Captain Money's author, Don Bauder, talks to Matt Potter

Don Bauder
  • Don Bauder

I was born in Chicago in 1936. I just turned 69. Went through high school in a suburb of Chicago and went to the University of Wisconsin. I got two degrees at Wisconsin. My bachelor’s was in business, and my master’s was in journalism.

The only reason that I got a master’s in journalism — in many respects, I think how lucky this was — was that I had become editor in chief of the campus newspaper at Wisconsin, and so then after I served my six months in the Army, I found I could get into journalism school without taking all the journalism courses, because they said, “Well, you’ve had experience as editor in chief of the campus newspaper.” I realized that I really loved writing. The writing was where my real interest lay. And so I went back and got a master’s in journalism.

At that time, I actually was thinking of public relations or advertising. Possibly because my father was a stockbroker; my brother was in advertising. I don’t know.

I did go into advertising and public relations for four years in Chicago and then got the chance to go with Business Week. It’s really unusual for somebody who’s in advertising and public relations to get with the media, but I was able to do it. Then, after less than two years in Chicago, I was promoted to bureau chief in Cleveland. And then we moved to Cleveland in 1966.

It actually was in Cleveland that I got an interest both in financial fraud and in offshore monkey business, off-shore banks. The case in Cleveland, it was a Swiss bank. That case was about a group of organized-crime-connected swindlers who had pulled off a series of IPOs — they didn’t call them IPOs in those days; they called ’em new issues — in which they would get either founders’ stock or first- or second-level offerings in the stocks, and the stocks would miraculously get run up and they’d dump ’em off. These guys were also connected with the Cleveland mob.

The Cleveland mob dates way back to the days of Prohibition — you know, Moe Dalitz and all those characters. They later went out to Las Vegas and incidentally came to San Diego in the construction of La Costa. Of course, one of the key guys was Jackie Presser. I’m sure you remember Jackie Presser, who was the head of the Teamsters and, of course, mob-connected.

Anyway, this brokerage house had put out several new issues of stock, and they all had a pattern of zooming, and the insiders who had gotten themselves shares for almost nothing would bail out as they were on the way up, and then the stocks would collapse.

The story I wrote on that bunch of gangsters and swindlers in Cleveland did not run satisfactorily in Business Week, and that’s one of the main reasons I left. They ran something, but they really watered it down and didn’t put in key things, such as the fact that the Cosmos Bank, a tiny Swiss bank, had sold off something like 75 percent of its stock in a hot new issue before it collapsed. And guess who stashed $30-some million in the Cosmos Bank? Richard Nixon!

[Laughs.] At least, that’s according to the book called Interference.

So anyway, I had an interest in fraud.

I didn’t leave right away. There were complications. We had built a house, and, you know, there were a whole bunch of problems. And then Business Week also had finally come around to realize that I was right, ’cause these guys pulled another swindle and it got Business Week to write up that swindle. They realized that I wasn’t crazy.

But, you know, they didn’t do anything to tell me that they had recognized that, so, you know, bye-bye.

I came to San Diego in ’73. Naturally, in summer of ’73. We packed up the kids, who were then six — well, five and a half — and the other one was three, and we went to Seattle and rented a car and went all the way down the coast interviewing newspapers, and San Diego Union really wanted a financial editor.

And I had interviewed papers for both financial writer and investigative reporter, whatever they needed. Union really wanted a financial editor.

So I came out in mid-’73 as financial editor of the Union.

I started in mid-1973 for $18,500, the exact sum I was making at Business Week when I left. My final salary after 30 years at the U-T was $100,000.

When I arrived in San Diego I was right in the middle of U.S. National and, of course, Arnholt Smith. John Alessio was already in prison, as I recall.

The C. Arnholt Smith case was going on and really occupied a tremendous amount of our time.

He was being pursued by banking officials and by the Securities and Exchange Commission.

They were after him. I mean, he was in a lot of trouble. The SEC and the banking officials were both after him, the SEC for accounting irregularities at the conglomerate, Westgate-California; and the banking officials were after him for the fact that the bank — U.S. National Bank — had loaned way too much money out to Smith’s cronies. Of course, that included La Costa

and all of that stuff. Smith was the kingpin of the community. Of course, I was distressed to find out that he was so close to the whole Copley organization, and here I was working for them. I came into a situation where I was really walking on eggs. We all were, actually.

