Collyard admits fraud in Bixby case

Delano businessman Gary Collyard pleaded guilty Monday in St. Paul to federal fraud charges stemming from his sale of stock in Bixby Energy Systems, plus other business ventures involving real estate ventures.

Collyard, 62, told prosecutors that he conspired with Bixby CEO Bob Walker, 69, and former business consultant Dennis Luverne Desender, 65, in a plan to raise money for the struggling alternative-energy company. Some of the money was raised from unsophisticated investors, he admitted. The government alleges that about $43 million in investor funds have been lost.

Bixby, based in Ramsey, has been trying to market technology in China that can convert coal to natural gas, but it has been plagued with technical problems and a shortage of cash.

Desender has pleaded guilty to securities fraud related to Bixby, as well as tax charges, and awaits sentencing. Like Collyard, he is cooperating with federal authorities investigating Walker, some of Walker's family members and other top Bixby officials.

Walker, of Ramsey, is best known as the founder of the Select Comfort bed company. He was indicted in December on securities fraud charges and awaits trial. He has denied any wrongdoing. Peter Wold, his attorney, quietly observed Collyard's plea hearing.

Collyard said he was responsible for $3 million in investor losses related to Bixby since January 2005. He also acknowledged that his sale of Bixby stock wasn't his only fraud. His company, Collyard Group, was involved in leasing, renting and developing real estate. Collyard admitted to bilking $1.3 million from a number of area banks since at least April 2005. He used much of the proceeds from his business loans for personal debts and living expenses.

"Gary Collyard today admitted that he made terrible mistakes in connection with the sale of Bixby Energy securities," his attorney, Thomas Brever, said after the hearing. "He is anxious to try to resolve his legal issues and to try to make amends for these terrible mistakes. He looks forward to working with authorities and to put this regrettable chapter of his life behind him."

Loans financed high life

Court records show that Collyard has accumulated more than $3.2 million in court judgments in that time period even while he lived on a 50-acre estate and sent his children to the private Providence Academy in Plymouth. The school won a court judgment of $91,251 against him and his wife in 2009.

Collyard's plea agreement suggests three different possible prison terms, ranging from 51 months to 87 months, depending on how many prior convictions the judge counts under the federal sentencing guidelines. He also must pay restitution and agreed not to oppose government forfeiture proceedings against his property. Collyard also agreed not to appeal his sentence unless it exceeds whatever guideline the judge determines is appropriate.

In 1998 Collyard was convicted for filing fraudulent federal tax returns, statements or other documents, a misdemeanor. Last week he pleaded guilty to five state tax charges in Hennepin County District Court. Under his plea agreement in that case, his sentence will run concurrent to the sentence he will get in the federal case.

Two of Collyard's former employees and a Bixby investor attended the plea hearing. State and federal authorities have credited them for providing substantial help to their investigation.

"From our perspective, he's been doing this for more than a decade, and five years [in prison] would seem reasonable," said John O'Donnell, the Bixby investor.

Pamela Hengel, a former employee of the Collyard Group who settled a lawsuit against him last year, said she was happy to see him plead guilty to felony fraud charges. "It's been a long time coming. Thank goodness I caught on to him when I did," she said.

'I'm not done yet'

Collyard could get a shorter sentence by providing "substantial cooperation" to federal authorities investigating Bixby. Assistant U.S. Attorney Chris Wilton said Collyard might provide some insight into Walker's activities, as well as other officers and other "finders" who solicited investors for Bixby.

"Collyard is just one of a bunch of finders," Wilton said. "We are continuing our investigation. I'm not done yet."

Collyard acknowledged that much of the money raised for Bixby went to pay large salaries and commissions to company insiders. Wilton said money also paid for excessive expenses such as a $10,000-a-night hotel for Walker.

State business records show that Collyard has links to the Twin Cities' best-known fraudster: Tom Petters.

The two men formed Collyard-Petters LLC in Minnetonka in 1995. It's unclear what the business did, but it apparently didn't last long. Collyard formed his own firm, Collyard Group LLC, two years later. Petters went onto to run Petters Co. Inc. and a variety of other enterprises before one of his top executives informed federal authorities that he was actually running a $3.65 billion Ponzi scheme. He's now serving a 50-year federal prison term.

Collyard was paid $582,454 in "finder's fees" in 2006 and 2007 to help sell $5.8 million in Bixby stock, according to court records. He allegedly was recently trying to raise money for a St. Paul dessert company.

U.S. District Judge Susan Richard Nelson barred Collyard from soliciting funds for any companies, public or private, and said he cannot hold a job with any fiduciary responsibilities while he's on bond pending sentencing.

Dan Browning • 612-673-4493