat because he thought he had me by the you-know-what. He didn’t know I had the Forbes proxy, and he knew the old man had gone to South America, so he figured I couldn’t have gotten to him — because I’d just by the grace of God gotten there just before he left. So we had our meeting to elect new directors of the hank, and when we voted the Forbes proxy, Russell damn near dropped dead.
Another thing we did that was real smart — Russell wasn’t very clever about it — we had cumulative voting in the bylaws of the bank, where you can vote all your shares for one director if you want to or you could split your shares and vote for two. There were only five directors, and we elected to pound on just three directors. So we had a hell of a leverage on him in addition to the Forbes stock. We finally said, “Mr. Russell, you’re no longer a director. Would you please leave the bank.”
Ever after that, he spread bad tales about me all around town, but he was not a very nice man. I know there was talk about me throwing poor old man Russell out on his fanny and all that, but he was a bad cat, he really was, very bad.
Russell kept the stock that he got back from the Farmers and Merchants National Bank, but it was a minority holding and didn’t do him any good. And when Mr. Forbes came back from South America, we bought his stock and paid him. And then he had me do some real estate work for him out here, and he was very pleased with my help in renting the property, renovating it and stuff like that. Dr. Forbes and I became good friends.
At that point, we had majority control of U.S. National Bank. We elected new officers; Mel Wilson was president. He had been executive vice president of the bank. I went in as executive vice president. My brother in law, Mr. C.J. Wittmer, joined with me. He had been with the Bank of America too, at the same time. He left and joined us, and we started going. At the same time we acquired the bank, we got United States Holding Company, which Russell had started. The bank building was the holding company’s only asset at that time.
Of course, right after we took control of the bank, around 1933, the U.S. government declared the bank holiday, the bank moratorium, and closed every damn bank in the United States for two or three weeks. It came like a shot out of the clear blue sky. I thought that was the end of me. The bank was closed; I’d lost my investment; what’s going to happen now?
They were examining the banks at that time to see whether they would give you a new license to reopen. They told us we could reopen if we brought in $50,000 in new capital. And they didn’t give us very long to raise it — maybe a week or two. USNB’s capital stock investment on the books had been depleted through bad loans, just like the big savings and loans today. The biggest were the loans to the Crystal Pier in Pacific Beach and National Iron Works, both of which Russell owned. Of course, he had been doing another bad thing, in that he was loaning to companies that he controlled.
But by dint of hard work and pushing doorbells, I finally managed to gather the other $50,000. I went up to see my brother John, who was in the oil business, and he called on some of his oil-producing friends, and they helped. We raised $50,000 cash. There was no San Diego money in there. I had to go outside for it.
My brother had some stock in the bank, but not a great chunk. It was very nominal. And we did some land deals together over the years. We did some oil deals up in Wilmington under my brother’s kind of guidance. He suggested some possible good leases and things, but I was really never a partner with my brother in any businesses.
By now the Depression was very bad here. My father was a sly old fox and kind of smelled this thing was coming, so he gathered a bunch of gold coins that he kept in the house, and we lived on that.
If I hadn’t come up with that 50 grand to become a member of the FDIC, the bank would never have been allowed to reopen. And I’ll never forget it. The feds were wiring to the banks that had qualified to reopen; it was at night, and we were supposed to open the next morning. We didn’t get our wire, and, jeez, we were burning the telephone lines to the office of the Comptroller of the Currency, and they kept saying, “We’re working on it. We’re working on it. Just relax. We’re working on it.” At four o’clock in the morning, finally, came their wire authorizing us to open at ten o’clock that day. What a sweat that was.
I had handled a lot of customers and depositors in the old Merchants National Bank and the Bank of America, so when I bought U.S. National Bank, I started hustling my old pals and tried to get them to come to us. I remember Lawrence Oliver was the first. He was a big fisherman and seafood processor who became a manufacturer of poultry and cattle feed from the scraps and meal from the fish canneries. He brought in a hell of a big account, and then it just began to mushroom. He was head of the Portuguese clan here, and we had a whole bunch of Portuguese in the bank.
And then we brought in another young man named John Athaide. He was Portuguese too and had lots and lots of friends. These were some of the biggest businessmen in town. And of course, their employees sort of followed the boss, and it just began to snowball. We worked like hell to get deposits.
