}

Wednesday, March 5, 2014

BREAKING NEWS: Ponzi Scheme's Court-Appointed Receiver Supplied Information Regarding Robert Buckhannon's "Activities" To FBI, SEC In 2013

In the first an exclusive three-part series, Miss Fortune reveals Buckhannon's hedge fund activity, focusing today on his activities with the jailed Ponzi schemer Anthony Vassallo and right-hand man, Kenneth Kenitzer.


Battle Creek chiropractor Robert Buchannon, whose burned On Deck Sports Bar and Grill is currently under investigation by the Battle Creek Police Department, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and investigators and contractors hired by the company which insured the four-story building, may soon be facing another even more serious investigation.

Miss Fortune has discovered a document from California's Eastern District Court, dated November 4, 2013, confirming that Stephen E. Anderson, the court appointed receiver of Anthony Vassallo’s Equity Investment Management and Trading, Inc. (EIMT), supplied information concerning Robert Buckhannon’s Vestium Equity Fund, LLC to both the Federal Bureau of Investigation in Denver and the Securities and Exchange Commisssion in Atlanta.

And the recent arrest of another Vassallo associate, Kari Sonovich, could indicate that the FBI may finally be getting ready to take a close look at Buckhannon. 

On January 31, a federal grand jury returned a three-count indictment, charging Sonovich with mail fraud, and she was arrested in her Meadow Vista, California home on February 6. Sonovich was also Vassallo's former lover, and the mother of one of his children.

According to court documents, between July 2008 and April 2009, Sonovich recruited investors to invest with her Las Vegas company, B&B Consulting Group LLC, by telling them she could place their funds with an "international trader" who operated at an extremely high level, promising returns of up to 500 percent every 90 days. 

When investors deposited funds with her, Sonovich kept some or all of the funds for herself. The indictment alleges that Sonovich received more than $3 million from investors. To date, no investor has received the promised returns, and in most or all instances, no investor has received any of their initial investment back.

Some investors in Sonovich’s scheme became involved at the same time that an earlier investment fraud scheme in which they had invested was collapsing. Anthony Vassallo and Kenneth Kenitzer ran that Folsom-based Ponzi scheme through their company Equity Investment Management & Trading (EIMT). Both were convicted for that scheme, and Vassallo is serving a 16-year prison sentence. Kenitzer pleaded guilty to fraud in October 2009, was sentenced on February 14 to a 6-year prison term.


EQUITY INVESTMENTS MANAGEMENT & TRADING

Kenitzer was an officer in Equity Investments Management & Trading, the Folsom, California firm that claimed its computerized trading program would "deliver profits to customers of 36 percent a year". The scheme was shut down five years ago, and indictments soon followed.

The principal in EIMT, Anthony Vassallo, was given a 16-year sentence last June. Vassallo initially pleaded guilty and then changed his mind, saying he had been pressured by prosecutors and his own lawyer to admit his guilt. 


The judge in the case, Garland E. Burrell Jr., called Vassallo a “liar” and made the guilty plea stand before imposing the sentence.

The U.S. attorney’s office (for the Eastern District of California) said investors entrusted Vassallo and Kenitzer’s firm with $83 million between 2006 and 2008. Many customers got their money back, but investors’ losses came to $43.3 million, according to court records.

And according to court documents filed in his case, Vassallo’s EIMT invested “millions” with the Bradenton, Florida-based “investment funds” Arcanum Equity Fund, LLC, Vestium Equity Fund, LLC and/or Vestium Management Group, LLC headed by Battle Creek’s Robert Buckhannon. 

VASSALLO, BUCKHANNON, ARCANUM AND VESTIUM

According to court documents filed in the EIMT case, Vassallo and Kenitzer began investing a substantial amount of EIMT investor money with Vestium in 2008.

On June 30. 2008, EIMT wired $2,000,000 from a Wells Fargo Bank account to a U. S. Bank NA account which was held in the name of “Vestium/Rob Buch”.  On July 3, 2008, EIMT wired another $2,000,000 from EIMT’s bank account to Vestium’s bank account.

