PAGE   13                           

                         San Antonio Business Journal  

                                 April 10, 1989

SECTION: Vol 3; No 12; Sec 1; pg 1

LENGTH: 1962 words

HEADLINE: Report Accuses Dominguez of Fraud

BYLINE: Donna Kenny

DATELINE: CA; US

 BODY:    A California federal bankruptcy court issued a preliminary 
injunction on March 29 prohibiting developer H. Frank Dominguez and his 
family from shuffling assets between businesses after a bankruptcy 
examiner filed a report alleging that Dominguez's business failure 
resulted from acts of "dishonesty and gross mismanagement."

   Compiled by an examiner appointed by a U.S. Bankruptcy Court judge in 
California, the 159-page report concludes that Dominguez was responsible 
for repeated instances of fraud and self-dealing, and recommends that a 
variety of property and financial transactions Dominguez orchestrated 
through a group of companies in his control should be voided due to 
fraud.

   The report also alleges that Dominguez supported a lavish lifestyle at 
the expense of his creditors-using a chauffeur-driven limousine to drive 
to and from bankruptcy hearings and funneling money from his companies 
for $ 700,000 in renovations to his mountaintop luxury home.

   Some of the examiner's other allegations include claims that:

   * Dominguez committed fraudulent transfers of his assets to his family 
relations to the point that his business affairs were "hopelessly 
entangled."

   * Dominguez failed to maintain adequate financial records and failed 
to file tax returns for 1986 and 1987.

   * Dominguez claimed his net worth was $ 52 million at a time when he 
was unable to meet his debts and borrowed more than $ 40 million that he 
could not pay back.

   * Dominguez was guilty of "gross mismanagement."

   "We received the report just a couple of days ago, and have not had a 
chance to respond," Dominguez said, adding, though, that he found the 
various allegations "very inaccurate."

   "My observation was that there are a lot of assumptions made in a very 
negative sense," said Dominguez. Dominguez said that he would be 
preparing a point-by-point response to the report, but could not now 
address questions on

                                                                       
PAGE   14               San Antonio Business Journal  1989 UMI/Data 
Courier               

specific allegations.

   As a result of the allegations, the bankruptcy examiner is 
recommending that all the Vanir companies-a group of eight companies that 
Dominguez controls-be consolidated, and creditors seek to void or "set 
aside" Dominguez's past transfers of real estate and money.

   The move to void Dominguez's financial transfers is based on 
allegations that Dominguez violated U.S. Bankruptcy laws and a California 
law that states that transfers can be nullified if they were done with 
the intent to hinder, delay or defraud creditors.

   The bankruptcy examiner, Leonard Gumport, stresses that the results of 
his investigation are not a court decision or a finding from a jury, but 
his opinion based on interviews and accounting documents.

   As a result of Gumport's report, Judge William Lasarow of the U.S. 
Bankruptcy Court of the Central District of California ordered a 
bankruptcy trustee be appointed to take custody of Dominguez's business 
affairs. In addition, Judge Lasarow ordered a preliminary injunction on 
March 29 prohibiting Dominguez and his family from shuffling assets 
between businesses and individuals.

   Dominguez, the developer of Fiesta Plaza, Ramada Inn, the Control Data 
Building and other beleaguered projects on the city-owned land in Vista 
Verde, filed for Chapter 11 bankruptcy protection in California on Jan. 
22, 1988, amid numerous lawsuits by lenders threatening to foreclose.

   In an effort to stave off those foreclosures, the city of San Antonio 
filed a

petition to force Immer Vista Verde, one of Dominguez's development 
companies into involuntary Chapter 11 reorganization here in San Antonio.


   A proposed agreement between the city and Dominguez to free up the 
Vista Verde land for new development and dissolve the involuntary 
bankruptcy was approved by the California bankruptcy court last week.

   However, in the midst of the compromise agreement, Dominguez was 
slapped with the reams of documents from Leonard Gumport, bankruptcy 
examiner for Dominguez's affairs. The report was based on examination by 
the law firm Hufstedler, Miller, Kaus & Beardsley in Los Angeles and 
records from the accounting firm Neilson, Elggren, Durkin & Co.

