Piercing Papa Doug’s veil of cash and influence

Douglas Manchester has shed a wife, unloaded a mini-newspaper empire, and sold off its Mission Valley headquarters.

But San Diego's rich Republican kingpin still can't manage to dodge one persistent creditor, who has chased the wealthy La Jolla real estate mogul from Texas to San Diego with a legal cleaver that gets sharper with every courthouse move.

As first reported here back in July 2013, Manchester in January 2008 set out to establish a new La Jolla institution to be called Manchester Financial Bank.

Frederick J. Mandelbaum, a past member of the Housing and Community Development Advisory Committee for the County of San Diego, was retained to run the operation. Fay Avenue offices in La Jolla were leased, a bevy of lawyers was hired, and an Austin, Texas, outfit by the name of 21st Century Financial Services was contracted to provide computer help.

Documents subsequently filed in federal court showed that Manchester Financial Group, a holding company run by the real estate magnate, provided all of the front money for the venture, ultimately paying Mandelbaum a total of $220,000 for his start-up work, as well as $53,100 in deposits made to 21st Century for its engagement.

Then the market crashed, and on October 3, 2008, Manchester — who prefers to be known as "Papa Doug" — called the whole thing off, "based on the current financial turmoil," Mandelbaum said in an email to 21st Century.

But that was only the beginning of a slow-motion cross-country courtroom pursuit that has shed new light on the way Manchester does business.

"Although the Bank was incorporated, it was never capitalized; never hired any employees; never issued stock; and all of its business operations were handled and controlled by Manchester [Financial] Group,” says a September 8, 2015, brief filed by 21st Century's lawyers in federal court here.

When the putative bank's creditors came calling to collect for their unpaid work, they turned to Richard Gibbons, Manchester Financial's CEO, with no success, emails filed with the court show.

Then, on April 2, 2009, attorney S. Alan Rosen fired off an email to Manchester regarding the delay.

"Papa Doug," Rosen began. "For the last few months I've been communicating with Dick regarding payment of our final invoices for the work we did on the Bank."

Continued Rosen, "Although I understand and appreciate the decision to abandon the project, payment of our fees was not contingent on 'success' or opening of the Bank. Enough time has elapsed that I am now prepared to initiate legal process, although I've tried very hard to avoid that for everyone's benefit."

Said Rosen, “The balance due is $20,205. I've offered a compromise of $17,500 to settle, but I'd expect payment promptly, as the deadline was March 31st."

Less than an hour later, Manchester emailed Gibbons regarding Rosen's message, saying, "Simply pay him $17.5."

The next day, Mandelbaum emailed Manchester and Gibbons about the outcome.

"Papa Doug — Good Resolve," wrote Mandelbaum. "You may want to check with Dick ... regarding the billing from 21st Century as well."

But 21st Century remained stiffed, and subsequently brought a federal court case after an arbitrator ruled in favor of the data services company in February 2010 to the tune of $477,070.39.

Federal judge Lee Yeakel sustained the award in March 2013; the proto-bank, still using Manchester Financial's money, according to court filings, launched an appeal.

Manchester lost again in March of last year when the Fifth Circuit Court of Appeals rejected its plea and upheld the judgement.

Thus began 21st Century's relentless cross-country collection quest, targeted directly at Manchester.

"Mr. Manchester was an organizer of the Bank, Chairman of the Board of the Bank, and proposed 96 percent shareholder of the Bank," says the computer firm's September court filing, portraying Manchester's seemingly casual way of doing multi-million-dollar business.

"The fact that Mr. Manchester 'volunteered and committed' to pay the Bank's pre-opening expenses without any documentation, plan for repayment, or classification of the money transfer as a loan or otherwise, evidences Manchester Bank and Manchester Group's failure to maintain an arm's length relationship."

Contends the document, "the evidence revealed in post-judgment discovery overwhelmingly supports piercing the corporate veil to reach Manchester Group's assets."

Why is Manchester holding out, and is his the only cash backing his controversial development and erstwhile media outfit? For years, speculation has swirled about certain mysterious money men just behind the curtains.

The La Jolla mogul's purchase and subsequent dismantling of the North County Times, as well as his sale of the Union-Tribune to Chicago-based Tribune Publishing, which immediately junked the U-T's printing presses, has raised even more questions about his motives and those of his anonymous partners.

A bit of additional light was shed by Manchester's second-in-command Gibbons during a May 13, 2015, deposition.

Asked by an attorney for 21st Century about the members of the Manchester Financial partnership, Gibbons said there were "probably six."

The line of questioning drew an objection from a lawyer for the defendants before Gibbons was able to furnish the partners' identities, other than to say he was not among them, according to a transcript filed with the court.

More answers to Manchester's many other money mysteries may come October 30 with another hearing in the case before federal judge Barry Moskowitz.