Attorney: Walker buried Bixby Energy forensic audit

Bixby Energy Systems CEO Robert Walker in early 2007 buried forensic auditors' findings of improper business practices and fundraising that now are at the heart of his federal fraud trial, an attorney who led the audit testified Monday.

Jeannette Bazis, a partner in Greene Espel, said the audit committee of Bixby's board retained her Minneapolis law firm and an accounting firm in late 2006 to investigate the company after directors learned that its chief financial officer and main fundraiser had a criminal fraud record.

After auditors dug up information and sought to question Walker about it, he terminated the audit and tried to get back all of the audit papers, she said.

"I thought, 'We're on to him and he wants to bury it,' " Bazis ­testified in U.S. District Court in St. Paul.

Walker, 71, who led Bixby from 2001 to 2011, is on trial on fraud, conspiracy, tax evasion and witness tampering charges. He is accused of cheating 1,800 investors out of $57 million to enrich himself and his family. The Ramsey company initially produced corn-burning stoves, and later promoted a clean-coal technology that prosecutors say never worked.

Bazis said auditors concluded not only that chief fundraiser Dennis Desender had been paid excessive commissions for selling shares in private stock offerings, but that half of the commissions had gone to Walker.

Later, she testified, she was faxed a purported agreement indicating that the payments to Walker were a series of loans, but she didn't believe it. "I just remember shaking my head."

Before the audit ended, Bazis said the team interviewed Walker and he first said he found out about Desender's criminal record shortly before firing him in July 2006. When confronted with other evidence, she said, Walker backtracked and conceded that he learned some details of his business associate's criminal past in 2003 or 2004.

Desender, who has pleaded guilty to securities fraud and tax evasion in the Bixby case, has 1998 convictions for bank fraud and embezzlement. He is expected to testify against Walker at the trial, which is in its third week.

Arnold Angeloni, a longtime Twin Cities businessman who served on the Bixby board, testified Monday that in December 2006 he and other directors tried to fire Walker over the felons on the payroll and other wrongdoing uncovered by auditors.

"It was probably the low point in my business career," said Angeloni, former CEO of AmericInn International.

But Angeloni said he and another member of the board's audit committee instead found themselves ousted as directors on Jan. 1, 2007, in a proxy vote engineered by Walker's allies.

"I have heard of shareholder fights, but not when laws have been broken," he said.

He said the forensic audit had discovered a spreadsheet of Desender's indicating that half his commissions would go to Walker. "I was shocked, disappointed, floored," said Angeloni.

After Angeloni and the auditors were kicked out, Desender was brought back to Bixby and kept raising money. His criminal background didn't become widely known until 2011 in a lawsuit filed by subsequent board members who ­succeeded in ousting Walker.