New Falsehood Uncovered : Dominelli Is Competent to Stand Trial, Judge Says

A federal court judge on Monday found jailed financier J. David (Jerry) Dominelli competent to stand trial on a 25-count federal grand jury indictment charging him with perjury and fraud in connection with the bankruptcy of his J. David & Co. investment firm.

U.S. District Judge William B. Enright, after reviewing psychiatric reports concluding that Dominelli has made “remarkable improvement” from the stroke he suffered Oct. 2, set a trial date of April 2.

Meanwhile, The Times has learned that Dominelli late last month falsely claimed that there may be as much as $2.5 million hidden in an account at Bankhaus Deak & Co. in Vienna, Austria.

Attorneys for J. David bankruptcy trustee Louis Metzger traced the financier’s assertion--first brought to their attention by former J. David executive Nancy Hoover--but found the “usual result--it wasn’t true,” according to a source close to the case.

Metzger on Monday confirmed that his representatives queried Bankhaus Deak senior officials about the supposed $2.5 million deposit in a letter dated Feb. 5.

On Feb. 11, Bankhaus Deak chief executive officer Erich Stoeger and assistant vice president Rudolph Reitter responded, “reaffirming that there wasn’t such an account,” Metzger said.

Ronald S. Orr, an attorney representing Metzger, went to Bankhaus Deak April 12 as part of the trustee’s six-day European search for $112.8 million in investors’ funds that Dominelli had sworn under oath existed in foreign banks. Dominelli had claimed there was $24 million in Bankhaus Deak.

(Dominelli made those sworn claims exactly one year ago Monday, as a condition of release from his first jail stay--10 hours in federal custody for not cooperating with the J. David bankruptcy trustee.)

Dominelli has since admitted that his latest claim was just another in a long line of falsehoods.

“I lied to Hoover . . . there is no money in Austria,” according to a hand-written note signed by Dominelli and seen by The Times.

Assistant U.S. Atty. Robert D. Rose, who is leading the ongoing federal grand jury investigation of J. David, would not comment on the note. Metzger said he knew nothing of the note’s existence.

D. Gilbert Athay, Dominelli’s attorney, was given a copy of the note in court Monday, as was Michael J. McCabe, attorney for Parin Columna, Dominelli’s co-defendant. Neither Athay nor McCabe could be reached for comment late Monday.

At Dominelli’s competency hearing Monday, two court-appointed psychiatrists--Mark A. Kalish and Murray H. Rosenthal--agreed that the 43-year-old former financier was competent to stand trial and assist in his own defense.

Kalish wrote in his report that Dominelli has demonstrated “marked improvement in the fluency of his speech.”

The competency evaluations, ordered by Enright in November, said that Dominelli understands the charges against him and knows that it is “most likely that he will be found guilty on at least some charges.”

Kalish used a 13-point test developed at Harvard Medical School for determining a defendant’s mental competency to stand trial.

However, Dominelli refused to answer questions by Kalish that dealt directly with the grand jury indictment, “on the advice of counsel,” the report said.

The former financier receives speech therapy five times a week and often communicates with a hand-held, electronic communicator, which is much like a miniature typewriter.

Dominelli socializes more frequently than in the past with other inmates and the staff at the Metropolitan Correctional Center, where he has been held since May 1. “His level of socialization is greater than was the case prior to his stroke,” Kalish wrote.

Dominelli’s mood, however, “continues to be significantly depressed,” Kalish concluded.

Dominelli also was examined by Dr. Geoffrey A. Smith, an ear, nose and throat disorder specialist, who determined that Dominelli did not require hearing aids, as previously believed.

Smith noted that it “appeared that Mr. Dominelli was embellishing the degree of his hearing impairment,” according to Kalish’s report.

Judge Enright in November had ordered Dominelli fitted with a hearing aid after doctors reported that he had congenital hearing loss in both ears.

Legally, Dominelli likely will be indicted on further charges of securities, mail, tax and wire fraud in connection with events prior to the J. David bankruptcy. Any new grand jury charges probably would be issued after the April 2 trial, according to a source familiar with the case. That trial is expected to last about two weeks.

Enright on Monday also rejected a motion by Columna to dismiss his eight-count indictment because of discriminatory prosecution. A motion to separate the two cases--Dominelli is expected to testify on Columna’s behalf--is set for March 25.

The setting of a trial date takes place more than one year after the J. David & Co. empire was forced into bankruptcy on Feb. 13, 1984, by a group of disgruntled investors. Federal authorities have tabulated the total amount of funds invested in J. David by nearly 1,000 people at $100 million.

Metzger has discovered that much of the money that Dominelli is accused of losing was spent on the lavish life style shared by both Dominelli and Hoover.

To date, Metzger has retrieved nearly $11 million from the sale of various J. David assets, and expects to realize $800,000 more from the coming sale of seven pieces of property.

Metzger has paid out more than $4 million in liabilities and mortgages against those assets, as well as about $2.5 million in legal, accounting and administrative fees.

Still uncertain is the fate of up to $30 million in funds paid out to investors in the 90 days preceding the J. David collapse. Although federal bankruptcy law requires that that money be returned, only about $3 million from 150 investors has been recovered by the trustee. An additional 200 investors have refused to return the funds, arguing that they deposited and withdrew their money from J. David much as they would from a bank, so typical bankruptcy laws do not apply.

Metzger has said he will sue to recover the funds.

Dominelli also faces state perjury and conspiracy charges in connection with charges that he helped funnel tens of thousands of dollars into San Diego Mayor Roger Hedgecock’s 1983 election campaign. He will be arraigned on those charges Monday.