On December 3, 2008, Vestium returned $81,391.28 in “profits” to EIMT via a wire transfer.  On December 22, 2008, Vestium wired another $2,000,000 to EIMT sub-fund, Veritas.

On January 12, 2009, Vestium wired an additional $1,200,000 to Veritas.


A total of $4,000,000 of EIMT investor money was transmitted to Vestium in June and July 2008. Vestium returned $3,281, 931.28 in December 2008 and January 2009, leaving $718,068.80 of EIMT investor funds with Vestium.

The court-appointed receiver, Stephen E. Anderson, sought an order requiring Vestium to “disgorge” $718,068.80 and provide a full accounting of its EIMT fund history.

Instead, Robert Buckhannon’s Vestium claimed that it had wired $249,377.53 to “Phlorian Racing LTD” on February 9, 2009. The receiver’s investigation revealed that Phlorian Racing LTD was a British horse farm/racing entity run by “Sir Joseph Birch” that had no affiliation with EIMT. The receiver was unable to verify the transfer was made and that it was done at the written direction of an EIMT principal.

Vestium also claimed to have wired $800,000 to Veritas’ bank account, but statements for that account reflected no such activity.

In addition, during 2008, former Vassallo right-hand man Kenitzer wired $1,330,000 to Vestium in connection with the EIMT Kennitzer accounts. Kenitzer also wired an additional $150,000 to another “investment fund”, the Stewardship Group Foundation. The Stewardship Group wired $50,000 of that $150,000 transfer to Vestium on behalf of EIMT.

As things began to crumble for Buckhannon’s investment funds in early 2009, Kenitzer requested that Vestium release funds held in the EIMT Kenitzer funds to him.

On May 26, 2009, Buckhannon agreed to wire $100,000 from the EIMT Kenitzer Accounts Kenitzer, although he ultimately only returned half that amount—$50,000—on June 18, 2009.

On August 24, 2009, Anderson issued a demand letter directing Vestium to immediately transfer all funds contained in the EIMT Kenitzer accounts.

Vestium did not respond to Anderson’s letter, and Buckhannon responded to Kenitzer with a series of text messages explaining that Vestium was “in contact with the trustee”.

On October 16, 2009, Kenitzer finally received the EIMT statements from Vestium showing “substantial losses/withdrawals on accounts backdated to August 2009”.

The September 2009 statements reflected over $970,000 in “withdrawals” from the accounts that supposedly occurred in August 2009.

But Buckhannon’s Vestium did not transmit any of those “withdrawals” from the EIMT Kenitzer accounts to either Kenitzer or the court-appointed receiver and offered no explanation of how the value of the account plummeted by $970,000—on the investments that purportedly reached maturity in June 2009.

But according to court documents, attached to the statement was a letter from Buckhannon, on behalf of Arcanum stating that “in order to meet the cash requirements for redemptions during August, Arcanum was required to liquidate a AAA rated security at an inopportune time. The Fund (meaning Arcanum) incurred a loss on the position, which translated into a 3.24% loss on your investment.”

Buckhannon should have checked the batteries in his calculator—a 3.24% loss on the account’s purported $1,635,128.61 July 2009 balance would have been $52,978.17, not $970,000.

Ultimately, the court-appointed receiver, Stephen E. Anderson, sought disgorgement of $2.3 million from Vestium Equity Fund, LLC, Arcanum Equity Fund, LLC and the Vestium Management Group.

However, on Friday, April 9, 2010 (the last business day prior to a scheduled April 12 evidentiary hearing) Robert Buckhannon’s Arcanum/Vestium funds filed for bankruptcy.

Anderson later concluded that they, too, were operated as a Ponzi-scheme.

In July 2013, in one of the bankruptcies, the bankruptcy trustee sought discharge because no assets had been located.

It was during this period Anderson supplied information concerning Vestium and Vestium’s principal Robert Buckhannon, to the Federal Bureau of Investigation in Denver and the Securities and Exchange Commission in Atlanta. 



TOMORROW: THE KARI SONOVICH STORY

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