We also remodeled the bank. It was very, very old and cumbersome. High counters used to be the pattern of the design of banks. The tellers had cages with windows to look through, with screens in front of them so nobody could jump in and grab the money. I thought that was just a throwback to the frontier days when they really did have robbers jumping over the counter and shooting people, so we chopped all that off and put in what I guess was one of the first low counters in a bank in San Diego.
We also tried to get some trees on the street, so we planted palm trees up and down Broadway. Anyone that wanted a palm tree, we’d stick it in there. I think we were also the first bank in San Diego that had carpets on the lobby floors. They all thought that was nuts.
About a year after we took over the bank, we had to file lawsuits against Russell because he owed money personally that he hadn’t paid to U.S. National Bank, and we had inherited the notes. And National Iron Works and the Crystal Pier owed the bank a hell of a lot. Russell had borrowed on his bank stock and he couldn’t pay it, and then he also had National Steel borrow a lot of money that the corporation couldn’t repay. In the light of today, those loans he made to himself probably were improper. They were insider loans, but at that time it was not illegal. I think a lot of the big banks did the same damn thing. They loaned to their directors and loaned to themselves. But as long as the loans were going into industry and activity that was conducive to helping the community, there really was nothing wrong with it.
We tried to collect the loans, and when Russell didn’t pay, we foreclosed on National Iron Works, Crystal Pier, and several other pieces of property. Later on he sued us. He came up with some idea that this was all a plot that we had to bankrupt him.
But having foreclosed on those things, we said, now what the hell do we do? The bank couldn’t afford to take the loss, so I eventually bought the National Iron Works stock out of the bank. It would have wrecked the bank if I hadn’t taken it over. It was the last thing in God’s world I wanted to get involved in, but of course, the bank couldn’t run the iron works, so we had to form another corporation, put in some new capital, and try to build a business and create an industry. I had to hustle to raise new capital to make repairs and replace equipment.
Russell had acquired Crystal Pier from a man named Neil Nettleship, who had built it in the 70s. It had been built out there on pilings that hadn’t been properly treated. The bugs had eaten it all up, and the place was closed down. There used to be a beautiful ballroom out there, and the old building used to sway back and forth. The first thing that had to be done was to take the ballroom off the pilings. Then we shortened the pier down and put in new pilings.
Then we came up with the bright idea of building little cottages on it to rent to summer vacationers and people who just actually lived on the thing. We had maybe 15, 20 houses. They were very popular because they were right over the water. You could fish right off your front door; everybody had a little front yard. Some of them have been lost, but basically our cottages are the ones that are still there now.
Then we got into a big rhubarb with the State of California, who controlled the tidelands. Some of the cottages were on the state’s property, depending on how you defined the mean high tide line. At that time nobody could ever come up with an idea of how to do that. Anyhow, I went up to Sacramento to see Col. Ed Fletcher, who was then state senator— this was in ’36, ’37. I told him about the situation, and he introduced a bill in Sacramento that said here’s how you define the mean high tide line; now let’s sign it and put a survey stake in it. And that wound up that problem with the state.
It was the same kind of story with National Iron Works. Having taken it on, I worked like hell to make it successful too. Originally, it was just a structural steel plant. We built bridges, knocked them down, built buildings in Long Beach, over on North Island. We actually built prefabricated buildings and shipped them as far as Denver.
Eventually, we built the Convair buildings that are still on Pacific Highway today, the ones with the saw tooth roofs. Major [Reuben] Fleet was asking for bids on the structural steel, and I hustled him to give us a chance. He kind of pooh-poohed us and said, “Why, you haven’t got the facilities to do it.” We said, “Well, let us bid and we’ll prove to you that we can do it.” So he gave us a contract for the steel framework, with a clause in it that every day we beat the construction deadline, we’d get a thousand dollars a day. If we went over schedule, we had to pay him a thousand dollars a day. And we won, by God. We collected a small amount on the contract. It wasn’t much, but jeez, we worked day and night to get that contract out.
When World War II broke out, our first contracts with the government were for repairing battle-damaged ships. We used to take our crews and our equipment down to the naval repair base and work there. I remember our men were actually carried on out to sea as they worked; and when they’d finished, they were brought back so as not to delay the ships in port.
Then we started building refrigerated supply barges, like big floating iceboxes. And from that, we began to build little river freighters, then larger ships, minesweepers, tugboats, landing craft, and just every damn thing that floats.
