This is the remaining half of my presentation of Bill Carraway's reply to the SEC suit.
Paragraph 129 of the SEC suit begins the limited partnership story. It says GOE began offering partnership interests purportedly exempt from registration pursuant to Regulation D and Rule 505. Bill objects to the word "purportedly" because he was advised by G&S that the offering was exempt from registration.
Paragraph 136 says GOE published a summary of the LP offering and a purported economic model on the web site. Bill said G&S never advised GOE that it should not discuss the LP offering on the web site or it would not have done so.
It says Bo and Bill sold the partnerships. Bill said they were all sold by Bo. Bill bought one partnership, giving 1/2 to his son and the other half to his daughter.
The SEC suit then gets more into Ron Reece's activities. It says Ron defended the probity of O'Brien's many relationships with GOE to an investor on March 29, 1997 to an investor who questioned that O'Brien, the analyst from Techumseh, was located in the same office as Microcap. O'Brien's affiliation with Microcap was discussed and the"Chinese Wall" he purportedly imposed was discussed. Bill says a review of the message speaks for itself as public confirmation that Bo's multiple roles with Techumseh and Microcap were publicly known and discussed.
The suit then makes many statements about Ron's newsletter and public postings but Bill says he has no specific knowledge of them and had never seen any of the newsletters. One of the statements the SEC makes about what he posted the present GOE counsel has been unable to find but it seems innocuous to me.
Paragraph 151 says GOE paid Ron's travel expenses to visit the company site 4 times. Bill says Ron visited 4 or more times, but GOE reimbursed Ron for one round trip plane ticket and paid a hotel bill on two occasions.
The SEC says Ron purchased a $50K interest in the LP for $30K. Bill denies that but admits Ron tendered $30K cash and was told the price was $50K; thereafter he signed a note for the difference; otherwise GOE would have assigned him only 1/2 interest. Later Ron requested GOE cancel the note and convert him to 1/2 unit and convert the $5K balance into GOE common stock at 50 cents a share. However GOE has not done so as of this time.
Paragraph 151 says that Ron's failure to disclose receiving valuable considerations from GOE created a false impression that he was an impartial investor. Bill says Ron had been reimbursed $1,000 for certain travel expenses. I say that Ron had put in many hours of work starting in May of 1996 researching GOE and passing along what he discovered and learned. I still say that if it had not been for all of the disasters almost all brought on by G&S and DHEC, GOE and the partnership would be in great shape now and what the SEC is talking about is small change. The fact that Ron didn't make it public is really stretching. At least that is my perception while others may feel differently in light of the SEC's action and the condition of GOE, but I contend that is an opinion brought on by emotional reaction.
The suit then starts back into trading in the stock again. Remember that Bo and Bill sold stock and used the proceeds to support the operations of GOE. The SEC suit gives me the impression that it was against regulations. The SEC claims Bo and Bill manipulated the stock but Bill says he did not knowingly engage in any "manipulative efforts" to that he issued knowingly false or intentionally false press releases. The suit goes makes many statements about stock sales that Bill made and about stock prices. Bill corrects the statements. He says that shortly after GOE stock began trading on March 21, 1996, the SEC says Bill began to sell his shares. Bill says that the stock sold between $4 and $5 in March and April but he didn't begin selling any of his stock until May, 1996. During the balance of 1996, he sold 108,333 shares for a total of $231,768 at an average price of approximately $1.74 to $2.33 a share. He says further that although entitled to receive base compensation of $144K per year as CEO, he did not receive any compensation from GOE. Proceeds from Bill's sales were used in large part to continue to lend funds to GOE. All of his stock sale transactions were monitored, approved and cleared for trading by G&S and he was never counseled that he should not sell his shares at any time. The SEC's statements about his wife's sales were corrected by Bill and he says G&S (Anderson) actually spoke to the stockbrokers at the time.
Paragraph 165 gets into the estate sale of a stockholder who had passed away. The estate had 200,000 shares and wanted to sell them. Dumping them on the market in one block would have killed the price so Bill had Bo buy them at an agreed price on a periodic basis. This was coordinated with G&S who assisted Bo in gaining title and providing necessary Rule 144 opinions so the shares could be sold. I ask the question - does that constitute stock manipulation?
The suit goes into the private placement of shares which began December 1996 and ended February 1997. This is where Bo again used his own funds to provide operating cash for GRNO.
The SEC makes statements again about the Carraway's stock sales which Bill corrects. He say his sales totaled 203,383 shares for a total of $771,992 and Mrs. Carraway sold 223,000 shares for $633,926.
The SEC suit then goes into the current status of the plant and company. It says on October 7, 1997, it filed its Form 10-QSB for the period ending June 30, 1997, purporting to clarify the false and misleading information contained in earlier press releases and other information. Bill denies that and says GOE attempted to make full, complete, accurate disclosure of all material facts with the proper help of its new, competent corporate counsel as well as address issues raised by the sEC staff during the investigation.
Paragraph 172 states that the plant cannot be operated at its rated capacity of 400 gallons an hour without modification of its operating permit and re-testing at the higher capacity. Bill replies with what we all know to be the truth; something the SEC should learn to deal with.
The suit then goes into 5 counts of violations the defendants are alleged to have made after which it prays the court for relief. Bill denies all as they pertain to him and his wife. Then in his response, Mrs. Carraway says the SEC fails to state a claim against her upon relief can be granted. Bill says the "bespeaks caution" doctrine, in that the private placement memoranda and SEC Reports which Bill signed as President of GOE contained substantial negative information and substantial risk disclosure sufficient to alert a potential investor to the inherent risks in any investment in GOE stock. He says he, personally, had no duty to update information contained in the press releases issued by Microcap on behalf of GOE. He says the totality of the facts, as opposed to the SEC's characterization of alleged facts, will result in the conclusion that he did not violate the regulations. He says the sEC's complaint will be shown as a matter of law to be nothing more than an attempt to assert "fraud by hindsight". He says that the statements and omissions attributed to him were not "material" as a matter of law but were opinions for which he had a reasonable basis at the time they were made and are not actionable as a matter of law. His statements were mere optimistic, forward-looking statements that were either protected by recognized safe-harbors or were not material and therefore not actionable. His statements were acceptable predictions and/or projections. He says the press releases adequately and accurately described the information contained in them. He says the statements were mere "puffery" which are not actionable. He says that at all material times he acted on the advice, work-product and/or approval of GOE's corporate securities legal counsel and/or corporate securities investors relations counsel, thereby negating the required element of "scienter" as a matter of law. He says the facts alleged by the SEC do not establish "scienter" as a matter of law. He asserts that the SEC's assertion of wrong-doing through the actions, statements, or omissions of others does not provide a proper basis to assert statutory violations against him personally. He says he acted at all times in good faith and/or in the best interests of GOE's stockholders. He says the vast majority of funds he received as a result of stock sales were loaned and/or reinvested in the business and operations of GOE in a good faith attempt to make it successful for all shareholders, thereby negating as a matter of law any claim for disgorgement of alleged "ill gotten gains" or "unjust enrichment" as a matter of law. He say his alleged conduct does not provide a basis to assess civil fines or monetary penalties against him. He and his wife demand trial by jury.
Charles |
