Article from the Australian press. (thanks to cso1cso1 for posting the link at RB)
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A fuel and his money
They thought they were saving the world. Instead,
reports Ben Hills, investors have lost $400 million in
the wreck of a company which claimed it could abolish
vehicle exhaust pollution.
The man who banged on the door was in no mood for negotiation.
He said that unless he got his money back he was going to kill
someone - he was dying of cancer, so what did he have to lose?
Joe Daniels won't name him - "I don't want him coming looking
for me" - but says the angry investor was once a leader of a
notorious waterfront union and he meant what he said.
It happened last year, after Daniels had been persuaded to take
over the management of a little-known but ambitiously named
public company called Save The World Air Inc (STWA), and take
up residence in the home of its founder, a waterside mansion
with pool and tennis court at Carrara, on Queensland's Gold
Coast.
That did not turn out to be a good career move.
It soon became apparent that the company, and its founder, were
in diabolical trouble. "I answered the phone and I tried to take
care of people's bitches," says Daniels. "And 85 per cent had
legit bitches: 'Where are my shares I paid for?', 'Why can't I sell
my shares?' All day long, every day. They had [bought] something
that was worth absolutely nothing."
An easygoing American with a velvet voice, Daniels came to
Australia 20 years ago touring as an Elvis Presley impersonator,
fell in love with the place and settled down, making a living on
the club and cabaret circuit. Among the many friends he made
was one Jeffrey Alan Muller, promoter extraordinaire - the man
that former wharfie was looking for.
Now aged 49, the tanned, fleshy, fast-talking Muller is a
one-time Sydney real estate salesman who lays claim on his
company's Web site to an extraordinary CV - former champion
speedway driver, "one of the most successful property
developers in Australia for his age (18 years)", and a friend of
celebrities such as Ted Turner, Olivia Newton-John, John Denver
and Steven Seagal. He also boasts that he once owned the Gold
Coast Chargers, a defunct rugby league team. What Muller does
not mention is that the franchise was taken away after only a
couple of months when he failed to come up with the money,
brought in a faith-healer and, according to a judge, "... by inept
interference in the club's affairs, created such instability that
its chief executive officer and some other important personnel
associated with it resigned".
But Daniels regarded him as a bosom buddy - Muller was a
groomsman at his wedding, was present at the birth of his son,
jammed with him nights on the guitar. "He's the only living
cartoon character I know ... Popeye or Beetle Bailey or Donald
Duck," says Daniels. "He's just amazing - when I've been around
him 15 minutes I feel as though I've just drunk 80 cups of coffee
or taken crack [cocaine] or something."
So when, four years ago, Muller told his friend he was starting
up a company to help save the planet from pollution, no less,
Daniels was eager to plunge in. He invested his own money, he
persuaded relatives in the United States to buy $300,000 worth
of shares; finally he allowed Muller to talk him into running the
office while Muller disappeared on one of his frequent overseas
trips.
The trouble started shortly after when someone posted the
Carrara address on the Internet, where investors had been baying
for Muller's blood on day-trader chat sites such as
ragingbull.com, following the collapse of STWA's share price.
People began phoning, faxing, bombarding the company with
emails - and, eventually, banging on the door.
The story of the wharfie with cancer is one of the few with a
happy ending. According to Daniels, the man's friends were
begging him to let them "do the world a favour and off [murder]"
Muller and his wife Lynette - they even followed Muller to
Florida and shadowed him as he travelled.
Eventually, Daniels persuaded Muller to settle the debt, which
was about $78,000, by handing the man tradable scrip in STWA
which he managed to sell for a profit. The grateful ex-wharfie
gave Daniels a gift of $10,000 "because you're the only honest
motherf---er".
However, around the world, hundreds of other investors were not
so lucky. They are stuck with bundles of shares in a company
once worth more than $400 million, which promised to save the
planet, but which now admits it has a pile of debt and no money,
no employees, no income worth speaking of, no rented offices
and no prospect of paying a dividend - and whose only asset is an
invention whose ownership is hotly disputed.
NOW aged 72 and in poor health, Pro Hart is still an Australian
icon. From his base in Broken Hill he has built a national
reputation as a bush artist, and has just announced plans to
lease out some of his remarkable collection of paintings
attributed to international masters from Rembrandt to Renoir
and Picasso.
What is less well known is that Hart is also an enthusiastic
inventor - his nickname is short for "professor" - of all sorts of
gadgets. The most interesting, from Jeffrey Muller's point of
view, is the device on which his company is built, a piece of
shiny metal the size of a cigarette packet with holes drilled
through it, called a Zero Emission Fuel Saver.
Fitted between the carburettor and the manifold of an
older-model car, STWA makes the astonishing claim that the
$195 gadget can reduce poisonous exhaust gases to almost zero,
while increasing fuel consumption 42 per cent. Hart, says his
business manager, Rory Ryan, spent 30 years refining the device
in his workshop before he shared his secret with Muller.
It was not the first time Muller had attempted to cash in on
"green" technology. Some years earlier, he claimed to have
developed an engine "which runs on nothing but compressed air!".
Then he got involved in promoting something he called a "super
kiri tree" which he claimed was the world's fastest-growing
hardwood, growing 35ft a year and able to be harvested in two
years - this turned out to be a small plantation of paulownia
trees, a popular tax-minimisation scheme of the mid-1990s.
Hart and Muller met by chance on the Gold Coast, and on June 26,
1997, a "marketing and manufacturing agreement" was signed
under which the artist gave the entrepreneur exclusive
worldwide distribution rights to the anti-pollution device, in
exchange for 20 per cent of the anticipated profits. At least,
that's Muller's story.
