The BBC reports today that a man and woman charged in connection with multimillion-pound fraud and money laundering operation have both plead not guilty, and the two have a direct link to the man I like to call the “gift that keeps on giving”: Battle Creek’s “crooked chiropractor” Robert Buckhannon.
THE KARI SONOVICH CASE
The upcoming federal trial of Kari Sonovich just got pushed back — way back!
When Sonovich was arrested in California on February 6, 2014 on three counts of mail fraud, few knew Sonovich’s seismic shock could eventually reach all the way to Battle Creek, Michigan — except for Robert Buckhannon, the person referred to in the Sonovich indictment as “R. B.”.
A status conference previously schedule for Tuesday, July 28, 2015, has now been pushed back to Tuesday, December 15, 2015.
The Sonovich case has already had two of these orders “to continue to exclude time pursuant to the Speedy Trial Act”, providing time for “adequate attorney preparation” to review the growing mountain of discovery produced in the case.
The government has already produced a CD with 10,970 pages of discovery, along with the estimated 65,000 pages of discovery stemming from related cases, including USA v. Vassallo, SEC v. Vassallo and USA v. Kenitzer.
In addition, the government had issued to Google a search warrant for two email addresses, and produced seven DVD’s of information delivered in zip drive — for those of you following along at home, that means a lot of information!
And in June, the government produced additional discovery — emails from Google of the Gmail account of one Joseph Birch.
Court documents filed on July 24, 2015 peg a rough estimate of the number of Birch’s emails between 5,000 to 9,000.
So who is this “Joseph Birch”?
JOSEPH BIRCH…OR SHOULD I SAY “SIR JOSEPH BIRCH”?
Kari Sonovich’s indictment detailed three wire transfers totaling $345,000 that occurred on February 5 and February 6, 2009.
According to the January 30, 2014 indictment (unsealed after her arrest), 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 alleged 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 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 — a Ponzi scheme run by associates of Robert Buckhannon, Anthony Vassallo and Kenneth Kenitzer, through their company Equity Investment Management & Trading (EIMT).
Both were convicted for that scheme, and Vassallo is serving a 16-year prison sentence. Kenitzer was sentenced to a 6-year prison term on February 14, 2014.
Sonovich recruited EIMT investors while she was in Las Vegas, Nevada and Sacramento, California beginning around July 2008 and continuing at least through April 2009. Court documents indicate Sonovich gave investors “materially false statements” to induce them to part with their funds.
Sonovich claimed that she could help the EIMT investors recoup their losses by investing with a “Sir Joseph Birch”, a man who supposedly had a warehouse full of gold bars.
Sonovich falsely told investors Birch “would return anywhere between 250 to 500 percent every 90 days”. Sonovich falsely represented that she would be paid solely out of the investors’ profits. She told investors that after each 90 day cycle, they would have the opportunity to pull their investments out, leave the investments and profits invested for continuing 90 day periods, or pull out a portion and leave the remainder for an additional 90 day period.
But Sonovich didn’t tell the former EIMT investors who gave her in excess of $3 million dollars was that she did not wire the funds to the shadowy financier “Sir Joseph Birch”—she sent most of the money to her personal bank account and that of a “managing member” of B&B Consulting described in the indictment as “B. W-E”.
In most instances, court documents state, the investors sent funds to Sonovich through one of two bank accounts: a B&B Consulting Group, LLC business account at Charles Schwab or her personal bank account at Nevada State Bank.
However, on three instances, funds were wired directly to an overseas account associated with a man who called himself “Sir Joseph Birch”.
In one of those instances, the wire originated from an individual, “R. B.” The indictment stated that “R. B.” was “induced to wire the funds to J.B. by individuals acting in coordination with Sonovich”, who gave “R. B.” the impression that the wired funds belonged to EIMT, whose investors, after the collapse of EIMT, wished the funds to be transferred to “Sir Joseph Birch”.
The “R. B.” in the Sonovich indictment is Battle Creek’s “crooked chiropractor”, Robert Buckhannon, currently under federal indictment for his role in a $34 million dollar hedge fund fraud.
The story of that March 2009 transaction was vividly portrayed by writer Joshua Davis in the December 2011 issue of Condé Nast’s WIRED Magazine in an article about Dave Sanders.
WIRED MAGAZINE...AND ROBERT BUCKHANNON'S $872,306 MONEY TRANSFER
Sanders, the senior vice president of sales and marketing at a company that sold fiber-optic and copper cable, put together a money-recovery team to help investors recoup investments lost to Anthony Vassallo’s Ponzi scheme, EIMT.
Sanders met with Vassallo investor Russ Putnam in December 2008, who introduced him to Kari Sonovich and Brandy White Elk.
Putnam told Sanders the two were friends of his sister-in-law and owned a mortgage brokerage in Vegas. When they’d heard about Putnam’s troubles, they’d offered to use their real-estate know-how to track down property investments Vassallo had made, Putnam later told IRS investigators.
Sanders met Anthony Vassallo at Putnam’s home that night, and in January 2009 Sanders escorted Vassallo to a Sacramento-area bank to retrieve the $1.2 million of investor money he’d stashed there.
Kari Sonovich began pitching Russ Putnam on her investment opportunity—with a “successful British securities trader” named Sir Joseph Birch. Sonovich said he was a financial adviser to the Vatican and had special access to the markets that allowed him to make enormously profitable trades. Sonovich claimed Birch could help Putnam make some of his money back.
