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Wednesday, March 19, 2014

MALIBU MEDIA MUZZLE: Miss Fortune Tells The Story Of Robert Buckhannon and His Malibu Crony, Zia Shlaimoun

Miss Fortune has discovered a compelling international angle to the unfolding story of Battle Creek chiropractor (and burned bar manager) Robert Buckhannon. 

The story—told here for the first time—moves from Las Vegas to London, from Canada to Malibu, and winds up back here in Michigan. Using publicly-available international court documents, Miss Fortune brings you the exclusive story of Robert Buckhannon’s international business associate, Zia P. Shlaimoun—a story you’ll only read at “Glistening, Quivering Underbelly”.

Robert Buckhannon’s $220,000 Payment to Infinifund

On April 1, 2009, Robert Buckhannon, CEO of Vestium Management Group and managing member of Arcanum Equity Fund (AEF), wired $20,000 out of an AEF account to Infinifund Ltd.

However, less than six weeks before, (on February 24, 2009), Buckhannon had sent an email to the other managing members, Terry Rawstern, Dale St. Jean and Gregory Tindall, telling them that pending investor redemption requests “can be strung out for a bit” while they pursued other investment opportunities.

According to court documents, Buckhannon wired an additional $200,000 to Infinifund on June 30, 2009.

On August 18, 2009, Buckhannon sent a letter to the Funds' investors explaining the Funds lacked the necessary capital to pay investor redemptions. 


However, the very next day, Buckhannon transferred $2.5 million of Arcanum's funds to Shea Mining.

When questioned in November 2009 by the Funds’ controller regarding the existence of an agreement authorizing or explaining the purpose for the disbursements, Buckhannon explained that Infinifund’s sole principal, Zia P. Shlaimoun, was the “cousin of his fiancĂ© Marlena Michaels.” 

But as Miss Fortune revealed in a March 10 post titled "Serial Monogamy in the Cereal City", Buckhannon wasn’t being enitrely truthful— Buckhannon and Michaels had actually married on May 15, 2009.

Buckhannon initially told the controller to classify the $220,000 payments to Infinifund as “expenses related the AEF’s August 2009 investment in Shea Mining & Milling.” However, in March 2010, the controller stated that Buckhannon told him to reclassify the expenses as “legal expenses for AEF”.


When the controller questioned that classification, Buckhannon instructed him to reclassify the Infinifund payments as “investment management expenses”.

But just a few months later, Shlaimoun and his partner Nikolas Korakianitis scored and even bigger payday—from a disputed $2,000,000 “bond transaction”
 

The Case of Mining Technologies International, Inc. v Krako Inc., Krako International Holdings, Infinafund Ltd., Zia Shlaimoun, et al. 

In early 2010, Mining Technologies Inc. (an Ontario manufacturer of drilling tools for the mining, water well and construction industries) was introduced to Nikolas Korakianitis, a business associate of Zia Shlaimoun. Korakianitis claimed that he could provide financing assistance to MTI for MTI's business. Korakianitis advised MTI that he had access to “$300,000,000 of bonds that could be traded”. The bonds were allegedly held in a bank account at the National Westminster Bank in England (NatWest Bank).

According to Canadian court documents, Zia P. Shlaimoun testified that at all material times he “was, and currently is, the sole director, officer and shareholder of the Infinafund defendants”. Shlaimoun is also the "owner" and principal of Versailles Investments LLC, a California corporation that owns his current residence in Malibu, California. 

On May 13, 2010, Shlaimoun emailed Korakianitis advising that his ‘banker’ had ‘dictated’ a ‘letter of undertaking’. Shlaimoun advised that it made more sense for an investor to receive a ‘letter of undertaking’ as the investor would then have an undertaking from the bank to return their money in the "unlikely event that we don’t perform".

The court later determined that it was “clear that Shlaimoun and Korakianitis were both involved in obtaining or creating paper which would help persuade "investors" that the bond transaction was bona fide.”

While Shlaimoun has no formal education or experience in financing, let alone in transactions involving $300 or $900 million dollar bonds, court records show that Shlaimoun stated that from 2009 to 2011, he was in “the business of raising financing”.


But defendant Nikolas Korakianitis (the Krako companies are his family’s corporations) later defended MTI’s court action, claiming he “knew nothing of Shlaimoun’s fraudulent scheme” regarding the bond transaction.

