The following are some of the statements in the SEC suit against GOE, Bill Carraway, Bo O'Brien, and Ron Reece with Mary Ann Carraway as a relief defendant, along with Bill's replies in which he speaks for himself and his wife and not the others.
The suit by the SEC and the replies by GOE and the Carraways all have the Civil Action File No. 298191323.
It starts out with identifying the GOE players and states that Mrs. Carraway was unjustly enriched by the defendants' scheme. Bill's answer begins by defending his wife in several paragraphs, stating that she was not unjustly enriched and that she currently holds 1,050,000 shares of GOE stock. The SEC claims she profited by at least $806,955 from the sale of her stock, but she says she received $633,925.65 in gross, not net, proceeds from sales of 223,000 shares between Nov 1996, and March 1997. She denies specific knowledge of activities of others and must deny all such allegations in certain paragraphs in the SEC suit because they do not pertain to her.
Bill denies all allegations of scheming to defraud, and I am not willing to type in all such allegations, only to say they are denied. References to Bo O'Brien and Ron Reece are denied because he has no specific knowledge of allegations respecting them.
The SEC suit gives the amounts of stock each Carraway holds, including minor son Brian. It states Bill was and is solely in charge of GOE's activities which he denies.
Paragraph 25 states Raymond C. O'Brien helped find the initial financing for GOE in 1991 and has continued to assist BC obtain financing throughout the company's development. Through corporations he owns and controls, O'Brien served as GOE's investor relations firm, as a financial analyst recommending the company and as the Chicago-based waste oil processor which purportedly placed the first firm order for GOE's equipment.
Paragraph 26 says O'Brien's corporations include: (A.) Microcap Consulting & Communications, Inc. (Microcap). O'Brien formed Microcap to provide financial public relations services for small corporations. Microcap's first client was GOE. He hired employees for Microcap to serve as spokesmen for Microcap, and did not publicize his ownership of Microcap; (B) Techumseh Asset Management, (Techumseh). O'Brien, doing business as Techumseh, published financial analyst report recommending the purchase of GOE shares. O'Brien is Techumseh's sole employee and its business activates arose solely from O'Brien's relationship with GOE; and (C) RecOil, Inc, (RecOil). RecOil is an Illinois corporation that was organized and controlled by O'Brien, its sole employee. Although RecOil was purportedly a waste oil processor and in the business of distributing GOE equipment, it has never had any operations.
Bill admits Microcap has provided financial public relations and investor relations service to GOE; that Techumseh prepared financial reports on GOE; and that RecOil placed a firm order to purchase equipment from GOE, but he is without specific knowledge of the allegations respecting Mr. O'Brien and must deny them.
Paragraph 27 says Ron Reece publicized GOE on the Internet which Bill admits, but must deny specific knowledge of details.
Paragraph 31 says by June 1993, GOE had a plant purportedly operating at a design capacity of approximately 120 gallons an hour and Bill objected to the word "purportedly".
Paragraph 32 states that GOE claims the processing yields given on the web site but that no systemic measurements were ever made of the process yields. Bill vehemently denies the false allegations asserted by the SEC "because system efficiency testing was performed in 1993 by a highly respected engineering consulting firm that performs comparable work for major U. S. corporations and the U. S. government." I think this paragraph is especially significant because before this, allegations were exaggerations based on bias. Here we have clear statements from both sides, only one of which could be true.
Paragraph 36 says the South Carolina Securities Commission in 1995 issued a cease-and-desist order to prevent GOE from selling shares in SC which it had not registered with the SC Commission. Bill admitted the referenced order was entered by consent.
Paragraph 38 says in 1994 and 1995, Bill and Bo continued their efforts to pay the company's debts and finance further development by issuing additional GOE stock. Bill says he continued to act in GOE's and stockholders' best interest by personally paying numerous corporate debts but denies the allegations as phrased by the SEC.
Paragraph 41 says GOE's equipment never was able to operate continuously for more than several days to produce the yield BC publicly projected. Bill denies this of course.
A number of paragraphs are about sales of stock by Bill and Bo and how they used their personal funds and stock sales to support GOE's operations and development. Bill admits this in general, but denies statements phrased improperly or about Bo's activities about which he has no specific knowledge.
