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Ex-Financier, Jail Behind Him, Recalls His $21-Million Downfall

San Diego County Business Editor

Joe Bello had spent most of his lunch hour explaining how things went sour at his once-prosperous MB Financial, about how he hadn’t intended to defraud his 1,200 clients who invested $21 million, and about how he had coped with nearly 40 months in federal prison after he pleaded guilty to two counts of fraud in 1979.

After lunch, Bello cracked open a fortune cookie. He smiled.

“You are faithful in the execution of any public trust,” it read.

The irony was not lost on Bello but he turned serious and a bit morose.

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“I’d love to be part of the growth management of this city but I blew it,” he said. “I’d be an asset to (this community) because you know damn well I won’t make any (more) mistakes. I have more compassion than ever before.”

Joe Bello has maintained a very low profile during the nearly three years he has been out of federal prison, as opposed to his high profile during the late 1970s, when his firm’s celebrated annual returns of 40% to 120% lured hundreds of investors, including dozens of San Diego police officers.

But while Bello has been shunning the spotlight, memories of him and his firm have been resurrected during the past year’s hoopla surrounding the collapse of the fraud-ridden J. David & Co. investment empire, which attracted about $200 million from 1,500 investors.

There are several common threads between the two cases:

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- MB Financial’s liquidation bankruptcy is about to end, with investors receiving about 42% of the $9.5 million in outstanding claims (some investors retrieved their money before the firm’s collapse).

Concurrently, the criminal case involving J. David (Jerry) Dominelli is winding up. Dominelli will be sentenced today, perhaps to as much as 20 years in prison, after pleading guilty to four counts of mail and wire fraud as well as tax evasion.

- Both MB Financial and J. David & Co. were described in their own times as San Diego’s largest “Ponzi” scheme, with existing investors paid back from new investor funds.

And each has a similar cast of characters. For example:

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- Former Assistant U.S. Atty. Michael Lipman prosecuted the Bello case and launched the federal government’s investigation into J. David & Co. before entering private practice in 1983.

- Assistant U.S. Atty. Robert D. Rose, the chief prosecutor in the J. David investigation, assisted Lipman in the Bello case.

- Internal Revenue Service agent David Chell investigated and untangled the complicated financial webs of both MB Financial and J. David & Co.

- Retired Marine Corps Lt. Gen. Louis Metzger is the court-appointed bankruptcy trustee in charge of liquidating both MB Financial and J. David & Co.

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- U.S. District Judge William B. Enright was the jurist who sentenced Bello in 1979 and he will mete out punishment today for Dominelli. (Bello’s seven-year sentence was considered strict at the time. By contrast, sources close to the J. David case speculate that Enright may sentence Dominelli to the maximum 20 years.)

Comparisons between MB Financial and J. David anger Bello and his attorney.

“When the history of San Diego is written, Joe shouldn’t be lumped in with the Dominellis,” maintained his lawyer, Al Pitcaithley.

“Our intention was not to defraud,” Bello insisted, although prosecutors maintain that the MB Financial case was an open-and-shut Ponzi scheme.

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Indeed, when he pleaded guilty to mail fraud and income tax evasion as part of a plea settlement in September, 1979--he had been indicted on 35 counts of fraud the previous May--he admitted that he had used investors’ funds for his own personal use and had failed to report that money to the IRS as taxable income.

Information garnered by an FBI wiretap had revealed that Bello reportedly bragged about having underworld connections, and that he had told government informants that his firm was a front for loan-sharking, narcotics trafficking and money laundering.

According to financial documents compiled by federal prosecutors, incoming investors’ funds represented 95% of MB Financial’s revenue, meaning that Bello and his firm did little except to accept clients’ money.

Using a computer, investigators analyzed 25,000 checks written on 20 MB Financial checking accounts. “It was the single strongest case I’ve ever seen,” recalled then-prosecutor Lipman.

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After factoring out the paper profits, authorities discovered only about $9.5 million in recoverable assets and cash. Of that amount, bankruptcy trustee Metzger now believes he will return up to 42% to investors--considered a relatively large recovery, according to bankruptcy attorneys.

Bello’s life style may not have been as opulent as Jerry Dominelli’s but he rarely denied himself the creature comforts.

He drove fancy cars, including a Ferrari and a Rolls Royce, and had two yachts, one 65 feet long, the other 85 feet.

His house, while less palatial than Dominelli’s sprawling casa in Rancho Santa Fe, had a sweeping view of Mission Bay.

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Unlike Dominelli, Bello had a reputation as a womanizer. And Bello, unlike Dominelli, was not known for his philanthropy. In fact, Bello once gave a $1 donation to the local B’nai B’rith, according to a source close to the MB Financial case.

Joseph Anthony Bello was born in 1941 in New York. Raised in what he describes as a lower-middle-class family, he attended a Catholic grammar school before his family moved to San Diego in 1952. He attended St. Augustine Catholic High School and enrolled in what then was the University of San Diego’s College for Men.

Bello was kicked out of USD in June, 1961, after only four semesters, for “unsatisfactory grades,” according to school records.

He eventually received a degree; while in prison, Bello said, he earned an MBA from American Western University, a correspondence school in Tulsa, Okla.