We did make some money on the government contracts; but at that time, they had the excess profits tax, and you were allowed only a certain profit. The rest the government would recapture. I’ll never forget, the first year it went into effect, we wrote a check for $1.5 million and gave it back to the government. God, that hurt.
But it was really a smart idea, because they were in a hurry, and they allowed people to guess what it was going to cost. And if you ran behind, you could take your problems to the government contract managers, and they were pretty decent people, and then they’d give you an allowance if you misfigured. They were interested in getting the job done. And of course, our business just kept growing and growing and getting bigger and bigger and bigger.
When we took it over, National Iron Works was located at the foot of Seventh Street, but we moved south during the war. We didn’t have room for all the work at Seventh Street when we started building the refrigerated barges, so Joe Brennan, the port director, the harbormaster, said, “Christ, we’ll give you all the room you want, but you have to go south to 28th Street.” We were trying to be kind of careful about how much land we took, and he said, “For chrissakes, take what you need, because you’re going to need it.” And how right he was. So we rented a lot of land, but they gave it to us at a very low price.
When the war ended, our plant was in two different locations. We probably had more activity down at the foot of 28th Street, but the big metalworking equipment and the foundry and all that stuff was still at the foot of Seventh Street. We elected to go to 28th Street. I think that’s when we changed the company name to National Steel and Shipbuilding, because we were then actually building a hell of a lot of ships.
When World War II came on, the government put a clamp on any currency leaving the United States. You couldn’t take it across the border. So, jeez, Johnny Alessio, who’s still working for the Banco Nacional in Tijuana, comes barreling up to me at U.S. National Bank and says, “My God, what are we going to do? Tijuana’s going to die if the dollars disappear.”
So we scratch our heads and decide that we’d use cashier’s checks, which were legal, and we’d put tellers or clerks down at the border. Anybody that wants to go across into Mexico, they would give us cash on the U.S. side and we would give them a U.S. National Bank cashier’s check, and they would pick up their currency on the other side. When they returned to the U.S., we would reverse it. We would pick up the checks and give them back their currency. U.S. National Bank made money when the Tijuana merchants came up here to San Diego to deposit their money. They actually paid us two cents for every check they deposited.
Well, that started out fairly all right, and, God, it just grew and grew and grew. We had a whole bunch of clerks counting those damn things, sorting them out, packaging them up. They were just like currency.
The cashier’s checks were accepted in Tijuana in lieu of money, like a traveler’s check is today. They traded them, they banked them, they did this, that, and the other. We even had those damn money orders coming in from back east. People would carry them back and take them to their bank, and the banks would send them out here for reimbursement.
The certificates were all in numerical order, and we’d register them so we could keep track, but only $7000 worth were lost or destroyed somehow. We had thought we might capitalize on people losing the damn things and we’d just have a windfall, but that didn’t happen.
It got so dam big that we actually designed and lithographed money orders, called U.S. Holding Company money orders, that were issued in denominations of $5, $10, $20, $50 and $100. God, I don’t know how many millions of dollars went through that business.
Eventually, I got kind of scared and called the Comptroller of the Currency in Washington, and I said, “Hey, boss, we’re doing something down here. I don’t know whether it’s right or wrong, but I wanted to tell you about it so there were no surprises along the line.” No other banks were doing it at the time. And he said, “You’re doing what?” And I said, “Look, the whole town is hanging on this operation. They’ll be dead if we don’t continue.”
So the comptroller said, well, it sure as hell is not in the book, but if you know what you’re doing and don’t get your tail in a sling somewhere — somebody forging some of these things and wrecking the bank in the process — then go ahead.
One time we had a terrible shock. A lithographer up in Los Angeles called and said, “Is this the U.S. Holding Company? Well, we got a whole package of these money orders that somebody ordered from us, and we were kind of nervous about delivering them without some official word from the corporation.” So we went up there and, jeez, they had a bundle of counterfeit U.S. Holding Company money orders.
What they were doing was taking them into the racetrack, betting them, and getting them converted. We nipped it in the bud before it got too far. But, my God, as I think back, we could have been ruined if that had continued.
But all during the war, Tijuana lived off of those money orders. All the merchants honored them.
