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Saturday, June 1, 2019

SEE YOU IN SEPTEMBER: Kelly Demoss Criminal Fraud Trial Delayed As Her Attorney Explores “Mental State” Defense (What, Beguiled By Buckhannon?)

“In the course of preparing this case, counsel identified an issue relating to Defendant’s mental state at the time certain crucial documents were signed.”  


Fraud perpetrators often use a variety of excuses to alleviate the culpability of their mental states because they know they can't be convicted unless prosecutors can prove their criminal acts were accompanied by a guilty state of mind known as mens rea.

Take the case of Enron.

At the end of a five-year investigation, the FBI discovered that Enron Corporation — an American energy, commodities and services company based in Houston, Texas — used a variety of deceptive and fraudulent accounting practices to cover its financial reporting fraud. 

Corporate officers created the illusion that Enron was making profits in the billions, and its stock soared. 

Between 1996 and 2000, Enron reported an increase in revenue from $13.3 billion to $100.8 billion. 

However, the company was actually losing money. 

Enron executives, who used insider information to trade millions of dollars in Enron stock, knew the company was hiding losses in offshore accounts. 

Investors were oblivious. CFO Andrew Fastow and some subordinates created off-book companies to manipulate transactions that provided himself with hundreds of millions of dollars in guaranteed revenue — all at the expense of the corporation and its stockholders. 

As Enron stock climbed, and as Wall Street continued to promote it, a group of 29 Enron executives and directors began to sell their shares. 

These insiders received $1.1 billion by selling 17.3 million shares from 1999 through mid-2001. 

Enron founder, Kenneth Lay, and CEO Jeffrey Skilling also financially benefited from Fastow's fraudulent schemes in the millions of dollars of stock they sold prior to Enron's collapse. 

When Lay was indicted for fraud, he conveniently blamed Skilling, Fastow and CAO Richard Causey for Enron's demise and denied he'd known anything about the accounting fraud. 

Before his trial, he insisted he was a victim in an interview with “60 Minutes,” stating: “I don't think I'm a fool, but I think I was fooled … I can't take responsibility for the criminal conduct of someone inside the company.” 

(Lay died of a heart attack on July 5, 2006, after he was convicted but before he was sentenced.)
In a May 31, 2019 federal court filing, Scott Graham, an attorney representing Kelly J. Demoss, revealed the defense team had “identified an issue relating to Defendant’s mental state at the time certain crucial documents were signed.”

Pretrial in the case was set to begin on June 17, and go to trial on June 24, but the case has been pushed back into the fall.

As the May 31 defense filing revealed, Graham “discussed this request with Assistant United States Attorney Christopher O’Connor, who has indicated that the government does not oppose the relief requested in this motion. The government requests a new trial date on or after September 30, 2019, to avoid previously scheduled personal and professional conflicts.” 

In his motion for a delay, Graham stated the “process of obtaining experts to support this theory has been difficult and time consuming.”

Continuing, the defense attorney revealed progress had “been made and, earlier today, counsel received the first expert report on this issue. Inquiries remain outstanding with other experts, but the process moves slowly. In addition the government requires time to evaluate any expert notice and determine whether it wishes to retain its own experts.” 

“The principal object of the conspiracy was to obtain money from Blackburn by means of false and fraudulent pretenses and representations to unlawfullly enrich themselves, including by converting to their own personal use business loan proceeds fraudulently obtained from Blackburn that were intended for On Deck Sports Bar & Grill LLC,” according to the August 8, 2018 indictment.

The government's investigation, summarized above, included extensive documents and other evidence.

In addition, Demoss appears to have been actively involved in obtaining the $454,000 loan from Blackburne, including signing as the Managing Member of On Deck Sports Bar & Grill, LLC. 

And Demoss personally signed the business formation documents for both S.G.E. Investments, LLC (named for Buckhannon's son and Demoss' two children) and On Deck Sports Bar & Grill, LLC, the two Michigan business entities related to the Battle Creek business.

Buckhannon's name does not appear on either document.

And the documents for the Battle Creek home Demoss purchased for $179,000 on October 29, 2013, later selling it April 12, 2017 for $259,900 — a gain of $87,900.

Demoss signed those, too.

Can’t wait to find out more about those “crucial documents” Demoss is attempting to back away from.

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