According to the WIRED article, Sonovich and White Elk were staying with Putnam, Sonovich and White Elk were staying with Putnam, and to Dave Sanders the women seemed to be getting increasingly close to Vassallo. Putnam’s wife, Charity, would later report to IRS investigators that White Elk confessed that both she and Sonovich were having sex with Vassallo.
Before long, according to interviews and court documents, it came to light that Vassallo was using the opiate-based painkiller Oxycontin. Charity Putnam told IRS investigators she thought Sonovich “could control Vassallo with his drug addiction … and took full advantage of it.”
WIRED reported the alleged coercion quickly produced results.
Sonovich revealed that Vassallo had $872,306 on deposit with an investment firm in Las Vegas.
Vassallo’s money was managed by Robert Buckhannon.
SUNDAY MORNING IN LAS VEGAS...WITH ROBERT BUCKHANNON
In a meeting held on Sunday, February 9, 2009, Sanders and his team met with Buckhannon after he’d shown up at the office of Brandy White Elk expecting to meet with Vassallo and a prospective investor.
According to WIRED, Sanders told Buckhannon he had to immediately initiate a wire transfer of $872,305, the amount Buckhannon allegedly owed Vassallo’s investors. If Buckhannon cooperated, he’d have no further problems. If he refused, court documents show, a member of the recovery team told him that federal agents would harass him and that his business would be ruined.
Sanders handed Buckhannon wiring instructions for “Sir Joseph Birch’s” purported account in the UK, and Buckhannon hastily pulled a laptop out of his satchel. He used an open Wi-Fi connection to log in to his bank account and ordered the transfer. When it was done, he showed them the confirmation screen, Sanders recalled.
In March 2009, the federal government filed civil and criminal complaints against Vassallo, charging him with multiple counts of fraud, conspiracy, money laundering, and securities violations.
The court appointed Stephen Anderson, a retired banker, to act as a receiver to recover funds for investors, and he soon went after Buckhannon’s firm.
The receiver demanded that the company return money that Vassallo had invested, but a few days before an evidentiary hearing was to be held before a federal magistrate judge, Buckhannon’s firm hastily declared bankruptcy and hasn’t repaid any of the money.
The $872,305 disappeared into the purported “Sir Joseph Birch” fund and has yet to be recovered.
If convicted, Sonovich faces a maximum statutory penalty of 20 years in prison and a fine of up to twice the losses resulting from the scheme.
But guess what?
There really is a Joseph Birch.
But you won’t find his name in “Debrett’s Peerage” among the Dukes, Counts, Earls and Viscounts.
Birch is a former racehorse trainer and stud farm owner who, along with his wife, pleaded not guilty yesterday to a £9m international investment fraud.
|Exeter Crown Court building|
Birch and his German-born wife, Girt, both pleaded not guilty yesterday (August 17) at Exeter Crown Court in Devon, England to an international investment fraud scheme estimated to have raked in $14,000,000 USD.
Birch and his wife Grit are also alleged to have spent money on their stables in Devon as a way of concealing the proceeds of crime.
The couple are accused of paying £734,149.66 for cars, furniture and building work at the stud farm at Higher Lowton Farm, Bondleigh, North Tawton, with the proceeds of fraud in 2005.
Birch, aged 62, now of Horns Cross, near Bideford, and his wife Grit, aged 45, now of Exeter, pleaded not guilty to a total of eight counts of fraud or money laundering when they appeared in court.
They are both charged with five frauds by false representation involving £6.25 million (roughly $9,785,312 USD) between 2003 and 2010, one count of possessing articles for the use in fraud, and two of money laundering a total of £2.5 million (nearly $4,000,000 USD).
The frauds involve allegedly obtaining large amounts from investors who put money into what the British press dubbed ‘private placement programmes’ between in 2007 and 2009. (A private placement is a non-public offering of securities sold to small number of investors. SEC documents reveal that Robert Buckhannon's hedge funds, Arcanum and Vestium issued multiple private placement offerings.)
The first fraud charge alleges they obtained £730,412.26 dishonestly by conning 11 investors from Las Vegas into putting money into a “private placement programme” in 2008 and 2009.
The second alleges they obtained £374,096.62 from a company in Las Vegas and its two principles in 2008.
The third alleges they obtained £600,877.24 from an equity fund and an investor in Las Vegas.
The fourth alleges they obtained £1,563,236.10 from a New York investor called Felice di Sanza through a similar fraud.
The three money laundering charges allege they used companies including Phlorian Racing Ltd, Birchwood Stud Ltd, Ultimate Elite Ltd and Energy Enterprises International Ltd to transfer money allegedly swindled from investors in the USA, Germany, Spain and Italy.
The first alleges at Wednesbury, West Midlands, in 2003 they removed £1,872,308 from an HSBC account in Britain to an account with the Erstesparkasse Bank in Liechtenstein.
The second alleges they converted £734,149 in criminal property by cash withdrawals and payments for cars, furniture, fittings and building work at Higher Lowton Farm in 2005.
The third alleges they did the same thing to the value of £3,268,622 between 2007 and 2011. This charge corresponds to the total amount in the four fraud charges.
Joseph Birch also faces a separate charge of possessing two 7.65 calibre pistol cartridges in September 2013 at his home in North Tawton.
Grit Birch was given bail, while her hubby Joseph Birch remains in custody.
Who said Michigan criminals were boring? Not me!