SAN DIEGO — Nancy Hoover, whose political connections and social style helped the fallen J. David & Co. attract $200 million from Southern California investors, was indicted Tuesday by a federal grand jury on 234 counts of fraud, conspiracy and income tax evasion.
Hoover, 48, the former mayor of Del Mar, has remarried and lives in Santa Barbara. She will surrender and plead not guilty at an arraignment this morning, according to her attorney, Richard Marmaro of Los Angeles. Bail will be set at $500,000, according to Assistant U.S. Atty. Gay Hugo.
The maximum penalty on the 234 counts is 1,158 years in prison and nearly $48 million in fines.
"We remain confident that she will be vindicated after a trial," Marmaro said Tuesday.
The 40-page indictment charged that Hoover worked side-by-side with J. David (Jerry) Dominelli, now serving a 20-year prison sentence, in a scheme to defraud J. David & Co.'s 1,500 investors.
Lured by promises of annual returns of up to 40%, and Dominelli's supposed skill in playing the volatile and unregulated foreign currency market, investors poured millions into J. David. Last year, Dominelli confessed that he did little, if any, trading for his investors.
Actual losses totaled about $82 million, much of that spent by
Hoover and Dominelli to support their lavish life style and on charitable contributions. Hoover was regarded as the second in command at J. David's--and was Dominelli's live-in companion.
Hoover and Dominelli, according to the indictment, were actually engaged in a "Ponzi" scheme that used new investors' funds to provide a payoff for old clients.
J. David & Co. was forced into bankruptcy by a group of disgruntled investors in February, 1984, after the firm's checks began to bounce.
In April, Hoover pleaded guilty to state charges of conspiring to funnel thousands of dollars into Roger Hedgecock's 1983 mayoral campaign. She was sentenced to three years' probation, ordered to perform 350 hours of community service and assessed a $10,000 fine.
Dominelli pleaded guilty last year to four federal counts of fraud and income tax evasion. He is now serving a 20-year sentence at the federal prison at Pleasanton, Calif.
A federal grand jury is continuing to investigate others once associated with J. David, according to U.S. Atty. Peter K. Nunez.
Among the previously reported targets are Mark Yarry, J. David's international money-raiser who lives in London; Mike Clark, a former partner with the law firm of Wiles, Circuit & Tremblay; Norman Nouskajian, a former partner with the Rogers & Wells law firm, and Bob Smith, who was a salesman at J. David.
In addition, Internal Revenue Service agents in recent months have examined the monthly account statements J. David mailed to its investors. That investigation, according to sources close to the case, centers on whether some investors used their J. David accounts to launder money and avoid paying federal income taxes.
According to the indictment, between 1979 and February, 1984, when the firm went bankrupt, Hoover:
- Prepared fake "track records" showing Dominelli's profitable trading history.
- Lied to investors by claiming they would receive annual returns of 30% to 40%.
- Used investors' funds for her own use.
- Signed false monthly investor account statements.
Evaded federal income taxes by declaring about $314,000 in taxable income from 1980 through 1983 on actual taxable income of at least $2.37 million.
- Made false statements to the Commodity Futures Trading Commission about the existence of undisclosed commodity pools.
- Shredded some J. David documents and removed others during January and February, 1984, in the days preceding the firm's demise.
In addition, the indictment says Hoover advised Dominelli that he should not clear his foreign currency trading through J. David Securities, J. David & Co.'s broker-dealer, because the brokers there would be able to construct their own version of his track record. That possibility "could be bad," the indictment quotes Hoover as saying.
The charges against Hoover include conspiracy, mail fraud, fraud by a commodity pool operator, making false statements to a federal agency, income tax evasion and aiding in the preparation of false income tax returns.
More than 220 J. David investors are listed in the indictment as having received account statements from Hoover. Among them are former shipyard owner Art Engel, former newspaper publisher Lowell Blankfort, Municipal Court Judge Victor Bianchini, marathon runner Frank Shorter, and New York Mets baseball player Ray Knight.
Other J. David clients included celebrities and political figures, including Hedgecock, along with wealthy investors from throughout Southern California.
Hedgecock resigned as mayor of San Diego last year after he was convicted of receiving illegal campaign contributions from Hoover and Dominelli. Now a radio talk show host, Hedgecock was sentenced to one year in custody but is free on appeal.