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Old Lessons of Greed

March 24, 1985

He was a nondescript man, painfully shy. In fact, some say that it was his very plainness that made people trust him.

But while he had the outward appearance of a career bookkeeper, Jerry David Dominelli had the ambition of Lee Iacocca--or perhaps Robert Vesco.

In 1979 Dominelli ended his career as a mediocre stockbroker and began selling a much hotter commodity--dreams. He sold dreams for well-to-do professionals who had watched the values of their homes skyrocket during the real-estate boom of the 1970s, dreams for people who had seen artists make millions with a single idea for a script or a song. California dreams.

By the time he pleaded guilty in a San Diego federal court Thursday to charges of tax evasion and mail and bankruptcy fraud, nothing remained of the dreams but nightmares of savings forever lost, failed businesses and bleak futures.

After 14 months of civil and criminal litigation against him, Dominelli's plea came as no surprise. But the previously unpublicized dimensions of the fraud were breathtaking. His J. David & Co. had, he said, been entrusted by 1,500 investors with $200 million, and he had misappropriated $80 million.

Instead of investing money in the international money markets, Dominelli actually ran a classic "Ponzi scheme," using money from new clients to pay old clients. The profits that he reported, as much as 6% a month, he simply made up as he went along.

J. David's clients lived all over the world, but mainly in the wealthy Southern California areas of Newport Beach, Palm Springs and, his base, La Jolla. He was aided by a small cadre of super-salesmen, but the mystique that grew up around Dominelli was probably the key selling point. The words financial genius were commonly applied to him. Every time he raised the minimum amount that it took to open an "Interbank" account, more people sent him their money. Those looking on, familiar with the volatile international currency markets where no trader goes for long without some losses, wondered how he could consistently make so much money--or whether he really was.

Dominelli and his business partner and lover, former Del Mar Mayor Nancy Hoover, built credibility in San Diego by contributing hundreds of thousands of dollars to cultural and charitable groups, and were closely linked to Mayor Roger Hedgecock. They also lived like royalty--buying homes, exotic cars, racehorses and jewelry as if there were no end to their wealth. In one year, it is estimated, they spent more than $250,000 on the fledgling sport of triathlon, which they helped launch.

When word got out in February, 1984, that J. David & Co. had begun bouncing checks and failing to return investors' money, Dominelli blamed it on a paperwork problem. Even after being thrown into involuntary bankruptcy he insisted that he had been making money in Interbank, and told the court-appointed bankruptcy trustee that he had millions of dollars in European banks. That proved to be false.

Last April Dominelli defied a federal judge's order that he not leave the state, and fled to the Caribbean island of Montserrat. He said that he intended to stay there and build a new financial empire, but island officials, apparently tired of the bad publicity and hassle that he was causing, forced him to leave, and he was arrested in Miami.

When he is sentenced on June 24, he could be punished by up to 20 years in prison. Dominelli and Hoover still face charges in state court of conspiring with Hedgecock to evade the city's election law by funneling more than $360,000 into his 1983 election campaign. A jury that tried Hedgecock on the charges came within one vote of a conviction in February.

Dominelli and Hoover created a fantasy world for themselves, a Utopia where the bill never came due. Hedgecock, starry-eyed investors and the recipients of their civic largess all bought into that fantasy.

One searches the story of Dominelli and his victims for some new lessons, some new insights into human nature. But the lessons are all as old as greed itself.

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