J. David Trustee to Ask Refund of $1 Million in Donations

Dozens of charitable and civic organizations that received more than $1 million in contributions from the fraud-ridden J. David & Co. will be asked to return those funds or face litigation, the trustee in charge of the J. David bankruptcy case said Friday.

Although the groups, which include the San Diego Symphony and the La Jolla Museum of Contemporary Art, accepted the money in “good faith,” the contributions by J. David (Jerry) Dominelli were actually used to “protect his fraudulent scheme, and we must take some action to recoup the funds,” J. David bankruptcy trustee Louis Metzger said in a court hearing.

Dominelli, who headed the high-flying investment firm until it fell into bankruptcy in February, 1984, was sentenced to 20 years in federal prison in June after he pleaded guilty to three counts of fraud and one count of income tax evasion.

Prominent Organizations

Included among the beneficiaries of more than $1 million in J. David largess were the La Jolla Museum of Contemporary Art ($110,000), San Diego Symphony (a reported $180,000), San Diego Opera ($100,000), Mandell Weiss Center for the Performing Arts at the University of California, San Diego, ($162,500), KPBS-TV, San Diego’s public television station, ($58,000) and Easter Seals ($6,000).

The trustee said he will send letters next week to dozens of nonprofit groups, which include some of San Diego’s largest cultural and civic organizations, asking them to attempt to reach an out-of-court settlement concerning the return of the contributions.

The donations were used to market the firm’s image and helped solidify J. David & Co.’s reputation as a successful investment firm, according to Metzger’s letter.

Recipients of J. David’s donations were generally caught unaware of the trustee’s announcement Friday.

Big Surprise

“Oh, brother,” said Hugh Davies, director of the La Jolla Museum of Contemporary Art, when told the museum might be asked to return a $110,000 contribution. “I’m not in a position to comment on it.”

The museum’s president, attorney Chris Caulkins, also would not comment on the trustee’s action.

Other organizations seemed understanding of Metzger’s position.

“I think that Metzger is obligated to go after any money he can recover, within reason,” said Bill Nelson, president of the San Diego Opera’s board of directors.

At the time of its demise, J. David & Co. had attracted about $200 million from about 1,500 investors, with promises of annual returns of up to 40%. In court, Dominelli admitted he operated a typical “Ponzi scheme,” whereby new infusions of cash were used to pay off existing investors.

Actual losses totaled about $82 million.

Claims by former J. David investors and creditors have far exceeded those amounts, however, prompting U.S. District Judge J. Lawrence Irving on Friday to warn that those who filed exaggerated claims may find themselves under federal investigation for perjury.

To date, nearly 5,300 former investors and creditors have filed claims for $1.8 billion.