August 8, 2006
Xethanol Corp.
by Christopher Carey
Xethanol Corp. bills itself as a biotechnology-driven ethanol company that can turn wood chips, corn stalks and
paper sludge into cheap alternative fuel.
But a Sharesleuth.com investigation found no evidence that Xethanol (XNL: AMEX) has produced significant
quantities of ethanol from those raw materials. Combine that with Xethanol’s announcement that it’s poised to
become one of the first companies to commercialize that technology – a sort of Holy Grail in the renewableenergy
world – and you’ve got the type of inconsistency that Sharesleuth seeks to uncover with its stories.
When Sharesleuth identifies what might be considered corporate misdirection, we take a deeper look at the
company, its history, its business and the people behind it.
At Xethanol, we discovered that the shareholders whose names appeared in the company’s SEC filings over the
past year and a half included no fewer than eight current or former stock brokers who have been the subjects of
disciplinary actions by the Securities and Exchange Commission, the National Association of Securities Dealers
or other regulatory bodies.
One of the five biggest shareholders in Xethanol when it went public last year was William Scott Smith, who was
charged by the SEC in 1995 with defrauding investors in a Denver-based shell company called Melbourne Capital
Corp. The SEC said that Smith installed his nephew and two friends as officers and directors of Melbourne
Capital, and that the group -- at Smith’s direction -- misused or misappropriated 70 percent of the $246,000 that
the company raised from investors. The onetime stockbroker settled the charges in 1996, without admitting or
denying guilt. The SEC assessed $256,000 in financial penalties and barred Smith from serving as an officer or
director of any public company.
Xethanol’s SEC filings refer to him as W. Scott Smith and do not mention his past. We confirmed that he was the
same person by comparing address records, birthdates, Social Security numbers and other identifying
information.
Sharesleuth noted in its investigation that Christopher d’Arnaud-Taylor, Xethanol’s chairman and chief executive
officer, claims to have gained “global senior corporate executive experience with multinationals including Unilever,
Reed Elsevier, Northop Grumman and TKM Trading.’’ Two of those companies – Reed Elsevier and Northrop
Grumman -- said they could find no information confirming his employment, in any capacity.
Sharesleuth also learned that one of Xethanol’s two conventional ethanol plants, a facility it once called its
Biomass Technology Center, has been idle for more than a year and no longer has water or sewer service – two
prerequisites for testing or production.
Other things that caught our attention include:
· The company’s minimal spending on research and development.
· An absence of scientists on its staff.
· The relatively low price it paid for the outside technology upon which its waste-to-ethanol dreams are
based.
· Key alliances with two companies founded by the same person -- a former stock broker who now
functions as a financial consultant and promotor.
for the rest of the story:
sharesleuth.com |
