[Editor’s Note: There are some points in the narrative that I think I would characterize differently, but overall, Claviger has made some excellent points and puts the tail on the real donkey of the commodities and Los Angeles real estate debacles – Keith Raniere.]
By K. R. Claviger
Over the years, there have been lots of stories told about the commodities trades that were overseen by Keith Raniere – and the so-called Precision Development Project that involved the development of multi-million homes on hillside lots around Los Angeles.
Unfortunately, very few of those stories have been totally accurate – and several of them have been full of downright misrepresentations.
Most recently, the following comment appeared in response to a post about the trial involving the Bronfman sisters’ claims against Yuri Plyam:
Barbara Bouchey found Yuri Plyam, a licensed commodities broker in Los Angeles, CA. I don’t remember the date Yuri was hired offhand but believe it was after Keith lost $1M or so of Barbara’s own money or, some say, money she’d earned as the Bronfman sister’s accountant after joining NXIVM. At nearly 40 years old, however, Barbara was already a very successful financial manager in the Albany area. Barbara was referred to NX by Nancy Salzman in about 2000, a year or so after officially starting ESP, later NXIVM, with Keith. Nancy was Barbara’s “psychologist” or therapist for over a decade prior. Keith seduced Barbara or “they fell in love” rather, overnight. Barbara believed Keith was in love and that they had an exclusive, more or less, romantic relationship until 2009 when Barbara left with the “NXIVM 9.”
Keith called the shots on the trades, per Barbara, but Keith didn’t have a brokers’ license. Yuri and Keith became phone buddies as Keith blew through upwards of 65M loaned to him by the Bronfman sisters in market trades. Keith boasted with Yuri about his abundant sex life saying he enjoyed a different bed every night. Yuri and his gorgeous wife, Natalie, eventually met the Bronfman sisters and joined NXIVM. The Bronfman sisters and Nancy toured LA with the Plyams, selecting some of the LA properties but at trial it was said the Bronfman girls were more interested in playing with the Plyam’s little girls at their home. Nancy Salzman was officially the Bronfman sisters’ partner in the real estate ventures. Properties were purchased in Nancy’s name and some in the Plyam’s name that the Plyam’s were to retain in compensation for running Precision Properties. There were some properties the Plyam’s testified Keith and Nancy agreed to hold in the Plyam’s name for ease of obtaining development loans in LA. Initially, none were in the Bronfman sisters’ names though they were financing the entire project. Some of the commodities losses on the money loaned from the Bronfman’s were happening pretty much simultaneous to the real estate project development. Clare testified that the commodities losses occurred because, according to Keith, a big, bad Jew in New York — Edgar Bronfman Sr. — was deliberately betting against Keith. Much was made of the commissions Yuri was making due to the frequency of Keith’s trades (fee churning accusations) even though that was not an issue at trial and, again, Yuri wasn’t calling the shots, Keith was. The Plyam’s lost at trial but won on appeal. Today, the Precision properties and company are in Clare Bronfman and James Del Negro’s names. Clare did not disclose these properties on her assets list submitted to the court at her bail hearing as FR reported previously.
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I don’t really have a dog in this fight but, having talked to most of the parties who were involved in the commodities trades – and having had a chance to review a lot of the original documents about the Precision Development Project – I do have some knowledge (and some opinions) about both topics.
Let me start by parsing through that recent comment – and correcting a few factual errors and adding some more details on other aspects.
- Barbara Bouchey found Yuri Plyam, a licensed commodities broker in Los Angeles, CA. I don’t remember the date Yuri was hired offhand but believe it was after Keith lost $1M or so of Barbara’s own money or, some say, money she’d earned as the Bronfman sister’s accountant after joining NXIVM. At nearly 40 years old, however, Barbara was already a very successul financial manager in the Albany area.