So it was a very difficult situation. We force- fully argued that the guy was a crook and that, you know, you had to be pretty strong, but we were up against it, because, you know, he was so close with everybody there.

You gotta remember Smith ran San Diego in the ’50s and ’60s. Smith and Alessio ran San Diego. This is the distressing thing about San Diego today, is that it’s going right back to the days of Smith and Alessio, if it isn’t there already. The strong-mayor situation is going to be even possibly worse than it was under Smith and Alessio. They didn’t have a strong-mayor situation then, but they might as well have had.

Jim Copley was the owner of Copley Newspapers. Now, he died shortly after I came in, in 1973. I never did meet Jim Copley, so, in fact, I got there just a little bit before they moved from their downtown office out to the Mission Valley plant, where they are now. I was only in that downtown office for a couple of months.

One of the first columns I wrote for the Union — well, when I say one of the first, I must have been there less than two months — was predicting that Smith’s bank would be seized.

Actually one of my sources was Jim Mulvaney, who was president of the bank. He and I talked about it not too long ago. I quoted him in the story that I gave. I wrote this column and said that, you know, this bank was probably going to be seized. You know, it really shouldn’t have shocked anybody that much. But I got called up and reamed out, and the next day I was forced to run a column swallowing the whole thing. Everything I said was wrong, the bank’s in wonderful shape. And of course, a month later the bank was seized.

So that was one of my introductions to the Union. That kind of frightened me. I thought, “Oh, God.”You know, when I first came in they had talked about how one of the reasons that they needed somebody who’d done investigative stuff was that a lot of this stuff was going on.

Well, then I began to wonder, “My God, am I going to be able to do any of this?” ’Cause we didn’t have any money. We were planning our move out from Cleveland to San Diego, and the real estate prices were much higher in San Diego, and we were having trouble selling our house back in Cleveland because it was a terrible time in the economy. Inflation was starting to go up like crazy. So, you know, we were really hurting financially. Then, bingo, this thing with this column I wrote about Smith’s bank. I had to regurgitate the whole thing the next day.

And, Matt, you can say to me, “Don, you wrote something dishonest,” and you’re right. I wrote some- thing that I didn’t believe. But what would you have done? My family actually wasn’t here yet. Ellen and the kids were still in Cleve- land selling the house when I wrote that column. I wasn’t given any choice. The choice that I had was that if I hadn’t written the column saying everything was okay, I would’ve been fired. So it was written. So, you know, am I a dis- honest son of a bitch? I don’t know. You make up your mind.

Another thing happened probably within six or eight months. The lawyer for the brokerage house that I was telling you about, the mob-infested brokerage house in Cleveland that had pulled off the swindles, got onto the SEC as one of the commissioners.

Well, I wrote a column about that. Actually I had written a story about that after the Union hired me but before I got there, and I sent it to the Union and it got killed before I ever got there because peo- ple in the Nixon administration got it killed.

Then I wrote it again as a column, and it got in. Oh, the guy was gonna sue, and so on and so on. And that one had to be regurgitated too. I came out to take this job and do some of this stuff, and I thought, “Oh, boy. I’m in trouble.” The good thing was that the economy was also in a lot of trouble.

If you’ll remember the ’70s, inflation really started to zoom, so I wrote an awful lot about macroeconomics. San Diego’s housing prices were very high, and San Diego’s inflation was higher than the nation’s inflation. There was a period in there where I did a little bit of investigative stuff, but not much, because I thought, “My God, I’m not gonna be able to do it.” Some in management encouraged me to keep going on scams then, but I smelled a trap. So then when the J. David Dominelli thing came along, my intention all along was to do the investigative stuff, ’cause I knew that San Diego was the perfect place to do it. It was very obvious that San Diego was the perfect place to do it, or Southern California generally.

The three areas of the country that are generally considered the centers of organized, white-collar crime are south Florida, Southern California, and Las Vegas. J. David came along and that was a perfect outlet, you know, to get back on track.

