Lawsuits accuse Lima Energy of falsifying records
February 10, 2012 9:26 PM
limaohio.com
The Lima News
CINCINNATI — A litany of allegations and legal actions against Global Energy Inc., its affiliate USA Synthetic Fuel Corp., and company founder Harry Graves, were reported Friday by the Business Courier of Cincinnati.
The companies are the would-be developers of a $500 million synthetic natural gas plant in Lima that has been in the works since 1999. It is the cornerstone to redevelopment efforts pushed by Lima Mayor David Berger.
Among the allegations:
• Graves’ “repeated attempts to have senior management participate in the filing of knowingly false and misleading documents” with the Security and Exchange Commission.
• An alleged attempt by Graves’ wife, Lynne, to falsify corporate records and manipulate the company’s stock records.
• Graves’ failure to pay compensation owed to employees.
Reached Friday by The Lima News, Graves had limited comment, saying he had seen neither the Business Courier story, nor the most recent legal complaint, filed Jan. 23 in Hamilton County Common Pleas Court.
“We have not had such an action, so it would be impossible for me to comment on something we haven’t seen,” Graves said.
According to the Courier, former employees have successfully sued Graves, but locating assets to satisfy their judgments have been difficult. In one case, five computers were used to partially pay Timothy Ferguson, who was Global Energy’s commercial director from 2006 to 2009. He sued the company in 2010 for unpaid compensation. He is attempting to get the money from USA Synthetic. That has yet to happen, according to Hamilton County court records.
USA Synthetic’s former general counsel, Reynold Nebel, is suing for breach of his employment agreement. The Courier said Nebel’s lawsuit says he was fired by Graves in July 2010 along with USA Synthetic’s then-CFO, John Walker. The firings occurred after they and then-CEO Glenn Wattley informed the company’s independent directors about improper actions by Graves. According to their complaint, which was obtained by the Business Courier: “This action was taken only after it became obvious to senior management that the (Graveses) were unwilling, or incapable, of conducting the affairs of the company in accordance with the law and today’s corporate governance requirements and expectations.”
The Courier said the complaint listed activities such as:
• An alleged attempt by Lynne Graves to falsify and manipulate “the company’s stock records and transfer agent to accomplish inappropriate issuances of company stock to the Graveses and/or their commonly controlled company, Global Energy Inc.”
• “Harry Graves’ failure to return funds advanced to USA Synthetic Fuel by Nebel and the misappropriation of those funds by Lynne Graves”
• “Harry Graves’ ‘repeated attempts to have senior management participate in the filing of knowingly false and misleading documents’ with the SEC
• “Harry Graves’ utter disregard for properly conducting the affairs of the corporation, ‘most notably in the area of proper documentation of material transactions involving other entities controlled by the Graves.’”
The lawsuits
One of the most recent lawsuit against Global was filed by Ohio National Financial Services on Jan. 23 in Hamilton County Common Pleas Court. It alleged Global Energy breached a 2010 settlement agreement under which Global Energy agreed to buy back more than 2 million shares of USA Synthetic it transferred to Ohio National as part of that same settlement. It wants the court to order Global Energy to pay it $4 million for the shares and to turn over collateral in the form of rights to 50 million tons of coal owned by Global Energy near Terre Haute, Ind.
It is the second lawsuit filed by Ohio National Financial Services in two years. The earlier lawsuit involved more than $6 million in alleged debts and was settled a year and a half ago, the Courier reported.
According to the Courier, Ohio National states that Global Energy breached a 2010 settlement agreement under which Global Energy agreed to buy back more than 2 million shares of USA Synthetic it transferred to Ohio National as part of that same settlement. It wants the court to order Global Energy to pay it $4 million for the shares and to turn over collateral in the form of rights to 50 million tons of coal owned by Global Energy near Terre Haute, Ind.
Another suit was filed Feb. 1 by John Holden, of Mason, according to the Courier. He seeks $423,000 on a promissory note that Graves signed on Dec. 1, 2010, and which was due on Dec. 1, 2011. As part of that note, signed by Graves for Global Energy, it also pledged the same 50 million tons of coal as security.
The Courier reported that other complaints are seeking payments the companies allegedly owes or owed in regards to a downtown Cincinnati office lease and an equipment lease. It said Graves in 2007 leased an entire floor of the Scripps Center at 312 Walnut St. downtown, before the financial crisis hit. USA Synthetic announced in January that it was relocating its headquarters to Washington, D.C.
Graves interview
The Lima News talked with Graves on Jan. 31 about the financial stability of the company and a registration statement it filed this year with the Securities and Exchange Commission. In that statement, USA Synthetic reported total assets of $721 million as of Sept. 30, 2011, and current liabilities of $2.2 million.
Graves discounted much of the problems, and told The Lima News he believes this year will be the year the synthetic natural gas plant’s financing comes together. He also said he hopes to “put a shovel in the ground soon” to construction of a research and development building at the site.
Graves said he is motivated by a belief that the company’s technology will help many people by providing cheaper, clean and native energy.
“We’re an old school manufacturing, high-tech company,” Graves said. “We’re looking at 10 years of dedication, trying to be extremely helpful to a large population, making an impact on helping America make the best use of its energy.”
Berger was surprised by Graves’ announcement of a research center.
“That’s not a timetable that I’ve been advised of,” Berger said.
He defended the company’s dream at the time.
The technology is working around the world, Berger said. China has 35 such plants either running or in production and the United States has none. And, USA Synthetic is working on funding in a very difficult economy.
“I know they are working on multiple funding streams. They continue to have hopes about one or more of those coming to fruition,” Berger said. “They continue to aggressively pursue them, and I’m glad for that. If the economy is really on the mend, we’ll see some advantage gained and momentum from that.”
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