TONGA SUES ITS PENNGROVE 'ROYAL JESTER'ISLAND NATION CLAIMS LOCAL MAN WHO SERVED AS ITS FINANCIAL ADVISER COST IT $26.5 MILLION IN INVESTMENT LOSSES

The Kingdom of Tonga is no longer laughing at its court jester, a Penngrove

man whose financial advice allegedly cost the island nation $26.5 million.

Jesse D. Bogdonoff allegedly made millions for himself while fraudulently

steering the Tonga Trust Fund into ruinous investments, according to a lawsuit

filed earlier this week in federal court in San Francisco.

The $26.5 million is a lot of money for the South Pacific Ocean kingdom,

whose annual revenues are about $41.4 million, the lawsuit states.

Bogdonoff, 47, said Friday he was the victim of palace intrigue. Feuding

members of the royal family appointed their own trustees to the Trust Fund,

and the new trustees didn't take his advice, he said.

''They didn't follow my advice when one of their investments got in

trouble, so they're suing me,'' Bogdonoff said. ''I'm going to turn this into

a huge victory.''

Tonga is a nation of 170 islands about 1,250 miles northeast of New

Zealand. The nation of 100,000 people is ruled by King Taufa'ahau Tupou IV,

who appoints the prime minister and most of the members of Parliament.

The current charges and countercharges are a far cry from 1999, when a

grateful king bestowed the title of ''royal jester'' on Bogdonoff because of

his ''mirthful wisdom.''

Bogdonoff, born on April Fool's Day, said he asked the king for the title.

''I'm a natural-born fool,'' he said.

It was also in 1999 that Bogdonoff, who had serviced the Trust Fund for

five years as an investment adviser for the Bank of America, left the bank to

manage the Trust Fund independently, he said.

Bogdonoff had taken the Trust Fund from $21 million in 1994 to $33 million

in 1998, riding the wild bull market. But the value of the fund had declined

to $26.5 million in 1999, the lawsuit and Bogdonoff said.

Bogdonoff recommended the Trust Fund invest $20 million with Millennium

Asset Management, a Nevada corporation that buys and sells life insurance

policies called viaticals; $4 million in a startup company called Trinity

Flywheel Power, and $500,000 in a dot.com, FilmAxis.com.

But Millennium Asset Management foundered when the industry changed its

life-expectancy figures, lowering the value of the viaticals. Trinity Flywheel

is struggling to survive and FilmAxis.com is in Chapter 11 bankruptcy,

according to the lawsuit and Bogdonoff.

The Trust Fund was worth $9 million in November, when Tonga officials took

it over, and is now worth about $2.2 million, Bogdonoff said.

The lawsuit says Bogdonoff conspired with Millennium Asset and others to

exaggerate the value of the investments and understate their risk. He also

secretly charged the Trust Fund some $1.6 million in fees, the lawsuit

alleges.

Bogdonoff said he sincerely believed the investments were sound. He said he

actually made $1.8 million in fees but was not required to disclose them,

other than in the general wording of the contract he and the trustees signed.

''I didn't believe they were high-risk investments at the time,'' Bogdonoff

said. ''I had no intention to defraud anyone.''

Bogdonoff said he flew to Tonga in June 2001 to tell the trustees the

Millennium Asset investment was in trouble and suggest ways to reinvest the

money.

But Tonga Princess Pilolevu Tuita forced two of the three trustees to

resign and installed her political allies in their place, Bogdonoff said.

Newspapers in Tonga and New Zealand have also reported the forced

retirements and the ensuing controversy.

But in the turmoil, the decision on reinvestment was postponed, Bogdonoff

said. Millennium Investment became unable to pay the premiums on the policies,

and the policies became worthless, he said.

The Trust Fund stopped paying his commission in November 2001, and he has

no connection with the Trust Fund now, Bogdonoff said.

Bogdonoff said he was traumatized by the experience and by Tongan

officials' threats, while he was there, ''to put me underground and cook me

like a pig.''

He said has gotten out of the financial consulting business and started his

own music company, ''The Jester's Heart,'' in which he composes, performs and

publishes New Age instrumental music.

You can reach Staff Writer Carol Benfell at 521-5259 or

cbenfell@pressdemocrat.com.