In ’82, Fred Muir [another reporter at the Union] did a series on J. David, but he was never able to get much on it — the regulatory agencies were looking the other way. He told me a story that he was on a motorcycle — he’s a wonderful guy — and he was on a motorcycle and it was, I think, about the time he was leaving to go to the Wall Street Journal. He rode by J. David’s headquarters and flipped up his middle digit and said, “I’ll get you, you son of a bitch, someday!” And I had put that into Captain Money, but John Radziewicz, who was the book’s editor, took it out for some reason.

The thing really started in ’84. There were suspicions around that this was a Ponzi scheme or that there was something going on here that this guy was paying 40 to 50 percent a year, and he was a broker. Dubious. As a stockbroker, he had not been particularly successful, and he was not all that well educated, and here he was claiming to be this genius in foreign currency trade.

Nancy Hoover was J. David Dominelli’s lover. He was this squirrelly little guy with the big thick glasses, and he was kind of shy, yet he had this fantasy life that he had been a great and successful Marine, which he hadn’t been.

She was a good three inches taller than he was. She was almost six feet tall. She was outgoing, ebullient, and so on. She would’ve really made a good Marine. He left his wife; she left her husband. And they started living — they started in Del Mar, and they eventually got to Rancho Santa Fe, of course.

What was happening was that he was taking in all this money and just spending it instead of investing it. Investors would give him the money, and he would act like it was his own. That’s not the way you operate an investment concern! [Laughs.] It’s not your money, it’s the investors’ money. And if you make money for the investors and they pay you a certain percentage, then that’s yours. But the money that the investor gives you is not yours. So the whole thing was a colossal fraud and a Ponzi scheme.

We can’t determine that J. David ever — he may have attempted to do some trading in currencies, but it was on a very small scale, which incidentally, is very similar to what Ponzi himself had done in Boston.

Ponzi’s scheme was based upon the idea that you could buy stamps in a country with a weak currency and sell them in a country with a stronger currency and make a lot of money. Now, the prob- lem with that was, he didn’t do that.

He didn’t actually trade any stamps in the currency market. [Laughs.] All he did was he took in the investors’ money; then he paid off the first investors with money that came in from the next round of investors. The trouble with that is, this is like a pyramid scheme. Eventually it collapses. It has to collapse, mathematically.

In ’84 there started to be rumors that the thing was going down. There were rumors around town that Dominelli was not paying investors off.

Neil [Morgan] had done stuff on him, and I think it probably fair to say, Matt, that other than he stuff that Muir had done that [Dominelli] got a good press. Because, again, it’s the same damn thing that you get in San Diego. He was giving money away — and, of course, it wasn’t his money! He was giving money away to the opera, to the symphony.

In fact, I’ll tell you a story. I was — I can’t remember if I was on the board or the advisory board of the opera at the time — all the time I was in San Diego I was either on the board or the advi- sory board of the opera. I have a big love for opera. I remember talking to somebody who was a fundraiser for the opera, and I was telling her that we had a bunch of questions about Dominelli, and she said, “Oh my God! You can’t have questions about Dominelli!”

I said, “I’m sorry, my first loyalty is to the journalism profession, not to the opera.” And exactly when that was I couldn’t tell you. My guess is that it probably was around ’82 or ’83. And so, you know, people had questions about him. He and Hoover were both giving money away.

Finally I had a chance to go out there and talk with Dominelli. I never did claim that I broke the story. I think we said that I was instrumental in breaking the story, because there were other journalists who were involved in the thing. I know the Tribune had something that was off on the periphery, but it didn’t get to the central part of the thing.

It was a difficult interview. One, because I had to come back and write it that day because I knew that everybody else at the media would try to get to it. I didn’t have time to double-check a lot of stuff. You know how that goes. You and I go through that all the time. I did not have time to double-check.

And number two, you really couldn’t check, because it was a completely privately held organization, plus he was working through offshore entities, and there just wasn’t information that was available publicly to double-check against at that point, particularly when I was on deadline. Still, as you look back, it was a pretty damn good story.

Dominelli wouldn’t let his photo be taken, so the photographer took a picture of his empty desk and he zeroed in on the empty chair.

And then, as soon as that broke, then everybody was on the story. Then it became a really — it just became a feeding frenzy. Once it appeared in the Union and Tribune, it sort of gave it some sort of imprimatur. Everybody just became absorbed with it.

