Awaiting Senate confirmation as the nation's next ambassador to the Bahamas, known for its tax-sheltering proclivities, Doug Manchester, ex-publisher of the Union-Tribune and million-dollar donor to president Donald Trump's January inaugural festivities, can boast a victory in San Diego federal court.
Chief United States District Judge Barry Ted Moskowitz — nominated to the federal bench here by president Bill Clinton in 1995 and elevated to chief judge five years ago — has ruled that the developer's Manchester Financial Group, Inc. can't be held liable for the $466,310-plus judgement, along with costs and interest, awarded in 2013 against never-opened Manchester Financial Bank.
As reported here in July 2014, the deep-pocketed former U-T owner began dodging 21st Century Financial Services, a provider of data processing to his ill-fated banking start-up, following a ruling against the proto-bank by a federal court in Texas, later upheld by the Fifth Circuit Court of Appeals.
Manchester's eponymous financial institution began as a gleam in the developer's eye in February 2008, just months before Wall Street's legendary meltdown.
"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." the Union-Tribune, then owned by fellow La Jollan David Copley, reported that month.
"Officers and directors are expected to put up the remaining $1 million — thus eliminating the need to raise money from investors."
As with many of the developer's deals, the would-be bank involved a byzantine mesh of partnerships and corporations.
"A group of individuals, including Doug Manchester, Richard Gibbons, and Steve Strauss, sought to charter a bank to be called Manchester Financial Bank," recounts Moskowitz's June 7 order denying 21st Century's motion to name Manchester Financial Group, Inc., the developer's holding company, as an additional judgement debtor in the case.
During the crash, Manchester pulled out of the deal, "based on 'current economic turmoil',” leaving 21st Century holding the bag, court records show.
Complicating the cast of characters is the relationship between Manchester Financial Group, Inc.— referred to in the order as Manchester, Inc. — and a related but separate entity, Manchester Financial Group, L.P., which during the bank's start-up process "issued two deposit checks to 21st Century," the order notes
After the deal fell apart, 21st Century "issued invoices for amounts it claimed were due under the Agreement. In email exchanges between Mandelbaum, Gibbons, and Doug Manchester, Mandelbaum recommended that payment be issued to 21st Century on behalf of the Bank." When the money failed to materialize, the creditor undertook its thus-far futile legal slog.
"21st Century bears the burden to prove by a preponderance of the evidence that Manchester, Inc. was an alter ego of the Bank," writes Manchester's home town judge, adding, "Imposition of alter ego liability is 'an extreme remedy, [to be] sparingly used' and 'approached with caution.'”
"Although 21st Century contends Gibbons and Manchester were both owners of Manchester, Inc., there is no evidence of this in the record. Nor does the Court find any evidence in the record submitted by 21st Century identifying any of the shareholders of Manchester, Inc."
As a result, says the ruling, “the Court agrees with Manchester, Inc. that adding it to the judgment would violate its due process rights.”
Whether the creditor’s case figures into Manchester's yet-to-be scheduled ambassadorial confirmation proceedings remains to be seen.
The more pressing issue of who is going to finance his controversial downtown Navy Broadway complex is likely to come up, including Manchester's solicitation of Chinese investors for an Austin hotel project ultimately backed by fellow California Trump supporter Thomas Barrack, Jr.