Business

Missing: A Boise securities broker being investigated for possible fraud

Rodney Allen. This image was sent out as part of a plea for public tips as to his whereabouts.
Rodney Allen. This image was sent out as part of a plea for public tips as to his whereabouts.

The disappearance of Rodney Allen is more than just a standard missing-person case.

Before Allen vanished in April, he scheduled a meeting with an Idaho Department of Finance investigator on allegations his securities-investment company wasn’t certified and that he made questionable payments to investors. Then he hired an attorney, and that meeting never took place.

Allen, 65, is the sole owner and president of KA Investments Inc., which is based in Boise. Court documents claim he owes more than $1.1 million to investors.

On April 25, some of those investors petitioned to enter Allen’s company into immediate involuntary bankruptcy. On April 28, Idaho Chief Bankruptcy Judge Terry Myers froze its bank accounts, and just last week he approved the petition — ordering that Allen and KA Investments, through an appointed trustee, turn over any income tax returns and any related refunds.

On Wednesday, Myers ordered another freeze on a TD Ameritrade account under Allen’s name, found after his disappearance.

Allen’s whereabouts remain unknown. Court testimony by a state investigator raises the question of whether he took money from dozens of clients as part of a Ponzi scheme, when one investor’s money is essentially used to pay other investors back.

“Without new investors, the whole investment becomes a scheme and isn’t viable. It collapses,” Coleen Hodson, of the Department of Finance, said in court in April.

The search for Rod

Michael Falash, a friend and investor, described the initial search for Allen to the bankruptcy judge during an April 28 hearing on whether to appoint a trustee to oversee KA Investment’s assets.

He said Allen’s wife, Roberta Leatham, told him Allen had taken his passport and gun from a safe in their home the morning of April 20 before going to work. She reportedly said cash in the safe was also taken.

Falash testified that he and Leatham exchanged text messages about Allen while she was trying to convince OnStar to track the navigation system installed in Allen’s 2017 GMC Denali pickup. Falash said Allen’s phone was going straight to voicemail.

“He is a friend,” said Falash, who had agreed to help look for Allen. “I, you know, cared for him.”

According to Falash’s testimony, Leatham told him law enforcement first located the pickup, using OnStar, along a remote section of the Owyhee River on April 21. Overnight, the pickup moved to the side of the Snake River. It was found April 22 in southern Ada County, about 6 miles upstream from Swan Falls near the Snake, with the help of spotters in an airplane, Falash said in court.

Falash testified that he went to the location that day and found the truck lodged on some rocks with a broken driveline. There was no sign of Allen, and his cellphone, gun and computer were not in the pickup. The keys were.

Falash said he went back to the truck that evening to see whether Allen would return to it for shelter, but found no sign of him.

Ada County sheriff’s spokesman Patrick Orr said search and rescue crews spent hours performing an extensive search of the area and river. They also looked through debris at the nearby dam to make sure a body wasn’t trapped. The search came up empty, and there is no evidence that Allen is still in the area or that he ended up in the water.

A Boise Police spokesman said Thursday that investigators plan to search the river again in coming weeks. Police have received some tips about Allen, but continue to ask anyone with any further information on his whereabouts to contact Crime Stoppers.

It’s unclear how many people had invested money with KA Investments Inc. Falash is one of five investors who filed the bankruptcy petition, also including Jennifer Fitz, David Machado, Richard Welsh and Greg Bolton.

Since Allen’s disappearance, about 20 investors have reached out to Falash with concerns about their money, Falash said in court. Robert Faucher, the attorney for the investors who sought the bankruptcy, said he had heard from about 15.

A trusted friend

An audio recording from the April 28 court hearing included testimony from Falash and Coleen Hodson, the supervising securities investigator for the Idaho Department of Finance.

Falash said that he’d known Allen for about 25 years, meeting when they were working on a project together and before Allen established KA Investments. At the time of his disappearance, Allen was renting a space in Falash’s Downtown Boise office.

