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Tujunga Golf Project Finds Tycoon Deep in the Rough : Business: Japanese entrepreneur lost $340 million in Pebble Beach deal. He faces FBI money-laundering probe.

July 05, 1993|KARL SCHOENBERGER | TIMES STAFF WRITER

Japanese golf tycoon Minoru Isutani may have been vanquished at Pebble Beach, but now he's back.

Contrary to rumors of his financial demise, Isutani's corporate entity, Cosmo World, is still twitching in Los Angeles, where the controversial developer is forging ahead with plans to carve a championship golf course out of an ecologically sensitive wetlands tract.

For the Record
Los Angeles Times Thursday July 8, 1993 Home Edition Part A Page 3 Column 5 Metro Desk 2 inches; 58 words Type of Material: Correction
Japanese investor--Because of an error by the Reuters news service, a photograph of a Sumitomo Bank official was mislabeled in Monday's editions. The photograph was of Daisuke Saji, deputy general manger of Sumitomo Bank Ltd. of Tokyo, who represented an investment group that purchased the Pebble Beach golf complex last year. He mistakenly was identified as Minoru Isutani, the investor who sold the complex.
For the Record
Los Angeles Times Friday July 30, 1993 Home Edition Part A Page 3 Column 1 Metro Desk 4 inches; 132 words Type of Material: Correction
Japanese investor--A story July 5 said that a Beverly Hills restaurant owned by Minoru Isutani and his Los Angeles-based Cosmo World Corp. "failed." Under Cosmo World ownership, the Robata Restaurant operated at a loss. It subsequently was sold, and remains open under new management, with no ties to Isutani or Cosmo World. The story also characterized Isutani--currently under investigation by the FBI on suspicion of money laundering in connection with his purchase of the Pebble Beach golf resort--as "broke." The term referred to the $341-million loss taken on the sale of Pebble Beach as well as to the firm's cash flow problems. It was not intended to reflect on Isutani's personal wealth. Construction on Cosmo World's $200-million Four Seasons Kaupulehu golf resort in Hawaii ground to a halt in 1991, but resumed after Kajima Corp., the general contractor, took over financing of the project in a 50% partnership with Isutani's firm.

He is also fresh in the mind of the FBI, which is investigating Isutani for money laundering.

Isutani is the reclusive entrepreneur who lost a staggering $340 million when he bailed out of his investment in Pebble Beach golf courses early last year. Humiliated, broke and hounded by persistent allegations of a shady background and questionable business practices in Japan, he appeared to have closed shop in America and gone home for good.

But later this month, Isutani faces a critical hurdle in his efforts to obtain a federal environmental permit for the $50-million golf course he wants to build on an expanse of rocks and scrub at the mouth of Big Tujunga Canyon.

The Army Corps of Engineers is expected to rule soon whether the project along the crumbly, mud-sliding south face of the San Gabriel Mountains meets environmental standards and serves the public interest. Opponents of the development are hopeful that regulators will take into account questions about Isutani's financial solvency, as well as his bruised reputation.

Isutani's defenders claim that he has been the victim of unwarranted character assassination, which has helped keep the Big Tujunga project in a regulatory sand trap for six years.

Still, some of the more sensitive questions about Isutani's past remain unresolved, and a stigma of mistrust haunts the developer.

The FBI has confirmed that it is probing allegations that tainted funds may have been involved in the $841-million Pebble Beach purchase in 1990.

Rick Smith, a special agent for the FBI in San Francisco, said the bureau is "conducting an inquiry into allegations of federal criminal violations" in the deal, "one of which is money laundering."

In a report issued in December by a U.S. Senate subcommittee, Isutani's Pebble Beach deal was cited as an example of money laundering that investigators suspected had been hidden behind the wave of legitimate investment from Japan in the 1980s.

The Senate panel, which was probing Asian organized crime activities in this country, heard testimony from a confidential informant who said that one of Isutani's key financial backers in the Pebble Beach deal, Itoman Corp., had ties to the Japanese mob.

Contacted through his lawyer in New York, Isutani declined to be interviewed for this article. But he and his representatives in the past have emphatically denied any criminal associations.

"We're good at losing money, and we've made some bad business decisions over the years. But there's no evidence that Mr. Isutani has been involved in any money laundering scheme in any of his projects," protested Steve Timm, vice president of L.A. International Golf Club, the Cosmo World subsidiary that plans to build the golf course in Big Tujunga. "This is yet another character assassination."

Col. Robert Van Antwerp, district engineer for the Army Corps of Engineers, said Isutani's apparent financial distress and the allegations of money laundering will be taken into account when the decision is made on a federal permit for the Big Tujunga project.

Performance bonds can be required, he said, to guarantee the completion of the environmental mitigation and flood-control phases of the project, although not the clubhouse or golf course.

Suspected money laundering is a more difficult problem.

"We've been presented with the allegations, and I know he's under investigation," Van Antwerp said. "But we haven't consulted with the FBI at this point, and I don't know what they'd tell us."

Timm said he is hounded by questions about Isutani's reputation.

"It's making my job much more difficult," he said. "I have to answer these questions every week. I vehemently oppose (the allegations) and I let people know that unless anybody has evidence, we should be considered innocent. If we were an American company, this golf course would have been built by now."

Isutani, a former Osaka encyclopedia salesman who became a self-made millionaire, offers perhaps a typical profile of the contemporary Japanese entrepreneur.

He beat the system, which favors graduates of elite universities who join major corporations as team players. Individualists and outsiders, entrepreneurs like Isutani often emerge from the demimonde of Japan's shady real estate industry, which is rampant with speculation, fraud and underworld involvement.

And so Isutani, 53, who never went to college and who made his fortune in Japanese golf course development, brought his shadows when he jumped on the speculative bandwagon of U.S. real estate investment in the late 1980s.

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