La Costa developer Merv Adelson dead at 85

After long lawsuit, and denial, he admitted he had mob ties

The Vanity Fair article in which Merv Adelson admitted his mob ties, January 31, 2013
  • The Vanity Fair article in which Merv Adelson admitted his mob ties, January 31, 2013

Merv Adelson, one of the co-founders of La Costa, is dead at age 85, according to a story yesterday (September 9) on deadline.com.

Irwin Molasky

Irwin Molasky

Adelson, co-founder of Lorimar Television and former spouse (twice) of TV star Barbara Walters, developed La Costa along with other Las Vegas notables, including Moe Dalitz (a longtime Prohibition and Vegas gangster), Allard Roen, and Irwin Molasky (who, as Matt Potter of the Reader has pointed out, is now building offices for the FBI).

Allard Roen

Allard Roen

Adelson was an integral part of the history San Diego would like to forget — how mob money developed much of the county. Dalitz, Roen, Molasky, and Adelson were primary developers of La Costa, the resort in Carlsbad. Lowell Bergman, who now holds a chair in investigative journalism at UC-Berkeley, joined with another writer to pen a 1975 article, "La Costa: The Hundred-Million Dollar Resort with a Criminal Clientele," for Penthouse magazine.

The four Vegas men filed a $522 million libel suit that dragged on, essentially, for ten years. The attorney who pinned down the four men's ties to organized crime, Mike Aguirre, now operates in San Diego and was once city attorney. The jury sided with Penthouse. But the suit had dragged on for so long that both sides agreed in 1985 to make insincere compliments about the other and pay their portion of the costs, said to be around $20 million. They did not make payments to each other.

In 2013, Adelson shocked people by telling Vanity Fair that he knew he had had mob associations.

Moe Dalitz

Moe Dalitz

"I enjoyed a very close relationship with Moe Dalitz," Adelson told the magazine. Longtime gangster Dalitz was known as the "Godfather of Las Vegas," the iron man who enforced peace among the mob families. "So I know you're thinking, 'How do you account, Merv, for the fact that Moe Dalitz was a mob boss? All I can say is, in all the years I knew Moe, we never discussed anything criminal." Said Adelson, "I began thinking about leaving Las Vegas. I wanted to get away from the Mafia."

On January 30 of this year, Bergman sued Adelson and Molasky in San Diego Superior Court for malicious prosecution. I called Bergman yesterday.

Lowell Bergman

Lowell Bergman


"The lawsuit is dead," Bergman said, particularly now that Adelson is also dead. "The suit was filed 38 years beyond the statute of limitations," he chuckled. He said, "[I] never thought I would live long enough" to see Adelson admit his mob ties. Bergman remembered hours and hours of depositions and hearing Adelson and the others claim over and over that they had no mob ties.

C. Arnholt Smith was Nixon's first big contributor back in 1946 and was alone with him on election night in 1968.

C. Arnholt Smith was Nixon's first big contributor back in 1946 and was alone with him on election night in 1968.

Interim La Costa loans were made by San Diego's U.S. National Bank, controlled by C. Arnholt Smith, whom the San Diego Union had named "Mr. San Diego of the Century." He was later convicted of finance-related crimes and spent time in custody.

While he was in San Diego, writing for an alternative publication, Bergman had dug into real estate records to find that the Swiss-based Cosmos Bank had been involved in the La Costa financing. The Cosmos Bank, closed down by joint action of the U.S. and Swiss governments in the mid-1970s, had numerous mob clients. Cosmos loaned money to San Diego builder Irvin J. Kahn for the development of Rancho Penasquitos. Cosmos also loaned money to U.S. Financial, a San Diego–based real estate conglomerate that was in essence an accounting fraud. Its top executives went to prison after U.S. Financial collapsed.

On July 18, 2012, I wrote a column for the Reader showing that Richard Nixon had a secret account at the Cosmos Bank.

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ImJustABill: That's what La Costa was called for a long time. Ownership has changed since then. Best, Don Bauder

I was stiffed (no pun intended) big-time (many thousands of dollars) so many times by developers (many, if not all, with mob ties) that I quit accepting work for them and worked for government agencies and (so-called "do-gooder") NGO's (yellow-bellied sapsuckers) instead until I got tired of wise guy/gal shenanigans and retired. Some difference, but not much. One is expected to kiss the rings of both the mob and the government lackeys. The government agency and NGO "project managers" might not put out a hit on you, but they would cancel your contracts.

