And he died penniless, says Mulvaney. Most white-collar criminals stash loot offshore and have plenty left after serving time. Not Smith. Shortly before he died, Smith called Mulvaney. Smith groaned that he didn't have anything to eat. "He asked if I would send $150," recalls Mulvaney. "I thought he had stashed money away somewhere. But he didn't have a frigging nickel."
He had built so much -- indeed, the Westgate hotel had resulted from a conversation with former President Dwight Eisenhower. The two had been drinking in the old El Cortez hotel. Schmucker remembers this conversation with Smith: "He said Ike asked if this was the best hotel in San Diego. Smith was so embarrassed for San Diego that he built the Executive Hotel and from there built the Westgate."
But Smith, in fact, was not all that bright. Mulvaney puts it gently: "He was a gambler. He couldn't stop buying. He was a good acquirer but paid little or no attention to ongoing operations."
Says Norman Roberts, longtime San Diego investment banker, "Arnie was hardly an intellectual giant, but Alessio, actually, was pretty smart."
The 1960s and 1970s produced other conglomerate dillies. Harvard Law graduate Walter Wencke ran unsuccessfully for Congress in 1960 as a Democrat -- with Republican Smith's blessings. Then Wencke concentrated on building a conglomerate, winding up with 178 corporations and 46 partnerships in trucking, agriculture, bookkeeping, hotels, and real estate, including half ownership of a Holiday Inn in San Francisco's financial district. He also managed to stash money in offshore tax havens and even tried to set up a bank in the Cayman Islands pirate cove, according to articles in the San Diego Union.
But in 1978, he was convicted of mail fraud and filing false statements with the government. He was scheduled to go to the slammer in October 1979, but he fled and hasn't been seen since. It's assumed he joined his money offshore.
In 1962, Norman Roberts's brokerage firm sold an initial public offering of a company that invested in emerging enterprises. In 1968, Charles "Red" Scott, an effervescent horse trader who hired only confirmed optimists, got control of the company and later changed its name to Intermark, recalls Roberts.
Scott's Intermark owned grimy industrial companies. It also got into consumer enterprises. But two of Intermark's biggest San Diego investments, Nurseryland and Liquor Barn, tanked. For a while, Scott controlled the big specialty retailer Pier I. He controlled half of San Diego's Mission West Properties. And he managed to get more than 25 percent of the stock of Fuqua, an Atlanta conglomerate.
But Intermark and a companion company were unable to service their debt. In 1992, they went into bankruptcy.
Scott went to Atlanta to head Fuqua, where he began feuding with management, according to a detailed 1993 article in Forbes. Soon, he left. However, the loquacious entrepreneur's cornball aphorisms are still quoted in collections of maudlin business sayings. For example, the Horatio Alger Association quotes Scott opining, " 'I will' beats 'IQ' every time."
A rapid-fire acquirer of the era was Richard L. Burns. He moved his R.L. Burns Corp. from San Bernardino to San Diego in 1977. He bought one of La Jolla's most opulent mansions and gave lavishly to charity, as San Diego Union articles of the time attested. His company bought Texas oil wells, a dangerous game for a non-Texan. Mark Twain once defined a gold mine as "a hole in the ground with a liar on the top." Burns didn't realize that Twain's wisdom applied in spades to Texas oil wells, recalls Roberts. The company failed ignominiously.
Undeterred, Richard L. Burns bought control of Nucorp Energy and went on another acquisition spree, buying oil field equipment with stock that had zoomed more than 2000 percent in two years, according to press articles of the day. But no company can sustain such an acquisition binge. The acquirer inevitably buys dogs. Nucorp plunged into bankruptcy in 1982, and the Securities and Exchange Commission charged Burns with doing what San Diego's Peregrine Systems did many years later: booking a sale long before the product had been made and delivered legitimately.
Peregrine Systems, a software company headquartered east of Del Mar, was a case of accounting fraud that facilitated a planned acquisition binge -- all tied in with massive insider trading. Eleven people have been criminally indicted for allegedly helping to inflate the company's revenue by 40 percent between 1999 and late 2001. Among many things, insiders are charged with using techniques such as giving kickbacks to customers to get them to commit to buying products and then ringing up a sale even though the products weren't sold.
Former Peregrine chairman and majority Padres owner John Moores unloaded $487 million of stock during the fraud period and $650 million worth overall. Although he spent much of his time at the company, where he had an office, and essentially controlled the company, according to civil suits, he and some self-purported "outside" directors have not yet been charged. The investigation is ongoing.
As the books were being cooked and insiders were bailing out, the stock ran up almost to $80. The higher stock price would be used as currency to make acquisitions, according to civil suits against former directors and managers. "The higher the price of Peregrine stock, the fewer the number of shares Peregrine would have to issue for each acquisition," says one civil suit filed in federal court here. Because one acquisition was expected to depress Peregrine stock temporarily, directors were told not to sell their shares, according to the civil suits. But they unloaded them anyway. The company went through bankruptcy and is now trying to recover.
During the 1990s, FPA Medical Management, a Wall Street darling headquartered in La Jolla, bragged that it could be a middleman between insurers and physicians -- promising doctors that it could relieve them of clerical costs by handling payments to health insurers. As the stock soared, FPA bought out the practices of many doctors all across the United States. The company reported steadily growing profits until it suddenly filed for bankruptcy in 1998.