I remember Tijuana around this time very well. The Agua Caliente Casino was one of the most beautiful casinos I’d ever been in in my life, including those in Europe. It was just immaculate. Baron Long, who ran the Biltmore Hotel, actually used to be the boss of it. And he knew how to handle a dining room. People had to be on their manners there. They didn’t allow anybody to get tight or get noisy. If somebody got a little boisterous, they’d say, “Telephone call for you.” When the guy went to the phone, he went right out the door.
They actually used gold coins for chips in one room down there. The Mexican government was crazy ever to put that out of business. I think that had Caliente been allowed to grow, there would never have been a Las Vegas because it had such a strong hold. Everybody in the country knew about Caliente. They had wonderful shows. Rita Hayworth was an entertainer there. She and her father danced.
In Prohibition days, you could order booze and have it delivered from Mexico to your house in San Diego. They just drove across the border. It wasn’t a big-scale operation, but everybody wanted to have good scotch or bourbon.
FROM TUNA FISH TO TAXI CABS
Once the war was over, we had to think about what we were going to do at National Steel. During the war the government had commandeered all the old wooden tuna clippers for supply ships, general workhorses, and when the war ended, there were no tuna clippers. So we designed a couple of tuna boats.
Having built steel ships during the war, we recognized that a steel tuna clipper would be a lot more efficient vessel than a wooden ship. But we had a hell of a time convincing the Portuguese that they should use it. I’ll never forget Manuel Medina. He wanted three tuna clippers built, and we hustled him like hell to try to build them out of steel. “Mr. Smith,” he says, “now listen. You take a wood plank, you throw it in the water, what happens? It floats. You throw a steel beam in the water, it sinks.”
I said, “Manuel, look, a boat is like a tin can. You have to make them solid and tight.” No, he wanted a wooden ship, so we built him three wooden tuna clippers. We had been building wooden minesweepers during the war, so we were all set up. But those three ships for Medina were the last ones we built of wood.
After that we said, now, look, every fisherman wants his boat a little bit different, and that would never do. You’d be forever trying to design what they wanted. So we decided we’d build the ships first and then sell them to the fishermen. If they wanted changes to the boats, we’d make them at their expense. It was kind of a gamble. We weren’t sure if they’d buy them.
So we had naval architects here, and the guys knew pretty well how to design them. But the fishermen’s method of hauling in tuna by long lines necessitated actually filling the holding tanks with water in order to get the boat way, way down. They couldn’t lift the fish in unless the deck was pretty close to the water. They’d have to pump out water gradually as they brought fish in and put them in the hold. So when the vessel was in fishing condition, you actually had about six or eight inches of water on the deck.
I went out with one of the boats we had designed for a trial run. They filled the tanks, and we were out on the ocean, and it was a little bit rough, and, Jesus, I began to see that the boat was much slower recovering up than it should have been, so we hightailed it back to the harbor and pumped everything out. It turned out that the naval architects just plain goofed on their dimensions of the carrying capacity of the tanks, because wooden ships had sides that were about six inches thick, and of course, the steel ones were only about two inches thick. They had to build another skin about a foot around that damn hull to give it the buoyancy that it needed.
We had a tough time selling the boats to the fishermen, so I tried like the devil to sell them to the canneries. I said, “Look, you guys ought to buy the goddamn tuna clippers and lease them to the fishermen.” But, no, they wouldn’t do it.
Since I couldn’t convince the canners to buy a fleet of tuna clippers themselves, I, of course, began to feel kind of smart and cocky, and I said, “Well, goddamn it, we’ll buy a tuna cannery and show these guys how it ought to work.” And it worked pretty successfully.
In 1948 we bought some of the old canneries here and merged them. The first one was the People’s Packing Company, next door to National Steel. We bought one out of Point Loma, the High Seas Cannery, Sun Harbor —we put about eight together and built a good-sized cannery.
We finally settled our operation at the foot of 28th Street, near NASSCO, and called it Westgate California Seafood. The name Westgate came from one of the plants we bought, the Westgate Seafood plant. We just added California to it. That was the first time I used the name Westgate for one of my companies.
The business worked because, as I tried to tell these people, the canneries depended on a steady flow of fish coming in. The fishermen, they didn’t give a damn; they wanted to load up and come in when they got ready. And some of these clowns were young, husky guys; they’d hole up in ports in lower California, maybe lay in there for a week, ten days, drinking beer and living it up while the cannery was screaming for fish.