Barbara Bouchey contacted Yuri Plyam before she ever invested any money in Raniere’s patent-pending “Commodities Investment Formula”. Although the account was set up in her name, all the trades in it were done by Raniere. In the beginning, Raniere followed Yuri’s advice – and was actually making money. But once he started making his own trading decisions, he quickly blew through $1.2 million of Bouchey’s funds.
Next up was Michael Sutton – who was convinced to put up some funds so that Raniere could continue to refine his formula (Barbara and Keith did such a good job of convincing Sutton that they knew what they were doing, he even opened up his own commodities trading account and doubled-down on some of Raniere’s investments, thereby doubling the amount of the losses that he incurred via Raniere’s commodities trading strategies). Total losses for Sutton were approximately $5 million – some of which Bouchey promised to pay back to him (I don’t believe she ever did this).
The important thing to remember about all these commodities trades is that people did not “loan” money to Raniere to make the trades because that’s not how commodities trading works (See HERE for a primer on commodities trading). Instead, Bouchey and Sutton – and later, of course, the Bronfman sisters – “loaned” money to Raniere to cover the losses he had sustained on his trades. And given that Raniere had no known income of his own, these transactions most likely would not qualify as “loans” in terms of how the IRS defines that term and should have been classified as “gifts” that, except for small amounts, represented taxable income to Raniere.
The only way that Raniere could have ever paid back any of the money he “borrowed” from Bouchey, Sutton and/or the Bronfman sisters is if he actually made money on some future commodities trades. And although he did do that on several occasions, he kept losing whatever profits he made by investing in riskier and riskier trades.
Think of someone playing blackjack whose “strategy” is to keep letting his original bet – plus his winnings – ride on the next hand until he finally loses everything. That’s basically how Raniere “invested” in the commodities market.
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- Barbara was referred to NX by Nancy Salzman in about 2000, a year or so after officially starting ESP, later NXIVM, with Keith. Nancy was Barbara’s “psychologist” or therapist for over a decade prior. Keith seduced Barbara or “they fell in love” rather, overnight. Barbara believed Keith was in love and that they had an exclusive, more or less, romantic relationship until 2009 when Barbara left with the “NXIVM 9.” Keith called the shots on the trades, per Barbara, but Keith didn’t have a brokers’ license.
It was apparently sometime after her divorce that Bouchey started seeing Nancy Salzman. And although Salzman presented herself to cients and potential clients as a “psychotherapist,” she basically had the same psychologist/psychiatrist/therapist credentials as Lucy does in the Charlie Brown comic strip: i.e., NONE.
Although Bouchey has always maintained that she thought she had an “exclusive” sexual relationship with Raniere, several of her NXIVM contemporaries have disputed that claim. Indeed, there have numerous accounts of Salzman, Pam Cafritz and others counselling Bouchey about her unreasonable attachment to Raniere’s penis.
Regardless of the realities of Bouchey’s description of her personal relationship with Raniere, it’s true that she allowed him to make all the decisions about the commodities trades in her account. What that says about her prowess as a financial planner is an interesting question.
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- Yuri and Keith became phone buddies as Keith blew through upwards of 65M loaned to him by the Bronfman sisters in market trades. Keith boasted with Yuri about his abundant sex life saying he enjoyed a different bed every night. Yuri and his gorgeous wife, Natalie, eventually met the Bronfman sisters and joined NXIVM.
While it is true that Yuri spent a lot of time on the phone with Raniere, he always considered him to be a “client” rather than a “friend” (Those phone calls were almost always initiated by Raniere – who, much like a teenager, loved to regale Yuri with stories about all his sexual conquests). Although Yuri and his wife, Natasha, did attend three ESP Intensives over the course of eight years, they never considered themselves to be “members” of ESP (Natasha often had trouble staying awake in the classes).
From the Plyams’ perspective, the relationship with Raniere was purely business in nature. But, as with any important client, they did spend some social time with him – and even attended a few of his training classes.
