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By Christopher Noxon

LOS ANGELES (Reuters) - From the outside, the Ambassador Hotel looks like so many other crumbling monuments in central Los Angeles. Razor wire curls around the perimeter. Rain water collects in the empty swimming pool. Stray cats roam the overgrown gardens.

But the Ambassador was once the city's most famous hotel, a favorite stopover for some memorable figures.

Richard Nixon polished his famous 1952 "Checkers" speech, in which he defended himself against accusations of wrongdoing, in a top floor suite. Barbara Streisand made her West Coast debut in the hotel nightclub The Cocoanut Grove. And on a June evening in 1968, Sen. Robert Kennedy was shot and killed while walking through the hotel pantry.

Now the partnership that owns the Ambassador is preparing to flatten the hotel to make room for a huge mall meant to attract retailers such as Wal-Mart and Home Depot.

The $250 million project, called Wilshire Marketplace, is the kind of huge commercial complex that has become common on the suburban edges of the city.

But here in central Los Angeles, where historic buildings sit amid densely populated, mostly poor neighborhoods, the project has ignited fierce debate over the need for economic revitalization and the preservation of Hollywood history.

"This project is essential for the revitalization of this community," says Los Angeles City Councilman Nate Holden. "We must move forward to create economic opportunities and jobs. There's no historic value to that building at all."

But local preservationists say the project will trade a rare remnant of history for a bland slice of suburbia.

"This city doesn't need another generic mall," says Mitzi March Mogul, president of the Los Angeles Art Deco Society.

"I don't understand how cities like New York and Paris and Rome manage to maintain what makes them unique for thousands of years and still accommodate a modern and growing population, but here in L.A. we tear down our monuments to build malls. It's sickening."

Fighting over the property began soon after the last guest checked out in 1989. Business had suffered a slow decline from its heyday, when visitors mingled with starlets under fake palms in the Cocoanut Grove or browsed through a floor of shops that included jewelers, tailors and a hotel post office.

When the doors finally closed, a development partnership led by tycoon Donald Trump announced plans to raze the hotel to make room for the tallest skyscraper in the world.

But plans came to an abrupt halt when the Los Angeles school district declared eminent domain on the 23-acre property in the hopes of building a high school.

Three years later, the district dropped its plans and asked for its $48 million deposit back. By then, Trump and his partners had already spent the money to pay off the mortgage. The district sued to recover its deposit, and the partnership sued to cover $50 million in damages they claim resulted from the district's aborted acquisition.

Trump walked away from the project in August, leaving partners S.D. Malkin Group and Amec Corp. with plans for the commercial center. Work cannot begin until the legal action with the school district is settled, says attorney James Colbert, who represents the school district.

"The district will foreclose on the property if we don't get our deposit back," he said. "We've been waiting five years for this money. The uncertainty is very damaging to us."

Meanwhile the hotel is in limbo, empty except for the dozen or so cats left by the former building manager to control rodents, and a skeleton staff in an office deep inside the hotel that rents parts of the property.

The Ambassador provides an ideal training ground for special squads from the Los Angeles police, FBI and other law enforcement agencies. A few times a month, teams of officers stage mock assaults in the six-floor, 500-room main building.

More often, the hotel is rented out to film crews, who fix up sections to resemble everything from the White House to a New York tenement. The Cocoanut Grove was rehabbed for a recent HBO feature called "The Rat Pack," while Arnold Schwarzenegger rode a horse through the lobby in "True Lies" and Morgan Freeman squared off with a reporter in "Deep Impact."

In all, more than 80 productions are shot on the grounds every year, leaving behind scattered rooms of plush carpet and vivid wallpaper in a hotel where most walls are cracking or peeling.

One area that has been declared out-of-bounds to movie crews is the hotel pantry. Managers installed plywood walls around the area where Kennedy was shot after souvenir-seekers pulled up pieces of the floor where his body fell.

As it stands, the Ambassador is a gaping hole in the center of the community, says Gary Russell, Executive Director of the Wilshire Center Business Improvement Corp. With more than a million people living and working within three miles of the hotel, Russell said there is a huge market for the kinds of services the new project offers.

"A grand hotel just doesn't serve our community," he said. "What we need now is retail and services that currently we have to travel a great distance to find."

The project will provide a center for an unfocused community, said Stephen Lawler, the Wilshire Marketplace Project Manager. "I understand that this place was a very important place for a lot of people," he said.

"But the Ambassador stopped being the place it had been long before it closed. It's time to get on with this project and put the past to rest."