Out of the Spotlight : The Other J. David Bankruptcy Trustee
Martin Goldberg has eluded the public spotlight this past year, despite his trustee’s job with San Diego’s most visible bankruptcy controversy of the past decade.
But Goldberg doesn’t mind.
He is the other trustee in the complicated and very public J. David & Co. investment fraud imbroglio.
While all of the public attention has been riveted on J. David & Co. trustee Louis Metzger’s attempts to account for as much as $100 million from about 1,000 J. David investors, Goldberg has plodded along as trustee of J. David Securities Inc., a registered broker-dealer that was a separate legal entity from the J. David empire of companies.
Metzger’s job has been keyed by court appearances, press conferences, angry investors and zany auctions to sell off J. David’s lavish holdings.
By comparison, Goldberg is to Metzger as Ed Luther was to Dan Fouts.
But unlike Luther, Goldberg doesn’t protest being on the sidelines. He rather enjoys it, and even refused to have his picture taken for this article.
“He’s very proud of the fact that he doesn’t seek publicity and that J. David Securities has stayed out of the press,” said one attorney who has worked with Goldberg.
Little Excitement
Indeed, Goldberg admits that, unlike Metzger, he hasn’t “found any examples of fraud or of monies disappearing,” he said in a recent interview. “I haven’t worked with Jerry (Dominelli) at all and I haven’t worked (closely) with the U.S. attorney in this case.”
(While there was no apparent commingling, authorities believe that financier J. David (Jerry) Dominelli kept J. David Securities afloat by routinely pouring money in from his other companies. In addition, some brokers are known to have received commissions by referring their stock clients to Dominelli’s foreign currency trading--the so-called interbank.)
Although Goldberg’s job doesn’t parallel Metzger’s for intrigue and excitement, the nuts and bolts of the two trustees’ jobs are remarkably similar.
Goldberg has identified and recovered various assets, is struggling with other entities to release funds once deposited by J. David & Co., and may file suit to collect on monies spent that he believes rightfully belong to the bankruptcy estate.
So far, Goldberg has only $300,000 in the bank, although there may be as much as $1.2 million in assets yet to be recovered, he said.
There is a $330,000 reserve bond in Minneapolis for J. David Municipals, which was merged into J. David Securities before the collapse.
And there is the matter of $900,000 in promissory notes owed by about one dozen former J. David Securities employees that was “forgiven” by the firm’s directors on Feb. 16, 1984.
Goldberg would not discuss the $900,000 in forgiven notes, except to say that it is now “being reviewed for litigation.”
A large portion of J. David Securities’ assets were sold--before Goldberg was named trustee--to Rooney Pace, a New York investment firm.
Furnishings Sold
Rooney Pace bought the furnishings in J. David Securities’ five offices for $325,000, although the assets actually cost about $1.2 million.
The transaction sparked cries from J. David Securities directors that the sale by Earl J. Cantos, the interim J. David & Co. bankruptcy trustee, was a “giveaway” and prompted directors to file for bankruptcy, separate from the rest of J. David’s other companies.
The legal distinction is important because although Dominelli owned 90% of J. David Securities, he was not a director and had no voting rights on board matters.
Dominelli’s 90% ownership passed to the trustee, who later assumed control of J. David & Co.
The snag was that J. David Securities directors believed that the J. David & Co. trustee would have a conflict of interest if he were in control of the broker-dealer. Consequently, Goldberg was appointed, pledging to work closely with trustee Metzger.
Goldberg still faces a sticky legal situation, according to sources familiar with the case. Goldberg could argue that the J. David & Co. trustee had no legal right to sell the furnishings to Rooney Pace because the firm was not under that trustee’s control.
“If Goldberg tries to go after the $900,000 in notes without (protesting) the Rooney Pace sale, then the defense of the brokers will be that the notes were forgiven (in order) to approve the sale,” said one attorney familiar with the sale.
“We don’t know what kind of benefit we might get for the estate if we were to carefully go over (the Rooney Pace) transaction and then make a claim against the Dominelli estate,” conceded Joel C. Estes, Goldberg’s legal counsel. (Ironically, Estes is a former legal partner with U.S. District Judge J. Lawrence Irving, who is overseeing the J. David bankruptcy liquidation case.)
Goldberg, 49, is no stranger to controversial bankruptcy cases.
He was the trustee in the bankruptcy of Doncom and D&B; Investments, the La Mesa commodity firms owned by jailed financier Bernard Striar that bilked hundreds of unsuspecting investors out of $10 million.
Goldberg also served as trustee in the bankruptcy cases of Baron Buick and financier Catherine Wencke, and he was the trustee’s controller in the bankruptcy of Yellow Cab.
