From Financier to Fugitive . . . . . .to Defendant : J. David: A Year Later
It has been nearly one year since J. David & Co. was thrown into bankruptcy. The events since last Feb. 13 have had a dramatic impact on San Diego--from the plight of the investors who lost upwards of $100 million to that of a young, ambitious mayor fighting for his political life.
In these five articles, Bill Ritter, Times San Diego County business editor, updates the status of the J. David bankruptcy case, the ongoing federal investigation and the people affected by the company’s problems.
The door to bankruptcy trustee Louis Metzger’s office is unlocked these days, perhaps the most striking sign that the passions surrounding the J. David & Co. imbroglio have indeed cooled.
It was not always so.
Not during the frantic days one year ago when financier J. David (Jerry) Dominelli was still promising that a return of his investors’ money was just a week or two away.
Not during the months that Metzger was still trying to find J. David’s far-flung assets.
And not during the months that Metzger was hammering out controversial settlement agreements with key players in the J. David saga.
Today, visitors to Metzger’s office can simply walk in, without the security barriers of the past.
“It’s gone from being an emotional treasure hunt to an ordinary disposal of assets in a typical bankruptcy fraud case,” said one attorney close to the trustee.
The treasure hunt took Metzger and his attorneys all the way to Europe in an expensive search for a J. David fortune that had long since been frittered away.
Disposing of J. David’s assets isn’t nearly as glamorous as searching for them was, especially when some hope remained that there was a cache of cash left to be found.
It’s also not as emotional.
Days before J. David & Co. was forced into bankruptcy a year ago this coming Wednesday, investors stormed the investment firm’s plush La Jolla offices, futilely demanding to withdraw their money.
Some were not very pleasant. On at least two occasions, investors or their representatives entered the offices with guns.
Another time, former staff members say, three employees of one local company that invested more than $3 million in J. David showed up at the investment firm and demanded their funds from “petrified” J. David secretaries. “They were persuaded to leave” before any trouble erupted, recalled one staff member.
That was when people held out hope that there was some money left, somewhere. It was before Dominelli made a feeble attempt at exile on the tiny Caribbean island of Montserrat in April; before he admitted under oath in August that he either lost or had spent all of his investors’ funds, and before the stroke in October that has rendered him partly disabled and created doubt about whether he will ever be tried on the 25 federal charges he faces.
For Metzger, a former Marine Corps lieutenant general who in addition to handling bankruptcies has made a second career as a civic-minded volunteer, his once-highly visible J. David work has dwindled to nuts-and-bolts bankruptcy chores.
About $10.5 million has been recovered from the sale of J. David assets, and Metzger expects to realize $800,000 more from the sale of seven pieces of property. Of the incoming money, nearly $4 million was used to pay off encumbrances, and $2.5 million has been paid in attorneys’, accountants’ and other administrative fees.
Still uncertain is the fate of $25 million to $30 million in so-called “preference payments”--money paid to investors in the 90 days immediately before the firm’s forced bankruptcy. The trustee is suing to recover that money, but many investors are fighting, contending that they were simply getting their investments back.
Add it all up and the maximum recoverable amount is only about $40 million.
That is considerably less than the $100 million in deposits that authorities discovered by examining the J. David accounts recovered last summer from Swiss prosecutors.
Metzger is reluctant to estimate how much money may eventually be returned to J. David investors.
But he describes his first year as J. David trustee as one of “excellent progress.” The estate, he said, is “now ready to move to new areas.”
He is not hopeful, however, that the case will be wrapped up soon. “I’ve been directed by the court to move as rapidly as possible, but in the legal world that’s not very fast,” Metzger said.
The 68-year-old trustee’s last well-publicized bankruptcy case was the liquidation of MB Financial, the San Diego firm that bilked 1,200 people out of $21 million in an insurance premium scheme.
That case will end this spring --six years after the firm folded.