   In the past, Dominguez has blamed his failed projects on the  Texas  
economy. The Gumport report, though, places virtually the entire blame on 
Dominguez.

   "Dominguez must bear the blame for all or nearly all of his  Texas 
problems," Gumport said in the report.

   The bankruptcy report outlines Dominguez's business affairs in 
California and  Texas  from 1985 to the present. As of December 1985, 
Dominguez is the record owner of 100 percent of the stock of Vanir Group, 
the top-tier holding company for at least eight corporate subsidiaries.

   The report refers to the Vanir Group and its wholly owned subsidiary 
Vanir Development Co. as "corporate shells that Dominguez uses to hold 
his fraudulently transferred assets and funds."                                                                        
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Courier               

   Dominguez comingled the business assets and debts between several of 
his Vanir companies including Vanir Group, Vanir Development and a 
"fictitious" business known as Vanir Research Co., the report alleges.

   Over the past four years, Dominguez has borrowed more than $ 40 
million from numerous financial institutions and individuals and has paid 
back almost none of it, the report alleges.

   During this time, Dominguez claimed he had a net worth of $ 52 
million, despite many signs that he was struggling financially, the 
report alleges.

   For example, the report contends, tax returns prepared by Dominguez's 
accounting firm reflect a negative cash flow overall for each year from 
1984 through 1986. In addition, Dominguez had difficulty making payments 
on a court judgment that the Kraus-Anderson Mortgage Co. received against 
Dominguez for more than $ 800,000 in 1985.

   In response to his growing debts, "Dominguez concealed his financial 
difficulties with a grossly misleading financial statement which 
exaggerated his net worth," the report alleges.

   In addition, Dominguez "made fraudulent or otherwise voidable 
transfers of his assets to his family members, to corporations controlled 
by him and to insiders," the report contends.

   Some of those transfers allegedly include:

   * In an effort to remove $ 4.2 million from his balance sheets and 
beyond the reach of his creditors, Dominguez transferred 50 percent of 
the stock of Vanir Group of Companies Inc. to his wife and children;

   * between 1986 and 1987 Dominguez transferred various corporations 
including the Law Center of San Bernardino, Center City Food Services and 
a $ 650,000 California mountaintop home, known as the Big Bear Property, 
out of his name and into the Vanir Group;

   * in 1986, Dominguez received more than $ 1 million from the sale of 
his Colton Cablevision Co. and "fraudulently" transferred these funds to 
Vanir Group, and Vanir Group used the funds "as part of a fraudulent 
scheme" to acquire title to Vanir Tower.

   The report also alleges that during a time when he was experiencing 
"severe financial problems," Dominguez committed "gross mismanagement." 
Claims of mismanagement were backed up by allegations that Dominguez 
takes funds from the rents of income-producing properties that belong to 
his bankruptcy estate and funnels them through Vanir Development "so that 
he can pay the upkeep on his house, pay credit card bills, support his 
children and parents, vacation in his mountaintop resort, and go to and 
from bankruptcy court in a chauffeur-driven limousine," the report 
alleges.

   Gumport's report also alleges that the creditors' committee overseeing 
Dominguez's bankruptcy failed to function properly, and that one 
corporate entity "engaged in a secret act of self-dealing."



                                                                       
PAGE   16               San Antonio Business Journal  1989 UMI/Data 
Courier               

   Gumport alleges that after the first creditors meeting, "the committee 
did nothing."

   In addition, Gumport alleges that Marathon National  Bank,  a 
financial institution in West Los Angeles, and the chairman of the 
creditors' committee, engaged in an unauthorized settlement with 
Dominguez by accepting a trust deed to hold Big Bear property until 
Dominguez paid his debt to the company.

   In return, Marathon agreed to refrain from objecting to Dominguez's 
attempt to discharge himself from the bankruptcy, the report alleges.

