}

Total Pageviews

Friday, February 7, 2020

COOPERATING WITNESS...OR RAT? Facing February 13 Federal Fraud Sentencing, “Crooked Chiropractor” Robert Buckhannon Pins Hope For Probation On Insider Information Squeal Deal; Government Prosecutors Request 18-24 Month Prison Sentence

Rattus Buckhannonus
“Buckhannon’s scheme involved making false representations to a commercial lender and creating fake lease documents to fraudulently obtain financing for a struggling business venture in Battle Creek. 

The leases were fake. 

The signatures were forged. And the victim lender never would have loaned the money had it been told the truth. 

Additionally, similar his use of investor funds for personal expenses in the Nevada fraud, Buckhannon siphoned off part of the business loan proceeds to help finance the purchase of a personal residence in Battle Creek for his own personal use without telling the victim lender of his plan. 

After the loan proceeds were exhausted and the business was destroyed by an intentionally-set fire two months later, Buckhannon left Michigan to move on to his next business venture.” 

Government's Sentencing Memorandum
United States of America v. Robert Lyle Buckhannon
February 6, 2020

In a sentencing memorandum filed late yesterday, government prosecutors (while recommending 18-24 months behind bars) revealed Robert Buckhannon has provided “substantial assistance”, providing a “lengthy proffer statement to a senior trial attorney with the U.S. Securities and Exchange Commission Division of Enforcement and the U.S. Attorney’s Office in July 2019.” 

Buckhannon provided information concerning allegations of securities fraud being committed at a company located outside of Michigan “based on his personal knowledge and firsthand observation.”

After the proffer, Buckhannon searched for and provided documents and records to the SEC. Buckhannon agreed to meet with SEC representatives to answer any follow-up questions and the SEC has indicated that it may request such a meeting. The information provided by Buckhannon was very detailed and consisted of information previously unknown to law enforcement. 

The SEC has advised the U.S. Attorney’s office that the information by Buckhannon appears credible. 

To date, the information has not led to any administrative enforcement actions or criminal charges, but the SEC’s investigation is ongoing. 

If the government’s February 6 motion for a “downward departure” is granted, Buckhannon could face an 18-24 month range of imprisonment, and the fine range is $7,500 to $75,000.

In its sentencing memorandum, the prosecutors related Buckhannon's criminal history stating justice “demands that Buckhannon finally serve time in federal prison for his fraudulent behavior.” 

Buckhannon's defense team has requested he be sentenced “to probation with a reasonable restitution award based on his criminal conduct.”

This is Buckhannon's second criminal federal fraud conviction in the last two years. 

The first conviction, in 2017 for conspiracy to commit wire fraud, resulted in a sentence of 36 months of probation and nearly $240,000 in restitution. Buckhannon was convicted in 2019 for a second conspiracy to commit wire fraud (the Battle Creek On Deck case), which resulted in at least $436,559.50 in losses. 

As related by federal prosecutors, Buckhannon’s first federal conviction was in the District of Nevada for criminal conduct occurring in 2008 and 2009.

He admitted conspiring with others to defraud investors in connection with a hedge fund called the Vestium Equity Fund.

Buckhannon was one of four managing members of Vestium, which was engaged in a fraudulent scheme to misappropriate investor money by commingling money from two offerings and steering proceeds to themselves. 

In his plea agreement in that case, Buckhannon admitted that the conspirators misrepresented to investors that Vestium implemented safeguards to protect investor funds. 

Instead, Vestium disbursed millions of dollars of investor funds from its custody account for impermissible transactions. 

Additionally, “because [Buckhannon] and his co-conspirators used millions of dollars to make improper investments, and pay themselves bogus monthly profit payments, Vestium did not have sufficient cash to pay redemptions when investors requested them.” 

Buckhannon further admitted that he made several false and misleading statements to investors during a 2009 conference call “in order to lull them into a false sense of security, continue the fraud, and avoid reporting to authorities.” 

For his part, Buckhannon admitted using fund accounts to pay his personal expenses, misappropriating investor funds for himself, his family members, and a friend. 

He knew that he was not entitled to those funds. 

Nonetheless, and by way of example, he transferred $60,000 from a fund account to purchase an engagement ring for his fiancé and wired an additional $80,000 to a title company for a down payment on a Las Vegas house. 

He was personally held responsible for $239,686.19 in losses to more than 50 victims in that case. 

After he committed his first federal offense, Buckhannon returned to Michigan where he engaged in another fraud resulting in his conviction in this Court. 