I think, to look back on it, that there were a number of reasons that people were so absorbed with it. One was just kind of the unlikely nature of these two people. Dominelli, the squirrelly little guy with the thick glasses, and his lover who was three inches taller. She had been mayor of Del Mar. She was also a very good friend and financial sup- porter of Roger Hedgecock.

Now that story I didn’t break. The one who really got that one first was Tom Blair, who got the connection with Hedgecock. What he did — I remember him telling me this — he just did a short little couple of paragraphs or something like that or a couple of sentences. Then shortly after he brought it out in short form, the L.A. Times brought it out in long form. And Tom had actually written a long story on it also but had decided to hold it over a day, so I think he got beaten on the long story by the L.A. Times.

I didn’t cover the campaign. I didn’t know a damn thing about Dominelli’s connection with Hedgecock until I read it a day later or something in Blair’s story.

At that time, San Diego politics, I just wasn’t interested in it. I had met Hedgecock, I guess, but I was strictly on the financial side of things. So when I went out and did that empty-chair story I was blissfully unaware of that relationship with Hedgecock.

I had more than I could handle on my plate just doing the financial stuff, because there were a whole bunch of characters in here that I was following. There were literally hundreds of people who eventually over the years served as sources or they were people who were involved in the thing, you know. I had this long list of sources, and I was talking to — I was just interviewing people. But I was strictly on the financial side of the stuff except for the purposes of the book, in which then I got into the political stuff. At the time that the campaign was going on — Hedgecock had won a special election for mayor in 1983; then he was running for the full term in 1984 — I was already writing the book. Two months before the 1984 election, Hedgecock, Hoover, Dominelli, and Tom Shepard were indicted on several counts for supposedly playing a role in Hedgecock’s 1983 campaign.

Sometime in the fall of ’84 I turned the manuscript in. Fortunately, Dominelli then, by that time, was in the slammer and, you know, it was pretty much over — well, it wasn’t over, but, I mean, it was pretty much very clear. There weren’t many doubts about what had happened in the Ponzi scheme, as far as Dominelli went, but Hoover had not been indicted or even charged yet, so we had to dance around Hoover a little bit.

Hedgecock was tried twice, as you remember. There was a lone holdout juror the first time, a guy that worked for the city, and it was 11–1 against Hedgecock in the first suit. Then they tried him a second time, and it was 12 to nothing. So at that point he was convicted.

Then he appealed, and it was thrown back by the appellate court or the supreme court or some thing and it had to be retried, and then it was Ed Miller who made the decision, “Aw, shit, we’ve tried it twice; we won’t try it again.” It annoyed me one time when I heard Hedgecock imply that he was found not guilty. That’s not so. It’s simply that he wasn’t tried a third time.

Hoover is supposedly living in Del Mar. She landed on her feet. She married a very rich guy from Montecito, and he paid for her trial. But then he died, and the last I heard, which was two years ago, she was living in Del Mar, and I’ve always wanted to do something for the Reader that she was in Del Mar, but the people who’ve told me have clammed up and won’t say a word to me.

I heard that Dominelli was in Chicago. He got out of jail after 12 or 14 years. Then he was in Chicago in 1996, and his parents were supposed to be taking care of him. But he did spend a number of years in prison. But she only spent 30 months. She was sentenced to ten years but only spent two and a half. Again, it’s a big mystery why she got out. Nobody has any idea why she got out. I couldn’t even tell you where to go because obviously I tried to find out. The federal government just said, “Sorry, we’re not talking.” I’ve never been able to find out from anybody else.

Early in the game — a few weeks after the story broke — I had given some thought to writing a book. Then, fortuitously, somebody representing a publishing company came to San Diego, saw the raging controversy, and called me out of the blue. I told him I would get back to him.

It just so happened that I had an upcoming interview with William Jovanovich, chief executive of Harcourt Brace Jovanovich. I mentioned the other company’s interest to him. Right on the spot, he made me an offer and I accepted. Never went to an agent — signed up with HBJ immediately and never regretted it.

I started writing the book in the middle of ’84. The U-T gave me permission. I didn’t even take time off from work to do the book. What I was doing was working three 12-hour days at the Union and then working four days on the book. I got it done by, I believe it was October. It was really interesting because my wife, who subsequently got her Ph.D., she had to be in residence at Davis. She got a joint doctorate from SDSU and Davis in plant ecology. So she was off, and I was taking care of the kids, both of whom were in high school at the time. Let’s see, ’84, yeah, the youngest would’ve been 14 and the oldest would’ve been 16.

