Ken Johnson's Galt's Gulch Chile Affinity Fraud: When Is a Partner Not a Partner?

Future convicted felon
Kenneth Dale Johnson

Here's a riddle for you: when is a partner not a partner?

When he’s Ken Johnson’s partner, of course.

The story goes that John Cobin and Germán Eyzaguirre identified a property in Chile, El Peñon, they thought would be perfect for a real estate development. Through the libertarian grape vine, they discovered that Jeff Berwick and Ken Johnson were interested in starting a community and were looking for a suitable location. They connected to become partners in GGC, or so they thought…

Cobin and Eyzaguirre made a handshake deal with Berwick and Johnson where they would be junior partners and be paid for finding the property, incorporating an entity for holding title, arranging the purchase and being the developers. They were given powers of attorney by Johnson and Berwick to close on El Peñon.

We’re sure that Johnson didn’t want to pay the agreed upon fee of $250,000 to his new partners. To that end, he cooked up a scheme to discredit Cobin that would convince Berwick to join him in kicking Cobin and Eyzaguirre out of the project, saving them big bucks.

Johnson accused Cobin of trying to sell El Peñon out from under them to another newsletter writer and real estate investor known as Simon Black. This accusation had an air of credibility since Cobin and Black knew each other and had done business together before. It was a lie, of course, but it did the trick. The dissension that ensued led to the original partnership of the four being dissolved, with no significant cost to Johnson.

That’s two partners down, and one to go.

Johnson proceeded to get a power of attorney from Berwick to incorporate the new GGC entity that would buy El Peñon. Berwick assumed that he and Johnson were 50-50 partners, having agreed to that in another handshake deal. However, Johnson incorporated Inmobiliaria Galt’s Gulch SA excluding Berwick. Berwick’s name does not appear as a shareholder, as a director or as a manager in the new company document. See for yourself: http://tinyurl.com/zkfg35e Johnson’s name, however, does appear in the Estatutos as the Primer Gerente, or General Manager. QED.

And that is how Johnson defrauded his three partners and took total control of Galt’s Gulch Chile without providing any capital. Not. One. Thin. Dime.

By the way, we recently called our friend, Simon Black. When we asked if it were true that Cobin approached him to buy El Peñon in October or November of 2012, his swift answer was, “Absolutely not.”

One more point: we are sure this is exactly what happened because Johnson threatened to use the same maneuver when he was entering into his second disaster of a real estate purchase, El Lepe/Las Casas.

The First Round Founders–the four equity investors–had just discovered, more than six months after paying Johnson, that the first property was essentially worthless to them. Li’l Kenny Fraudster warned one of them to side with him against Berwick in the partners’ feud or he’d incorporate a separate entity to hold title to the second property, El Lepe/Las Casas. They would have no equity interest in the new entity and therefore no claim on any of GGC’s profits. They would be left only with equity in the problematic El Peñon that couldn’t be developed.

Ironically, the equity investors may have been better off if Johnson had gone ahead with that maneuver. They would at least have title to El Peñon where they could possibly build houses or that they could sell to recoup some of their loses.

This is part one of how Kenneth Dale Johnson started off Galt’s Gulch Chile as a fraud. Part two will be posted in the next few days. If you'd like more information, please see our webpage, or that of Terence Gillespie at http://McGillespie.com. Thank you for reading.

Cathy Cuthbert * GGC Recovery Team * http://ggcrecovery.com