Paragraph 51 says Bill and Bo executed a contract between GOE and Microcap. Bill in his reply states the contract, under the heading "1. Consultant's Services" says,
Consultant, which shall at all times be acting as an independent contractor, will provide the Company consulting services in connection with the following:
a. Consult with the Company about its present and future capital structure.
b. Provide additional guidelines regarding shareholder relations programs.
c. Assist in the development and coordination of financial public relations.
d. Provide introductions and information about the Company to brokers, investment bankers, financial analysts, and money managers.
e. Provide other services that are deemed necessary from time to time as such services relate to the business of the Company.
For these services, GOE agreed to pay Microcap 20,000 shares of GOE stock valued at $3 a share for one year of Microcap's services, valued at $5,000 a month. In March 1997, the contract was renewed for a second year for which Microcap received 12,000 more share, valued at $6.50 a share. The SEC and Bill agree on these facts.
After this, Microcap began publishing news releases the SEC says were optimistic and misleading but Bill says were not materially misleading or were intended to be misleading.
On March 22, 1996, as public trading of GOE stock began, Techumseh issued an analysis entitled, "Flash-Aggressive Buy Recommendation" in which Bo described GOE as an extraordinary opportunity, forecast significant growth for GOE revenue, income and earnings per share for 1996 and 1997, and predicted that the price of GOE stock would rise to 10 to 12 within 12 months. When he wrote the recommendation, both Bo and Bill knew there was no reasonable basis for Bo's recommendation. Bill denies the allegations as they pertain to him and since he is without specific knowledge of allegations respecting Bo, must deny them.
Paragraph 63 says Bo's recommendation made no mention of the stock Bo received for Microcap to promote the company. Bill replies that the Techumseh report speaks for itself and further denies that the alleged omission was material or otherwise required as a matter of law. Note that Bill's reply document is signed by his SEC law firm Hornsby, Sacher, Zelman, Stanton, Paul & Beiley, P. A. and by his local counsel, Michael S. Seekings, Esq. The doc is signed by Barton S. Sacher, Florida Bar No. 0691313.
The SEC doc says the recommendation was mailed out to investors, brokerages and investment bankers. Bill says it was in a standard package of information which included the report and which was approved by GOE's then-corprate counsel (G&S).
The SEC doc says a series of press releases began to be issued which created a misleading impression about the resumption of GOE's operations and likelihood of success. Bill denies the allegations as they pertain to him and that Microcap issued press releases from time to time pursuant to its contract, denies that the releases were intended to be misleading, that each press release was forwarded to G&S to be reviewed. Microcap drafted the releases.
The SEC doc says Bill issued numerous false press releases making false claims about the synthetic fuel tax credit. Bill says he did not issue press releases, Microcap did. Microcap held itself out as an experienced and capable financial public relations firm, well-versed in the business of providing proper, lawful services to publicly held companies; Microcap and/or Bo consulted and communicated directly with GOE's corporate counsel (G&S) from time to time; and Bill vehemently denies that he ever intended any false press releases to be issued by Microcap respecting GOE. Further, Bill says that after the issuance of the press releases about the credits, the stock price and volume declined. Bill admits that he was led to believe by numerous sources at the time that GOE's process would qualify for the synthetic fuel tax credit and continues to believe so. Further, Bill asserts that GOE was contacted by a representative of one of the largest investment banking/stock brokerage firms in the U. S.; advised of the synthetic fuel tax credit; provided written documentation on the subject, which included an IRS Ruling on another company's synthetic fuel which qualified for the tax credit; and encouraged GOE to pursue the opportunity.
Paragraph 78 says on November 25, 1996, Bill published a press release that announced that GOE had retained an experienced energy law firm to obtain a private letter ruling from the IRS that these credits would be available for GOE. Bill admits that Microcap issued the release and that prior to the announcement, he had signed and returned an engagement letter with the referenced law firm, and on the advice of G&S, advised the referenced firm that GOE would forward the required retainer after gaining required environmental ruling at the state and federal levels. These approvals have now been granted. The SEC says that in a phone call, Bill was told by the law firm that no such precedent would support the grant of the tax credit (which Bill denies) and that the law firm offered to research the matter more fully upon receipt of a retainer to begin the project. Bill also denies that. The SEC says Bill never returned the engagement letter.
The SEC suit then has a series of paragraphs about the order of 3 plant from RecOil (Bo). It says Bo and Bill created the misleading impression that an independent and operational waste oil processor had given a deposit and would begin commercial operation of the company's equipment. Bill states that he believed the press release issued by Microcap on behalf of GOE was accurate and proper and that he relied on the asserted expertise of Microcap. The RecOil purchase agreement was signed by Bo and the press release was reviewed by G&S; Bill never intended to mislead anybody.
