Doing the Doug Manchester dodge

Documents sought in bad debt case, ex-Padres exec says "no comment”

Doug Manchester and Frederick Mandelbaum (insets)
  • Doug Manchester and Frederick Mandelbaum (insets)

In March 2013, an electronic banking vendor won a $466,310 federal court judgment against a would-be bank bearing the name of U-T San Diego publisher and mega-millionaire real-estate developer Douglas Manchester.

In March of this year, a federal appeals court in Texas turned down the Manchester group's bid to overturn the verdict. Now, judging from documents recently filed in federal court here, comes another legal challenge in the case: trying to collect the cash.

The saga dates back to the fall of 2008, when the publisher and his fellow participants in what was to be called the Manchester Financial Bank decided to pull the plug on the deal in the wake of that summer's Wall Street meltdown.

The San Diego Union-Tribune, not then owned by Manchester, had reported on the bank's founding in February 2008, saying, "Rick Mandelbaum, a longtime bank executive who is helping launch the new venture, said 95 percent of the $20 million to capitalize the bank will come from Manchester himself.

"Officers and directors are expected to put up the remaining $1 million — thus eliminating the need to raise money from investors."

“We understand it is not the best time to start a bank,” Mandelbaum was quoted by the paper as saying.

“If it wasn't for Manchester and the fact that it's a private placement, I would be reluctant to start a bank today without having those things determined.”

The worries proved prescient.

That October, Mandelbaum emailed Scott Davis of 21st Century Financial Services, which had contracted with the Manchester group to provide various services.

Mandelbaum had some bad news, telling Davis that although the new institution "had received FDIC approval to move forward," the bank's principal investor, Douglas Manchester, "decided not to move forward based on the current financial turmoil."

21st Century filed suit when the proto-bank refused to pay up on a judgment awarded through arbitration. Manchester's lawyers asserted that since the bank was never real, its organizers couldn’t be held liable for its debts, a position rejected by the courts.

The creditors have now filed a case in San Diego, petitioning the federal court to require Mandelbaum's appearance at a hearing, along with a variety of records, for the purpose of digging up hidden assets that could be used to satisfy the Manchester debt.

"Based on my information and belief there is property of Manchester Financial Bank, subject to execution within the state of California which appears to be discoverable only through appropriate supplementary proceedings in aid of execution such as requested in the motion of 21st Century Financial Services, LLC," says a July 9 filing by Mary R. Robberson, a partner at the downtown law firm Higgs, Fletcher.

In addition to material from Manchester and Mandlebaum, the proposed order also seeks memos, emails, and legal-fee receipts from the publisher’s second in command, Richard V. Gibbons, as well as onetime Salk Institute vice-chairman and ex–Padres executive Richard J. Freeman, among others.

Reached by phone regarding the case, Freeman said he had no comment.

Mandelbaum's debtor examination in the matter is set for August 6, according to a July 11 order by U.S. judge Karen S. Crawford, "for the purpose of determining what property or assets Manchester Financial Bank owns in this district that may be subjected to execution or garnishment toward satisfaction of the judgment rendered against it on March 22, 2013."

"Once the Court has sworn in Frederick Mandelbaum, Judgment Debtor Manchester Financial Bank's Chief Executive Officer, the parties will immediately proceed to the offices of Higgs Fletcher & Mack...where the actual examination will be conducted."

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Hmmm, i wonder if the August 6 examination results will be reported by the U-T?

"Dougie the Deadbeat" is a fitting way to refer to him now. I'll use it, since I invented it.

He resisted paying $thousands in fines to the City, for major code violations at his Grand Del Mar Resort (as reported a year ago by Dorian Hargrove). The Dougster finally paid just before the deadline date. What a piece of work!

Can anyone explain to me the usage of the "failed bank" as money shield/laundry/stash?

Apparently "failed banks" can exist and still contain assets?

Yes, banks can fail and still have assets that other banks will purchase. https://en.wikipedia.org/wiki/Bank_failure

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