As explained earlier, the Bronfman sisters did not provide Raniere with $65 million to invest in the commodities market. Instead, they agreed to cover any losses that he might incur as he “tweaked” his patent-pending “Commodities Investment Formula”.
But because he kept doubling and tripling down on his losing investments – and also rolling over his winning investments until they too became losing investments – he eventually had to come up with $65 million to cover his margin calls.
So, when the Bronfman sisters ponied up all the funds that were needed to cover his losses – and he agreed to stop making any more “investments” in the commodities markets – they knew damn well that they would never get any of that money back.
All the Bronfman-related commodities investments were made through a company named First Principles, Inc. – which was, of course, in Nancy Salzman’s name, rather than in Raniere’s name.
The problem was that Salzman, as the owner of First Principles, Inc., ended up with $65 million of capital losses – but had no capital gains that those losses could be applied against (See HERE for an explanation as to how such capital losses are supposed to be handled).
So, the most that Salzman could write off on an annual basis with respect to those commodities losses was a paltry $3,000 – meaning it would take her more than 21,000 years to utilize all of those losses as income tax write-offs.
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- The Bronfman sisters and Nancy toured LA with the Plyams, selecting some of the LA properties but at trial it was said the Bronfman girls were more interested in playing with the Plyam’s little girls at their home. Nancy Salzman was the officially Bronfman sisters’ partner in the real estate ventures. Properties were purchased in Nancy’s name and some in the Plyam’s name that the Plyam’s were to retain in compensation for running Precision Properties. There were some properties the Plyam’s testified Keith and Nancy agreed to hold in the Plyam’s name for ease of obtaining development loans in LA. Initially, none were in the Bronfman sisters’ names though they were financing the entire project.
Originally, the deal was structured so that Yuri would get one-third of the profits from the sale of the various Precision Development properties (Another one-third of those profits was supposed to go to Salzman – and the remaining one-third to the Bronfman sisters). It was never intended that Yuri would end up owning any of the properties.
Most of the properties were originally titled in the name of the company that had been set up to oversee the project: i.e., Precision Development, LLC. It was only when a particular property went from “undeveloped lot” status to “home under construction” status that a property was titled in someone’s name – and that was because the banks that were providing the funding for the construction required things to be done in that fashion.
The only property that ended up in Nancy’s name was the 33-unit condo project on Libbit Avenue. That was also the only project for which she signed the construction loan documents.
The original plan was to invest the Bronfman sisters’ $26 million into acquiring hillside lots and preparing them for construction (This preparation generally including a tremendous amount of grading – and the construction of caisson foundations).
After a site was fully prepared, a construction loan would then be taken out and the house would be built. All but one of these construction loans was taken out in Yuri’s name – which, per the lending bank’s requirements, meant that each of these properties had to be titled in his name while a house was being built on it.
When Raniere decided to blow up the Precision Development deal, he hired Frank Parlato, gave him misinformation, and Frank went to Los Angeles to confront Yuri.
Yuri and Frank agreed on an “Operating Agreement” giving the Bronfman sisters two thirds ownership and it was signed within a month of Frank’s arrival in L.A. Per the terms of that agreement, the profits from the Precision Development venture were to be split as follows: one-third to Yuri, one-third to Salzman, and one-third to the Bronfman sisters.
Within 24 hours of the signing the agreement, Salzman, fearful of being charged with fraud, transferred her one-third share to the Bronfman sisters.
Per his unsigned agreement with the Bronfman sisters, Frank Parlato was supposed to be paid 1/3 of their share of the profits from the Precision Development Project and was to manage the project.
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- Some of the commodities losses on the money loaned from the Bronfman’s were happening pretty much simultaneous to the real estate project development. Clare testified that the commodities losses occurred because according to Keith, a big, bad Jew in New York — Edgar Bronfman Sr. — was deliberately betting against Keith. Much was made of the commissions Yuri was making due to the frequency of Keith’s trades (fee churning accusations) even though that was not an issue at trial and, again, Yuri wasn’t calling the shots, Keith was. The Plyam’s lost at trial but won on appeal. Today, the Precision properties and company are in Clare Bronfman and James Del Negro.
