What about those Cayman Islands assets?

San Diego’s self-proclaimed “best” tax lawyer charged with embezzlement.

Douglass and Peggy Jennings
  • Douglass and Peggy Jennings

Attorney J. Douglass Jennings Jr. boasts on his law firm’s website that “we are proudly recognized as one of the leading estate and tax planning law firms not only in California but in the United States and internationally.”

Jennings’s mission is “studying and understanding government loopholes,” brags the website. Jennings Tax Law, with posh offices at 3655 Nobel Drive in La Jolla’s “Golden Triangle,” claims to have a “faith-based” approach to financial planning. Jennings — purportedly called Uncle Doug by some clients — says he is considered by many to be “San Diego’s best tax attorney.” He advertises on AM 760 KFMB’s Roger Hedgecock Show and says Hedgecock is a client.

Jennings rakes in $62,500 a month and his wife, Peggy Jennings, a real estate broker who is also on the Jennings financial planning team, brings in $10,000 monthly.

How do we know their salaries? Well, on March 24 of 2011, they filed Chapter 11 bankruptcy (reorganization), along with Jennings’s first law firm. The filing shows that despite the hefty pay, they came up $370 short every month because of such monthly expenses as $18,404 for mortgage payments, $500 for clothing, and $1500 for recreation, clubs, entertainment, newspapers, and magazines. They had $7.4 million in jointly owned assets (primarily real estate) and $11 million of liabilities. They still have two Rancho Santa Fe homes — one worth $3.5 million and the other, which is rented out, worth $2.28 million. At the time of the filing, there were ten lawsuits and administrative proceedings against J. Douglass Jennings Jr.

According to the Chapter 11 filing, they owed money to the Rancho Santa Fe Association, retailers, credit card companies, banks, a real estate firm named Ramos Properties, a yacht company, and many individuals, some of whom were Jennings law-firm clients who invested in deals promoted by him. Among the Jennings deals in which investors filed claims were La Jolla Equities, Horizon Properties, and Jackson Hole LLC.

Among the creditors was Cayman National, a bank representing a condominium and apartment firms on Grand Cayman in the Cayman Islands, the big tax and secrecy haven. The condo company was owed $1.6 million and the apartments $235,976. I asked attorney Jennings about the Caymans. Did his family take vacation trips there? Did he have money in hideaway institutions in the Caymans? Did he put his tax clients’ money in the Caymans or any other offshore tax and secrecy haven? Did he or his clients set up nontaxable businesses or trusts there? Alas, he did not return my phone calls or answer queries I sent twice by email.

On March 15 of 2012, the Chapter 11 was converted to a Chapter 7 (liquidation). A trustee was placed in charge of selling assets to pay off creditors. The only sale I can find is a 2008 Mercedes, and lawyer Jennings himself bought it. At the time of the Chapter 7, Jennings and his wife owed $5.7 million to the Internal Revenue Service and $2.4 million to the California Franchise Tax Board, with liens dating back to 2005. Those deficiencies grew as more tax liens were subsequently recorded.

Among institutions submitting claims are big banks such as JPMorgan Chase and Citibank and smaller institutions such as Commerce Bank of Temecula Valley and First Bank of Wyoming. Individual investors are still lined up. All told, the amount claimed by Chapter 7 creditors is $25.2 million.

J. Douglass Jennings’s original law firm exited bankruptcy. On July 10, 2012, after the couple’s Chapter 7 filing, Jennings formed a second firm at the same address, the current Jennings Tax Law. He and his wife remain in Chapter 7. Beginning in 1982, J. Douglass has been sued 15 times for professional negligence, 6 times for malpractice, and 2 times for fraud. In an earlier conversation I had with him in October, he claimed the suits had been settled.

Louise Adler

Louise Adler

There have been serious charges against J. Douglass and Peggy Jennings. Last year, Louise DeCarl Adler, judge of the United States Bankruptcy Court in San Diego, ruled on a dispute between the Jenningses and Ramos Properties. In 2004, “Attorney Jennings and Mrs. Jennings sold a 67.43 percent interest” in Utah property to Ramos, for $1.3 million in cash plus some other funds.

However, “Jennings did not record the 2004 warranty deed so he knew there was no public record of the sale to Ramos Properties,” wrote Judge Adler. Two years later, the couple executed a warranty deed, conveying 100 percent of the property to themselves. J. Douglass Jennings got a new loan, claiming he was 100 percent owner of the property, according to Judge Adler’s narrative. Ramos was not told of these moves.