Most people have no idea how widespread criminal (if not always illegal) behavior is in the real world.

Twister: I think only a fraction of San Diegans realize how so much of the county was built with mob money. As Forbes magazine pointed out, Irvin Kahn, the developer of Penasquitos and parts of Clairemont, "was involved in numerous deals with principals related to organized crime." Kahn was a buddy of St. Louis Teamster lawyer and mob associate Morris Shenker. Kahn tapped the dirty money that helped build parts of the county. Central States Teamsters money (the mob) was big in developing parts of San Diego. La Costa and also Murrieta Hot Springs (actually, Riverside County) were big mob hangouts.

San Diego banker C. Arnholt Smith was snug with the mob, and not just in the financing of La Costa. (Full disclosure: I gave much information on the Cosmos Bank to both Forbes and Business Week. ) Best, Don Bauder

One of the biggest stiffers was a lieutenant of Kahn's, and somehow some Iranians ended up at one of their big parties.

I couple of Kahn's Chicago goons (right out of central casting--a Peter Lore type and tall, salt-and-peppered guy like a cross between Peter Lawford and Jack Palance [if you can imagine such a thing] )--got me in an elevator and told me that what I was doing wasn't healthy (criticizing the proposed "Tierrasanta" development). Talk about twisted irony when it comes to naming subdivisions (as in where the Devil himself has sprinkled the hills and dales with unexploded ordinance). Shoulda been called "Tierra del Diablo." I forget how many kids got blown up . . .

Is there no antidote for bullshit?

Twister: When someone connected with a developer who gets mob money, and runs with mobbed-up people, you pay more attention than if some nerd makes threats. Best, Don Bauder

It's only happened twice, at least in any direct way. It's nothing like Hollywood, that's for sure.

Twister: There is no antidote for b.s. -- none that I know of, anyway. Best, Don Bauder

Don, Maybe you're the one that told this story but I heard that when C Arnolt was interviewing accounting firms, the final question he asked each one was, "How much is 2+2?" All but one answered "4" thinking he was kidding around. The firm that got his business had answered, "How much do you want it to be Mr. Smith?"

Ken Harrison: That is an old story about accountants in general. But it certainly applied to C. Arnholt Smith. Best, Don Bauder

"In Jersey everything's legal, as long as you don't get caught"

So goes the saying and Dylan line from a Traveling Wilburys song. That's clearly the attitude of the mob but also I think increasingly the attitude of many powerful people. The philosophy is not to do what's fair and just but to do whatever you get away with. So for example a customer might not pay a contractor simply because the contractor has no way to force the customer to pay, i.e. a contractor might not get paid if they don't have any "leverage" on the customer. A business might not complete a service they committed to provide for a customer because the business decided they're not making profit on that service and their resources are needed elsewhere. A homebuyer or business, even with access to money, might walk away from a loan because they decided they're better off declaring bankruptcy. Goodness knows Wall Street firms and banks do whatever makes them money in the short run regardless of pesky ethical or fairness constraints.

I think you're right that a lot of activity which is or should be criminal goes on in the real world and a lot of it is swept under the rug.

ImJustABill: I have spent more than 45 years looking into mob money that is behind so-called legitimate businesses, and the laundering process. I have found that there will likely be as much or more anti-social activity (welshing on contracts, cheating consumers, running stock market swindles, fraudulent accounting, etc.) in the recycling of the mob money as in the mob's original stealing of it.

First, lawyers are hired to conceal the source of the dirty money. These are not clean lawyers. Then, the business executive that knowingly takes concealed mob money as capital is likely to be just as much a sociopath as the mobster. Best, Don Bauder

Ponzi: Yeah, but many pizza houses and Italian restaurants are mobbed up. The distribution of mozzarella cheese was once in the hands of mobsters. That may still be true. Best, Don Bauder

Twister: I have had good meals there. Otherwise, no comment. Best, Don Bauder

Why Adelson decided to come clean after all those years of denial is a question. By the time he made the admissions, hardly anyone cared. And few even know of the controversies surrounding La Costa and his other ventures.

Then there's the matter of the expose by Bergman that was printed in Penthouse. It was a rare guy who bought that mag for its investigative reporting, and I'd hazard a guess that few "readers" of the product actually read the stories. The attraction of that publication was something different. His story would have been more widely known and seen as more "respectable" if it had appeared elsewhere. But at that time many of the more mainstream mags didn't cater to free-lance investigative reporters.