On the other hand, Shlaimoun pointed the finger right back at Korakianitis, alleging that Korakianitis was his client and that he only took instructions from him.

However, the Canadian court documents state that the “evidence is overwhelming and conclusive that both Shlaimoun and Korakianitis were jointly involved in the bond transaction and Shlaimoun played a much more significant role in the bond transaction."


In May 2010, MTI transferred $2,000,000 into Infinafund Ltd.’s bank account at NatWest. Mining Technologies Inc. (MTI) believed it was investing in a short term “bond transaction”. [NOTE: The Canadian court records spell Shlaimoun’s “Infinifund” as “Infinafund”; this story utilizes the Canadian court's spelling.]

Within a few months, MTI began inquiring about the investment and the return of its money. When little or no information was provided to MTI, it began an investigation into the “bond transaction”. At some point, MTI concluded the “bond transaction” was a fraudulent scheme and its money had been taken. 

Court records revealed the existence of a “a written and executed Joint Venture Agreement between Shlaimoun and Korakianitis dated March 12, 2010” that was a general agreement for ‘private financial programs’ in which Krako and Infinafund would share profits (the "Joint Venture Agreement"). The Joint Venture Agreement provided that Infinafund was responsible for operating the bank account, for securing the credit line for the exclusive use of the joint venture and for negotiating and managing the trading activities.

But Shlaimoun denied that he’d even signed the Joint Venture Agreement, suggesting that his signature was “cut and pasted onto the agreement”—but never offered any explanation why Korakianitis would do so while leaving himself significantly implicated in the bond transaction.
 

The Ontario Superior Court of Justice determined in 2010 Shlaimoun and Korakianitis were jointly involved in the bond transaction.

In making its decision, the court determined that it made little sense that Korakianitis was the client from whom Shlaimoun simply took instructions because the alleged $900,000,000 bonds and the “investor” monies were deposited with the NatWest Bank, into a bank account controlled solely by Shlaimoun. 


Shlaimoun's Malibu home
Korakianitis requested payments from Shlaimoun and Shlaimoun made a payment to Korakianitis' family. Not one document exists showing Korakianitis gave instructions to Shlaimoun on any financial matters.

In addition, much of the money from the Infinafund NatWest Bank account was transferred into other Shlaimoun owned or controlled bank accounts. There is no suggestion that Korakianitis had any control over the Infinafund NatWest Bank account or the additional recipient bank account that Shlaimoun controlled. In addition, there were a number of communications from Shlaimoun to MTI dealing with MTI’s “invested” $2,000,000 into Shlaimoun’s Infinafund account at NatWest Bank. The significant and concrete information regarding the bond transaction came from or was sought from Shlaimoun
financing, trading, and the bonds.

The communications confirm that Shlaimoun was a significant, if not the significant person, in MTI's involvement in the bond transaction and the bond transaction itself.
 

In December 2010, MTI began legal proceedings in the United Kingdom (UK), seeking disclosures, including copies of Infinafund’s NatWest bank account documents. A “Norwich order” was granted on December 31, 2010.  (A Norwich order is a pre-action discovery mechanism that compels a third party to provide certain information in its possession.)

On May 19, 2011 MTI filed a its lawsuit in Canada, alleging fraud, conversion, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, unjust enrichment, negligence and breach of contract.

Defendants included Zia Shlaimoun, his wife Oussha Arda Shlaimoun, the Infinafund defendants and other “Infinafund” companies and various other parties to the losses arising from MTI's deposit on May 27, 2010 of $2,000,000 into Infina Fund's NatWest bank account.
 

On May 27, 2011 Justice O’Connor issued a Norwich Pharmecal Order, a Mareva Order and an Asset disclosure Order (“O’Connor Orders”). The O’Connor Orders required Shlaimoun to provide a sworn statement of his worldwide assets within 7 days. (Shlaimoun’s assets were “frozen” by the Mareva injunction.)

On July 17, 2011, Shlaimoun served MTI with a sworn asset statement in accordance with the O'Connor Orders to report his worldwide assets.

In this affidavit, Shlaimoun stated that he resided in London, England, and that his worldwide assets included nominal sums in a Barclays Bank account in London, a residence with a small amount of equity in London, and shares of nominal value in the Infinafund Companies.

Shlaimoun submitted that he had "no significant assets with any substantial value".

But Shlaimoun failed to disclose the Malibu, California home he’d purchased in December 2010, interests in various luxury automobiles, his interest in the California company, Versailles Investments LLC, and other corporate interests.

