Hunter Guilty on Four Counts; Jailed as ‘Risk’

A federal jury Monday found Nancy Hoover Hunter guilty of four counts of tax evasion, acquitted her of one other tax-related charge, and could not decide on the 192 counts of fraud and conspiracy that were at the heart of the eight-month trial.

Hunter’s relatives hugged each other and said, “That’s good, that’s good,” as the jury returned its verdict. And Hunter’s defense attorney, while arguing immediately afterward that Hunter should remain free on bail pending sentencing, claimed that federal prosecutors had “lost this case.”

Those feelings of joy and victory evaporated moments later, however, when U.S. District Judge Earl B. Gilliam, saying Hunter was a flight risk, ordered her to jail without bail pending an April 16 sentencing hearing.

Hunter, her eyes glazed and her steps wooden, was led away by federal marshals out a side door of the courtroom. After a moment, she returned, craning her neck to look at her family, including her husband, Kenneth Hunter of Santa Barbara, who had yelled across the room, “I love you, sweetie!”

Hunter, 51, a former Del Mar mayor who was accused of conspiring to bilk about 1,500 investors out of $80 million, stood still for a moment, then collapsed, apparently having fainted, onto the red-carpeted floor after the judge’s order.

Gilliam started to leave the courtroom, and Hunter’s niece Sandy Shroeder screamed, “Ruthless! He’s ruthless!” and yelled at the judge, “How could you do this to her?”

Gilliam then ordered spectators and reporters from the courtroom, but, as various people went in or out of the room, Hunter could be seen on the floor for the next 20 minutes, sagging in the arms of her attorney, Robert Brewer, or her husband.

Hunter faces up to 20 years in federal prison, or five years apiece on each of the four counts of tax evasion, Assistant U.S. Atty. S. Gay Hugo told Gilliam. Hugo, the lead prosecutor in the case, also told the judge that prosecutors intended to refile the 192 counts against Hunter.

“I can’t say anything,” Hunter’s mother, Virginia Holm, said outside the courtroom. “I just can’t believe it.”

The chaotic and emotional sequence of events that followed the jury’s verdict, delivered on its 15th day of deliberations, capped a trial that began March 28. It is believed to be the longest-running criminal case in the history of the San Diego federal court.

The charges against Hunter stemmed from her role as a top executive in the La Jolla investment firm of J. David & Co. from 1979 to 1984, when its checks began to bounce and nervous investors forced the firm into bankruptcy.

In all, investors lost about $80 million in the J. David affair, a giant Ponzi scheme in which prosecutors alleged that Hunter played an active role.

Hunter’s defense lawyers, Brewer and Los Angeles lawyer Richard Marmaro, said she fell in love with the founder of the firm, J. David (Jerry) Dominelli and that love blinded her to any of his illegal activities.

Dominelli pleaded guilty in 1985 to four counts of fraud and tax evasion in connection with the Ponzi scheme and is serving a 20-year sentence in federal prison.

In November, 1986, federal prosecutors indicted Hunter, charging her with 234 counts stemming from her involvement in the now-defunct J. David firm. The indictment followed Hunter’s April, 1986, guilty plea to related state charges of conspiring to funnel thousands of dollars--allegedly J. David funds--to Roger Hedgecock’s successful 1983 campaign to become San Diego mayor.

The funds were funneled to Hedgecock’s campaign through the Tom Shepard & Associates consulting firm, Hunter admitted through her plea. She was sentenced to three years’ probation, fined $10,000 and ordered to perform 350 hours of public service, which she did at the Santa Barbara Public Library.

Midway through the federal case against Hunter, Gilliam dismissed 37 of the counts, leaving 197.

Hunter took the stand for more than a week in late October, claiming she was innocent of the state conspiracy charges. She pleaded guilty, she said, only because she knew federal prosecutors were “thinking about this trial” and “I didn’t know if I could go through two things.”

Hunter’s testimony capped the trial’s most eventful week. That week, the financial editor of the San Diego Union, Don Bauder, clapped his hand to his forehead in a gesture of disbelief while Hunter was on the stand, prompting a break while Gilliam tried to figure out whether any harm had been done.

He eventually decided jurors had not been improperly influenced by Bauder’s gestures and ordered the editor to stay away while Hunter was on the stand.

When the case resumed a few days later, and after Hunter had been on the stand for a few hours, prosecutor Hugo was stricken with chest pains. She was wheeled from the downtown San Diego courthouse on a stretcher and taken to a La Jolla hospital, where she was tested and released after a few hours.

Of the 197 counts that went to the jury, 192 centered on Hoover’s purported involvement with the Ponzi scheme, a pyramid under which money from new investors is used to pay off earlier investors.

The 192 included charges of conspiracy, mail fraud, commodity pool fraud and making a false statement to a federal regulator. Specifically, prosecutors charged that Hunter played an active role in the giant scheme, creating false documents both to lure investors to J. David and then to lull them into staying put while the firm headed toward bankruptcy.

It was those 192 charges that stymied the panel.

There was no indication, either in the notes the jury sent Gilliam or in any comments he made, of any votes the panel might have taken on those counts.

“I think it was a very complex case and that made it very difficult for us,” juror John Thomas Posey Jr. of National City said outside the courthouse.

In a note sent to Gilliam early in the panel’s deliberations, juror Dorothy Andre, 62, of San Diego, told the judge that the jury room was a “very hostile place.”

“At first it was,” Posey said. “Somewhat. Somewhat. Not excessively.”

Another juror, Arlene Fink, 32, of San Diego, said the trial was “an interesting experience,” but declined further comment.

Most jurors tried to elude reporters by leaving the courthouse through a stairway. Several said they had decided not to talk to the press.

The jury convicted Hunter of tax evasion in connection with her personal tax returns for the years 1980 through 1983. It acquitted her of aiding and abetting in the filing of a false 1980 J. David partnership return.

After the judge dismissed the jury, Hugo argued that Hunter was a flight risk pending sentencing, saying it was “apparent (Hunter) has the financial means to go anywhere in the world.”

“The jury chose to disbelieve (Hunter’s) testimony as it relates to her tax evasion and the money she received from Dominelli,” Hugo said. “Inasmuch as she lied on the witness stand, she cannot be trusted to tell the truth that if she was released pending sentencing, she would not flee.”

Brewer, however, said the verdict was a “total repudiation of the Ponzi scheme” charges, adding, “The government wants to put her into custody because they lost.”

Hunter, who had been free on $100,000 bail, had shown up for every court appearance since she had been indicted, Brewer said.

It would be “absolutely ludicrous and cruel to the worst degree to ask that this woman be placed in custody at this time, two weeks before Christmas,” he said.

Gilliam, however, ordered her to the federal Metropolitan Correctional Center without bail, concluding that Hunter “is a flight risk.”

There was “evidence in the case of her moving around the world” and having the ability to “live comfortably,” the judge said.

Gilliam also ordered that a gag order he imposed on the attorneys in the case--keeping them from talking about it with reporters--stay in effect until after the April 16 sentencing.