Grand Jury Indicts Silberman, 3 Others in Laundering Case

A federal grand jury returned an indictment Friday charging businessman Richard T. Silberman and three others with laundering $300,000 an undercover FBI agent had portrayed as profits from Colombian cocaine trafficking.

The indictment charges the four with two counts of laundering funds described as proceeds from narcotics sales, each of which carries a maximum penalty of 20 years in prison and a $500,000 fine.

It also charges Silberman and his alleged accomplices with one count of conspiring to launder money and avoid federal laws requiring the reporting of financial transactions involving cash sums of $10,000 or more. The maximum sentence on that charge is five years in prison and a fine of $5,000.

A powerful political fund-raiser married to San Diego County Supervisor Susan Golding, Silberman, 60 today, was arraigned with Chris Petti of San Diego and Darryl Nakatsuka and Jack Norman Myers of Los Angeles shortly after the indictment was handed down. The defendants entered pleas of not guilty before U. S. Magistrate Roger Curtis McKee and were directed to return to court Monday to schedule hearings on the myriad motions likely to precede their trial.

“Good luck, gentlemen,” McKee said as he concluded the brief proceeding before a standing-room-only crowd in the courtroom.

Immediately after the arraignment, prosecutors called a press conference to release the indictment. The 21-page document provides the formal charges the government needed to proceed to trial and largely mirrors information contained in an FBI affidavit unsealed 12 days ago.

U. S. Atty. William Braniff said the case illustrates the growing role people with power and status in the financial community are playing in the world of narcotics trafficking.

“I believe this indictment points out the potential danger that exists when members of society with influence in financial affairs offer their services, in this case to the underworld, for any illicit purposes they want,” Braniff said. “Narcotics has gotten to be big business. . . . They need the assistance of regular banking facilities and of otherwise legitimate businessmen to give the air of legitimacy to their trade.”

Without cooperation from prominent and well-connected men like Silberman, Braniff argued, “it becomes difficult (for drug dealers) to make international transactions” necessary to disguise the massive proceeds from major narcotics sales.

Braniff, noting that his office has assisted in the FBI’s investigation of Petti for more than two years, said its inquiry is continuing and may lead to more charges against the four defendants.

Silberman was joined in court Friday by Golding, who clasped her husband’s hand while awaiting the start of the proceeding. After the arraignment, Silberman--dressed in a dark suit and burgundy tie--strode briskly away by himself and drove off in a car parked in front of the U. S. Courthouse.

Golding and noted defense attorney Milton J. Silverman, who is expected to represent Silberman but has not yet been retained, remained behind but declined to discuss specifics of the case with reporters.

“I have to look at what the facts are,” said Silverman, perhaps best known for successfully defending Sagon Penn on charges stemming from his shooting of two police officers and a civilian. “I look forward to meeting these charges in court and not on the curb in front of the courthouse.”

Golding reemphasized her prediction that Silberman will be cleared of the charges that have rocked the business and political worlds where he has commanded respect for years: “I believe in my husband,” she said. “I believe he will be acquitted.”

Was Adviser to Governor

Silberman, a former close adviser to Gov. Edmund G. Brown Jr., was arrested April 7 in a “sting” involving an undercover agent who posed as a representative of Colombian cocaine dealers. Prosecutors say FBI agents stumbled upon Silberman during their 2 1/2-year-old investigation of Petti, a reputed mobster.

The detailed government affidavit, which draws heavily from wiretapped conversations among the defendants, says Silberman late last year told Petti, a longtime acquaintance, that he was anxious to launder some money. It says Petti then introduced Silberman to the undercover agent, leading to the alleged laundering of $300,000 provided by the agent in two deals in November and February.

The first deal allegedly involved $100,000 in government money, which Silberman intended to disburse through a complicated stock swap involving Yuba American Gold Ltd., a subsidiary of Yuba Natural Resources, which Silberman served as president. The affidavit says Nakatsuka, described principally as a courier for Silberman, picked up the money from the undercover agent at the Airport Hilton in Los Angeles on Nov. 30.

The second transaction involved $200,000 in federal money that the agent allegedly gave to Nakatsuka and Myers at the Hyatt Islandia Hotel in San Diego on Feb. 22. The affidavit says Silberman exchanged those funds for U. S. Treasury bonds.

At the time of his arrest in Room 719 of the Hyatt Islandia Hotel, Silberman allegedly was negotiating with the agent to launder another $1.1 million. The indictment says Silberman intended to transfer that money to a bank in Switzerland.

The indictment cites 92 “overt acts” said to constitute a conspiracy among the four men. It says they conspired to convert cash obtained from the agent “into property in a way in which the true owners of the cash would be hidden from law enforcement authorities.” Making dirty money untraceable is the art of money laundering.

The indictment says the men conspired to structure their investments in a way designed to skirt laws requiring that transactions involving $10,000 or more are reported to the federal government.

The two counts of money laundering are allegedly supported by evidence showing that the defendants thought the funds involved were profits from cocaine sales. Prosecutors alleged that transcripts of wiretapped conversations between Silberman and the agent show Silberman believed the money came from Colombian drug traffickers--who, according to the cover story provided by the agent, needed to hide it through investments in the United States. The affidavit says that Silberman frequently asked the agent not to mention the word “drugs” during their discussions.

‘Takes Two to Tango’

Under a new change in the law approved by Congress in November, a person need not be laundering actual drug money to be convicted. One need only believe that the funds’ source is illegal activity to be guilty.

Defense attorneys say the change gives the government unlimited power to conduct stings and entrap innocent victims. But, although they concede the amendment helped their cause, prosecutors said that people snared through undercover investigations must commit a crime before they are arrested.

“It’s not carte blanche,” Braniff said of the new change Friday. “It takes two to tango. This just permits one side (the undercover agent) to be legal.”

Under the old system, federal agents were forced to use “dirty” money in stings aimed at money launderers--far less convenient than using government funds. If the Silberman case had occurred before November, no money-laundering charges could have been brought under the circumstances described in government documents. Instead, the prosecution would have had to focus on conspiracy, Assistant U. S. Atty. Charles Gorder said.

Silberman has been free on $500,000 personal surety bond since April 8, and both Nakatsuka, 42, and Myers, 43, also have posted bail.

Petti, 62, remains in custody at the Metropolitan Correctional Center. Magistrate McKee has characterized Petti, who reputedly has ties to the Chicago Cosa Nostra crime family--as a danger to the community and ordered him held without bail. A hearing on Petti’s appeal of that order is tentatively scheduled for Tuesday.