   Gumport alleges that Marathon knew that Dominguez fraudulently 
transferred the Big Bear property to Vanir, because the lender had 
previously filed legal papers objecting to Dominguez's discharge.

   Marathon, however, vehemently denies those allegations, saying there 
is much more to the story than what's available in Gumport's report. 
Marathon claims that its officers never reviewed its legal pleadings 
before they were filed and were unaware that Dominguez had "fraudulently" 
transferred the property.

   Gumport was acting as an "advocate" as opposed to an "independent fact 
finder which he is required to be under the Bankruptcy Code," Marathon 
alleges in its legal papers opposing the appointment of a trustee.

   In addition, Marathon asserts that its settlement with Vanir was no 
secret, and that the creditors' committee was aware of it. Marathon also 
alleges that its settlement actually benefited other creditors because it 
decreased Marathon's claim by more than $ 220,000.

   Finally, Marathon alleges that its settlement with Dominguez was in 
line with normal bankruptcy procedures. It contends that if a trustee is 
appointed, he would only liquidate the estate and creditors would get 
"little, if nothing."

   Another large portion of the report focuses on the pending litigation 
and claims surrounding the Vista Verde South project that Dominguez 
developed with loans from local and out-of-state thrifts and federal 
grants from the U.S. Department of Housing and Urban Development.

   Dominguez formed a joint venture with two local developers  David Saks  
and Doyle Spruill, and named their partnership Omni/Vanir Vista Verde 
South Joint Venture.

   In 1984, Omni/Vanir hired George Smith Financial Services, a loan 
broker in Southern California, to help the partnership find funding to 
build the Ramada Hotel.

   According to the report, George Smith Financial approached Southern 
California Federal Savings and Loan (SoCal) to make a construction loan 
to the partnership in return for Omni/Vanir's purchase of a piece of 
SoCal's foreclosed property at the thrift's book value.

   After SoCal loaned Omni/Vanir $ 11.6 million and the partnership 
agreed to buy the Hazelwood Apartments in California, the partnership got 
into financial trouble and defaulted on the loan. At a meeting in SoCal's 
offices in December 1985, SoCal's officers told the partnership that the 
loan would not be

                                                                       
PAGE   17               San Antonio Business Journal  1989 UMI/Data 
Courier               

extended until management problems were solved.

   Dominguez alleges that SoCal instructed him to buy out the interest of 
Saks and Spruill. SoCal denies this. At any rate, Dominguez bought out 
the 50 percent interest of Saks and Spruill.

   Meanwhile, Sikes Construction, the general contractor for Ramada, had 
not been paid for more than a month, the report alleges.

   During this time, Dominguez needed about $ 650,000 to fund the 
Saks/Spruill buy-out and used $ 597,407 from SoCal, designated to pay 
Sikes construction, for the buy-out, the report alleges.

   In late August 1986, Sikes construction walked off the job. The Ramada 
Hotel remains unfinished.

   This episode resulted in SoCal moving to foreclose on the hotel in 
April 1987. Dominguez and Omni/Vanir filed suit against the thrift 
alleging it violated usury laws when it required the partnership to 
purchase the Hazelwood Apartments.

   That litigation is still pending.

   In the recent settlement between the city and Dominguez, Dominguez 
will release his rights to the land and complete Ramada Inn, provided he 
obtain financing.

   Gumport's report lists numerous debts Dominguez owes including several 
to a friend, Lily Wong, who loaned him money to purchase a Church's Fried 
Chicken restaurant and invest in a movie.

SUBJECT: Developers; Federal court decisions; Bankruptcy; Fraud; Debt 
management; Holding companies; Litigation; Pacific; Southwest

NAME: H. Frank Dominiguez

GEOGRAPHIC: Southwest Region; San Antonio; TX; US

COMPANY: Immer Vista Verde Inc; SIC: 6552 Vanir Group of Cos Inc; SIC: 
6719 Marathon National  Bank;  DUNS: 10-652-1016; SIC: 6021

LOAD-DATE-MDC: July 6, 1990

                                                                       
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