But if the cannery owned the boats, they could say get back here, we need fish, even if the boats weren’t fully loaded, just to keep the machinery running and a supply of product going on. So it was really a logical thing to do, to have the cannery, the tuna clippers, and the sales organization all one unit.
We had no problem at all getting crews or captains because they were paid on the catch they brought in. Of course, after the steel boats were accepted, we provided a lot of comforts they didn’t have before, like a lounge for the crews instead of sitting on a wooden bench in the galley. And our boats were better, faster, so we could kind of have the pick of the fishermen and the captains too.
And of course, they had an immediate unloading schedule when they came into the harbor. There was a time when the canners tried to be smart with the independent boats and wouldn’t unload them, dickering over the price. They kept some of those boats tied up down at the foot of Broadway there for weeks with their equipment running, keeping the fish frozen in the hold. But since we owned our own boats, we wanted to get them unloaded and get them the hell out again and move it. So really it made a lot of sense.
One guy who worked for us got the bright idea of making hot dogs out of tuna for the Catholic trade. They were called, “Toonies”. They tasted and looked just exactly like a hot dog. Actually tasted better than a hot dog, I think. The poor guy worked his brains out perfecting that. They were in the store, but they just didn’t seem to take over.
We also developed a salad dressing that was very good, and we packed olives. They didn’t have anything to do with the fish. It was just a diversification. And we had a plant down in South America that made fish meal for poultry feed. That was a profitable operation.
Westgate California Seafood also developed a packing factory to ship frozen crab. They actually took the crab aboard in Alaska, cleaned it, packed it up in the five and ten-pound packages, and stored it in their refrigerated holds until they could ship it south. This was faster than normal, because usually they’d have to take the crab ashore, send it down whole, and then break it up down here. It’s much sweeter and better tasting if it’s all done on the ship. We were the only ones that I knew of other than the Russians and the Japanese who were doing that.
At this time, we were trying to flesh out the companies. We thought we should have a broader base to make them really competitive. It was a dog-eat-dog business.
During season, the crab boats and crab operations in Alaska would borrow money from us at the bank. The crab company was a separate company managed by separate people. They would go up to Alaska and load up with crab and pack it and get it ready, and they’d ship the crab down and sell it to Westgate’s seafood company. The bank loaned money to these subsidiary companies because why the hell would we go somewhere else when we had a bank to finance the packing, the shipping of cans coming in, tuna going out, and things like that. When the crab company got its dough, it would pay the loan off. It just kind of evolved, like a farmer financing a wheat crop.
One of our directors with Westgate California Corporation got us started in the taxicab business. His name was Mike Coen, an investment banker back in Kansas City. He waltzed into my office one night and said, “I just bought the Yellow Cab system in Los Angeles.” I said, “You did what? Who the hell told you you were authorized to buy anything?” “Oh, I didn’t buy it for Westgate. I just want to offer it to you if you want it.” I said, “Where in hell did you get the money to buy it?” “Standard Oil Company advanced it to me.” Of course, Yellow Cab was one of the biggest gasoline accounts that Standard Oil had here. So we bought it from him because there was no way he could run it.
I don’t know what possessed us to get into the damn thing, but it was intriguing. But then Yellow Cab here in San Diego was in trouble, so we took that over. Eventually, we owned all the large cab companies in Los Angeles, San Diego, San Francisco, Oakland, Sacramento, Palm Springs, and Phoenix.
But here again, it was just more of an acquisition process to gain size and to get our costs down. With all those cab companies, we had the advantage of major cost controls. We were able to buy fuel and tires and cars at a much lower rate. We’d buy 500 cabs at a clip or maybe 1000 cabs at a clip, and we’d get them for practically nothing, because the automobile manufacturers considered them a hell of an advertisement for their product.
During the early ’50s, I was a member of the San Diego Yacht Club, and they had an old dilapidated clubhouse and facility. And again, like so many organizations, no one really grabbed ahold of the thing and tried to do something with it. I remember during one storm, my cruiser piled up on top of the floats, and it wrecked the hell out of my boat. I started raising hell about how we got to build a new clubhouse, and we have to do this and that, and there was no action. So I saw the sandbar across the way there, and I thought, well, to hell with it. You go on and do what you want, we’ll go across the bay and build our own yacht club.