Pro Hart, according to his lawyer, Tony Freestone, denies ever
having signed this agreement, pointing out that he only uses the
signature "Pro Hart" on his paintings - on legal documents he
signs with his given name, "K.C. Hart". Freestone says Hart has
never received a cent from Muller, is outraged that his device is
being misrepresented, and is contemplating legal action
Muller, however, had decided that Pro Hart's gadget - he
acknowledges the real inventor on his Web site, though he has
lodged a patent application himself - would be the key to
fabulous wealth. He bought a listed US "shelf company", changed
its name to Save The World Air Inc, made himself president and
sold the company his rights to the device (for which he had paid
nothing, remember) for $1 million, plus 5 million shares.
Even amid the high-tech hyperventilation of 1999-2000 Muller's
promotion of the company was extraordinary. He pumped out a
score of media releases, he demonstrated the device on Fox TV,
he was written up in The New York Times, he recruited a stable
of sporting and showbiz celebrities he claimed endorsed the
device.
The former world champion racing-car driver Jack Brabham
helped promote it, PGA champion Wayne Grady was enlisted,
Hollywood star Steven Seagal video-taped a testimonial, former
Australian sports minister John Brown wrote: "I have never been
more impressed over my long life in business and politics with
any other venture." All now repudiate these endorsements.
In the new-found freedom of cyberspace, hundreds of buyers in
Australia and overseas rushed to snap up the stock - and Muller
was eager to accommodate them. The latest filings with the US
corporate watchdog, the Securities and Exchange Commission
(SEC), show that Muller has sold about 1 million of his own
shares - the shares he got for nothing - at prices anywhere from
10¢ to $10 each. The company return shows that 835
shareholders scattered from Scotland to Australia to the US and
Canada own a total of 15 million shares. Those located by the
Herald include a number of Sydney and Queensland businessmen,
a restaurateur, a policeman, an agent for the investment adviser
Rothschild, and an airline pilot now working in Papua New
Guinea to try to save the home he mortgaged to buy shares.
Whipped along by Internet chat-room gush - some of it planted
by Muller's friends - the shares rocketed up from a few cents
when it listed in 1999 to a peak of $28 last July. This valued the
company at $420 million, and Muller - who owns about a quarter
of the stock - joined the ranks of Australia's wealthiest men,
worth more than $100 million on paper. "I've been told we've got
the potential to be as big as Microsoft," he crowed to a
Bloomberg business wire reporter. He had just sold his first
distribution franchise for "a guaranteed $4 million" to a
Jamaican auto-parts dealer, he said, and planned to sell 100
more for $20 million apiece - a cool $2 billion.
However, those deals came to nothing and most of those who
bought shares from Muller soon discovered they were not to
share in the wealth.
UNLIKE Bill Gates, Muller has never manufactured anything. The
only Zero Emission Fuel Savers in existence are about a dozen
closely guarded prototypes used for demonstrations, which were
knocked up by Adrian Menzell of Ashmore Wreckers, a Gold Coast
car-parts yard. Joe Daniels says Muller had no intention of
actually selling the devices, because that would give away the
secret - they were made of cheap, simple magnets. "Once
somebody sees one and holds one in their hand they can go out
and make one in their garage," he says, "He's got no product -
he's out there peddling air.''
The other problem Muller had - the one which was to bring his
wild ride to a grinding halt - is that the claims made for the
device had never been independently scientifically verified. He
had conducted demonstrations with pollution testing machines,
but never submitted it for examination by a government
standards laboratory, or a major car manufacturer or oil
company.
So how to explain an endorsement from a university which
featured prominently in the company's promotional material? On
the letterhead of Queensland's Griffith University, Dr Allan
Edwards certifies that he has seen the machine work under
"credible circumstances" and believes it to be "highly effective".
Contacted by the Herald, Edwards said that he had no expertise
in vehicle emissions - he conducts a course in sports
management and marketing. He said he had been invited to a
demonstration of the device because he was a friend of Muller's
and he had not received any shares or payment for the
endorsement. He had not realised how his letter would be used
and now feared that he would be sacked from the university. "I
feel really ashamed and angry," he said. " I was a frightful goose.
I'd like to wring his [Muller's] effing neck. I feel used and abused
by him."
Others are equally angry. Geoff Campbell, a former bank
manager, has known Muller for years and bought about 20,000
shares in the Save The World group - when they hit $28 last
year, he thought he was sitting on a small fortune and sent the
scrip to his broker to sell. It was then he learnt Muller had sold
him "restricted" stock which was unregistered and could not be
traded. "The broker told me they are worthless - 'Wallpaper your
toilet with them,' he said.''
Some of the more canny commentators had also focused on the
fact that this hot "tech" company appeared to have no assets and
no prospects. Last July, Stock Patrol published a two-part
investigation headlined Stock or Schlock? on the Internet, which
concluded: "Investors will have to decide for themselves - is
there an upside to these down under companies? Or have they
simply tossed their investment on the barbie ?''
The next day, as STWA's share price gyrated wildly, the
watchdogs at the SEC moved in. Citing a misleading media
release implying the Ford Motor Company was interested in the
device, the SEC suspended trading in the stock "because of
questions raised about the accuracy and adequacy of publicly
disseminated information concerning the results of tests of
[the] Zero Emission Fuel Saver".
And there the stock has languished ever since, in the limbo of
the so-called "Pink Sheets", a fourth-tier listing for securities
that do not qualify for any of the official, regulated US
exchanges or over-the-counter boards. The last sale reported
was about $2, which is 7 per cent of its price nine months ago.
As for Muller, he recently returned from yet another "road show"
in the US to a newly purchased home on the Gold Coast - the
waterside mansion having been seized by the mortgagee - still
promoting the company to anyone who will listen, though
declining to talk to the Herald.
"What can you do?" says Joe Daniels. "That man could fall into a
septic and come up smelling of roses."
smh.com.au |
