Las Vegas chiropractor settles federal fraud complaint for $1.5 million

By Steve Green

Wednesday, Dec. 22, 2010 | 2:12 p.m.

A Las Vegas chiropractor has agreed to pay nearly $1.5 million to settle a federal complaint that he participated in a $34 million investment fraud victimizing hedge fund investors.

The Securities and Exchange Commission on Tuesday filed suit in federal court in Tampa, Fla., against the chiropractor, Robert L. Buckhannon, and codefendants involved with two now-defunct Bradenton, Fla.-based hedge funds, Arcanum Equity Fund LLC and Vestium Equity Fund LLC.

The SEC said the funds, which worked with investment advisor Imperium Investment Advisors LLC, told investors they would earn handsome profits through conservative investments.

Instead, much of the money was misappropriated, the SEC alleged in its lawsuit.

The defendants from early 2008 through April 2010 "comingled investor money from three separate offerings and then looted and bankrupted the hedge funds by steering millions of dollars to themselves,'' the lawsuit alleges.

For instance, the SEC says Buckhannon, 49, was involved in deal to steer $6 million in investor money to Shea Mining and Milling LLC for a project called the "Tonopah Mine.'' Buckhannon, however, didn't disclose he had a conflict of interest because he was a founder of Shea Mining and planned to enter into an employment contract with Shea and receive a share of the firm's revenue, the SEC alleged.

The SEC also complained Buckhannon funneled at least $390,000 of investor money to himself, his father, two brothers, his fiance's cousin and a friend. The SEC said in August 2008 he wired $60,000 out of a fund account to a jewelry store for the purchase of an engagement ring for his fiance and in July 2009 he wired another $80,000 to a title company for the down payment on a Las Vegas home.

"Buckhannon knew he was not entitled to these funds because he asked the funds' controller to classify these personal expenditures as business expenses of the funds without any reasonable basis for such classification,'' the SEC lawsuit alleges.

The suit says the defendants told investors in 2009 the funds were profitable when in fact they had lost $8.1 million in 2008 and 2009.

"Buckhannon knew the monthly account statements and newsletters (sent to investors) were false because he simply made up a monthly percentage return figure and reported it to the Vestium Management Group consultant who prepared the funds' monthly statements,'' the lawsuit alleges.

Without admitting or denying the allegations, Buckhannon agreed to return $1.349 million to investors and to pay a $130,000 fine, a settlement agreement filed in court says.

Monday's lawsuit isn't the only recent litigation involving Buckhannon.

Investor Mahany/Humphreville LLC, a California company, sued Buckhannon, Arcanum and Vestium in Clark County District Court in April, charging the plaintiff invested $300,000 in Arcanum in January 2008 based on representations it would receive a 15 percent rate of return.

After Mahany/Humphreville became concerned about the use of its funds, the defendants failed to return the investment as requested, the lawsuit charges.

"The parties formulated a scheme to keep the monies and invest them not in securities but in precious gem mines and other nefarious investments which were not part of the original agreement between the parties,'' the suit charged.

Buckhannon has not yet filed a response to that lawsuit.

Also, attorneys filed notice in Clark County District Court in June to enforce $171,000 in judgments against Buckhannon.

The judgments resulted from a lawsuit filed in Sarasota County, Fla., state court against Buckhannon by Velasco Securities Inc. (now known as Midlan Capital Corp., Bethesda, Md.), Patrick C. Ryan and Wayne M. Lee.

At that time the Florida judgments were entered in 2007, Buckhannon's address was in Morrison, Colo.