So I got ahold of Johnny Bates, the harbormaster, and we told him what we wanted to do, and it sounded great to him because he didn’t have much on the waterfront there. So they went ahead and dredged and filled in the sandbar to the land. It made a little peninsula sticking out — Shelter Island. There were no roads, no nothing out there. We had to drag everything out with tractors and actually built the clubhouse out there. The old sailors, they stayed at the yacht club. The motorboat people — stinkpot operators — they moved to the Kona Kai.
We hired an architect from Honolulu to give it the Hawaiian touch. We planted palm trees and put in a swimming pool. We were the only tenants out there in 1953. Then the harbor department built a building just beyond us, and then after that, the hotels started building back from us and toward the land.
The Kona Kai was a private club. We sold memberships. And people started screaming because the port authority had leased so much land to a private club. Because of the public pressure, Bates finally said, you’ve got the room here, why don’t you build something the public can use? So we built the Kona Inn, which was open to the public, and it was balanced. You could either belong to the club, or you could just go into the public rooms and dining room and also have slips to tie your boat up. It worked out well for the club too, because it provided extra rooms for the Kona Kai Club.
To build the Kona Kai on fill, the design of the hotel was actually to pour one great big solid mass of concrete, like a big brick, and then build the hotel on that brick, way down into the ground. I know at the time it was the biggest single and continuous pour of concrete ever poured in San Diego. Jeez, everybody was running trucks in here with concrete. They couldn’t stop, of course. If they had, it would have fractured. So the foundation had that tremendous weight down there, and then the steel frame was bolted onto that big brick.
The club was quite the center of social events. We danced around the swimming pool. We had big-name bands down there — Lawrence Welk, Jan Garber, all the big names. I remember we hired Lawrence Welk for $2500 a night. My God, what does he get now?
It’s been remodeled many times since then, and it’s lost a lot of the charm it had originally. It was really a yummy place, before they started tinkering with the damn thing.
We also got a radio station in the mid ’50s just because we felt that it might be of help to the bank to have a station using the bank’s initials. The first station we had was KUSN — U.S. National Bank. Those were the call letters, and we just kept repeating them over the air, of course. And it was in the U.S. National Bank Building, and all that crap. It was good advertising.
We had built a studio right in the bank. We had a man in there that said we had to build a big, major studio, put on shows, have speeches, things like that. We found out after we built it that all we really needed was disk jockeys, a glass-encased studio, and a turntable.
The first license was pretty hard to get, but after that we just bought the stock of four existing local stations and merged them. We broadcast mostly popular music and a lot of sports. Eventually, that station became KSDO.
Another reason we had the station was for the baseball team. We owned the Padres at the time, and the station broadcast the games, so it was also advertising for the team. They weren’t actually broadcasting from the ballpark. We had a man down there who was following the play and was phoning it in to the studio. They had a really slick system of making sound effects, so it sounded just like they were at the park.
We bought the Padres in 1955. It was a minor-league team then. The owner, Bill Starr, was having financial problems. He had an opportunity to sell the team to one of the cities upstate, and when word got around, everybody screamed bloody murder. Jeez, we can’t let the team leave, and things like that. Starr, who was banking with us, said, “Well, why the hell don’t you buy it, and then you can handle the thing down here. It isn’t too much money, and it would save my bacon.” So, like a damn fool, I stepped up and said I’d help keep the team here in San Diego.
We bought the team for about $300,000. Of course, after we bought it, then everybody started screaming, “We need a new stadium!” The Padres played down at Lane Field, at the foot of Broadway, at the time, and the stadium was all slivery and falling apart. It had been built during the old WPA days as a works project, and it was just slapped together with old lumber, and it was pretty punk. Starr had tried unsuccessfully to finance a new park. He wanted the city to give him space in Balboa Park, but they turned him down. I think the condition of Lane Field was one reason he wanted to sell the team. I think we played there for two or three years before we built Westgate Park in Mission Valley.
We had a professional come in and recommend where to build a ballpark. Strangely enough, they said to put it at the foot of Sixth Street, where it drops into Mission Valley. Well, that was where we had my daughter Carol’s 60-acre horse farm at the time. I laughed like hell when they told me that.
