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Monday, August 19, 2019

SHE KNEW, SHE FAILED TO TELL LAW ENFORCEMENT & SHE HELPED COVER IT UP: Feds Drop All Charges Contained In Original Indictment Against Kelly Demoss; In Return, Demoss Pleads Guilty To Misprision Of A Felony

BREAKING NEWS! MAXIMUM SENTENCE: Three years in prison, one year of supervised release and a fine of at least $250,000.

Kelly Demoss is scheduled for a Change of Plea Hearing on August 22 at 2:30pm in U. S. District Court in Grand Rapids.

Demoss will plead guilty to one count of misprision of felony, per a formal plea agreement made public late today.

In return for her guilty plea, federal prosecutors have agreed to drop the original counts from her August 8, 2018 criminal indictment, relating to fraudulent activity that hastened the demise of Battle Creek's On Deck Bar, including one count of conspiracy to commit wire fraud, one count of wire fraud and three counts of money laundering.

By agreeing to the plea deal, Demoss gives up the right to indictment by a grand jury and agrees to plead guilty to the “Superseding Felony Information charging her with misprision of a felony.”  (The document appears below.)

Misprision of felony is when a person is aware a felony, but fails to report the crime to authorities. In the federal courts, misprision of felony is a felony. 

The federal definition of misprision requires that, “(1) the principal committed and completed the felony alleged; (2) the defendant had knowledge of the fact; (3) the defendant failed to notify the authorities; and (4) the defendant took affirmative steps to conceal the crime of the principal.”

In this case, the principal referred to is Robert Lyle Buckhannon, who inked his own plea deal on May 30, 2019. The “personal residence” referenced in the superseding document was a home Demoss purchased in her own name. (Demoss later unloaded the home on April 12, 2017 for $259,900, nearly $88,000 more than its original $172,000 purchase price.) 

Today's federal court filing reveals Demoss “carefully reviewed the allegations contained in the Superseding Felony Information” and agreed they are correct:

(1) Robert Lyle Buckhannon committed and completed the crime of wire fraud against Blackburne & Sons Realty Capital Corporation; 

(2) Demoss had knowledge of Buckhannon’s crime; 

(3) Demoss failed to notify law enforcement in Calhoun County or elsewhere in the Western District of Michigan; and 

(4) Demoss took an “affirmative step” to conceal Buckhannon’s crime.

Here is an excerpt from the Kelly Demoss plea agreement:

Starting in September 2012, in Calhoun County, Michigan, in the Southern Division of the Western District of Michigan, Demoss and Robert Buckhannon “controlled two Michigan commercial entities: On Deck Sports Bar & Grill, LLC (“On Deck”) and S.G.E. Investments, LLC (“S.G.E.”). 

On or about October 2, 2012, Demoss signed, on behalf of On Deck, S.G.E., and herself, a loan-approval letter with Blackburne & Sons Realty Capital Corporation (“Blackburne”), a nationwide private-money commercial lender headquartered in Sacramento, California. 

Blackburne was in the business of originating commercial loans, selling ownership interest in those loans, and servicing those loans. In signing this loan-approval letter, Demoss agreed to borrow $456,000 from Blackburne for use by On Deck. 

Blackburne funded the loan on or about October 9, 2013, and recorded a mortgage on the On Deck property as security for the loan. 

On or about October 12, 2013, Buckhannon instructed Demoss to write a check for $36,500 from On Deck’s Comerica Bank account payable to Buckhannon, using funds from the Blackburne loan to cover the check. 

She did so. 

On or about October 15, 2013, Buckhannon and Demoss signed a document entitled “Gift Letter Affidavit” which represented that Buckhannon had given Demoss $36,000 as a “gift”, without any obligation of repayment at any time, to obtain a residential mortgage on a personal residence in Battle Creek. 

In fact, the source of the funds was Blackburne commercial loan proceeds from the On Deck account. Demoss knew that she, On Deck, and SGE were obligated to pay the money back to Blackburne with interest, but instead she assisted Buckhannon in concealing the source of funds and the repayment obligation to Blackburne. 

Blackburne was never told that On Deck’s loan proceeds would be used to finance the purchase of that personal residential property, and therefore Blackburne had no mortgage on the residential property to secure repayment of the commercial loan. 

Here's how Kelly was able to buy that 4,450 square foot house, pictured above (using information taken from federal documents filed in the case): 

On or about September 4, 2013, Kelly Demoss signed a contract to buy a house located at 224 Wahwahtaysee Way in Battle Creek for $172,000 with a $2,500 deposit. 

At the time, Demoss did not have the funds for the deposit or a down payment for a personal residence.

On or about September 26, 2013, DeMoss signed a residential loan application to borrow $137,600 to purchase the Wahwahtaysee home. The application advised Demoss that she would be required to pay $37,274.94 in cash at closing to purchase the home. 

By October 9, 2013, the $456,000 Blackburne loan was approved, closed, and was fully funded. Blackburne recorded a mortgage on the On Deck property as security for the loan. Additionally, Demoss was personally liable to repay the loan. 

On or about October 10, 2013, Demoss received and deposited a check in the amount of $126,169.10, which consisted of Blackburne loan proceeds, into On Deck’s Comerica Bank account. 

Prior to that deposit, On Deck had $0 in the account. 

Demoss wrote several checks to make payments on several business and personal debts, including a personal vehicle loan. 

On or about October 12, 2013, Kelly Demoss wrote a $36,500 check from On Deck’s Comerica Bank account payable to Robert Buckhannon. The memo line of the check was left blank. However, Kelly DeMoss wrote “House” in the check register column entitled “In Payment Of.” 

On or about the same day, Robert Buckhannon deposited $36,300 from that check into his account at Comerica Bank. 

Prior to the deposit, he had $0 in that account. 

On or about October 15, 2013, Buckhannon purchased a Comerica Bank Cashier’s Check in the amount of $36,000 payable to Kelly DeMoss by withdrawing funds from his personal Comerica Bank account. 

The source of the funds was the $36,500 check Buckhannon had deposited three days earlier. 

The Cashier’s Check receipt included a handwritten notation: “Gift.” 

On or about the same date, Demoss deposited the $36,000 Cashier’s Check into her account at Chemical Bank, completing the alleged money laundering cycle. 

In the plea agreement, Demoss agreed to cooperate with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), the U. S. Attorney’s Office, and any other law enforcement agency in their investigation of the charges contained in the indictment and information. 

In return, the U. S. Attorney’s Office agrees to move to dismiss the original indictment against Demoss at the time of sentencing. 

The sentencing judge may consider the dismissed counts in determining the applicable Sentencing Guidelines range. (Demoss does not concede that an increased sentence or an upward departure is warranted.) 

The U. S. Attorney’s Office agreed not to oppose a “two-level reduction of her offense level for acceptance of responsibility”, requested by Demoss. 

Although United States Sentencing Guidelines are not mandatory, the sentencing judge must consult the guidelines and take them into account when sentencing Demoss. 

The sentencing judge, with the aid of a presentence report, will determine the facts and calculations relevant to the sentencing. 

Demoss and her attorney will have the opportunity to “review the presentence report and to make objections, suggestions, and recommendations concerning the sentence imposed.” 

However, there is no agreement between the U. S. Attorney’s Office and Demoss as to the final sentencing guidelines range.

More on this story as it develops.

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