U.S. Indicts J. David Aide Over Role in Fraud Case
Nancy Hoover Hunter, whose political connections and whirlwind style helped the fraud-filled J. David & Co. lure about $200 million from wealthy Southern California investors, was indicted Tuesday by a federal grand jury on 234 counts of fraud, conspiracy and income tax evasion.
Hunter, 48 and now living in Santa Barbara, will surrender and plead not guilty at an arraignment this morning, according to her attorney, Richard Marmaro of Los Angeles. Bail will be set at $500,000, according to Assistant U.S. Atty. Gay Hugo.
If convicted, Hunter could face as many as 1,158 years in prison and nearly $48 million in fines.
“We remain confident that she will be vindicated after a trial,” Marmaro said Tuesday.
The 40-page federal grand jury indictment charges that Hunter worked side by side with J. David (Jerry) Dominelli in a scheme to defraud J. David & Co.’s 1,500 investors.
Lured by promises of annual returns of up to 40%, investors poured $200 million into J. David, believing in Dominelli’s purported knack of playing the volatile and unregulated foreign currency market. In truth, Dominelli did little if any trading for his investors.
Actual losses totaled about $82 million, much of that spent by Hunter and Dominelli on their lavish life styles and on charitable contributions. Hunter, considered J. David’s second in command, was Dominelli’s live-in companion.
Hunter and Dominelli, according to the indictment, operated a “Ponzi” type scheme, using new investor funds to pay off existing clients. J. David & Co. was forced into bankruptcy by a group of disgruntled investors in February, 1984.
Hunter’s indictment is the first federal action against any former J. David executive for the actual investment scam.
Dominelli pleaded guilty last year to four counts of fraud and income tax evasion, but those charges were in connection with events that followed the J. David bankruptcy. Dominelli is serving a 20-year prison sentence at the Federal Correctional Institution at Pleasanton.
Hunter also pleaded guilty in San Diego Superior Court to conspiring to channel illegal campaign contributions to former San Diego Mayor Roger Hedgecock. She was sentenced last May to three years probation, 350 hours of community service and a $10,000 fine.
A federal grand jury is continuing to investigate others who were once associated with the J. David firm, according to U.S. Atty. Peter K. Nunez.
Between 1979 and February, 1984, when the firm went bankrupt, Hunter, according to the indictment:
- Prepared fake “track records” purporting to show Dominelli’s profitable trading history.
- Lied to investors by claiming that they would receive annual returns of between 30% and 40%.
- Used investor funds for her own use.
- Signed false monthly investor account statements.
- Evaded federal income taxes by declaring only about $315,000 in taxable income from 1980 through 1983 on actual taxable income of at least $2.37 million during that period.
- Made false statements to the Commodity Futures Trading Commission about the existence of undisclosed commodity pools.
- Shredded some J. David documents and removed others during January and February, 1984, in the days preceding the firm’s demise.
Clients Included Hedgecock
The charges against Hunter include conspiracy, mail fraud, fraud by a commodity pool operator, making false statements to a federal agency, income tax evasion and aiding in the preparation of false income tax returns.
Hunter, married last year to Kenneth Hunter, a Santa Barbara businessman, has declined numerous requests for interviews.
J. David clients included wealthy investors from all over Southern California, several celebrities and elected officials, including former Mayor Hedgecock.
Hedgecock resigned from office last year after he was convicted of receiving illegal campaign contributions from Hunter and Dominelli. Hedgecock, now a radio talk show host in San Diego, was sentenced to one year in jail but is free on appeal.
Hunter, Dominelli and associate Tom Shepard subsequently pleaded guilty to conspiracy charges.
The Hunter indictment has long been anticipated. Although several former J. David investors have complained about the length of time it has taken to bring charges, federal prosecutors maintain that fraud cases typically take two to three years to indict.
The federal grand jury officially opened its investigation into J. David in February, 1984, according to Nunez.
Won’t Comment on Testimony
Dominelli recently testified before that grand jury. However, in a brief telephone interview from the prison Tuesday, he said he would not discuss his testimony.
Nunez said Tuesday that Dominelli did not implicate Hunter in his confession when he pleaded guilty in March, 1985.
When asked if Dominelli had implicated Hunter during his recent grand jury appearance, Nunez said simply, “No comment.”
Meanwhile, the J. David bankruptcy case continues, with the trustee in charge of liquidating the firm now in possession of about $12.5 million. Trustee Louis Metzger has sued to collect another $25 million in payments made to investors and J. David insiders in the 90 days prior to the firm’s bankruptcy.
Former J. David investors sued several legal and accounting firms that once represented J. David, and most of those cases have been settled out of court.
Earlier this year, Rogers & Wells settled for $40 million, the Chicago law firm of Abramson & Fox settled for $7 million, the Laventhol & Horwath accountancy firm settled for $6.5 million and First National Bank of San Diego settled for nearly $7 million.