It was an ideal place, really. It had beautiful trees and access from north, south, east, and west. Lots of parking. It was just ideal. We used about 20 acres on the eastern end of the farm. The park itself only seated 17-18,000 people. It was well engineered. We actually dug it down so as you walked in, you were about halfway up in the seating area and the field was below you. It brought the audience right up close to the team’s activity. You could hear the players swearing and yelling at each other. Of course, National Steel really built the park. It was all made of steel.
While we owned it, I think the team broke even, maybe made a little money, not much, though. But when people like Jim Copley started talking about building a new stadium in Mission Valley to seat 50, or 60,000 people, I said, “What will we do with our small audience in that big pit.” But they were just beating on us and beating on us to move into the big leagues and a new stadium. And when they built the Sports Arena down there, it took away the circuses and concerts and other things from our Westgate Park, so that hurt us too. But I didn’t oppose the Sports Arena. They would have tarred and feathered me if I had done that.
So after we moved the team to San Diego Stadium, about 1969, we said, what the hell are we going to do with Westgate? And then Ernie Hahn, who was a director of U.S. National Bank, came up with the idea that we should build a shopping center on the site. It was centrally located, and everybody could get there. And of course, Fashion Valley has been very, very successful.
Hahn and United States Holding Company formed a partnership to build Fashion Valley. We tossed the Westgate Park land into the partnership. He promoted the shopping center. We had financed two shopping centers for him — one in Santa Barbara and one around L.A. somewhere. But Fashion Valley was too big for the bank to finance.
U.S. Holding was the landowner and then also shared in the profits of the rentals there. We insisted that one of the big stores — I think it was the Broadway — that the rents of that particular building go directly to the holding company, because we were afraid that if things went bad, we might be facing a huge debt and no income. U.S. Holding got out of Fashion Valley in about the mid- or late ’60s because Ernie wanted to do something that had to do with providing more depreciation, and I think he talked us into swapping a general partnership into a limited partnership, but one that merely had the land, but we still shared the same amount of rent we did before.
Ernie Hahn had become a director of U.S. National Bank in the late ’40s, when we bought out his bank in Hawthorne, the Hawthorne State Bank. Hawthorne was one of many, many banks that we bought out. The first was a bank in Santa Fe Springs; it was so damn tiny, it hardly justified being called a bank. We put it together with one in Monrovia, and that was the start. And then we just reached around and tried to spot banks in various parts of Southern California where we thought people would expand and grow over the years. U.S. National Bank ended up with 60 branches.
But an interesting thing happened when we were buying Hawthorne Bank from Hahn. The Korean War was teetering, and we were kind of nervous about what was going to happen. The contract that I prepared to be signed between me and the Hawthorne’s stockholders had a clause that said that in the event of war, we would not buy the stock back from the sellers. On every bank that we took over, we offered cash or USNB stock to the shareholders. We always gave them one year to decide whether they wanted to stay with U.S. National Bank or sell the stock back.
There were several drafts of the contract for Hawthorne, and one morning real early I went up by myself to sign the damn thing. So it was signed and everything went along okay, and then war broke out in Korea. And, jeez, everybody started throwing their stock back at me. The clause was supposed to prevent that, but when I wasn’t looking, some goddam bright attorney put in there, “In the event of war declared by Congress....” And Congress never declared war in Korea.
So I said, “Wait a minute!” And we had a hell of a to-do about it. There was so much uproar, we finally took their damn stock back rather than let them go around saying we were welching on our deal. I think Hahn should have controlled his stockholders; he was president of Hawthorne. But I bought the goddam stock back, and the market was crashing down; all stocks were down. I took a hell of a beating. I did it as a matter of good public relations. Legally, we didn’t have to buy the stock back, because it was war, dammit. We ate the losses and went along. But I never forgot about that. It just infuriated me that I missed that damn clause. Three goddam words cost me about a million dollars.
During these years too, my wife and I kind of drifted apart. Lois was a wonderful lady, but we were two different people. She was very withdrawn. I was like a young fire-horse, roaring at the end of the tether wanting to do things. She kind of drifted into becoming a nationally known bridge player. She played with Omar Sharif, and she went to bridge tournaments all over the country and the Orient.
She was out practically every night. I was usually the first one home at night, at 10:00 or 10:30. That kind of left me by myself, with my son and daughter, and I just gradually fell into the work habit. Sometimes when I was working late in the office and I was tense, I’d go to a movie in the Spreckel’s Theater just to relax. Two or three times I fell asleep sitting there, and when it got very late, my daughter Carol would call the manager to go in and wake me up.
