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Monday, April 22, 2019

KELLY DEMOSS FILES CHAPTER 7 BANKRUPTCY: Meeting Of Creditors For One-Time Owner Of Battle Creek's On Deck Sports Bar Scheduled For April 23 At 9:00am In Kalamazoo; Demoss & Co-Defendant Robert Buckhannon Face Federal Wire Fraud, Money Laundering, Conspiracy Trial This Summer

UPDATE April 23 @ 7:00pm: Federal bankruptcy court records reveal this morning's hearing was delayed until April 30 to “allow the debtor additional time to submit documentation to the trustee”.  

Facing a federal fraud trial later this summer, Kelly Demoss filed Chapter 7 bankruptcy on February 22, 2019, seeking to discharge nearly $65,000 in liabilities—including nearly $33,000 owed to a Kalamazoo law firm.

Demoss, along with former live-in boyfriend Robert Buckhannon, was charged August 8, 2018 with a total of five criminal counts: one count of conspiracy to commit wire fraud, one count of wire fraud and three counts of money laundering. If convicted, maximum penalties range from 10 to 20 years, plus mandatory restitution.

The bankruptcy case, filed under the name “Kelly Jane Flees”, reveals Demoss/Flees owes $49,881.64 in unsecured claims, and an additional $15,043.82 in a secured claim: the outstanding amount still owed on her 2012 Acura. 

The bankruptcy filing shows that Demoss/Flees claimed $104,967.87 in personal property, including an untouchable $84,31787 retirement account from her current employer, Lowe's Home Improvement.

Under most circumstances, when you file Chapter 7 or Chapter 13 bankruptcy, you get to keep your retirement and pension accounts.

In addition, Demoss/Flees owes the following:
Visa $2,003 
Best Buy $3,957 
Macy’s $1,123 
Sam’s Club $8,865 
Schaeffer Law Offices $32,633 
IC System (collections agency for ATT U-Verse) $1,298

BACKSTORY When the On Deck opened in April 2013, Buckhannon and DeMoss shared a residence at 200 Wahwahtaysee Way, Battle Creek, Michigan. 

In May 2013, On Deck was forced to close as a result of a legal dispute with one of its private investors and remained closed for several months. In order to resolve the dispute and re-open the business, On Deck required a substantial infusion of cash. 

In about June 2013, Buckhannon and DeMoss sought to obtain a private loan for On Deck to resolve the legal dispute, pay off certain business debts, and re-open the business. 

While searching for a lender who would loan them $500,000 to re-start operations, Buckhannon and DeMoss, through a commercial loan broker, represented to Blackburne that On Deck was located in a 5-unit mixed-use building with four rentable office spaces totaling 4,500 square feet. Buckhannon and DeMoss represented that the office space was pre-leased to three tenants. 

No later than August 2013, Buckhannon and DeMoss entered into negotiations with Blackburne to obtain a commercial loan for On Deck. Buckhannon and DeMoss represented to Blackburne that On Deck would use the loan proceeds to settle the legal dispute with the investor; pay off a note on the property; pay off building improvement debts and revolving credit debts for certain furniture, fixtures, and equipment; and for working capital. 

But here’s what Buckhannon and DeMoss concealed from Blackburne: they planned to use the business loan proceeds for personal expenses, including the purchase of a personal home for DeMoss. 

The August 8, 2018 indictment alleged the two did not obtain approval from Blackburne to use the proceeds for personal expenses. Blackburne required documentation of On Deck’s lease agreements with the three purported tenants. 

On or about August 8, 2013, Robert Buckhannon sent an e-mail to a Blackburne representative indicating that he was working on obtaining a copy of the leases from his attorney’s office. 

On or about August 9, 2013, Kelly DeMoss signed, on behalf of On Deck, S.G.E., and herself, a Blackburne loan approval letter agreeing to borrow $494,000 from Blackburne for On Deck’s “mixed-use property with 5-units” located at 225 W. Michigan Avenue in Battle Creek. 

The loan was subject to limitations and conditions, including “Current executed copies of all leases.” 

The indictment alleged that, on or about August 21, 2013, and again on September 4, 2013, Buckhannon sent an e-mail to a Blackburne representative that indicated in the body of the message, “Please find the leases attached.” 

The attachment was a document entitled “On Deck Leases.pdf.” The attachment contained three documents that were entitled “LEASE AGREEMENT.” 

The documents represented to Blackburne that On Deck had three one-year signed lease agreements totaling $42,000 per year of rental income, as follows: 

a. A lease dated July 15, 2013, between On Deck and Tenant 1 for “600 square feet on the second floor and 1,400 square feet on the third floor of the south building” commencing October 1, 2013, and ending September 30, 2014, at a rate of $1,500 per month. The document was purportedly signed by Tenant 1 and countersigned by Buckhannon for On Deck. 

b. A lease dated August 5, 2013, between On Deck and Tenant 2 for “1,200 Square feet on the Third Floor North, Unit 301A” commencing October 1, 2013, and ending September 30, 2014, at a rate of $1,000 per month. The document was purportedly signed by Tenant 2 and countersigned by Buckhannon for On Deck. 

c. A lease dated July 29, 2013, between On Deck and Tenant 3 for “1,200 Square feet on the south end of the Third Floor, South Unit 302A” commencing October 1, 2013, and ending September 30, 2014, at a rate of $1,000 per month. 

The document was purportedly signed by Tenant 3 and countersigned by Buckhannon for On Deck.

More on this story as it develops.