Here, Buckhannon’s scheme involved making false representations to a commercial lender and creating fake lease documents to fraudulently obtain financing for a struggling business venture in Battle Creek. 

The leases were fake. The signatures were forged. And the victim lender never would have loaned the money had it been told the truth. 

Additionally, similar his use of investor funds for personal expenses in the Nevada fraud, Buckhannon siphoned off part of the business loan proceeds to help finance the purchase of a personal residence in Battle Creek for his own personal use without telling the victim lender of his plan. 

After the loan proceeds were exhausted and the business was destroyed by an intentionally-set fire two months later, Buckhannon left Michigan to move on to his next business venture. 

Buckhannon and his defense attorney argued at his June 2018 Nevada sentencing that Buckhannon deserved leniency in that case in part because he has had no prior criminal record. 

Although Buckhannon may not have had any criminal history points, Buckhannon was no stranger to the criminal justice system, having admitted guilt for an assault in 1991 in a case that was dismissed after a deferred sentence. 

He was arrested in 2014 and convicted in 2015 for disturbing the peace in Allegan County, Michigan, after the original domestic violence charge was reduced. 

According to the government, Buckhannon also had a variety of other police contacts that ultimately led to pretrial diversion or no charges. 

Two months after he was sentenced by the Nevada court, and shortly after Buckhannon learned that he and his co-defendant, Kelly DeMoss were indicted on wire fraud and money laundering charges in this case, Buckhannon attempted to sell a false narrative to DeMoss in a desperate attempt to avoid responsibility:

 “The leases were real and not made up.” “You paid me as a consultant . . . I gifted you money.” “We did nothing wrong and definitely nothing illegal.” “Call or email if you want or can.” 

According to the government, those are “not the words or actions of a man who has been humbled and reformed by his prior convictions and sentences. 

Robert Buckhannon deserves no leniency in this Court. 

He has earned a significant prison sentence to punish his fraudulent activity, protect the public from more fraudulent schemes, and deter others from engaging in similar conduct. 

This Court should send a strong message to Buckhannon that basic principles of truth, honesty, and fair dealing matter, and that fraudulent behavior will be punished by more than simply making him repay what victims lost in the wake of his deception.” 

(And that behavior continues: as reported exclusively on this blog, Buckhannon was named in a civil fraud complaint filed January 15, 2020 in California's Orange County, alleging breach of contract, intentional interference with a contractual relation, intentional interference with prospective economic relations, and conversion relating to a clinical testing lab kickback scheme that allegedly occurred shortly after Buckhannon sang like a bird to the feds.) 

As you might expect, the Buckhannon defense team has a different perspective, one that lays much of the blame for the fraud scheme at the feet of his co-defendant, Kelly DeMoss.

“In or around April of 2013, Mr. Buckhannon and Co-Defendant Kelly DeMoss opened a sports bar and restaurant known as On Deck Sports Bar & Grill, which was located in Battle Creek, Michigan. 

On Deck was owned by S.G.E. Investments, LLC. Ms. DeMoss was the registered agent and sole manager of S.G.E. 

Mr. Buckhannon was the general manager of On Deck with Ms. DeMoss sharing in the responsibilities of the day-to-day operations of the bar. 

In or around June of 2013, Mr. Buckhannon and Ms. DeMoss sought out a capital infusion for On Deck through a private loan. 

On Deck needed to pay out an early investor and pay off other operating liabilities. 

On Deck was located in a three-story commercial building owned by S.G.E. 

In the course of negotiating a loan for $494,000 with Blackburne & Sons realty Capital Corporation, Buckhannon and DeMoss represented to Blackburne that the building had three other commercial tenants in addition to On Deck. 

Blackburne required proof of the three active tenants by way of executed lease agreements. 

Blackburne’s decision to loan the $494,000 would be contingent on a verified stream of rental income from the three other tenants. 

Mr. Buckhannon acknowledges that between he and Ms. DeMoss, he was the one who possessed the business knowledge and expertise to negotiate and execute the loan transaction. 

But Ms. DeMoss did actively participate in the running of the On Deck business. 

She was also aware of who was, or was not, a tenant of the property. 

In August of 2013, Mr. Buckhannon sent an email to Blackburne’s representative that included three purported lease agreements for the On Deck property. 

The lease agreements represented $42,000 in annual rental income. 

These lease agreements were not genuine. 

Mr. Buckhannon created the lease agreements in order to induce Blackburne to loan $494,000 to On Deck. Mr. Buckhannon followed up with Blackburne by forwarding two purported rent checks for the purpose of evidencing that the leases were in good standing. 

