}

Monday, July 31, 2017

GOING TO POT? Budding Ganjapreneurs…Or Just Two “Chronic” Fraudsters?

On the eve of his Las Vegas appearance tomorrow morning in a federal courtroom for a change of plea hearing in his hedge fund fraud case, Michigan's “crooked chiropractor”, Robert Buckhannon, is letting grass grow under his feet—sort of. 

Buckhannon has formed a new business venture with longtime associate Christopher Paganes, who recently partnered with Buckhannon in Clinical Testing Corp, LLC and Cambridge Health and Medical Sales, two now-shuttered clinical testing lab schemes.

The duo is selling a marijuana-related product, under the name “MicroCann1260”. It's described as a “root inoculant” used for increasing marijuana plant yields. 

Ah, yes: two buds promising to make big buds. Is it a real company, or another investment scam?


THE TRUE STORY OF TWO MICHIGAN CLOWNS, AND THEIR NEW MARIJUANA-BASED BUSINESS.
Left: Robert L. Buckhannon; right: Christopher Paganes


BACKSTORY 

Michigan native, chiropractor Robert L. Buckhannon, was arrested on September 30, 2014 by FBI agents at a Henderson, Nevada coffee shop, and is set to plead guilty tomorrow morning during a 10:00 am hearing before U.S. District Judge James C. Mahan in Las Vegas.

Buckhannon was released on a personal recognizance bond on October 1, 2014, and plead not guilty at his arraignment.

Buckhannon and co-defendant, Terry Rawstern, of Aberdeen, S.D., were charged in a criminal indictment with one count of conspiracy to commit wire fraud and one count of wire fraud. Daniel G. Bogden, United States Attorney for the District of Nevada said the fraud was committed from 2008 to 2010. 

If convicted, Buckhannon could have faced up to 30 years in prison on the conspiracy charge, and up to an additional 20 years in prison on the wire fraud charge. When the indictment was announced, the United States Department of Justice said both men faced fines up to $1 million per count. 

According to the indictment, from April 2008 through April 2010, Buckhannon and Rawstern, along with some other co-conspirators managed members of two Bradenton, Florida-based hedge funds, Arcanum Equity Fund, LLC and Vestium Equity Fund, LLC.

However, a member of Buckhannon's squalid financial squadron, suburban Detroit resident Christopher Paganes, was not indicted.

But, according to a December 20, 2010 SEC complaint, Paganes was in it up to his neck.

In the complaint, the SEC accused Paganes, Buckhannon, five cronies and an investment firm of duping investors out of $34 million by bankrupting two hedge funds and skimming more than $16 million off the top. 

The SEC complaint said the men “looted and bankrupted the hedge funds by steering millions of dollars to themselves.” 

Defendants Buckhannon, Terry Rawstern, Dale St. Jean and Gregory Tindall were the managing members of two Bradenton, Florida-based hedge funds, Imperium and Vestium. 

Aided by Paganes, defendants Richard Mittasch and Glenn Barikmo and Imperium Investment Advisors, the gang "commingled investor money from three separate offerings and then looted and bankrupted the hedge funds by steering more than $15 million into loans and other deals with companies in which they had undisclosed financial interests" the SEC complaint said. 

The SEC’s complaint, filed in the U.S. District Court for the Middle District of Florida, alleged that from April 2008 through April 2010, the Managing Members raised funds by promising investors that they would generate substantial returns through conservative investments in high-grade debt instruments and, in some cases, limited physical commodities transactions. 

Additionally, the offering materials and prospectus for Vestium Equity Funds further assured investors that Imperium would safeguard their funds from impermissible uses. Contrary to these assurances, however, the SEC alleged that the defendants disregarded the Funds’ respective investment parameters and used investor funds for “illiquid private investments and loans to affiliate entities”. 

Additionally, although the Funds incurred investment losses of at least $8.1 million, the Managing Members disseminated monthly statements “falsely depicting consistent profits and paid at least $6 million to investors in alleged profits. The Managing members further paid themselves over $1.3 million in compensation that was improperly based on inflated asset values and fictitious profits.” 

The SEC’s complaint further alleged that Buckhannon, Mittasch, Paganes and Barikmo collectively misappropriated at least $734,000 of investor funds to themselves and others. Christopher Paganes was a managing member of Imperium and held securities licenses. 

He was CEO of Maximum, but in August 2009 FINRA permanently barred him "from serving in any principal capacity at a securities firm and suspended him from associating with any securities firm for nine months based on his conduct while he was Maximum's chief compliance officer." 

No fine was imposed at the time because Paganes “evidenced an inability to pay”, according to an October 2009 FINRA Disciplinary Report. 

However, in November 2011, Paganes was ordered by the SEC to “disgorge $650,000 and and prejudgment interest of $90,339.19 and to pay a $650,000 civil penalty". 

Paganes and his wife declared bankruptcy on November 30, 2012. Paganes' debts were officially discharged on June 13, except for his SEC fines and penalties, which remain unpaid.

BIG BONG THEORY?

The product, sold under the name “MicroCann1260”, is described as a “root inoculant” used for increasing marijuana plant yields.  

WHOIS records reveal Buckhannon personally registered three domain names (h2omicrotech.com, microcann1260.com and microgrow1260.com) since early April 2017. 

One domain (microcann1260.com) was registered by Buckhannon at his now-closed chiropractic clinic: 2846 Capital Ave SW, Battle Creek Michigan 49015. 

The remaining two (h2omicrotech.com and microgrow1260.com) are registered to Buckhannon at a Las Vegas condominium: 101 Luna Way #129, Las Vegas, NV 89145. 

As of today, none of the domains have launched.


Buckhannon is definitely conducting this business with Paganes.

