Instinctively Dominelli was an anarchist, someone who hated authority. He believed that with a little professional assistance, he could forever keep the despised authorities off his back. Once, a president of one of his subsidiaries promised a regulatory body that Dominelli wouldn't open another office within the next several months. "Fuck 'em. I'll hire a lawyer," Dominelli said. "That was his philosophy of life. He believed that a lawyer or an accountant could get him out of anything, but he often didn't follow their advice," recalls a former financial official of the firm.
Captain Money and the Golden Girl named their company J. David, and for four years it appeared they might convert their fantasies into reality: He would strike a rich vein, and she would strike the vain rich.
Hoover was out to take over and reform the wealthy, tradition-bound ruling class of San Diego, the nation's eighth largest city and easily one of its most conservative. Like many of her fellow liberals and yuppies, she preached that the San Diego establishment is callous, selfish, and too tolerant of financial scoundrels.
To an extent, she had a point. In San Diego it's sometimes hard to distinguish the landed gentry from the light-fingered gentry. Cozeners -- accepted by the ruling establishment -- have been preying on San Diego investors for years. They sun themselves on the beaches in the upscale coastal town of La Jolla and ride to hounds in the aristocratic inland community of Rancho Santa Fe. They are indefatigable partygoers, apotheosized almost daily in the society columns of the local newspapers, despite, in some cases, their records of convictions.
And in San Diego, as in many other cities, it's difficult to distinguish the recidivists from the philanthropists. That's because often they are one and the same. The habitual fast-buck operators buy respectability by pouring money into local charities -- always with maximum public exposure.
San Diego's financial scoundrels of the recent past have fallen into two categories. There were the acquisitors, the conglomerateurs -- those building a massive empire through accounting voodoo and inflated stock. And then there were the fleecers of the innocent -- those promising unbelievably high returns to naïve investors.
The classic conglomerateur was the revered C. Arnholt Smith, dubbed "Mr. San Diego of the Century" by a local newspaperman. Smith built a conglomerate that operated many of the city's prime businesses -- a taxicab firm, a tuna cannery, a luxury hotel, a shipbuilding yard, an airline -- and that owned huge tracts of agricultural land. Smith also controlled a bank with $1 billion in assets. The Byzantine paths by which Smith funneled funds from the bank to the conglomerate, and thence to his own pocket, had investigators befuddled for years. In the early 1970s, the U.S. Treasury Department's Comptroller of the Currency described Smith's bank as "self-dealing lending run riot."
Eventually both the bank and conglomerate went under. In 1975 Smith was indicted for manipulating $170 million in bank funds and channeling $27.5 million to himself and his cronies. He only got probation on these federal charges, but in 1979 he was convicted of grand theft and sentenced to prison by the state. Five years later, on November 26, 1984, he began serving a one-year jail sentence. Now in his mid-80s, he is still adored by many of La Jolla's Beautiful People.
At the time Smith was being tried, another conglomerate, U.S. Financial, was going into bankruptcy and some of its former executives into the slammer. The company, which controlled important San Diego real estate, became a darling of Wall Street. The stock rose from $4.62 a share to $62 as management used every accounting trick in the book -- including selling itself its own assets several different times -- to overstate its profits. After the crash common shareholders considered themselves lucky to come out with 25 cents on the dollar.
During the same period, still another publicly held company, Royal Inns, which owned hotels and restaurants in 18 states, was bellying up to the bar. This company reported fat profits from building hotels but lost money operating the hotels. The founder, Earl Gagosian, became very rich selling off the artificially inflated stock, often utilizing inside information, charged the bankruptcy trustee. His multimillion-dollar La Jolla mansion overlooking the Pacific became something of a local shrine -- celebrated in the press, ogled by the citizenry and tourists.
Richard L. Burns was an acquisitor hailed by the establishment when he brought his R.L. Burns Corporation to San Diego from San Bernardino in 1977. He bought Gagosian's mansion and moved his company into the posh quarters previously occupied by John Alessio -- a racetrack entrepreneur, ex-"Mr. San Diego," and C. Arnholt Smith associate who had gone to jail. Like Smith and Alessio, Burns established himself as an eleemosynar, generously donating to local charities. His energy company seemingly prospered, but one day the entrepreneur stunned shareholders by peddling his stock for $14.6 million at a time when it was worth $40 million on the market. Shortly thereafter, as grim news hit, the company and its stock collapsed. Burns used his proceeds to buy another company, Nucorp Energy, and launched an acquisition binge, gobbling up oil-field equipment suppliers with stock that rose 2100 percent in just two years. But that 2100 percent gain vanished almost overnight when the company plunged ingloriously into bankruptcy amid a sea of lawsuits.
The Securities and Exchange Commission has charged Burns and a fellow official with inflating revenue by $50 million through the dubious practice of "prebilling": recording a sale on the books at the time of the handshake, rather than after the product is manufactured, sold, and delivered to the customer in return for money. The bankruptcy trustee is suing Burns for $10.4 million, and the company still owes banks $326 million. Not surprisingly, the major bank is Continental Illinois, which has since been, in effect, nationalized because of its bad energy loans. Continental Illinois loaned Nucorp more than $100 million and also loaned large sums to Burns personally.