PureChoice founder goes to trial in St. Paul on federal fraud charges

Is Bryan Reichel a fraudster who lied to investors in his start-up company to get rich and live the lavish life of a successful CEO? Or is he a visionary who weathered the financial crisis only to be pushed out of his own company by investors with ulterior motives?

Attorneys painted starkly different pictures of Reichel in a St. Paul federal courtroom Tuesday, the first day of his trial on numerous wire fraud and bankruptcy fraud charges.

A federal grand jury indicted Reichel in 2014 on seven counts of wire fraud, alleging that he lied to investors. Last year, the grand jury added five more charges alleging that when his business fell apart, Reichel tried to defraud the bankruptcy court by hiding his assets, and then lied about it.

"This case, at its core, is not that complicated," federal prosecutor David MacLaughlin told jurors Tuesday in his opening statement. "This case is all about self-dealing."

Reichel, 61, of Prior Lake, spent years soliciting investments in PureChoice, a Burnsville company that developed and sold air monitoring equipment, by insisting that the company was on the verge of success, MacLaughlin said. The company could have been successful — it attracted the attention of heavy-hitting business owners eager to invest, as well as major Minnesota companies like 3M and Honeywell.

But what investors didn't know, MacLaughlin said, was that PureChoice was losing money — and that Reichel was using new investments to pay off old ones while skimming off the top to fund his wealthy lifestyle.

"That lifestyle included a large mansion located in Credit River Township which Reichel built from 1999-2000, numerous, expensive luxury items, including an extensive gun collection, high-end yard tractors and skid-loaders, a Mercedes-Benz S Class Sedan, lavish trips, and all of the other trappings associated with being the Chief Executive Officer of a successful, vibrant company," prosecutors wrote in court filings.

"Mr. Reichel is a big, charismatic guy," MacLaughlin said. "He is not a good businessman, but he is a good salesman."

Reichel's attorney, Peter Wold, reminded the jury there are two sides to every story. He began his opening statement by quoting scripture to the churchgoing jurors, then went on to describe Reichel as a businessman who did his best to navigate a changing and volatile marketplace.

PureChoice technology won patents and earned contracts with national companies — success that drew the attention of savvy businessmen. Ken Macke, the former CEO of Dayton Hudson Corp., served as a member of PureChoice's board of directors and a guarantor of PureChoice's debt. Richard Perkins, a well-known investment adviser, put millions of dollars into the company.

Prosecutors describe Perkins as a "co-conspirator" who pulled cash for himself directly from investor contributions, including $125,000 to buy a condo in Belize. Perkins was not indicted.

In his opening statement, Wold said that Perkins was simply trying to keep PureChoice afloat. With payroll due and the company short on cash, he said, Perkins would supply a loan and then need the money back in a matter of weeks.

The government says in court filings that they lost the most from Reichel's scheme — about $12.3 million.

According to Wold, though, the Andersons were more victimizers than victimized.

After the Sept. 11 terrorist attacks, George Anderson became preoccupied with the possibility that terrorists could destroy the United States' power grid with an electromagnetic pulse (EMP) attack, Wold said.

When Anderson learned about PureChoice air monitoring technology, he got the idea to use it to create his own EMP detectors. In 2009, he traveled to Washington to testify before a congressional committee about the purported threat, proposing the detectors that he was creating as a solution, Wold said.

Anderson started investing in PureChoice in 2003. Eventually he and his son — and their investment company, 7th Rig — had taken over PureChoice and its intellectual property.

"Bryan Reichel isn't a perfect man, but he's not a federal criminal," Wold said.

Reichel filed for bankruptcy at the end of April 2011 while embroiled in a lawsuit in Scott County District Court — an effort by George Anderson to recover a $1.5 million loan.

This was one of many methods Reichel used to advance his fraud scheme, MacLaughlin said.

Even before filing for bankruptcy, Reichel moved his family's finances to a checking account for Reichel Investments, a limited liability company. And during the early stages of his bankruptcy, he failed to disclose a substantial amount of personal property, including all of the home goods and furnishings in his 10,000-square-foot mansion.

Wold countered that these were mistakes — that Reichel got bad advice from an incompetent lawyer. By the time he got a new lawyer, Wold said, it was too late.

MacLaughlin advised jurors not to get too caught up in the complexity of the case, adding that he doesn't even understand it all.

"You're not going to be called upon to untangle the spaghetti," MacLaughlin said, "because the spaghetti probably can't be untangled."