The SEc says price and volume increased significantly over the days following the Recoil news. However, Microcap published at that time the news of the Midwest Fuel Purchase order that overshadowed the RecOil news and that the stock price did not increase significantly before the Midwest news.
The SEC doc says that the RecOil press release failed to disclose O'Brien's ownership of RecOil and his other relationships to the company. Bill objects to the characterization of the written document and asserts that the alleged omission was not material or otherwise required as a matter of law.
The SEC doc says Bill knew that GOE could not begin development of a higher capacity model 600 until its prototype Model 400 was placed back in operation and was successfully tested. Bill admits the prototype unit needed required emissions testing for operational approval which GOE obtained in due course and that he and others believed it would produce 400 gallons an hour or more.
Paragraph 101 of the SEC suit says that both Bo and Bill knew that RecOil was not independent, had no business, had paid no deposit and had not located a site or financing for the yet undeveloped equipment purportedly scheduled for April delivery. Bill denies specific knowledge of what Bo knew and must deny the allegations. He says RecOil paid a $50,000 deposit and was advised by Bo that RecOil was joint-venturing with Evans Systems of Texas, an established, publicly traded oil company that was also a financial public relations client of Bo. Further, he asserts that the President of Evans Systems paid a site visit to GOE's Charleston facility with an Evans Systems engineer; and that Bill was advised the RecOil/Evans System joint venture would locate the equipment in Texas on Evans Systems' property, utilize Evens Systems' tanks and other equipment, and that the facility would be operated by Evans Systems.
Paragraph 102 of the SEC suit says that Bill continued to falsely misrepresent that commercial sales were imminent of February 3, 1997, when he published a press release announcing that GOE had received a signed $1.65 million contract for its equipment: "Financing for the unit, including a down payment of $500,000, has been arranged by Research Fuel, Inc. (Research Fuels) with Citicorp. GOE intends to begin construction of the unit shortly in order to make delivery in late March or early April." Bill denies that, saying that Microcap issued the press release on behalf of GOE and at the time of the release, Bill believed the quoted information was true; GOE had received a signed purchase order from Research Fuels, and Research Fuels had represented that Citicorp had committed the financing; and that an individual who stated that he was a representative from Citicorp confirmed to Mr. Carraway in February, 1997, during a site visit to GOE's new Charleston facility that Citicorp was prepared to finance the purchase. Bill asserts that he never intended to misrepresent the Research Fuel transaction.
Paragraph 103, "when he published this press release, Carraway knew that an addendum to the contract lowered the contract price to $1.35 million." Bill denies this, saying he had no knowledge of the alleged addendum or the alleged price reduction. This potential sale was generated by one of GOE's independent agents, EnviroSales, Inc.
The SEC suit claims that Bill knew the prototype had not been assembled, was not operational and that its development was not completed. Bill denies this, saying that as of the press release on February 3, 1997, the prototype had been assembled and GOE was preparing to restart the unit and its emissions testing, additionally, the plant was fully operational later in February when Research Fuels personnel arrived for a site visit.
Next there are several paragraphs telling the story of how Ron Reece and Bill got hooked up and that Bill contracted with a company to set up the GOE web site. Bill just modifies the SEC statements but they agree pretty much.
Paragraph 115, SEC says in September 1996, Bill and Bo gave interviews which were published in a financial newsletter with Bo stating that GOE had a backlog of $25.2 million in orders, although both he and Bill knew at the time that none of the purchasers who had signed letters of intent were likely to order until the equipment was reassembled, tested, and successfully demonstrated. Bill says GOE info was published in a newsletter, although a review of Bo's interview by John J. O'Hanlon, published in the Wall Street Corporate Reporter in September 1996, makes no reference whatsoever to a claim by Bo that "GOE has a backlog of $25.2 million orders." Bill admits he believed that GOE had letters of intent for more than $25 million at that time.
Paragraph 118 claims that the GOE web site falsely claimed that it had developed the system to the point that it was ready for commercial sale. Bill denies that.
The SEC doc refers then to the various places on the Web and AOL where talk about GOE ensued. It says Bill had discussions with investors including Ron Reece who participated in news groups on the web. Bill says he eventually found out that Ron participated in news groups generally.
Tell y'all what. This is as far as I've gotten so far and is enough for y'all to chew on for a while. I'll come some other time to complete the job.
Charles |