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Bello started selling life insurance at seminars for Navy personnel in the early 1970s. Because the sailors typically didn’t have the cash to pay the up-front premiums, Bello would loan them the money they needed to close the deals.

He would collect his commission and the sailors would pay him back, with interest, when they received their paychecks.

Bello broadened this “insurance premium financing” concept when he and an associate, Charles Miles, formed MB Financial Inc. in 1974. Clients were offered high returns if they invested in up-front insurance premium payments.

But the legitimate financing lasted only a few months, according to government prosecutors.

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MB Financial didn’t limit itself to insurance premium investments. It also offered clients real estate investment, development and construction services, as well as legal advice and estate planning.

The typical investor contract was a simple four-paragraph letter, which explained in confusing double-talk that if MB Financial were to default on the amount invested, it would pay “directly to you any and all monies due, including any and all attorney fees, court costs and collection fees . . . “

The contradiction that MB Financial would guarantee payment of any funds it defaulted on was apparently lost on investors, who willingly signed the contract.

It took the state Department of Corporations until 1977 to order Bello and MB Financial to stop selling their “investments” because they were unregistered securities.

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But federal investigators didn’t get wise to MB Financial until an FBI informant tipped them to potential fraud at the firm.

Government wiretaps and a bug in MB Financial’s office followed, through which authorities discovered investments by several well-known San Diegans, including a member of the Fletcher banking family and Roberto DePhilippis, owner of the Butcher Shop restaurants in Mission Valley and Chula Vista, as well as the Filippi’s chain of pizza restaurants. In addition, dozens of San Diego police officers invested in the scheme after being lured by one of Bello’s top salesman, a former policeman.

DePhilippis had about $300,000 invested in MB Financial. When he decided to get his money out, he sent his son to Bello’s firm to withdraw the funds, reportedly with instructions to immediately deposit the money in the bank.

But the son stuffed the checks in his pocket and headed to the golf course for the rest of that day, according to sources close to the case.

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When federal authorities found out hours later that DePhilippis had pulled his money out, they became concerned that the investigation’s cover had been blown and worried that a “run on the bank” would ensue.

Authorities quickly obtained search warrants to seize MB Financial’s assets and freeze the firm’s bank accounts.

When DePhilippis’ son went to the bank the next morning to deposit the checks, he was informed that the MB Financial checking account had been closed.

Bello admits remorse but says he believes he was the victim of circumstances beyond his control.

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“Maybe it’s naive but I got wrapped up in my own personal world,” he said in a recent interview. “I let the company be run by a vice president and an accountant, and I couldn’t honestly tell people in the last year what was happening financially.”

Money was coming into MB Financial “faster than we could do anything with it,” he recalled. “There was no way we could make all that money workable . . . I realized we had a problem.”

He insisted that his firm “had not lost a dime” when the government froze its assets and bank accounts. But he stops short of predicting that his firm could have survived financially.

“If they would have left me alone, I’d love to say everything would have been hunky dory, but I don’t know.”

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Bello now says that he wanted to go to trial on his indictment, but that his attorney at the time advised against it. He spent $100,000 on attorney fees--half in cash and half with a note payable.

When the case ended before a trial, Bello tried unsuccessfully to get some of his money back. But his attorneys balked, and they later received a judgment demanding payment of the $50,000.

Bello has yet to pay it.

Nor has Bello paid a $500,000 stipulated judgment owed the government as part of his plea bargain agreement. Any future fortune made by Bello would likely be eaten up by the lawyers’ fees and the judgment.

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“If I ever made any money, I would pay it,” he said matter-of-factly. “People tell me I’m crazy, but it would be the right thing to do.”

Despite his assertion, Bello said he “can’t own any property because it would be seized” to pay the money he owes.

He now rents a home in a section of San Diego he declined to identify and works for a building maintenance firm he also declined to identify.

Bello’s job involves computerizing the firm’s accounting records.

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“I try to keep them away from the pitfalls,” he said. “I tell them what they can or can’t do, not because I’m so smart, but because of my experience.”

When he was released from prison in early 1982--he served half his time at a prison 120 miles east of Tuscon and half at a facility 30 miles northeast of Barstow--he went to work for a friend’s ship-repair yard in San Diego.

It wasn’t a hard decision to return to San Diego because his family--his wife, mother and 18-year-old son--is here and his 26-year-old daughter lives nearby in Orange County, he said.

But more than that, Bello’s return was his way of showing that he is “damn persistent . . . (and that) my intention was never to run away with anybody’s money.”

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Instead, he insisted, “I stayed here, I fought, I took my licks and punishment--39 months, 21 days right to the penny.”

Nonetheless, he said he will remain secretive about his address and his employment. His wife, who works at a local shipyard, uses her maiden name.

“When people find out they have an ex-felon working for you they sometimes stop doing business with you. How unfair. But who says life’s going to be fair?”

He said that he feels sorry for the investors who lost money in MB Financial but that “the No. 1 problem with people who invest is the word ‘greed.’ That’s the common denominator.”

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The bottom line is that “I’d like to be left alone,” Bello said. “I just want to live. You can only express remorse; people can believe it or not. I know what I feel.

“I feel terrible about what happened. But it’s like the United States apologizing for dropping the bomb on Japan. How many years can they do that?”


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