Visduh: I didn't talk with Bergman about why he and his co-author chose Penthouse. My guess is that, just like any free-lance writers, they were looking for a publication that would pay handsomely. Penthouse was trying to make a name for itself at that time to compete with Playboy. So it was probably paying big bucks for free-lance pieces.

I think you are right that a lot of publications were probably not interested -- my guess is that they just didn't want to get into mob reporting. It was risky and probably too shocking for the publications' readerships. Mob influence was pervasive then, and many people simply didn't want to hear about it. Mob money then (and now) went deeply into the business and banking communities

I ran into that with Business Week. I was named the reporter who would cover the mob in business. I gave the magazine a great story that involved the Cosmos Bank, a slot machine company, and a couple of stock swindles. But it also involved a company that was large enough to be an advertiser. The regional vice president and some in top management of McGraw-Hill were good friends of the swindlers. The editor and publisher got completely conned, the story was pathetically emasculated, and I, disgusted, started looking for another job. However, Forbes -- then the gutsiest and most honest business publication -- contacted me five years later about the same bunch of mobbed-up swindlers and Forbes printed everything. Best, Don Bauder

Twister: I even was denied a routine pay increase because the Business Week editor and publisher -- along with top people at McGraw-Hill -- had been completely conned. Best, Don Bauder

At least transgressions are not bullets--yet you ran the risk repeatedly when they could have been bullets at any time. I honor and respect you in that you have stood up like a man against them rather than be their lackey.

Twister: For an investigative reporter, getting smeared comes with the territory. The lawyer for this bunch of mobbed-up swindlers was named to the SEC. I wrote a story about it for the U-T, which I was just joining.The lawyer went to a former U-T editor, then working for Nixon, and got the story killed. From then on, the mobbed-up lawyer was feeding hate material about me to this editor, who actually was rather naive, but a smooth backstabber. I had an interesting 30 years at the U-T. Best, Don Bauder

ADDED INFORMATION; I forgot to mention above that the former editor who worked for Nixon returned to the Union and then U-T as a top editor. He was one of two top editors at the Union and U-T that had worked for Nixon and returned. I tangled constantly with both of them during my 30-year career there. The repeated incidents with the mobbed-up lawyer who was a commissioner of the SEC was just one of the things that had me in hot water. Generally, they opposed our efforts to do tough reporting in the business section. Best, Don Bauder

Like I said, you've got a helluva book there. The only reason I ever read that Goddamed paper was because your column was in it. I usually tried to find a used one so I didn't have to pay.

I hoist my glass in your honor!

Twister: Many thanks, but no more books for me. I wrote one and it did well -- not great, but reasonably well. So I got a single in one at-bat. I will retire with a perfect batting average. Best, Don Bauder

Another of your dirty double-entendre: Freelance pieces in Penthouse. Haha, big bucks.

shirleyberan: You are the one with the dirty mind. The double-entendre you suggest never occurred to me. I have to congratulate you for your cleverness. I'm too mentally feeble at my age to have thought of that. Best, Don Bauder

Twister: I have a sweatshirt with "The Don" on the front. It wasn't intended to strike fear into others. The maker of those sweatshirts made other ones with names like "The Sam," "The Joe," etc. Best, Don Bauder

And most people would not know that right here in San Diego resides a gent who is known as the banker to the mob (or at one time, but things likely stay the same). Membership has its privileges.

Darren: Truth be known, there are many bankers to the mob. The big, well-known banks cater to the mob. Dirty money flows right through our banking system all the time.

Jerry The Banker: [concluding negotiation] Hey Tony, how's married life treating you?

Tony Montana: Better than you are.

Ponzi: Is Jerry the Banker a Swiss banker? (They have the title "Dr.") Or a Cayman Islands banker? Or a Liechtenstein banker? Turks and Caicos? Best, Don Bauder

Thanks Don. And thank you for a great article you authored!

Darren: San Diegans should know about the filthy money that was behind real estate development over several decades. Best, Don Bauder

Dirty money is still in play in San Diego. How does one think that average guys get millions to open tap rooms and beer-based bars along Coast Hwy.? How many $8 beers must one sell to re-pay a loan of a few mil? Could never be done with conventional lenders.

Ken Harrison: How about the laundered drug coming across the border and going into San Diego's construction industry. Best, Don Bauder

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