Michael Krzyzaniak sent an e-mail to an investor in 2006, explaining that his massive golf course development in Desert Hot Springs, Calif., was in serious financial trouble. Unless he got more cash, he wrote, he would have to shut down the project and dump the land at fire sale prices.
That was enough to shake loose $2.05 million from the investor, and Krzyzaniak put it to use within weeks. He wired $1,141,171.90 to a title company -- to buy a home in Wayzata.
That's according to sworn statements by U.S. Postal Inspector Robert Strande. The U.S. attorney's office submitted them to obtain federal search and seizure warrants last week.
Those warrants, unsealed Tuesday in U.S. District Court in Minneapolis, allowed agents to search Krzyzaniak's computer, iPhone and scanner, and to seize $4,409.61, the proceeds from an estate sale that was held May 5 and 6 at his former residence in Minnetrista, about three weeks after Krzyzaniak was indicted and incarcerated on mail fraud, wire fraud, money laundering and tax evasion charges.
Robert Sicoli, Krzyzaniak's attorney, could not be reached for comment Wednesday.
Krzyzaniak -- also known as Michael Crosby -- raised $20 million since 2003 in a series of investment fraud schemes, Strande wrote.
Krzyzaniak, 62, allegedly used investor funds to pay $1.8 million in American Express charges, $56,045 for a 1989 Porsche Turbo 911, $11,682 for "a luxury fish house," $44,000 to stable two horses over the years, $38,000 for two snowmobiles and a trailer, and thousands more on appliances and electronics goods, among other things.
In the end, there didn't appear to be much left.
A listing for the estate sale itemizes the usual accumulation of a middle-class homeowner -- tools, bikes, fishing poles, picnic table, "weber grill nice," and a pole barn full of miscellaneous items.
Desert Hot Springs project
The indictment alleges Krzyzaniak had been soliciting investors for projects that included the Palmwood golf resort in Desert Hot Springs. The prospective development included about 1,800 homes, a 400-room resort and a million square feet of retail space, all centered on a golf course designed by renowned golf pro Phil Mickelson.
A judge halted the project after two environmental groups raised concerns about the effects on the area, which is near Joshua Tree National Park. Strande said the Palmwood project was never properly funded because of Krzyzaniak's "lavish personal expenses."
Krzyzaniak also solicited investors for other projects, including a NASCAR-style racetrack in Elko New Market, a solar project in Hartsel Springs, Colo., and Internet-based communications terminals that were supposed to be installed in hotels and airport terminals in Southern California, Strande said.
Investors described Krzyzaniak, whom they knew as Crosby, as a boisterous personality who traveled in chartered jets, drove a $130,000 Mercedes and relaxed at a California beach house he rented. He didn't tell investors that his business projects were not viable because of environmental issues, lack of regulatory approvals or other reasons, the government alleges.
To lure investors, the government says, Krzyzaniak promised substantial returns and falsely claimed to have celebrity endorsements that would ensure the projects' success. He allegedly spent some of the money he raised to keep projects afloat or to make "lulling" payments to investors. But the indictment says he spent more than $6.1 million of investor funds on himself. Strande said Krzyzaniak hasn't filed a tax return for at least six years.
Krzyzaniak has an earlier mail fraud conviction. In the mid-1980s, he and some associates sold overpriced silver medallions on the promise that they'd increase in value, and a bogus claim that some of the money would be used to build a 70-acre veterans' park next to Mount Rushmore National Memorial in South Dakota. Retired Air Force Gen. Chuck Yeager, the first pilot to break the sound barrier, testified that Krzyzaniak had tricked him into making a promotional videotape for the park. Elderly coin buyers said they lost their life savings. He was convicted in 2003 and sentenced to three years in federal prison.
Dan Browning • 612-673-4493
