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Noted restaurateur's recipe for disaster

INVESTING

Nancy Silverton of La Brea Bakery fame put her savings in a fund entrusted to Madoff.

December 24, 2008|Claudia Eller

It's a good thing Nancy Silverton still has her day job.

The La Brea Bakery founder and queen of L.A.'s restaurant scene is among the legions of investors who've lost their fortunes in the alleged $50-billion fraud attributed to New York financier Bernard L. Madoff.

The financial pain is bad enough, Silverton says, but what makes it worse is that she ignored the advice of her father and others who warned her to diversify her investments.

Instead, after walking away with a profit of more than $5 million from the sale of La Brea Bakery in 2001, Silverton put all of her money in a fund affiliated with a Beverly Hills advisor, who in turn entrusted the funds to Madoff.

"I was silly and I learned a lot," said Silverton, 54, who is an owner of Pizzeria Mozza and its neighboring Osteria Mozza in Hollywood. "I will never not diversify."

Silverton said she learned the bad news from her father when she called him at his office as she was driving up to Napa Valley about two weeks ago.

"He said, 'I want to tell you something. Everything's gone. We lost everything.' "

She was devastated. Silverton said she lost her entire nest egg, including her retirement fund and money she had set aside for her children and their educations.

"I need to reinvent my life," said Silverton, who co-founded the landmark Campanile restaurant and La Brea Bakery with her ex-husband, Mark Peel, and another partner. "To think you have a chunk of money is very comforting. Now, I'm just like 99% of the world. If I had to retire tomorrow, I could not."

She also needs to "build something" again for her three children, ages 15, 23 and 26. "They don't have any of that savings."

Silverton invested with Beverly Hills money manager Stanley Chais through a fund called CMG Ltd. Silverton's father, a former lawyer and real estate investor, and other members of their family also lost money through another Chais-related fund called "Caroline," she said.

Chais, 82, was named last week in a lawsuit filed in federal court in Los Angeles, alleging that he and his firm were involved in "false, misleading, unlawful, unfair and fraudulent acts and practices."

Chais could not be reached for comment.

Silverton concedes she is "a lot better off than a lot of people." But she noted that her income from the restaurants hinges on how well those eateries do. With the country in recession, she has to worry about "what happens next year."

Silverton works five nights a week behind the mozzarella bar at Osteria Mozza, the pricey Italian restaurant on the corner of Highland and Melrose avenues that she owns with star restaurateurs Mario Batali, Joe Bastianich and other investors.

She also keeps an eye on what goes on next door at her pizzeria -- also a popular entertainment industry haunt frequented by such power players as Jeffrey Katzenberg and his DreamWorks co-founding partner Steven Spielberg. Katzenberg and a charity funded by Spielberg also lost money in the alleged Madoff scheme.

Although Silverton is no longer an owner of La Brea Bakery, she said she still moonlights for the now-global company, developing new recipes and products.

She said she had passed up a number of other business offers, such as launching a line of cookware or doing a reality TV show. But with her financial setback, "I might be a little more open" to those opportunities in the future, said Silverton, who is currently writing her eighth cookbook.

Silverton grew up in Sherman Oaks and Encino and said she first realized her calling when she was a student at Sonoma State University cooking vegetarian dishes like "lentil loaf" for her dorm mates. She dropped out of college in her senior year to devote her full attention to cooking and baking.

After working at a Marin County restaurant, she signed up for a six-month course at Cordon Bleu in Paris to hone her skills. In the late 1970s, she landed her first major job as an assistant pastry chef at the tony Santa Monica restaurant Michael's, where she met Peel.

The two went on to Wolfgang Puck's popular Spago, then worked at New York's Maxwell's Plum for a brief stint before returning to L.A. and eventually opening Campanile and La Brea Bakery.

So, how could someone known as an obsessive personality and perfectionist, who struggled through 75 recipes before settling on the sourdough bread for which La Brea became famous, not have paid scrupulous attention to her investments and diversified?

"The returns I saw on paper were so lucrative, I thought, 'I'll take care of it someday. . . . I'll do it next month,' " Silverton said.

Silverton certainly isn't the only smart businessperson to ever get snookered.

"Some of the most brilliant financial minds in the world have consistently failed in their attempts to 'beat the market,' " said Neta Gagen, a certified financial planner with Inspired Financial in Huntington Beach. No matter how smart private investors may be, "they often get confused by the obtuse nature of the investment world."

And, if the returns look too good to be true, they probably are.

Silverton has learned her lesson. "The last $25 to my name," she said, "is very secure under my mattress."

--

claudia.eller@latimes.com

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