Kennewick candidate’s relative ran a Ponzi scheme. Someone is trying to link him to it

A front-runner for Kennewick City Council is mystified that someone is linking him to a notorious Idaho Ponzi scheme orchestrated almost a decade ago by his then brother-in-law.

Brad Beauchamp said he doesn’t know who is sending local media copies of a court document that offers a tenuous but not criminal link to a Great Recession-era fraudulent investment scheme led by Daren Palmer.

The FBI said the scheme cost investors $29 million.

Beauchamp speculates it’s related to his run for city council. He was the top finisher in the Aug. 6 primary to succeed Councilman Paul Parish.

He will face Ed Pacheco, the city’s planning commission chair and a member of the Hanford Patrol, in the Nov. 5 general election.

Pacheco said he did not distribute the document. However, he believes it shows Beauchamp showed poor judgment in someone who wants to oversee how tax dollars are spent.

“When you sit on the city council, you sit on a large budget,” he said.

Shortly after the primary, two current and one former Tri-City Herald employees were mailed copies of a 2010 lawsuit filed against Beauchamp and his wife, Gloria, in U.S. District Court for Idaho.

The three pieces of mail were identical and anonymous.

The suit stemmed from the Palmer case but did not allege wrongdoing by the Beauchamps.

Brad Beauchamp.jpg
Brad Beauchamp

It was one of 25 filed by R. Wayne Klein, the receiver appointed to take over Palmer’s assets, against associates in a bid to recover funds. Palmer was married to Beauchamp’s sister Michelle.

Klein sought the return of about $1.3 million the Beauchamps received from Palmer — most of it to build a house.

Although the Beauchamps are not accused of being involved in the fraudulent investment scheme, they were treated as “insiders” because they were close relatives.

The 2010 complaint tells the beginning of the story of the Beauchamps’ relationship to Palmer. But a separate document tells how it ended, with a settlement and a dismissal.

$1.3 million Idaho house

Klein settled with the Beauchamps in 2012 for $3,000 after concluding the $1.3 million payment to build a house near Coeur d’Alene was legitimate.

“The Beauchamps provided information demonstrating that the $1.3 million was actually spent on construction. The Beauchamps acknowledged receiving the $25,000 gift but asserted a financial inability to repay that amount,” the receiver informed the court.

The Securities and Exchange Commission and the Commodities Futures Trade Commission, which had jurisdiction in the case, did not object to the settlement deal.

Party politics in council race

City council posts are officially nonpartisan. But the anonymous mailings have injected partisan politics into the Beauchamp-Pacheco race.

Ed Pacheco.jpg
Ed Pacheco

Beauchamp is endorsed by the Benton County Republicans, a process that includes asking for the endorsement, being interviewed and agreeing to uphold Republican principles.

The Benton County Democrats are not endorsing candidates in nonpartisan races.

However, Judy Johannesen chastised the Republicans and the Tri-City Herald for failing to unearth the 2009 Ponzi scheme. Johannesen is chairwoman of the Benton County Democrats. She said she was not acting in that capacity.

The case “sheds light on the character of a Kennewick candidate,” she wrote, though she said she did not send the documents.

Bill Berkman, chair of the Benton County Republican Party, said the party reviewed Beauchamp’s connection to the Palmer case and stands behind him.

Berkman said it appears someone conducted “opposition research” on Beauchamp but misunderstood the outcome of the legal case against the couple.

“The only scandal is the lack of intelligence and diligence,” he said.

Idaho Ponzi scheme

The scale of Palmer’s Ponzi scheme drew national attention.

In May 2011, about the time Palmer pleaded guilty to wire fraud and money laundering, the New York Times reported on the case, noting Palmer preyed on family and friends.

He was, the paper wrote, the picture of success in Idaho Falls before his empire collapsed in 2009.

When it did, the FBI, the Internal Revenue Service Criminal Investigation Unit and the U.S. Department of Labor, Employee Benefits Security Administration moved to investigate.

The investigation found Palmer raised approximately $75.8 million from 68 investors between 2002 and 2008, then lost more than $29 million.

The SEC and Commodities Futures Trading Commission sued Palmer and his company, Trigon Group Inc., for running a Ponzi scheme.

The court appointed Klein to take control of the assets and recover what funds he could to return to investors.

Palmer was sentenced to pay restitution and to eight years in prison followed by three years of supervised release and community supervision in September 2011.

Prison records indicate Palmer, now 50, was released in September 2018.

The Idaho Post Register reports he was sent to a reentry center in California.

$7.08 million recovered

Klein’s recovery efforts netted $7.08 million, according to a final accounting dated in June 2015.

Palmer’s victims received $5.2 million. Klein and his legal team were paid $1.34 million. Palmer’s now former wife received $16,000 in support payments.

The Kennewick council race is presently a low-key affair.

Beauchamp has raised $8,000, including a $5,000 loan, to his election campaign, according to filings with the Public Disclosure Commission.

He has spent nearly $3,000 to buy 360 campaign signs.

Pacheco has registered as a mini filer who will not raise or spend more than $5,000, which exempts him from filing detailed financial reports to the regulatory agency.

The PDC has no record of complaints lodged against either candidate.

Wendy Culverwell writes about local government and politics, focusing on how those decisions affect your life. She also covers key business and economic development changes that shape our community. Her restaurant column and health inspection reports are reader favorites. She’s been a news reporter in Washington and Oregon for 25 years.