The checks were also not genuine. Ms. DeMoss was aware of Mr. Buckhannon’s actions, but did not inform Blackburne of the true status of the On Deck building. There were no other tenants in the On Deck building. 

After further negotiations, Blackburne agreed to loan On Deck $456,000. In early October of 2013, Ms. DeMoss signed Blackburne’s loan approval letter on behalf of S.G.E., On Deck, and herself. 

This loan approval letter required that Blackburne receive copies of any and all lease agreements for the On Deck property. 

On October 9, 2013, the $456,000 was approved, closed and fully funded. Blackburne recorded a mortgage against the On Deck property as security for the loan. 

Ms. DeMoss also agreed to be personally liable for the loan. Approximately two-thirds of the loan proceeds were directly paid through the loan closing to previous creditors of On Deck. 

After depositing the remaining loan proceeds into On Deck’s bank account, Ms. DeMoss wrote a $36,500 check to Mr. Buckhannon. Mr. Buckhannon converted that check to a cashier’s check in the amount of $36,000 made payable to Ms. DeMoss. Ms. DeMoss deposited the cashier’s check into her personal bank account. 

Within approximately two weeks of depositing the Blackburne loan proceeds into her personal account, Ms. DeMoss wired $36,584.16 to a title company to purchase a home in her name. In November of 2013, On Deck reopened for business, based in large part on the Blackburne loan. 

On December 30, 2013, a fire destroyed the On Deck building which forced the permanent closure of On Deck. 

An Auto-Owners insurance policy for the building eventually paid to Blackburne $425,000. Neither Mr. Buckhannon nor Ms. DeMoss received any money from the insurance proceeds.” 

The Buckhannon defense team, utilized a legal maneuver commonly known as “turd polishing”, asserting the Court “does not need to draw the conclusion that Mr. Buckhannon’s conduct in the instant case evidences a propensity to commit fraud in his future endeavors.” 

“Mr. Buckhannon is a college graduate with a post graduate degree. He is an accomplished business man, and a loving husband, father, son and brother. Any training, care or treatment envisioned by the Legislature will surely be a misappropriation of tax dollars in the case of Mr. Buckhannon. Mr. Buckhannon, by all accounts, is well positioned to continue to be a strong family man, community leader, and business man in whatever future ventures can be afforded to him from now and into the future.” 

Olga & Dr. Rob
Noting that Buckhannon will be celebrating his 59th birthday on the day of his scheduled sentencing hearing, the defense motion noted that in 2018 “Buckhannon married Olga Churillova. Mrs. Buckhannon is the mother of a 22-year-old daughter from a previous marriage. Mr. and Mrs. Buckhannon reside in Las Vegas. Mr. Buckhannon is the primary source of financial means for the couple.” 

Continuing, the defense motion states: “At first blush, the Court may consider Mr. Buckhannon to be a callous recidivist operating solely for personal gain.” 

No, really? 

Wrapping up its argument in favor of probation instead of incarceration, the defense spins Buckhannon's purported cooperation with the government: 

“Unrelated to this case, and of particular interest to the Government, was information provided by Mr. Buckhannon detailing an ongoing fraud against shareholders perpetrated by the management team of an entity that Mr. Buckhannon had a previous relationship with. When Mr. Buckhannon discovered the fraud, he confronted the management team. He then terminated his relationship with the company. A short time after he left the company, Mr. Buckhannon met with an attorney from the U.S. Securities and Exchange Commission’s Enforcement Division. He has given detailed information to the S.E.C. in the form of a debriefing and the production of hundreds of documents. Currently, the S.E.C. intends to conduct at least one other debriefing with Mr. Buckhannon on a date to be determined.” 

Hmmm...sounds a lot like Buckhannon rolled over on former cohorts to save his own ass. 

We may learn the answer soon: Buckhannon is scheduled to be sentenced next Thursday, February 13, at 11:00am in Grand Rapids at United States District Court.

4 comments:

  1. Filthy Rat bastard. He still burned the bar, fucked numerous people in Battle Creek out of money anything less than prison is unacceptable. Where's the DVR asshole?

    ReplyDelete
    Replies
    1. The Feds took it and harvested the video. The DVR got smoked when the firemen flooded the basement, hard drives are waterproof however :)

      Delete
  2. Miss Fortune, I cant give you my real name, its complicated. These are not allegations, I'm the source.

    ReplyDelete
    Replies
    1. If you can't give your real name, assume a name and send me an email at: tcmissfortune@yahoo.com

      Delete