Hoover Denies Guilt; Dominelli Might Testify
Former J. David & Co. executive Nancy Hoover pleaded not guilty Wednesday to 234 counts of fraud and income tax evasion amid growing evidence that J. David (Jerry) Dominelli, her former associate and live-in companion, will testify against her.
Appearing tan, fit and composed at her arraignment before U.S. Magistrate Roger Curtis McKee, Hoover stood motionless as a clerk ticked off the litany of legal charges against her.
Asked by the clerk how she pleaded to the charges, handed down by a federal grand jury Tuesday, Hoover answered quietly but firmly: “Not guilty.”
Hoover’s bail was set at $100,000, but not before Assistant U.S. Atty. S. Gay Hugo disclosed that the government’s case against Hoover includes testimony from the only person who could incriminate her.
That person, whom Hugo declined to identify, “has remained silent--until now,” she said in court.
Sources close to the case contend that the unidentified person is Dominelli, who in recent months has testified before the federal grand jury that indicted Hoover.
Dominelli, who once lived with Hoover and shared a lavish life style of fancy homes, private jets and exotic racing cars, refused to discuss his grand jury testimony during a brief telephone interview Tuesday from the federal prison in Pleasanton, where he is serving a 20-year sentence.
Between 1979 and 1984, the La Jolla-based J. David & Co. attracted $200 million from 1,500 investors from throughout Southern California. Clients, who believed that Dominelli was a successful player in the volatile and unregulated foreign currency market, lost about $82 million.
Dominelli pleaded guilty last year to four counts of fraud and income tax evasion, and confessed that he did little actual currency trading.
If Dominelli has turned against his former lover, Hoover might rely heavily on a his-word-against-hers defense, sources close to Hoover suggested Wednesday.
The 40-page indictment charges that Hoover worked alongside Dominelli in an elaborate Ponzi scheme in which new investors’ money was used to pay off existing clients. Hoover was charged with conspiracy, mail fraud, commodity pool fraud and income tax evasion.
In court, Hugo said that prosecutors have obtained two sets of Dominelli trading records for the same 1980 account. One set accurately reflects a trading loss for the year of $28,000, said Hugo. The other set, which was shown to potential J. David investors, shows that Dominelli’s trades were all profitable.
Both sets of records are in Hoover’s handwriting, Hugo said. At the time, Hoover was a broker at Prudential Bache (then known as Bache, Halsey, Stuart) and Dominelli had just started his J. David & Co. firm.
Some of J. David’s early commodity pool accounts were registered with the Commodity Futures Trading Commission and some others were not, Hugo said. Those not registered were “under Hoover’s supervision,” Hugo said.
In addition, Hugo said that in the weeks preceding the forced bankruptcy of J. David & Co. in February, 1984, Hoover shredded company documents and carted off various corporate records in garbage bags.
Arguing that bail should be set at $500,000, Hugo said that until now Hoover has been unaware of the scope of the government’s case. The legal discovery process “will truly be an education,” Hugo said.
Hoover’s attorney, Richard Marmaro of Los Angeles, asked that Hoover be released on her own recognizance.
Marmaro argued that Hoover is not a flight risk and has appeared at all of her other scheduled court sessions. In April, Hoover pleaded guilty to state charges of conspiring, with Dominelli, to illegally funnel thousands of dollars into Roger Hedgecock’s 1983 mayoral campaign in San Diego. She was sentenced to three years’ probation and ordered to perform 350 hours of community service and pay $10,000 in fines.
Hoover, 48 and a former mayor of Del Mar, is now living in Santa Barbara and is married to businessman Kenneth Hunter. She and Hunter arrived in San Diego from Santa Barbara on Wednesday about 9:20 a.m. aboard a commuter airline.
They were greeted at the airport by Dwight Worden, Hoover’s longtime friend and a civil attorney from Del Mar.
Twenty minutes later, they arrived at the law offices of Robert Brewer, Hoover’s local criminal attorney, who was officially brought into the case Monday. Brewer and Marmaro were colleagues in the U.S. attorney’s office in Los Angeles in 1980.
About 10 a.m., with a gaggle of reporters and photographers following, Hoover went to the local FBI office, where she officially surrendered, was booked and fingerprinted.
After her 10:30 a.m. arraignment, Hoover again went through the booking and fingerprinting process at the federal marshal’s office.
She was then freed and must post the $100,000 bail by Dec. 1. Her next court appearance will be that day before U.S. District Judge Earl Gilliam.
Worden said Hoover is “partly relieved” by the indictment, which has been “hanging over her head (like it) would never end.”
The government’s investigation of J. David and several of its former executives and attorneys continues, however. Previously named targets include Mark Yarry, J. David’s international money-raiser, who now 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 that J. David mailed to its investors. Agents are trying to determine whether some investors used their accounts to launder money and avoid paying federal income taxes, according to sources familiar with the investigation.
The grand jury inquiry focuses on events at J. David during 1983, when the firm brought in the overwhelming majority of its $200 million in investments, according to sources close to the case.
The charges against Hoover include alleged wrongdoing primarily in 1981 and 1982, although the indictment lists dozens of investors who received monthly account statements from her in 1983.
But investigators have had a difficult time identifying J. David clients “who bought anything through Nancy,” according to one source close to the case. Hoover’s primary role in 1983 was promoting J. David, said the source--contributing to charitable causes and increasing the La Jolla investment firm’s visibility.
While Hoover was being arraigned in the packed courtroom, bankruptcy trustee Louis Metzger and about 30 lawyers representing J. David investors huddled across the hall in the chambers of U.S. Magistrate Harry McCue in an attempt to settle dozens of lawsuits filed by Metzger.
Metzger is trying to retrieve millions of dollars in so-called “fraudulent conveyances” from former investors who, Metzger claims, withdrew more from J. David than they invested.
Metzger’s claims are based on court-ordered hard-dollar-in, hard-dollar-out calculations, which eliminate the nonexistent profits investors thought they were earning with the firm. Under such a calculation, an investor who paid in, say, $100,000, and withdrew $150,000 because he thought he had earned $50,000 in profits, would owe the bankruptcy estate the $50,000.
