Most Issues in J. David Case Resolved

Officials involved in the complex and acrimonious bankruptcy case brought on by the J. David & Co. investment swindle said Monday that most key issues have been resolved and the matter could be put to rest within two years.

“The end is in sight,” said Louis Metzger, who retired Monday as trustee in the case. “There’s a long way to go, but it’s in sight.”

Metzger, 71, a retired Marine lieutenant general, has been trustee since his appointment by U.S. District Judge J. Lawrence Irving in March, 1984.

$30.6 Million Recovered

To date, about $30.6 million has been recovered in the case through a variety of means, including the sale of company assets such as artwork, horses, breeding bulls, three airplanes, furniture and a 1956 Gullwing Mercedes-Benz that sold for $117,000.

Much of the $200 million J. David & Co. attracted from investors was used by J. David (Jerry) Dominelli, the firm’s founder, and Nancy Hoover Hunter, then his girlfriend, to support their extravagant life style. They also spent large amounts on charitable contributions.

Dominelli, who is serving a 20-year sentence for his role in the fraud, confessed that he did little, if any, trading for his 1,500 investors. Instead, prosecutors charge, Dominelli, Hunter and others ran a Ponzi scheme, in which money from new investors is used to repay old ones.

Of the $30.6 million recovered thus far, about $8.4 million has been used to repay secured debts, such as outstanding loans on the airplanes, automobiles and real estate, according to Allan M. Frostrom, chief operations officer for the bankruptcy case, who succeeds Metzger as trustee.

About $5.4 million has been paid to 28 lawyers, accountants and other professionals involved in the case over the past four years, he said.

Costs for general administration, insurance and payment of the trustee totalled about $1.5 million, he added.

Case Costs

In his final report to Judge Irving on Monday, Metzger said that Dominelli’s “lack of truthfulness” and “lack of cooperation” in the early stages of the bankruptcy proceeding substantially added to the administrative costs of the case. A good deal of time and money was spent locating and sorting through records to determine what actually happened to the investments, Metzger said.

On Monday, Irving approved payment of a total of $263,709 to Metzger for his four years of work. Metzger said he had spent more than 7,000 hours on the case, making his pay rate $38 an hour or less.

Both Metzger and Frostrom said they hoped the remaining issues in the case could be settled within two years. One such issue, to be argued this month, is whether investors who have won monetary judgments in separate civil suits against J. David’s lawyers and others can also seek full restitution in the bankruptcy case.

At present, investors have filed claims of losses totaling $112 million in the bankruptcy action, Frostrom said. None of the investors can be paid until a final amount of recovered money is known and all creditors with higher priority are repaid.

About $15 million of the recovered money remains in the hands of the trustee and that amount could grow by several million dollars or more before the case ends, Frostrom said. “Money comes in virtually every day and we have settlement discussions almost every day,” he said.

The $15 million is being kept in relatively low-yielding, but extremely safe, Treasury bills, Frostrom said.