SAN DIEGO -- Jerry Dominelli, founder of the high-flying J. David & Co. investment house, was sentenced to 20 years in prison Monday and ordered to make restitution to investors in what the judge called 'a monumental fraud.'
U.S. District Judge William Enright gave Dominelli, 44, the maximum sentence for the three fraud charges and income tax evasion charge to which he pleadedguilty to March 21 under the terms of a plea bargain agreement.
Enright also ordered Dominelli to pay up to $82 million in restitution to some 1,200 investors he swindled. 'There ain't no such thing as a free lunch,' the judge told him.
As a result of the plea bargain, 21 fraud charges were dropped.
'It is a very unique offense,' Enright said before passing sentence. 'It boggles the mind. It was a monumental fraud.'
Investors poured money into J. David after hearing of Dominelli's reputation as a currency-trading wizard who could produce returns as high as 40 percent.
'Dominelli admitted his involvement in this plan,' Domielli's lawyer, D. Gilbert Athay told Enright. 'He has expressed sorrow for the heartache and damage caused.
'Nothing we say or do will make people hope. Victims have lost everything in what they perceived to be a get-rich-quick scheme. When 30 to 40 percent returns were announced the biggest red flag in the world should be waving.'
In his written confession, Dominelli said he was not a competent trader and that J. David was a massive Ponzi scheme which used new investments to pay off earlier investors.
Dominelli and Nancy Hoover, his vivacious business partner and live-in companion, circulated among the social elite in San Diego. Both face trial in connection with alleged political fund-raising irregularities.
The bankruptcy trustees have concluded that most of the investors' money was spent during the halcyon days of J. David on the lavish lifestyle of Dominelli and Hoover. The couple also gave money to charity and other favored enterprises.
'Why did he do it?,' asked Assistant U.S. Attorney Robert Rose following the hearing. 'It was his desire for wealth and power. I frankly don't understand this man. He started his company with a lie.'
Rose said Dominelli was obsessed with making money and that even while he was in jail he had tried to set up an operation to export untaxed cigarettes to Europe.
Dominelli enjoyed a steady flow of money until February 1984 when company checks began bouncing and nervous investors began closing their accounts. The prestigious investment house quickly plunged into bankruptcy.
'There must have been nights you had to lie awake, knowing everything would unravel and you would be standing before a judge as you are today,' Enright said to Dominelli. 'There ain't no such thing as a free lunch, Mr. Dominelli. One day the bill collector came to you as he does to everyone.'
The collapse of J. David also triggered one of the biggest political scandals in San Diego history. Dominelli, Hoover and Mayor Roger Hedgecock were indicted along with political consultant Tom Shepard for an alleged scheme to illegaly finance Hedgecock's 1983 campaign.
Hedgecock's first trial on the 13 conspiracy and perjury charges ended Feb. 12 with a hung jury. His second trial begins Aug. 22.
