Ex-NXIVM official seeks protection

Federal bankruptcy court judge told records reveal "potentially illegal" activity

The Albany Times-Union/June 18, 2010

Albany - A Saratoga County financial planner with a deep trove of information about the secretive NXIVM organization and some of its deep-pocketed followers has alleged to a bankruptcy judge that she is being hounded by leaders of the Albany-based group since she broke away because she possesses records documenting potentially illegal activities.

The revelations come in a new bankruptcy petition filed by Barbara Bouchey, a certified financial planner who became a core member of NXIVM and a girlfriend of its leader, Keith Raniere, before breaking from the group last year. She said she is personally owed almost $2 million by Raniere and others associated with NXIVM and that their legal actions targeting her and others have caused her to pay hundreds of thousands of dollars to lawyers resulting in her need for bankruptcy protection petition. She declares nearly $2.5 million in debts.

Her case before U.S. Bankruptcy Court Judge Robert E. Littlefield Jr. includes her declaration that she must, as a financial planner, maintain records generated from her association with Clare and Sara Bronfman, heiresses to the Seagrams fortune. The sisters are underwriters of NXIVM and members of its executive board who help in the Executive Success Program, a self-help training regime marketed by the group, she said.

"Because of my involvement with NXIVM/ESP and the Bronfmans, my intimate knowledge of Raniere and his closest associates, and all that I became privy to while I was involved as a high-ranking member in NXIVM/ESP, there are records in my possession," she wrote to the court. "What they are trying to do now is prevent me from maintaining my copies . . . that I am required to maintain by law and that will document their involvement in a myriad of activities that are questionable, and, in some cases, potentially illegal."

A 22-page declaration filed by Bouchey opens a rare window for the public to learn of her unique observations about the group, which some watchdog groups have claimed exhibits the characteristics of a cult. Raniere, whose philosophies inspired the manual used by NXIVM and ESP trainers, is described by NXIVM as a highly intelligent person whose teachings about ethics promote better living and achievement, according to NXIVM literature.

Raniere once ran a company based in Clifton Park called Consumers' Buyline. It was investigated by several government agencies as an alleged pyramid scheme and settled a probe by the New York Attorney General's Office, which obtained a $31,000 judgment against it in 1996.

In an argument before Littlefield Wednesday, Beth Bivona, an attorney for the Bronfman sisters, demanded that the records held by Bouchey not be disclosed. She cited a ruling by a California court to prohibit disclosure in a case in which the Bronfmans are suing Bouchey.

Littlefield bristled at the Bronfmans' request to silence Bouchey, noting that legal papers he received from their lawyers suggested all they wanted to do was prohibit Bouchey from sharing information about financial transactions. Bivona said that the Bronfman sisters' California claim against Bouchey could seek monetary damages and she wouldn't rule out that possibility. Littlefield said the submissions by the Bronfmans' attorneys were "very disingenous."

"I am very uncomfortable with the tenor of this," the judge said.

After further discussion by Bouchey's lawyer, Richard Croak, Bivona, and Littlefield, the judge agreed to handle the matter in his court and the Bronfmans agreed to end their case against Bouchey in California. They had alleged breach of fiduciary duties in that case.

Bouchey did not appear at the bankruptcy court and neither did the Bronfmans. Croak said associates of the Bronfmans' criminal lawyer, Steve Coffey, have been on the lookout for Bouchey. A woman associated with Coffey's firm was stationed outside the courthouse with a large envelope in her hand asking whether Bouchey had been seen at the federal building.

Bouchey wrote to Littlefield that since she severed ties with NXIVM in April 2009 Coffey has threatened her with civil and criminal actions. In her sworn declaration filed in court, she said the Bronfmans' California attorney, Robert Crockett, has made erroneous comments about her, suggesting she threatened to go to the press if she was not paid money owed her. She denies ever making that threat.

Coffey was unavailable. Crockett did not return a call.

Bouchey said Raniere and NXIVM executive Nancy Salzman owe her $1.65 million plus interest and that NXIVM owes her $150,000 in commissions and a $25,000 legal retainer. Plus, she said, she is owed $10,000 in unpaid billings by the Bronfmans. She served as a financial manager for them after Raniere introduced them to her following their enrollment in NXIVM about seven years ago.

She said the Bronfmans wrote her at the time: "Our professional relationship was based on the assumption that your skills, knowledge and experience -- enhanced by your access to Keith's tutelage -- would help us to ethically manage our current portfolios."

An affidavit in a separate case showed Bouchey helped manage almost $100 million of their funds, most of it used by Raniere to finance a series of unsuccessful investments in the bond markets. Bouchey said in her bankruptcy declaration she had once managed $90 million in assets for clients before the Bronfmans engaged her. She said she had earned $900,000 a year, but has lost her life savings by providing Raniere funds for his market trades.

She said in her court statement that Raniere had scoffed at her criticism of his trades, claiming "he was a mathematical genius, the smartest man in the world." She said he had deceived her about the investments. She said he implied she was selfish to ask to be repaid sums owed her.

She said she signed for NXIVM borrowing $1.35 million from Michael Sutton, a person identified in another other legal complaint filed by NXIVM as a participant in the group's self-improvement programs, but that the money flowed to Raniere and Salzman. Bouchey lists that debt among her liabilities.

"I believe the reason the Bronfmans, et. al., want to get these records away from me is that they are trying to use me as a scapegoat for the enormous losses they sustained during the time they have been associated with Raniere, Salzman and NXIVM/ESP," she told Littlefield.

Bouchey is at least the third former associate of NXIVM to have ended relations with the group only to later file for personal bankruptcy protection, with their cases facing costly litigation with NXIVM. Bouchey said she has had a difficult time finding a lawyer to take her case and was turned down by seven law firms.

She turned to Croak, who is already representing another ex-NXIVM bankruptcy petitioner, Joseph O'Hara.

"They are one of the most aggressive creditors in the bankruptcy arena I've come across," said Christian H. Dribusch, the lawyer for the other ex-NXIVM bankruptcy petitioner, Toni Foley, whose case took nearly nine years to resolve.

To see more documents/articles regarding this group/organization/subject click here.