Judge Signals Truce in Dispute Over Seized Documents

A sticky jurisdictional legal dispute was temporarily settled Monday when a federal judge said that the San Diego County district attorney can examine but must later return documents seized last week from a federally appointed liquidator of a failed real estate investment firm.

U.S. District Judge Earl B. Gilliam ruled that the district attorney did not have jurisdiction to seize a carload of books and records from the offices of Doerring & Associates, once a large investment firm that attracted more than $65 million from 800 investors. The company is being liquidated under the auspices of Thomas Lennon, a federal court-appointed “temporary disbursing agent.”

The district attorney’s office had argued that a previous federal order prohibiting seizure of Doerring records did not preclude county prosecutors, who are conducting a criminal investigation of the Doerring firm, from taking documents.

Deputy Dist. Atty. Tom McArdle said in court Monday that his office is investigating Doerring for “possible embezzlement” of about $3 million and that criminal prosecution is likely.

McArdle argued that his office needed original versions of Doerring’s books and records for its investigation. He also questioned the original documents’ “integrity” because two “suspects” in the criminal investigation--Kirk Doerring and Paul Donndelinger--are working for Lennon.

District attorney officials last Wednesday found an empty file folder in Donndelinger’s office labeled “DA Investigation,” according to Deputy Dist. Atty. Duane Shinnick.

Don McGrath, attorney for disbursing agent Lennon, said that his client needed the originals to proceed with the liquidation of Doerring’s real estate holdings. McGrath, upset by last week’s search and seizure of documents at the Doerring office, said in papers filed last week that the district attorney’s action may have hurt “potential sales of assets.”

McGrath said he will ask Gilliam to order the district attorney to reimburse the Doerring estate for legal expenses incurred by the seizure--which could total $10,000, according to one source.

Gilliam said Monday that federal jurisdiction prohibited the district attorney from confiscating the documents. As a compromise, Gilliam said that investigators could review and copy the documents but must return the originals to Lennon “after they’re done.”

He ordered both sides to “be cooperative” in an effort to avoid a recurrence of the expensive jurisdictional clash. McGrath previously had told the district attorney’s office that he didn’t want to spend Doerring estate funds to copy the documents without being under formal order to do so.

The prosecutor’s office interpreted McGrath’s insistence on a subpoena or search warrant as an unwillingness to aid in the investigation.