Falash invested nearly $780,000 with Allen’s company, according to court documents. He said he’d started with just an $18,000 investment. Nearly every month, he said, Allen provided him statements on the status of his investments. As recently as January, Falash had placed another $200,000 with KA.

“On paper, it looked pretty good,” Falash said in court. “I trusted it.”

Falash said that Leatham called him around 9:30 p.m. on April 20 because Allen hadn’t come home from work. Falash claimed he was in the office all day and never saw Allen.

“She was just worried, you know,” Falash said. “This is unusual, something’s wrong.”

The paper trail

Hodson testified that she began looking into KA Investments in February, after the Department of Finance received an inquiry about the company’s licensing. She subpoenaed bank records and records from TradeStation, a brokerage firm company where Allen had an account. Hodson said she did not meet with Allen before seeking the records.

“The information that was given to me led me to believe that Mr. Allen was aggressively taking investor funds and investing them and he was not licensed to do so,” Hodson said. “And so at that point, I wanted to get some additional information and have some knowledge of what was going on, prior to confronting Mr. Allen.”

From the records, Hodson said in court, it appeared Allen was transferring money from a KA account — money possibly belonging to investors — to the TradeStation account. When an investor wanted to take money out, Hodson said, Allen would remove the funds from one or the other of the accounts, regardless of whose money he was providing that investor.

By the time of Hodson’s investigation, she said, the KA account had just over $1 million in it. There was no money in the TradeStation account. Trading had recently ceased, according to Hodson, and all of the cash was wired to the KA account.

According to court documents, the later-found Ameritrade investment account had a cash balance of about $175,000.

Faucher, an attorney with Holland & Hart LLP, asked Hodson in court whether Allen’s actions constituted a Ponzi scheme. Hodson said she “would say yes,” but wasn’t yet comfortable labeling it that way as she believed Allen had some unaccounted-for accounts.

Hodson said that to her knowledge, Allen, through his company, was never a registered broker-dealer or a registered investment adviser. She explained that a broker-dealer is an entity licensed to deal in securities transactions. An investment adviser is an entity licensed to give investment advice, normally for a fee.

Allen’s response

Hodson said she wrote Allen on April 11 through a mailed letter and through email about his lack of licensure, and received an “immediate response.”

“He was very concerned,” Hodson said in court. “He had no idea that he needed to be licensed and indicated he wanted to work with the department.”

Allen and Hodson scheduled a meeting for April 14, but he rescheduled it for April 20, saying his wife was ill.

On April 19, an Atlanta securities attorney, Brent Gillett, contacted Hodson saying he had been retained by Allen. Hodson said the attorney told her he was willing to work with the department and would provide the Department of Finance with the requested information. But Allen wouldn’t meet with Hodson, the attorney reportedly said.

On the last day Allen was seen, Hodson said, she received a call from an employee at an Oregon credit union who was concerned because an older client was attempting to transfer money from an IRA and the credit union employee thought “there was something really suspicious going on.”

Hodson testified the credit union employee knew the investor was from Idaho, but didn’t have a name. Hodson said the documents were similar to the kind Allen used with his existing IRA clients.

“At that point I didn’t have evidence that it was Mr. Allen, but I had a pretty high confidence level that it was Mr. Allen,” Hodson said in court. “And so I called Mr. Gillett.”

On April 22, Gillett notified Hodson that Allen had gone missing, Hodson said.

The current status of the Department of Finance investigation is unclear, as is whether other agencies have become involved. The finance department told the Statesman it had limited ability to discuss inquiries and investigations and pointed a reporter to court testimony.

The Idaho U.S. Attorney’s Office has said it can neither confirm nor deny there’s an investigation into Allen. The Boise Police Department said it is investigating only a missing-person case, not any criminal matter.

On May 4, Leatham filed for conservatorship over Allen in Ada County. A court-appointed conservator is a person who is designated to manage an incapacitated person’s finances. Conservatorship and guardianship cases are sealed from the public in Idaho and further details were not available.

On May 8, Leatham was appointed as temporary conservator of Allen’s estate in federal bankruptcy court.

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