J. David Lawyers Tried to ‘Contain’ Probe, Papers Say

Lawyers from the Rogers & Wells law firm discussed ways to “contain” a January, 1983, state investigation into J. David & Co.’s sale of unregistered securities, according to confidential documents obtained by The Times.

At a meeting with four high-ranking J. David & Co. executives, members of the nationally prominent law firm also discussed whether a person would be faced with “the choice of perjury” if ordered by a federal court to disclose confidential information regarding J. David depositors.

The documents detail a Jan. 21, 1983, meeting at which Rogers & Wells officials informed financier J. David (Jerry) Dominelli that the state Department of Corporations’ “worst case” against J. David & Co.

would conclude that the firm’s banking operation in Montserrat was “owned by U.S. citizens, living domestically” and therefore would fall under the jurisdiction of regulators.

However, Dominelli declared under penalty of perjury to state regulators in a 14-page memo dated Feb. 22, 1983, that his banking operation “is not accepting any accounts from other than non-resident aliens of the United States,” which means the accounts would not need to be regulated.

However, Dominelli’s foreign currency trading, the so-called interbank, catered to investors in Southern California.

The hand-written notes of the Jan. 21 meeting list the initials of eight participants. The initials indicate that the attendees included Dominelli, his second-in-command Nancy Hoover, J. David executive Mark Yarry, J. David general counsel Frederick Storm, and Rogers & Wells attorneys Mitchell L. Lathrop, Norman Nouskajian, Don Augustine and John M. Liftin.

Liftin is the Rogers & Wells securities specialist in Washington, D.C.; Augustine is a securities specialist in San Diego; Lathrop manages the San Diego office, and Nouskajian was the firm’s lead J. David & Co. attorney. Nouskajian has been on leave of absence from Rogers & Wells for nearly a year.

The documents surfaced during depositions taken by local attorney Michael J. Aguirre, who is suing Rogers & Wells and others on behalf of former J. David & Co. investors.

They appear to substantiate a theory held by many sources close to the J. David bankruptcy that state regulators could have prevented the $100 million J. David imbroglio if they had known in early 1983 what Rogers & Wells attorneys knew about the La Jolla investment firm.

On the other hand, sources say that Rogers & Wells will argue that it was merely fulfilling its client obligations.

The firm asked for information from Dominelli and, when it was not forthcoming, Rogers & Wells eventually resigned from interbank work, Rogers & Wells sources have maintained.

The resignation, however, was in June, 1983, eight months after Nouskajian advised Dominelli to reorganize J. David so as to avoid government regulation.

It is not known who wrote the hand-written notes.

The U.S. attorney’s office, which is leading a federal grand jury investigation of J. David & Co., has for some time had all of Rogers & Wells’ internal documents on J. David.

In January and February of 1983, attorneys and executives at J. David kept busy dealing with the state’s probe. In mid-January, Rogers & Wells attorneys huddled in London and concluded that J. David’s interbank should be registered. Then, on Feb. 2, 1983, Augustine advised Dominelli in a four-page memo that selling interbank accounts to investors violated federal and state securities regulations.

As planned, no mention of the violations was made the next day, when Augustine met with Department of Corporations counsel George A. Crawford to discuss the state’s J. David investigation, according to Augustine’s memo to his partners that summarized that meeting.

Crawford said J. David’s “individual discretionary accounts . . . were not a security.”

J. David’s interbank accounts, contrary to Crawford’s opinion, were not individual and discretionary. Rather, J. David pooled its investors’ funds, with Dominelli managing the pool. That type of pooled investment requires government regulation.

Elsewhere, the documents note that “D.A.,” presumably Don Augustine, asks Dominelli, “Why did you embark on your course of action” of accepting pooled client accounts in California in “apparent (violation) of (the) law?”

At another point, the documents say that Rogers & Wells attorneys advised Dominelli not to reply to state investigators in writing. “Go up to (Los Angeles) and talk about the (Department of Corporations’) investigation.”

Included in the documents is a 44-page itemized Rogers & Wells bill for its services for J. David between Dec. 1, 1982, and Feb. 28, 1983. More than 400 entries are listed.

The total bill for services in those three months: $97,964.18.