This story about Edgar Bronfman interfering with Raniere’s commodities trades is, of course, total made-up bullshit. In reality, Raniere was taking such large positions on some commodities that the federal agency overseeing the market forced him, on several occasions, to reduce his holdings.
The bottom line is that Raniere lost $1.2 million of Bouchey’s money, $5 million of Sutton’s money, and $65 million of the Bronfman sisters’ money because he had no idea what the fuck he was doing. It’s really as simple as that.
What is also true is that the combination of the commodities losses and real estate investments did put a strain on the Bronfman sisters’ cash flow. Indeed, at one point Bouchey arranged for them to borrow $20 million against one of their future trust payouts so that they could keep both things going (Another great piece of advice from their financial planner – who, by the way, more than recouped her $1.2 million of commodities losses via the fees she earned as the Bronfman sisters’ financial adviser).
The bottom line on the Precision Development trial against Plyam is that the Bronfman sisters spent about $8 million in legal fees to get a $10 million verdict that they never collected. Plyam filed for bankjruptcy.
They do, however, still own some prime building lots in the hillsides surrounding L.A. In order to build on these lots now, however, the original caisson foundations – which they spent millions to build – would have to be removed – because they left them exposed to the elements too long.
Additional grading work would also have to be completed.
It is not known if any of the Precision Development properties ended up in Jim Del Negro’s name. Since, however, he ostensibly took over as “Project Manager” after Frank was fired by the Bronfmans, that is a possibility.
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- There were some properties the Plyam’s testified Keith and Nancy agreed to hold in the Plyam’s name for ease of obtaining development loans in LA.
At the time that Raniere decided to blow up the Precision Development Project, there were four (4) houses that were almost completed and ready to go on the market. Interestingly enough, when Yuri offered to transfer the almost-completed properties that were still in his name, the Bronfmans’ attorney, Bob Crockett, rejected that offer.
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- Initially, none (of the Precision Development Project properties) were in the Bronfman sisters’ names though they were financing the entire project.
As previously explained, this is how Raniere originally structured the project. All of the properties were held in the name of the company, Precision Development LLC, until they were ready to have homes built on them. Then, in order to get the necessary funds for construction, a property would be transferred to whoever signed for the construction loan. Thereafter, when the finished property was sold, the proceeds would be transferred back to the company.
The issue was that the Bronfman sisters did not own any portion of Precision Deevlopment. Once again, this was by Raniere’s design. When Frank went there, he insisted that the Bronfmans be listed as part-owners of the company. Raniere agreed – reluctantly – and this was the seed of Frank’s being fired.
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The only way that the Bronfman sisters could show any “losses” was by refusing to take ownership of the 4 partially-completed houses. These houses were eventually foreclosed upon by the banks that had provided the construction loans for them.
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Frank Parlato did, in fact, succeed in getting an agreement signed that ensured the Bronfman sisters would get 2/3 of the profits from the sale of the properties. And since those profits were projected to be approximately $15 million, that would mean they would have made approximately $10 million between them.
Had Frank not managed to get the agreement signed with Yuri, the Bronfman sisters would have nothing to prove that they were supposed to get any of the profits from the Precision Development Project. How the hell Raniere and Bouchey convinced them to advance $26 million without anything in writing is beyond my comprehension.
But Raniere then convinced the Bronfman sisters to fire Frank and put Jim DelNegro in charge of the Precision Development Project. Del Negro’s only known experience in real estate is that he signed a couple of leases for apartments where he lived. As a result, the entire project cratered – which is exactly its status as of today
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So, there we have it: the real story of Keith Raniere’s commodities trading skills – and the real story of the Precision Development Project. And just like everything else he ever touched, both of these ventures turned into epic failures because of Raniere’s compulsion to lose and destroy things of value and people.
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Viva Executive Success!