And I didn’t know a goddamn thing about computers, and here I was writing on this computer, and my oldest son was a computer whiz and he is still, to this day. He’s with Apple, in the Bay Area. I would be writing all night oftentimes. I remember getting him up in the night a couple of times, and also getting him out of school one time when the fucking computer went down.

HBJ did not have much of a promotional budget. There was little advertising, and there was no national author tour. At first, I was disappointed about the tour, but other authors told me it was a pain in the neck — sloshing through the snow in Cleveland to attend a signing with a handful of people there, for example.

The book was distributed nationally but not heavily. The major market was always Southern California. It was on the L.A. Times best-seller list for nine weeks, I believe — at least it was more than two months. Some people thought HBJ could have pushed it harder to a national audience, but I was never sure it would have been that big.

My editor was John Radziewicz. I thought highly of him but never thought the feeling was mutual. The book was racier, snappier, more sarcastic, mean-spirited, and irreverent than HBJ was used to. Also, even though Dominelli was in jail by the time it came out, it was lawyered from hell to breakfast.

That was okay with me — it was good protection. But John got exasperated with me because I was always trying to push the envelope. One time he said that editors are like nuns in school, and writers are like the children. The writers get out of line, and the nuns have to whack their fingers with a ruler. He whacked my fingers several times.

At one point, I tried to quote someone calling a character in the book a “syphilitic whore.” I couched it as a ridiculous comment, hardly an apt description for the per- son. I remember John telling me, “You’re not going to get ‘syphilitic whore’ in.” Of course, he was right.

I didn’t argue with him or the lawyers on such points. The one thing I did argue on, I believe, was one of our best decisions. After they got my salacious manuscript, some people in HBJ wanted to delay the book for one cycle. They wanted to tone it down, and they also saw some holes. I didn’t argue either point but said that would be an economic mistake. This story would not have that long a shelf life. The timing was perect. Dominelli was already in jail, and the story was still hot. We could make what- ever changes we needed, but one thing we should not do is wait. I believe Bill Jovanovich agreed with me on that one. The book came out in spring of 1985 and was well-timed.

The editor in chief of Forbes, Jim Michaels, gave it a one-page review, quite positive. He wrote it himself. That was a tremendous boost and particularly meaningful to me personally because I considered Michaels the best business editor of the 20th Century. I still feel that way about him.

The S.D. Union review was bullish. The Tribune was so-so. Barron’s gave it a so-so review — not particularly positive. It was written by the editor who had handled two stories I had done on J. David for Barron’s.

I wrote her back and said she was being honest and I appreciated the review. I can remember her main point: I said in the book that while Dominelli was a crook and a liar, he was also a dreamer who couldn’t separate reality from his fantasies.

I still believe that — and I believe that about many crooks. They are not 100 percent knaves; they are almost always a certain percentage fool. That was certainly true of Dominelli. She disagreed with that point — and that was fine.

The only all-out panning that I can recall was the Los Angeles Times. Who- ever wrote the review had talked with people in the San Diego bureau of the Times as well as with one of the characters of the book. The reviewer really tore me up. That’s part of writing a book.

The book was also serialized in condensed form in three major daily newspapers, including the Sun-Times in Chicago, my hometown. The only downside of this was that Money magazine had intended to run a condensed version, but when it learned that the dailies had done so, it dropped the idea.

The advance was $15,000. The first two printings of the hardback came to 28,000. Then, of course, came the returns, which probably took the total to 20,000 or possibly even below. However, I sold the books myself at a discount. I used to make a lot of speeches in the community in those days — probably two or three a week.

For several years, I toted a box of books to every speech and sold autographed copies afterwards. I sold a bundle of them. The paperback printing [1986] was 20,000, and 13,000 sold. But again, I bought a bunch of them at a steep discount and sold them at speeches.

Well into the 1990s, I was selling paperbacks for $2 each. (I got them for $1 at that time.) All told, I might have grossed a year’s pay — around $50,000 at that time. My wife, however, says it wasn’t that much, by far, and she is the bookkeeper.

I joined forces with a San Diegan who knew the Hollywood scene, and we tried to make a movie out of it, but we never connected.

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