While Shlaimoun stated that he did not include property in California because he understood that California did not recognize foreign Mareva Orders, it is significant to note that the Shlaimoun’s affidavit purported to describe "the nature, value and location of their assets worldwide, whether in their own name or not and whether solely or jointly owned" as required by the O'Connor Orders.

There was no reference in the document to Shlaimoun’s non-disclosure of his California assets.

On July 21, 2011 the O’Connor Orders were continued and, given the intention of Shlaimoun to set aside the O'Connor Orders, the court permitted Shlaimoun access to $50,000 from the frozen assets for living and legal expenses.

On August 26, 2011, Shlaimoun and the Infinafund defendants moved to set aside the O’Connor Orders. MTI sought to extend the O’Connor Orders.

On September 6, 2011 the O’Connor Orders were continued. The Shlaimoun and Infinafund defendants' motion was adjourned to November 7, 2011.

Again, given the proposed motion to set aside the O'Connor Orders, the Ontario Superior Court permitted Shlaimoun access to a further $100,000 (for a total of $150,000) from the frozen assets for living and legal expenses.

But MTI defended the motion to set aside the O'Connor Orders.

One of the documents produced was an affidavit from Peter Cosandey, a lawyer in Switzerland, setting out documents required to be produced by Shlaimoun's Infinafund BSI Bank in Switzerland which would permit a tracing of the funds received from NatWest Bank's Infinafund bank accounts.

Court records show Shlaimoun provided no documents.

In September 2011 MTI discovered that Shlaimoun had moved to Malibu, California. MTI discovered that Shlaimoun had entered into an agreement to purchase a large oceanfront home on July 6, 2010. This was one of the more significant assets not disclosed in Shlaimoun's sworn asset statement.

MTI discovered Shlaimoun's failure to disclose all of his worldwide assets.

The $12,000,000 Malibu Home 


Shlaimoun’s home, described in a 2012 SF Curbed post as a “huge, less-than-tasteful Malibu mansion”, is a sprawling, 20,000-square-foot personal palace. With sweeping views of the ocean, broad expanses of featureless tile and tacky '90s architecture, the house holds 11 bedrooms and 12 bathrooms, while the sizable 5.33-acre lot includes "horse stables with riding area, tennis court, a grand infinity edged pool with pool house, large fruit orchard, rose garden and space for a vineyard”.

 

Court records show Shlaimoun “carefully avoided disclosing assets which may be held by other corporate entities which he owns or controls”.

For example, there is no information at all regarding the financial affairs of Roxlark or Lantierst.

Roxlark International Ltd. is an offshore corporation registered in Belize. In his court documents, Shlaimoun stated he was “introduced to Roxlark” by a company called Lantierst.

However, Shlaimoun delivered, on the closing of the Malibu home, a letter on Roxlark letterhead signed by Shlaimoun "for and on behalf of Roxlark".

Shlaimoun also transferred $6,200,000 from Roxlark's bank account for the purchase of the Malibu home.

Shlaimoun prepared a “personal wealth statement” in April 2011 for Deutsche Bank in connection with a mortgage for his Malibu home in which he disclosed he was the 100% owner of Roxlark.

Although requested by the court, Shlaimoun has never provided documents with respect to transfers of monies to Roxlark by the Infinafund defendants. Shlaimoun does not deny in any of the voluminous materials that he is not the principal of Roxlark.

He simply does not admit it.

Yet, Shlaimoun attempts to distance himself on the basis he was "introduced" to Roxlark. Canadian court records reveal there was not a single document in the mountain of paper produced in the case which even hints that Shlaimoun and Roxlark are third parties or independent of each other. But there are numerous documents which clearly state, and those which imply, that Shlaimoun is the principal and "controlling mind" of Roxlark.

In November 2011, upon MTI bringing motions for documentation from Belize relating to Roxlark, Roxlark was abruptly deregistered as a company.

When confronted with a payment of $6,200,000 from Roxlark to Shlaimoun (for the purchase of the Malibu home), Shlaimoun stated it was a payment for a patent of his but did not produce one single document consistent with or confirming such a patent transfer or transaction.

The court decided that there was no question Roxlark was controlled by Shlaimoun.

Lantierst was yet another Shlaimoun corporation. Attached to the same personal wealth statement of April 2011 for Deutsche Bank for the Malibu home financing, Shlaimoun described himself as the “100% beneficial owner of Lantierst”.

