Trial begins for Bixby CEO charged in $57 million fraud

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Bob Walker

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Businessman Robert Walker was trying to change the world — or deceiving people into thinking he could.

Jurors heard those contradictory views of the former chief executive of Bixby Energy Systems as his federal trial began Tuesday on charges that he defrauded 1,800 investors of $57 million in a decadelong scam.

“This case is not about Mr. Walker being a bad businessman,” said Assistant U.S. Attorney David MacLaughlin in his opening statement to the jury in U.S. District Court in St. Paul. “This case is about Mr. Walker and his accomplices, and there were many of them, lying and deceiving people over and over to get them to invest money.”

Walker is charged with mail and wire fraud, conspiracy to commit fraud, tax evasion and witness tampering over his involvement with the energy company whose technology ultimately went nowhere. If convicted, Walker could face a lengthy prison term, perhaps for the rest of his life. The most serious charges, mail and wire fraud, each carry maximum prison terms of 20 years.

“Bob Walker is not guilty of anything but hope and optimism,” Walker’s defense attorney, Peter Wold, told jurors. “Bob Walker didn’t set out to deceive anyone.”

Walker, 71, is best known as the founder and ex-CEO of Select Comfort Corp. and inventor of the Sleep Number bed. After leaving the company, he co-founded Bixby, which he led from 2001 to 2011. The Ramsey company started as a maker of stoves that burned corn, but when that market crashed in 2006, it began to promote a technology that Walker claimed could convert coal to natural gas.

From the beginning, MacLaughlin said, Bixby was mainly in the business of raising money from investors, offering the potential to profit if the company’s stock began trading publicly. But for years, the prosecutor said, Walker was collecting kickbacks from his chief fundraiser, a man with a criminal record of fraud.

MacLaughlin played a 10-minute Bixby video created in 2008 that declared its process to convert coal to natural gas and crude oil was “world-altering” and that an “energy revolution is about to begin.” He also displayed on the same big screen a Bixby internal e-mail indicating the technology didn’t work.

In contrast, Wold said Walker still believes the so-called “Bixby process” can work, and blamed a man hired to build the coal-gasification machines with deceiving him about whether they did. The defense portrayed a key government witness, former Bixby Chief Financial Officer Dennis Desender, as the real fraudster who agreed to testify against Walker in order to get a reduced sentence on tax and securities fraud charges.

The alleged kickbacks from Desender on his stock-sale commissions were nothing more than loans that Walker intended to pay back after Bixby became a success, Wold said.

“Bob is a dreamer and an inventor,” Wold said. “He doesn’t think like an accountant or businessman.”

But prosecutors contend that investors, many of them with no experience investing in risky start-ups, bought into the Bixby story because they believed Walker had a track record of success at Select Comfort. “The evidence is going to show that he drove that company to the brink of bankruptcy,” MacLaughlin told the jury.

The first two witnesses called by the government were a Duluth couple who said they invested $40,000 in Bixby a decade ago after hearing Walker speak at a Two Harbors, Minn., electric cooperative. The investment was lost.

Walker has been behind bars since August, when investigators alleged he tried to contact a government witness through an intermediary. A judge revoked Walker’s conditional release.

 

David Shaffer • 612-673-7090 • Twitter: @ShafferStrib

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