As shown above, Paganes registered “MicroCann1260 of Michigan LLC” on June 19, 2017 and it was officially endorsed by the Michigan Department of Licensing and Regulatory Affairs on June 26, 2017. 

And while MicroCann1260 lacks an e-commerce presence, on or about July 15, 2017, this Detroit-area Craigslist post appeared:

https://detroit.craigslist.org/wyn/grd/6219044658.html 

The post is illustrated by nine photographs showing an indoor grow room, along with a picture of the MicroGrow1260/MicroCann1260 product. 

In addition, the Craigslist ad copy includes a reference to “local delivery for cash (preferred)”, which would make any transaction nearly impossible to trace.  

Here's the copy not visible in the image above:

We only have a limited supply at this price and running a special at $400 per gallon (min 3 gallons for 12 plant test and normally $619 per gallon) through end of July. We will honor any re-orders at $400 per for those who buy in July only. 

Why pay $750 plus per gallon with others, when you can get better results with this at a more affordable price...Guaranteed! CC paid in advance before shipment is sent or we can arrange local delivery for cash (preferred).

The Craigslist contact information, via the “Reply” button, links to a cell phone number that has long been used by Christopher Paganes for his various businesses.  (UPDATE: As of 7:45pm on July 31, the post had been deleted.)

One of those Michigan businesses, Cambridge Health Solutions, was recently linked to Robert Buckhannon.  

CAMBRIDGE HEALTH SOLUTIONS

Chris Paganes formed Cambridge Health Solutions as a Michigan corporation on March 22, 2016 and six months later began circulating a private investment opportunity to ostensibly fund Cambridge’s expansion. 

Paganes, who billed himself as Cambridge's Managing Director of Sales, sent a pitch email in late September 2016 with the the subject line: “Investment Proposal”. 

I am attaching the numbers for you to review the investment opportunity Fred and I are working on. These are very realistic numbers as we are converting the accounts over this month as well as the new business coming on board. 

As it stands, Enterprise Capital Partners is Fred’s Company, was signed on to be Cambridge Health Solutions primary Sales/Marketing partner. Fred is running Enterprise (I will be advising) to diversify our business. Anything I am working as well will be transferred to Enterprise. The reason we did this is we want to keep the sales companies and solutions companies separate for a bevy of reasons, of which primarily is we eventually will be become a lab and CLIA regulations are strict on doing internal sales out of your own lab, etc. 

We are seeking $50k to basically get in house marketing materials, call centers, and hire a few internal representatives to help support the sales and operations. 

The business is there, we are about 45 days out from getting any payments in significance form the lab. We just recently signed on PC Medical Mgmt, LLC out of Farmington, that has over 20 reps and 750 accounts. Since they are primarily a blood and medical services lab, they figure about 80% of their accounts do not have PGx or Chronic Care solutions. We are meeting with their top 2 reps on Thursday and they are very excited about the opportunities as this futher solidifies why we need a short money raise. 

Let me know what you think as the terms we are offering are a 10% annual interest payment paid monthly as well as a preference payment of 10% (see spreadsheet for formula). If you know someone we need to talk to or think this has legs, I would love to work something out with you. 

For the record, PC Medical Mgmt, LLC is not registered as a Michigan corporation, and I could not find any trace of a company with that name in Farmington, Michigan.

In 2015, Paganes was briefly involved with a clinical testing lab rep business venture, Clinical Testing Corp. Paganes’ former hedge fund associate, Robert Buckhannon, was the firm’s Executive Vice President of New Business Development for this Nevada-based company. Clinical Testing Corp was incorporated on October 28, 2014 by John Rittenour. When the company’s website launched shortly days later, it boasted Clinical Testing Corp had already provided "outsourced services to thousands of customers from most healthcare disciplines, including nearly all the largest pharmaceutical, biopharmaceutical, and chemical companies in the world." 

On June 9, 2015, Buckhannon (while he was supposedly flying around the country training Clinical Testing Corp sales people) formed Phoenician Medical LLC as a Delaware corporation, later forming Phoenician Medical LLC in Florida on July 17, 2015 under a “foreign limited liability corporation” status. 

The company’s status was revoked on September 26, 2016 for failing to file an annual report. 

However, Buckhannon had teamed up with another hedge fund associate, Zia Shlaimoun, to create and launch Goldstar Laboratories, LLC. On July 20, 2015, a new venture, Goldstar Laboratories, was formed as a Delaware corporation. 

Paganes used Goldstar Laboratories’ reference lab facilities to process some of his tests. 

Between October 29, 2015-February 6, 2016, six more "Goldstar" entities were formed: Florida, Michigan, Ohio, Missouri, Dayton and Texas. 

Paganes began operating under the name Cambridge Health and Medical Sales, LLC after August 27, 2015. A Michigan attorney, Craig Aronoff, was Paganes’ business partner and registered agent. 

In April 2017, Aronoff joined the Cannabis Legal Group, a Royal Oak, Michigan, law practice that bills itself as the home of Michigan's top marijuana attorneys. (It is unclear whether Aronoff is advising Paganes or Buckhannon.)

CRIMINAL POTBOILER 

Lacking an online presence, it's impossible to determine if Buckhannon and Paganes have done their OSHA compliance, including production of material safety data sheets for the chemicals used in the product.  And although the MicroCann Craigslist post boasted the product delivers a “20-40% bud yield increase”, Buckhannon and Paganes did not document substantiation for that claim.

In addition, although the label lists additional products in the MicroCann line (for example, MicroCann grow kits and Clone Booster), there's no way to purchase cannabis capitalists Buckhannon and Paganes' wonder product except through a seedy Craigslist post.

I guess, like this duo's soon-to-be-pitched investment opportunity of a lifetime, it's on a “weed-to-know” basis.