Court: Entrepreneur Deni Leonard used indigenous Canadian energy contacts to defraud investors

SAN FRANCISCO - Early on, 2003 was looking like the proverbial very good year for Deni G. Leonard. But by ;'at least'' May of that year, according to Securities and Exchange Commission accounts in a lawsuit later filed against him, his business practices had gone bad. Then, in June, the online SFweekly.com described Leonard, pejoratively, as ''a shaman in a business suit'' and reported doubts about his projects among employees and prior business associates.

Working out of San Francisco, Leonard had developed a reputation around Indian country as an entrepreneur in the mid-1990s. In the process, the Confederated Tribes of Warm Springs citizen authored at least one competent publication on economic development as inflected by Native cultural considerations. And if a box of them, delivered to a Native nonprofit organization that was accustomed to the free exchange of materials, came with a bit of a stiff bill inside, no one complained too loudly.

In the mid-'90s, before gaming revenues had led to quantum jumps in readily available Indian-specific economic and financial analysis, competent materials in that swim were hard to come by. Leonard, 62, holds a master's degree in public policy from the John F. Kennedy School of Government at Harvard University.

By February 2003, to all appearances, Leonard had arrived. In January, the last leave-'em-smiling chapter on him in a bestselling motivational book by Po Bronson landed them both on ''The Oprah Winfrey Show.'' That same month, Leonard was one of 12 recipients of a Businessman of the Year award from the Business Advisory Council and the National Republican Congressional Committee for ''successfully integrat[ing] business and financial success with the support of Republican issues like tax cuts and decreased government regulations.'' In the next month, he collected the 2003 Indian Business Owner of the Year award from the National Committee for American Indian Enterprise and Development.

His company was Indigenous Global Development Corp., touted by Leonard as the first publicly traded company with a majority of Native-owned shares. According to PIPEwire, an online affiliate of the PIPEs Report, an investment industry newsletter, ''The company was supposed to be in the business of providing strategy, financial and investment tools to promote self-sufficiency for Native Americans and indigenous people worldwide.''

''Instead,'' the SEC alleged in a 2006 complaint, ''for more than two years, IGDC and Leonard misled investors by mischaracterizing and omitting key provisions of preliminary agreements reached with various indigenous groups in Canada, thereby falsely leading investors to believe that IGDC was poised to reap millions from natural gas contracts.

Further allegations stated that IGDC and Leonard also falsely claimed that IGDC was purchasing $3 million worth of natural gas, and that they falsely claimed on two separate occasions that IGDC had obtained multimillion-dollar investments that would allow it to further develop its natural gas business.''

Other business ventures IGDC ''repeatedly described its involvement in,'' the SEC alleged as fact in its 2006 complaint, were ''a division dedicated to providing low-cost mortgages and developing prefabricated homes, and a health care program working to provide pharmaceuticals to Native American communities. IGDC's press releases and marketing materials described even more purported businesses: acquiring luxury property, selling indigenous wine, and providing sophisticated computer products and consulting services. According to IGDC, all of these projects were highly lucrative.''

The misleading claims did not bring revenues to IGDC, the SEC concluded, nor lead it to build or broker or distribute anything, nor sell anything for which it got paid, nor consult with clients on computers, nor keep it from ''teetering on the brink of extinction.''

''Instead, Leonard has funded IGDC's operations on the backs of investors by selling stock and issuing promissory notes.''

As a result, ''The commission seeks injunctions, disgorgement of ill-gotten gains, and civil money penalties against both defendants [IGDC and Leonard]. It also seeks to bar Leonard from participating in any offering of penny stock and from serving as an officer or director of a public company.''

On June 30, after an initial decision in an administrative law court and a review process, the U.S. District Court for the Northern District of California delivered the order the SEC sought, finding Leonard ''liable for fraud'' in the purchase and sale of IGDC securities. The court's order stated that in attracting investors, IGDC claimed its transactions of natural gas would contribute to ''financial self-sufficiency for Native Americans ... and indigenous people worldwide.''

In addition to banning him from participation in stock offerings or acting as an officer or director of a publicly traded company, the court ordered Leonard to pay disgorgement of $249,793.68 (his gain from fraudulent IGDC stock sales to the public) as well as prejudgment interest of $37,586.84 and a civil money penalty of $249,793.68. It also entered a punitive judgment of $208,000 against IGDC, which is now defunct.

Leonard has claimed all along that his problems have been caused by disgruntled former employees and a pattern of bias against tribes on the part of the SEC.

In his initial decision against Leonard and IGDC, administrative law judge James T. Kelly found no merit to the contentions.

The San Francisco Chronicle reported that in a brief interview July 8, Leonard claimed to be at work on an appeal and said he could say no more.