Shlaimoun had been asked by the court for information regarding Lantierst but has failed to provide any credible information regarding Lantierst or the transfer of funds to it from the Infinafund defendants.

Again, Shlaimoun did not deny that he was the principal or “controlling mind” of Lantierst.

He simply did not admit it.

There is not a single document that suggests that Shlaimoun and Lantierst are third parties to each other.

In addition, there was nothing produced regarding the ownership or assets of the other Infinafund companies.

MTI has included information in the motion materials regarding luxury vehicles and other corporations it alleged that Shlaimoun owned or controlled.

Shlaimoun has not seen fit to deal with these allegations other than a bald denial that he has any assets or income, yet he continues to live in a 22,000 square foot home overlooking the Pacific Ocean in Malibu.
 

The Case

In the fall of 2011, Shlaimoun and the Infinafund defendants filed a “Statement of Defence” in this action. The Statement of Defence challenged the jurisdiction of the Ontario courts and submitting that Ontario was not the forum conveniens for this proceeding. The Statement of Claim contained no defence to the merits of MTI's claim. There was no denial of any factual allegations in the Statement of Claim.

Once Ontario's jurisdiction for this proceeding was determined, MTI brought a motion for partial summary judgment—and the crazy train left the station. The action spawned additional motions and cross motions.

Shortly after the Court of Appeal dismissed Shlaimoun and the Infinafund defendant's challenge to Ontario's jurisdiction, Shlaimoun and the Infinafund Defendants submitted a draft “Amended Statement of Defence” dated January 14, 2013.

The Amended Statement of Defence stated:
a) Shlaimoun and the Infinafund Defendants admitted that MTI deposited $2,000,000 USD into Shlaimoun's Infinafund’s NatWest Bank account in England; 

b) Shlaimoun admitted that the Infinafund’s bank accounts were controlled by him; 
 c) Shlaimoun and the Infinafund defendants stated that they did not participate in the bond transaction except to arrange for the funding;
d) Shlaimoun and the Infinafund defendants stated that the entire "bond transaction" was undertaken and controlled by Korakianitis; and
e) Shlaimoun and the Infinafund defendants denied that they ultimately received any of MTI's monies.

On November 25, 2013, MTI's motion for summary judgment against Shlaimoun and the Infinafund defendants for $2,000,000 (USD) was granted, together with pre-judgment, post judgment interest and costs.


As set out above, the court determined that Shlaimoun was personally and actively involved as a principal in the fraud and the misappropriation of MTI's monies. 


Shlaimoun was the beneficiary of the unjust enrichment, and the court concluded that Shlaimoun's use of the Infinafund corporations for fraudulent purposes for his direct financial benefit would be sufficient for this court to pierce the corporate veil and make Shlaimoun, the controlling mind of the Infinafund corporations, liable for the amount of MTI's loss of $2,000,000

And yesterday, on March 18, 2014 , MTI attorney Norman Groot confirmed to Miss Fortune in an email that his firm “filed an extensive motion record with the Ontario Superior Court of Justice in Brampton returnable April 1st. The motion record contains the judgment issued by the Brampton Court against Shlaimoun for $2M, plus interest and costs. The motion record also contains other relevant documents related to the judgment. We are seeking further relief against Shlaimoun on April 1st.”


FLY ME TO SHLAIMOUN: What's Next?

In an "order to appear" filed on February 12, 2014, in California's Central District, Zia Shlaimoun was personally ordered to appear in front of the Honorable Paul L. Abrams on April 22nd at 10:00am.

Shlaimoun was ordered to appear to "furnish information to aid in enforcement of a money judgment against you".

The plaintiff is Wires Jolley, the Toronto law firm that represented Shlaimoun in the MTI case.

After successfully arbitrating their fee down to $227,503 (plus interest) from $326,000, Shlaimoun still hasn't paid his lawyers.

4 comments:

  1. Just to clarify, the "Krako" companies were created and operated for off shore business by Nik Korakianitis himself in 2005. No one but him worked for the companies and he is not a financial expert, he is a salesman by trade. The account into which Shlaimoun deposited funds was opened by Korakianitis in his mother's name (as he holds power of attorney due to health issues) the day before the deposit.
    Interesting, but perhaps unrelated, korakianitis testified in another fraud case involving Robert Gordon Buchan (2009)...

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