Law Firm Aided J. David Swindle, S.D. Judge Finds : $580,000 Is Awarded to 5 Investors; Hundreds of Lawsuits Still Pending
The La Jolla law firm of Wiles, Circuit & Tremblay and a former partner were found by a San Diego County Superior Court judge Thursday to have aided and abetted convicted swindler J. David (Jerry) Dominelli’s fraudulent investment operation, a Ponzi scheme that bilked investors out of $83 million.
The law firm and ex-partner Michael A. Clark were also found to have been professionally negligent. Clark and his partners face possible disbarment proceedings if the finding stands, attorneys involved in the case said.
In a judicial finding that plaintiffs’ attorneys hailed as an unqualified victory in the civil suit, Superior Court Judge James A. Malkus awarded actual and punitive damages totaling $580,700 to J. David investors Marnie Ackerman, Anna Pulaski, Helene Reynolds, Thomas Roth and Donald Van Ness.
The plaintiffs’ advanced years--each is over 70--qualified them for a preferential trial date, ahead of some 340 other investors who have also filed suit against Clark and the law firm, which represented Dominelli.
The finding buttresses the hundreds of lawsuits still outstanding against Wiles, Circuit & Tremblay and Clark, the first of which is scheduled to go to trial in October. But J. David bankruptcy trustee Louis Metzger and several attorneys involved in the case said chances are good that WC&T; and its insurers will settle the suits out of court in light of the investors’ convincing victory in the suit decided Thursday.
But Los Angeles attorney Jack I. Samet, who represented Wiles, Circuit and Tremblay, said that his client will appeal Malkus’ finding “promptly.” In a prepared statement Thursday, Samet said the law firm is unfairly being “held accountable” for the crimes of Dominelli, its client.
At its high point, Dominelli’s firm, J. David & Co., had $200 million under management from investors attracted by promises of 2% to 3% monthly profits, based on Dominelli’s purported knack for playing the volatile and unregulated international currency market. Dominelli admitted later that J. David operated a Ponzi scheme that used new investor dollars to pay off old obligations and to fund Dominelli’s lavish life style.
The firm was forced into bankruptcy in February, 1984, and Dominelli pleaded guilty in 1985 to fraud and tax-evasion charges. He is serving a 20-year term in federal prison.
Another Trial Slated
Dominelli’s live-in companion and second-in-command at J. David, Nancy Hoover Hunter, 48, is slated to go on trial in San Diego early next year on fraud and conspiracy charges.
Malkus listed 77 “factual findings” to support his contention that Clark and WC&T; advanced the Dominelli fraud, among which were findings that Clark and WC&T; concealed and later shredded damning investment transaction records.
Clark and WC&T; were “aware of (Dominelli’s) unlawful conduct . . . and engaged in a systematic course of concerted action with and/or for Dominelli to perpetuate and conceal his unlawful activities,” Malkus wrote. Clark, who was Dominelli’s personal attorney, played an active, sometimes daily role in managing J. David, Judge Malkus wrote in a his 37-page finding. Clark left WC&T; in September, 1984.
Meanwhile, the U.S. Attorney’s office in San Diego refused to comment on reports it has begun a criminal investigation of WC&T;’s and Clark’s role in the J. David investment scandal. Several plaintiffs’ attorneys said federal investigators have asked them for records related to the case and noted that Assistant U.S. Atty. Gay Hugo attended several sessions of the trial.
Hugo refused to comment Thursday, confirming only that her office is working in conjunction with an ongoing federal grand jury investigation of J. David.
Clark and members of Wiles Circuit & Tremblay could also be subject to disbarment proceedings if Malkus’ finding stands, attorneys said. A State Bar of California spokeswoman in San Francisco said Thursday there is no “public record of discipline” against Clark and that the association declines to comment on investigations in progress.
Big Settlements
Wiles Circuit & Tremblay was the only “deep pocketed” professional firm connected to Dominelli that did not settle investor claims out of court.
Rogers & Wells law firm, Laventhol & Horwath accountants and several other firms have paid settlements totaling about $62 million to investors since J. David collapsed in scandal in February 1984. The $40-million settlement by the law firm headed by William P. Rogers, a former U.S. secretary of state, was described as the largest ever made by a U.S. law firm.
The finding in the Wiles Circuit & Tremblay case capped a lengthy trial that began in June, 1986. The trial was recessed earlier this year when the parties reached a tentative $3-million out-of-court settlement. The settlement collapsed after WC&T;’s lead insurer could not convince its co-insurer to accept the settlement because it was beyond what it maintained were the policy limits.
Plaintiff attorney Bob Meyer of Los Angeles said the previous settlement figure is now “off the table.”
“If they intend to settle, it will be for significantly more than we had been willing to settle for before but which they backed out of,” Meyer said. All of the 340 investors suing WC&T; and Clark have agreed to share equally in whatever money damages are recovered, Meyer said.
