J. David Investors to Get 15 Cents on the Dollar

Investors in the bankrupt J. David & Co., founded by since-convicted swindler J. David Jerry) Dominelli, will receive about 15 cents for every dollar they put into the fraud-riddled brokerage house.

U.S. District Judge J. Lawrence Irving on Monday authorized the payment of $14.7 million to nearly 1,000 J. David creditors, mostly people who invested an estimated $83 million in La Jolla-based commodities trading firm.

The payments, expected to be mailed Friday, are the first reimbursements to investors since the company collapsed into involuntary bankruptcy in February, 1984.

It will be the largest lump-sum payment investors can expect, although there may be future distributions of much smaller amounts, bankruptcy trustee Allan M. Frostrom said.

“This will be the bulk of the money,” he said. “There will be at least one more distribution, but I can’t say with optimism that it will approach anything more than 5 cents” per dollar invested.

About $6 million has been paid by the J. David estate through the trustee for adminstration of the bankruptcy.

That money and the amount being returned to investors come from funds authorities recovered by selling J. David property, settlements of preferential payment lawsuits and interest earned on those funds, Frostrom said.

After disgruntled investors forced the closure of Dominelli’s financial empire, investigators found only $350,000 of what investors thought would total more than $83 million, Frostrom said.

Dominelli is serving a 20-year federal prison sentence for his guilty plea to mail fraud, bankruptcy fraud and tax evasion. He ran a sophisticated Ponzi scheme, in which money from new investors was used to pay previous investors and finance his lavish life style.

Former J. David executive Nancy Hoover Hunter, then Dominelli’s girlfriend, also was convicted by a federal jury last week of four counts of tax evasion in connection with the operation.

Hunter, who has since married Santa Barbara millionaire businessman Kenneth Hunter, remains jailed without bond pending her scheduled sentencing Feb. 20, the same day her retrial is scheduled to begin on 192 unresolved conspiracy and fraud charges.