Finance company accused of fraud; A Florida investment fund alleges it was duped by Lazy Deuce of Burnsville and related firms and people.(BUSINESS)

Byline: DAN BROWNING; STAFF WRITER
A small private investment fund in Florida accused several Twin Cities firms and individuals of running an elaborate investment fraud and racketeering scheme with its money.
In a federal lawsuit filed this week in St. Paul, Integrity Dominion Fund of Loxahatchee, Fla., claims it was tricked into making $3.6 million in short-term, supposedly low-risk loans to Lazy Deuce Capital Co. of Burnsville and has not been repaid $1.5 million.
The suit names as defendants Brian S. Baldwin of Eden Prairie, Frank W. Delahanty III of Apple Valley and Brent L. Johnson of Prior Lake, describing the three men as "the principals and masterminds."
Baldwin and Delahanty did not respond to messages seeking comment. Johnson could not be reached.
Integrity Dominion is operated by three principals, including Gueorgui "George" Bakalov of Apple Valley. The lawsuit says Bakalov was introduced to Lazy Deuce in October 2010 by Minneapolis resident Jeff Hagen, its director of business development. Hagen, who runs a Christian-based business ministry called Hill Cities Inc., met Bakalov at some prayer meetings.
Hagen told Bakalov that he had been able to pay his living expenses solely from income he had received from the investments he had made in Lazy Deuce, the suit says.
"I had a lot of money in there," Hagen said in an interview. He said he was not paid for his fund-raising and is a creditor of Lazy Deuce, just like Integrity Dominion.
Baldwin pitched Lazy Deuce as a company that made high-interest, short-term loans to companies with "exotic" collateral that traditional financial institutions wouldn't touch, the suit says. "Baldwin claimed to be an expert in this area, and Lazy Deuce's methods ... were said to be highly sophisticated and closely guarded secrets," according to the lawsuit.
Lazy Deuce also made money by financing lawsuits, a specialty of Johnson's, the suit says. Bakalov said Johnson claimed to own an $8 million home free and clear and showed off a valuable art collection and a safe filled with silver and gold.
Integrity Dominion lent money to Lazy Deuce for use in short-term loans to others from November 2010 through the spring of 2011. Among them were loans to former Minneapolis police and pension fund adviser David Blaine Welliver and his advisory firm, DBlaine Capital.
In March, a principal in Integrity Dominion asked Lazy Deuce executives if the loans to Welliver's company posed any risk. Lazy Deuce responded that it had plenty of capital, and more than enough collateral to cover the loans, the suit says.
As it turned out, the suit says, "Lazy Deuce's investment capital had come from Integrity Dominion's short-term loans. Lazy Deuce had few other investors of significance."
Just before Lazy Deuce defaulted on its loans, the suit says, Johnson informed the fund that Baldwin was leaving the firm "due to personal problems involving alcoholism and other issues."
In fact, the suit says, Baldwin quickly started another investment company called Stone Path Financial, whose website closely resembled Lazy Deuce's and claimed to be "powered by Lazy Deuce Development Company," a co-defendant in the case.
The lawsuit accuses the defendants of breach of contract, securities fraud, misrepresentation, deceptive trade practices and racketeering.
Lazy Deuce and its co-defendants figure prominently in a securities fraud lawsuit that the U.S. Securities and Exchange Commission (SEC) filed in October against Welliver and DBlaine Capital. The suit says Welliver misrepresented the value of a mutual fund in 2010 and spent about $500,000 of his investors' money on personal items that included a $40,000 new car, vacations, liquor, meals, home improvements, jewelry, his son's college tuition and back taxes.
Welliver, 51, of Buffalo, responded in December with a lawsuit blaming his compliance officer, David D. Jones of the Woodlands, Texas. In an interview, Jones denied any improprieties or errors.