Captain Money and the Golden Girl: The J. David Affair.
By Donald Bauder. San Diego: Harcourt Brace Jovanovich, Publishers. 1985. Illustrations. Index. 244 Pages. $15.95.
Reviewed by Harry McDean, Professor of History at San Diego State University, who specializes in business and economic history.
If you’re looking for another version of ‘Dallas’ or ‘Dynasty’ in this book, you’ll be disappointed. No hot tempestuous blood flows in the veins of this book’s characters. Their blood is more like that of the late 19th century Victorian characters who may have been moved by six of the Seven Deadly Sins, but not by the seventh, lust. David Dominelli, in fact, comes across as a prude. Nancy Hoover appears as the fair maiden who seems unaffected by the downfall of J. David’s empire, but shattered by the fact that Dominelli headed off to jail refusing to marry her.
So lackluster are the romantic relationships in this book that one soon realizes without reading the inside cover of the dust-jacket — that this book was not written by an out-of-work Payton Place scriptwriter. Donald Bauder has been financial editor of the San Diego Union since 1973. Positioned there, Bauder not only covered his share of legitimate commodities, real estate and stock offerings, but scores of illegal ones as well. And in the case of J. David, Bauder was the first of the journalists to sniff out the scam that Dominelli had created.
This book provides as careful an analysis as one can find of the nation’s oldest money making scheme, the “Ponzi”. As Bauder explains, Charles Ponzi first used this scam to amass a fortune in late 19th century Boston. Ponzi played on investors’ greed to make his scheme work. He never invested any investor’s money. He returned part of it to investors as astronomical “annual earnings,” then spent the rest on himself. Ponzi’s scam could have worked indefinitely, because investors’pride caused them to brag to others about their fantastic earnings, and, as the news was spread, new investors poured fresh monies into Ponzi’s pocket, Their investments then were divided up among the other investors and Ponzi.
Ponzi scams materialize from time to time, each taking advantage of new economic developments that make investors vulnerable. In recent years, interbank trading for international currencies (a method by which banks throughout the world trade currencies with one another through a network of hi-tech computer and communication systems) is a mystery to many investors, and more importantly, is unregulated by international, federal, or state law. Because only a few hundred professionals have access to modern computer and communications systems employed in interbank currency trading, knowledge about this world is scant, and what there is of it is closely guarded by the elite group who do the trading. Since the trading is not regulated, interbank traders need report to no auditors on the nature of their trades.
Because of both the mystery that surrounds this trading and the absence of regulators, interbank currency trading is a natural for the Ponzi. All that is needed is someone to stir up in investors several of the Seven Deadly Sins — greed, gluttony and envy – and a scam is born.
Dominelli, described alternately as a boob and a recluse, could not do the stirring himself. But, Nancy Hoover, perhaps unwittingly, helped accomplish this through her social network of immensely powerful and wealthy friends, including Roger Hedgecock. The extravagant parties, social regattas, and lifestyle of Hoover helped convince many investors of the genius in J. David’s interbank trading scheme. Even so, Dominelli employed “moneyfinders,” whose job it was to locate new investors and thereby maintain the necessary inflow of fresh money.
Bauder allows his materials to suggest an eye-opening conclusion: such was the greed of Americans, that J. David’s scam might have worked indefinitely, had Dominelli been a better accountant and listened more attentively to his lawyers.