Motions Run High in Nancy Hoover Hunter Case : Each Side Blames the Other for Extensive Delays in Trial of Ex-Dominelli Partner

J. David (Jerry) Dominelli, once the high-living head of the J. David & Co. investment firm, has spent the past four years in prison, reviled, denounced and sentenced to 20 years as the mastermind of a Ponzi scheme that bilked investors of more than $80 million.

During that time, Dominelli has suffered two strokes that have affected his speech and his general health. He is now living quietly at the federal prison in Pleasanton.

For Nancy Hoover Hunter, who once lived with Dominelli, shared in the lavish spending, and was second-in-command at the firm, those same four years have brought little change, at least in terms of the quality of her life.

Since her breakup with Dominelli and the spectacular failure of their firm, Hunter, the former mayor of Del Mar, has married wealthy businessman Kenneth Hunter and lives in Montecito, an exclusive coastal community near Santa Barbara.

Arranged to Avoid Hearings

Since her first indictment 18 months ago, Hunter, 49, has taken trips to Kenya and the Caribbean and visited Rancho Santa Fe recently for her son’s wedding. She rarely comes to court for the hearings in the two complex criminal cases brought against her, having arranged to be excused from appearing.

But as the cases drag on in federal court, the slow progress has become a matter of increasing contention between the defense and the prosecution, each blaming the other for perpetrating the delay.

Gay Hugo, the assistant U.S. attorney handling the cases, said last week that she believes Hunter and her lawyer, Richard Marmaro of Beverly Hills, are filing meritless and time-consuming motions in the hope that Dominelli, a key witness against Hunter, will die before the matter comes to trial.

“This is a callous thing to say, but they know Dominelli has had two strokes, and the probability of a recurrence is high,” Hugo said. “It’s obvious they are doing everything they can to delay this trial. They do not want to bring this case to trial.”

Dominelli, 47, pleaded guilty in 1985 to four counts of fraud and income tax evasion, and he must cooperate with federal prosecutors as part of a plea bargain.

Marmaro said last week that the opposite is true, that he wants the cases to come to trial

quickly and that Hugo is delaying matters by refusing to turn over pretrial “discovery” documents that he needs to prepare his defense.

“The defendant, in her strategy, believes that time is definitely on her side,” Hugo said. “Over time, there’s a lessening of outrage in the community, people’s memories are not that good, and it becomes more difficult to find witnesses. And they’re thinking and hoping it will not be the same prosecutor.”

Hugo has been responsible for the Hunter case since she moved to San Diego four years ago from Chicago, where she was a member of the Justice Department’s Organized Crime Strike Force. She said last week that she has “made a commitment” to stay on the case until the end, but she added that she has no idea when the end may come.

The chief reason for the delay in trying Hunter on the 234-count fraud, conspiracy and tax-evasion indictment handed down in November, 1986, is a motion contending that the indictment is invalid because Hugo was not a member of the California Bar when she was presenting the case to a grand jury.

The motion was filed last fall by James Hutchens, a lawyer for Robert G. Smith, a J. David & Co. salesman under indictment on charges that he evaded $200,000 in income taxes while working for the firm. Hugo had handled that case as well.

No Word From Court

Marmaro filed a similar motion on Hunter’s behalf, and both were rejected without comment last March by the 9th U.S. Circuit Court of Appeals. However, the defendants have filed a motion to reconsider the rejection and, in the absence of any word from the 9th Circuit, the cases have remained on hold for months.

Hugo, who passed the California Bar examination in 1985 and has since been admitted, said the issue of her credentials is “truly a red herring.” Marmaro is using the issue, she said, to delay the case and to attempt to obtain grand jury documents to which he is not entitled.

“As an assistant U.S. attorney, I only need to be a licensed attorney, and he is well aware of that,” Hugo said.

“We’d like to go to trial as soon as we can to vindicate Nancy and let her get on with her life,” Marmaro said.

However, he said he is not willing to move the case along by dropping his appeal of the Bar-admittance issue, and he rejected Hugo’s contention that the issue is a frivolous technicality.

“There are substantial legal issues that have to be ironed out,” Marmaro said.

Hadn’t Passed One Test

Though Hugo had passed the Bar examination, she had not yet passed its ethics test, called the “Professional Responsibility Test,” before she presented the Hunter case to the grand jury, Marmaro said. Therefore, he said, he is entitled to examine grand jury records for signs of ethical misconduct.

While the motion has stalled the fraud case, it does not affect a second set of indictments, returned four months ago, charging Hunter and others with securities violations.

That case is proceeding, though slowly, before U.S. District Judge Earl Gilliam. Hugo and some of the defense attorneys are playing a legal chess game over the issue of discovery documents, a situation that has annoyed Marmaro.

“The government is playing it very close to the vest, and it’s making it very difficult for me to prepare my case,” Marmaro said.

Federal prosecutors typically turn over investigative documents to defense attorneys early in a case, without requiring that formal discovery motions be filed, Marmaro said. However, in this case, Hugo has refused to do so unless defense attorneys file formal motions, something that some of the lawyers in the multi-defendant case have refused to do. Such a move would trigger a requirement that the defense also turn over documents to the prosecution, which several of the lawyers do not want to do right now.

“If the government were open in its discovery, we would be able to get to trial much sooner instead of having to investigate anew with considerably less resources at our disposal than the federal government,” Marmaro said.

He has filed a motion and is willing to reciprocate, under the terms of a protective order imposed by Gilliam last week that bars him from sharing records with other lawyers.

Feared Disadvantage

That order was requested by Hugo, who said that to informally turn over documents to the defense in the case would put the government at a disadvantage “because we wouldn’t have gotten anything back from them.”

“If I had given it to Marmaro, he could have given it to any of the other defendants,” she said, but only Marmaro would have had a responsibility to reciprocate.

Gilliam cannot proceed on the 1986 fraud cases until he receives word from the appeals court, but he has ordered all the lawyers back to court Sept. 6 for a status check and to set a schedule for the securities fraud cases.

However, no one, including Gilliam, is predicting when any of the matters might come to trial.

Hunter has declined to talk to reporters, and Marmaro said he has advised her not to do so until after her trials.