Hoover Named in J. David & Co. Indictment

Nancy Hoover, whose political connections and social style helped the fallen J. David & Co. attract $200 million from Southern California investors, was indicted Tuesday by a federal grand jury on 234 counts of fraud, conspiracy and income tax evasion.

Hoover, 48, the former mayor of Del Mar, has remarried and lives in Santa Barbara. She 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.

The maximum penalty on the 234 counts is 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 indictment charged that Hoover worked side-by-side with J. David (Jerry) Dominelli, now serving a 20-year prison sentence, in a scheme to defraud J. David & Co.’s 1,500 investors.

Lured by promises of annual returns of up to 40%, and Dominelli’s supposed skill in playing the volatile and unregulated foreign currency market, investors poured millions into J. David. Last year, Dominelli confessed that he did little, if any, trading for his investors.

Actual losses totaled about $82 million, much of that spent by

Hoover and Dominelli to support their lavish life style and on charitable contributions. Hoover was regarded as the second in command at J. David’s--and was Dominelli’s live-in companion.

Hoover and Dominelli, according to the indictment, were actually engaged in a “Ponzi” scheme that used new investors’ funds to provide a payoff for old clients.

J. David & Co. was forced into bankruptcy by a group of disgruntled investors in February, 1984, after the firm’s checks began to bounce.

In April, Hoover pleaded guilty to state charges of conspiring to funnel thousands of dollars into Roger Hedgecock’s 1983 mayoral campaign. She was sentenced to three years’ probation, ordered to perform 350 hours of community service and assessed a $10,000 fine.

Dominelli pleaded guilty last year to four federal counts of fraud and income tax evasion. He is now serving a 20-year sentence at the federal prison at Pleasanton, Calif.

A federal grand jury is continuing to investigate others once associated with J. David, according to U.S. Atty. Peter K. Nunez.

Among the previously reported targets are Mark Yarry, J. David’s international money-raiser who lives in London; Mike Clark, a former partner with the law firm of Wiles, Circuit & Tremblay; Norman Nouskajian, a former partner with the Rogers & Wells law firm, and Bob Smith, who was a salesman at J. David.

In addition, Internal Revenue Service agents in recent months have examined the monthly account statements J. David mailed to its investors. That investigation, according to sources close to the case, centers on whether some investors used their J. David accounts to launder money and avoid paying federal income taxes.

According to the indictment, between 1979 and February, 1984, when the firm went bankrupt, Hoover:

- Prepared fake “track records” showing Dominelli’s profitable trading history.

- Lied to investors by claiming they would receive annual returns of 30% to 40%.

- Used investors’ funds for her own use.

- Signed false monthly investor account statements.

Evaded federal income taxes by declaring about $314,000 in taxable income from 1980 through 1983 on actual taxable income of at least $2.37 million.

- 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.

In addition, the indictment says Hoover advised Dominelli that he should not clear his foreign currency trading through J. David Securities, J. David & Co.’s broker-dealer, because the brokers there would be able to construct their own version of his track record. That possibility “could be bad,” the indictment quotes Hoover as saying.

The charges against Hoover 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.

More than 220 J. David investors are listed in the indictment as having received account statements from Hoover. Among them are former shipyard owner Art Engel, former newspaper publisher Lowell Blankfort, Municipal Court Judge Victor Bianchini, marathon runner Frank Shorter, and New York Mets baseball player Ray Knight.

Other Clients

Other J. David clients included celebrities and political figures, including Hedgecock, along with wealthy investors from throughout Southern California.

Hedgecock resigned as mayor of San Diego last year after he was convicted of receiving illegal campaign contributions from Hoover and Dominelli. Now a radio talk show host, Hedgecock was sentenced to one year in custody but is free on appeal.

Hoover, Dominelli and political consultant Tom Shepard subsequently pleaded guilty to conspiracy charges.

Hoover’s indictment on the federal charges has long been anticipated. Several former J. David investors and some newspaper columnists have complained about the length of time it has taken to bring charges, but federal prosecutors maintain that indictments in fraud cases typically take two to three years.

Federal authorities were first tipped to possible wrongdoing at J. David & Co. in 1982 by an employee. The investigation was apparently dropped, although authorities kept an eye on the investment firm. According to the indictment, two FBI agents interviewed Hoover in September, 1983. Details of that interview were not disclosed.

Investigation Opened

The federal grand jury officially opened its investigation into J. David in February, 1984, according to Nunez.

Dominelli recently testified before a federal grand jury, but in a brief telephone interview Tuesday said he wouldn’t discuss his testimony.

“I have no comment,” Dominelli said when told of Hoover’s indictment.

Nunez said Tuesday that Dominelli, when he pleaded guilty in March, 1985, did not implicate Hoover in his confession.

The prosecutor refused to comment on whether Dominelli had recently implicated Hoover.

Mark Yarry, the former J. David money-raiser who was often at odds with Hoover during J. David’s heyday, described her Tuesday as “a friend.”

In a telephone interview from London, Yarry, who has lived in Europe since early 1984, said that “one is always distressed when these things happen.” He added: “Hopefully, I won’t be charged with anything.”

Last year Hoover married wealthy Santa Barbara businessman Kenneth Hunter. She has declined numerous requests for interviews. Several sources close to the case have said they expect Hoover to ask that her trial be held in Los Angeles because of what an associate described as the “enormous publicity in San Diego.”

‘Kind of Scary’

On Tuesday, Hoover’s sister, Carol Fletcher, said that Hoover and her family have “always known this was going to happen. . . . It’s kind of a scary thing. . . . Her emotions are mixed. We’ve always been fighters, and we’re going to fight this. When you feel you’re right, you just can’t give in.”

There were brief attempts to reach a plea bargain before the indictment, according to sources familiar with the case. But authorities proposed a tougher bargain than Hoover or her attorneys would accept.

Nunez suggested Tuesday that, if convicted, Hoover would receive a sentence similar to Dominelli’s 20 years.

Meanwhile, the J. David & Co. bankruptcy case continues, with trustee Louis Metzger, in charge of liquidating the firm, now in possession of about $12.5 million. He has sued to collect an additional $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, the law firm of 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.

Related stories, Part II, Page 1.