A convicted fraudster who once served as chief financial officer of Bixby Energy Systems testified Tuesday that CEO Robert Walker knew all along of his felony record and for years took kickbacks from commissions on the sale of company’s now-worthless stock.
Dennis Desender, who also served as a top fundraiser for the company, said he met Walker through another man in 2001, just as Bixby was getting started in the business of making corn-burning stoves.
“He really didn’t care if I had a past or not,” said Desender, 66, who wore a prison-issue pullover as he testified at Walker’s trial in U.S. District Court in St. Paul.
In his first day of testimony for the prosecution, Desender described Bixby as a company focused on raising money from investors while Walker and his family enriched themselves. He will be on the witness stand again Wednesday, eventually facing cross-examination by Walker’s attorneys.
He is a pivotal witness not only for federal prosecutors, but also for the defense. Walker’s attorneys likely will try to pin Bixby’s downfall on him. They have painted Walker, 71, as an entrepreneurial dreamer who naively surrounded himself with criminals.
Desender said that as he found more and more people to invest in the private company — and collected a 10 percent commission for fundraising — Walker demanded that half the money be kicked back to him. “He said, ‘I need you to split the commissions,’ ” Desender testified.
Walker, best known as founder of Select Comfort Corp. and inventor of its famous adjustable bed, is on trial for fraud, conspiracy, tax evasion and witness tampering. He is accused of defrauding 1,800 investors out of $57 million. He co-founded Bixby in 2001, and was chief executive until his ouster in 2011.
The company, last based in Ramsey, initially sold corn-burning stoves and then began promoting a clean-coal technology that failed in its first commercial installation two years ago in China. Prosecutors say investors lost everything.
Desender said that in addition to himself, Walker knew that some other business associates had criminal records, including Bixby’s former vice president of sales as well as a man who once worked unsuccessfully to take the company public through a process known as a reverse merger.
Walker also had been warned in 2005 by an attorney that it was illegal for Bixby executives to take commissions, or finders’ fees, on stock sales, Desender testified. Walker’s daughter, Melanie Bonine, an ex-Bixby executive, was among finders who got such payments, he said. She and other family members also were overpaid, with Bonine sometimes double-dipping on her paycheck, Desender added.
Bonine has not been charged in the Bixby fraud, but is facing tax evasion charges in connection with the sale of $700,000 in Bixby securities.
Desender said he and other finders talked up Bixby as an investment even to people who shouldn’t have qualified because they lacked a high net worth typically needed in such private placements. Potential investors eventually got a presentation from Walker. “Bob would put on the dog and pony show,” Desender testified.
Desender, who is serving an eight-year prison term, said he knew Bixby was overstating sales figures of its corn stoves. That was done, he said, so “the company would look like it was doing better than it was.’’ Investors weren’t told of the bogus sales, or other wrongdoing uncovered by forensic auditors in 2006, he said.
That year Walker fired Desender, citing his criminal record, as auditors dug through the company’s books. But Walker brought Desender back after they mounted a successful proxy vote that put Walker in control and ended the audit, Desender said.
Around that time, Desender said, Walker had him sign an agreement to make the kickback payments look like a series of loans. “It was backdated to cover all the payments, the kickbacks, that had been made,” he testified.
In 2007, as Desender returned to Bixby, he stopped paying kickbacks to Walker. Instead, Walker got the board to raise his annual salary to $325,000 to make up the money, Desender testified. Desender also got a big salary increase — to about $295,000 a year, he testified. Meanwhile, about 25 to 30 employees were laid off, he added.