Lois didn’t like to go dancing, she hated the beach, she hated boats. I used to take Carol and my son on trips to Catalina, Palm Springs, Hawaii. The three of us were like a trio, and Lois was out by herself. I remember one time when Carol was ready to graduate from Point Loma High School, Lois didn’t even go to the graduation ceremony. I had to drag Carol down to a neighbor to have her hair and her dress fixed.
THE ’50s ROAR TO A CLOSE
By the late ’50s I just felt I had to get rid of some of the damn things I was running. There were so many responsibilities. I think I got a bigger kick out of building and creating things than actually running them or operating them.
NASSCO was just getting bigger and bigger. We started bidding on bigger ships, like freighters and tankers. Finally, we couldn’t handle it financially, so we formed a partnership with Morrison-Knudsen, F.E. Young Company, Edward Kaiser, and a couple of others. They said, “You guys run it.” And I said, “Jesus, we wanted you to run it.” “No, you’re on the home ground.” So we went on there doing millions and millions of dollars of work, and it just got too heavy, and finally I said we’d just better sell out because it just got to be too big a ballgame. I think the final deal was for about $10 million.
About this same time I sold the Kona Kai Club. It took a lot of time, and people were always complaining about this or that. Johnny Alessio had run the Coronado hotel for a while and the Caliente racetrack down in Tijuana, so he knew how to run the club. And we really just had our hands full, so I said to him, “Why don’t you take it and you run it?’ So Johnny Alessio bought the Kona Kai from Westgate in 1959, the same year we sold NASSCO. It was just a lot of responsibility and one of those things that didn’t really fit into or add an awful lot to the gross income of Westgate. And I think Johnny was kind of bugging me about it. He thought he could take it and do more with it than we were doing.
The proceeds became working capital for Westgate California Corporation. We had a I7,000-acre cattle ranch up in Kern County, which was taking a lot of attention and cash. We had a lot of agricultural land up in Bakersfield: cotton ranches, citrus. We were also putting together a commuter airline and an airport shuttle bus system. We were also, about that time, developing San Luis Rey Downs. We bought a bunch of acres up there, and we built the golf course and the hotel and the training track. And I just thought it was time to kind of lighten up on some of these things.
I don’t know why we expanded like this. I guess I’m a damn fool and like to work and create things — things that made the community. We had to have jobs, industry. San Diego, as a city, it wasn’t like Pittsburgh and Pittsburgh Steel. In the early days, the only thing we really had here was seafood and the Navy. The rest of it had to be hustled from the outside.
For instance, USNB financed Ryan Aeronautical company. When Ryan wound up their training of aviators after the war, they didn’t know what the hell to do, so they started making metal caskets. Then they bought a company called Navion that made small planes. We made a hell of a big loan to them to buy that company.
Ryan Aeronautical never would have made it except for our little bank. We started loaning to Ryan when he had nothing but a pair of pliers in his pocket. I think at the high peak, we were lending him $I8 million. Finally, we couldn’t handle Ryan anymore. They just got too big, and Bank of America stepped in and took it over, even though Claude Ryan was a director of U.S. National Bank. You couldn’t blame Ryan. He had to have the credit.
And Solar Aircraft — there’s another institution that we made. And that damn Herb Kunzel. He actually was president of Solar at the end, and he would eventually be appointed to liquidate West-gate California when it was declared insolvent. But National Steel lugged that Solar Aircraft Company along by supplying them with things they couldn’t pay for. And I think maybe some of the animosity between Kunzel and me came because we were pushing him to try to collect the debts. They ran up a hell of a big bill with us, and we kept bugging them, and there was a lot of friction in there. Kunzel and I were opposites, on opposite sides of the Republican Party. He was kind of the leader of the left-wing Republican Party, and I was on the very right wing, and there were personality clashes back and forth.
I can think of so many companies that we really — through faith and risk — put on the map that are still here today. I could have sat on my ass at the U.S. National Bank if I’d wanted to and taken a big fat salary out of Westgate, National Steel. I could have had other people do the work, and I could have sat in the sunshine or just played golf. But I was a crazy damn fool trying to build and energize and create things.
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