Adler charged both J. Douglass and Peggy Jennings with “embezzlement and/or larceny” with “fraudulent and/or felonious intent.” Their actions were “willful and malicious,” said Adler, defining “felonious” as “proceeding from an evil heart or purpose; malicious; villainous.” She also charged J. Douglass Jennings with “defalcation by a fiduciary,” a polite way of saying J. Douglass fleeced his own client. The conduct of Jennings, attorney for Ramos, was “particularly egregious. He owed ethical duties to his clients,” but preyed on them. “Mrs. Jennings is equally culpable,” wrote Adler, noting that she had 30 years in the real estate business and knew what the two of them were doing.

Roger T. Benitez

Roger T. Benitez

The Jenningses appealed. In September, United States district judge Roger Benitez affirmed Judge Adler’s decision, noting that both J. Douglass and Peggy Jennings committed larceny and embezzlement and J. Douglass cheated his client. Adler was correct in detecting “telltale badges of larcenous intent,” wrote Benitez, who also noted that in a deposition, Peggy Jennings “did not know or could not recall the answer to counsel’s questions approximately 111 times.”

Now J. Douglass and Peggy Jennings have appealed again — this time to the Ninth Circuit appeals court.

Adler has sent a letter about the Jennings cases to both the U.S. attorney’s office and the U.S. trustee’s office, but the contents have not been revealed publicly.

Don’t expect to learn about all this on the Jennings website or the Roger Hedgecock Show.

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And he didn't get back to you? How rude! (Not that you expected him to respond, I'd reckon.) Looking at the 2011 filing, it would appear that they just got themselves in a bind by spending too much. But a relatively minor and generally painless downward adjustment in the outgo could have put them on the road to solvency without a BK filing. But, as you point out, there's much more to the story, and it isn't pretty.

Don, do you have any notion as to whether some sort of criminal charges are likely to come out of all this?

Visduh: Judge Adler's office confirmed that the judge sent a letter about the Jennings couple to the U.S. Attorney's office. The subject is NOT the Ramos case in which she charged, and the district court affirmed, that the couple committed larceny and embezzlement. The Ramos case is enough to generate a criminal investigation. Now there is some other topic, apparently, although the contents of the letter have not been revealed.

If there is no criminal investigation, I would like to know why. Best, Don Bauder

So they're $340 short a month? On over $20,000 expenses a month? What a hoot.

See the rich are different.

MichaelValentine: Jennings counsels people in financial planning. It seems to me that he and his wife could use a little financial planning in knocking out that $340 monthly deficit. Of course, their troubles are far deeper than the monthly budget. Best, Don Bauder

500 dollars a month (six thousand a year if my math is right) for clothing? That's more then I've spent on clothing in the last ten years.

Who's entitled in America? The single mother of two getting food stamps or the wealthy who are entitled to spend more on clothing during a bankruptcy hearing then the single mother will spend all month feeding herself and her two children? Oh well just some more of the rigged game.

MichaelValentine: Excellent points. And what does Congress do? It cuts food stamps. And boosts defense spending. Many in Congress want to cut corporate taxes when corporations on average already pay only 12 percent. My guess is the same solons who vote to cut food stamps vote for corporate tax cuts, and tax cuts for the rich. Best, Don Bauder

I'm guessing that our congress is in fact delivering constituency service, to their corporate citizen constituency (proving that corporations are in fact people my friend?).

The model of oligarchy.

MichaelValentine: Of course. Wall Street and big corporations own most of Congress. Their lobbyists flood the halls and pass out the bucks like candy. The lobbyists write much legislation.

The public doesn't understand how much of this goes on, partly because of deliberate complexity, penned by lawyers who are experts at obfuscation. Best, Don Bauder

I tell my tax accountant to take only the tried and true deductions and that I am not interested in any of the deductions legal or not that raise the red flag in front of the bull (IRS). I sleep well and my friends who are into the "cute stuff" get audited.

AlexClarke: We tell our tax preparer to err on the side of paying too much. We don't want any questionable antics either. Best, Don Bauder

Christopher Glenn: Jennings is in good standing with the bar. He was suspended once, briefly, for a minor violation. Perhaps the bar feels that he had to be convicted of something before it will move on him. To me, the decisions of the two judges -- seeing larceny, embezzlement, and cheating of a client -- should be enough for the bar to cock an eyebrow.

If you go on Yelp you will see some interesting opinions of the Jennings Tax Law operation. Best, Don Bauder

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