Energae says future still goodSome concerned investors and officials of Energae LP are locked in a struggle over the company’s control.
By: Mikkel Pates, Agweek
Some concerned investors and officials of Energae LP, a Clear Lake, Iowa, company, are locked in a struggle over the company’s control, in the face of state regulatory action against one of the company’s key figures, Darrell Duane Smith of Forest City, Iowa.
Energae is facing its second petition to move the company into receivership. The renewable fuels company for several years has had investors in North Dakota, some of whom have filed petitions to move it into receivership. In March 2012, Smith held meetings in Grafton, N.D., to seek investment in a sugar beet-to-ethanol process there that never got off the ground.Energae is “alive and well and seems to be moving forward,” says Kathryn Barnhill, a West Des Moines lawyer, who told Agweek she represents the company. She declined to answer questions about the company but said she would find appropriate company officials to get in touch with Agweek. None contacted Agweek. Some shareholders are pressing their concerns about the company’s viability. Attorney J. Barton Goplerud of West Des Moines, with colleagues Joe Peiffer and Alan Rosca, are representing the petitioners, who want more information about where money has gone.
According to law firm Chapman LLC, the FBI on Oct 3 searched Smith's Mason City, Iowa, office where he had sold securities. The firm says Smith was not present when the agents arrived, and they carried out boxes of documents from the office. Chapman LLC has filed claims against Smith's former securities employer.
“I hope this marks the end, or at least the beginning of the end, of Smith’s Energae activities,” says attorney John Chapman.” If so, it’s a great day for Iowa investors.”
Smith has been stripped of his insurance sales license in Iowa, and has been barred from representing Energae LP or its related companies in any fundraising. Officials say there was evidence he mishandled insurance client funds.
Goplerud attended an Energae investor meeting on Sept. 19, according to the law firm’s website, www.darrellsmithinvestors.com. The three represented two Fargo, N.D., investors in a petition to Iowa courts to force Energae into receivership. That first case settled and was dismissed in August.
Peiffer and Rosca say the Energae investor meeting was “emceed” by Jon Alexandres, who in some documents is identified as “managing partner” of the business. They say the primary meeting spokesman was Dennis Roland, who company correspondence in February identified as the chief operating officer. Peiffer and Rosca say Roland had attended one of the law firm’s meetings in Mason City, Iowa, and then identified himself simply as an “outside consultant.” Phone messages left with Roland and Energae’s office in Clear Lake went unanswered.
Rosca says a couple dozen people at the Sept. 19 meeting included investors who asked about what is happening with their money and why some didn’t have certificates for their investments. Rosca says Roland did not directly answer some questions, including identifying accounting firms that have certified the company’s ability to issue tax credits for renewable energy production.
Goplerud, Peiffer and Rosca filed a second petition, this time on behalf of Cliff and Joel Hylden of Park River, N.D. The stated goal for both petitions was determining “whether Energae investors have suffered any losses and removing current management/control persons.” The effort is specifically aimed at separating the company from former stockbroker Smith.
“New proceedings are being prepared on behalf of new investors,” Peiffer says, saying they’ll keep filing them until they get sufficient information about the company’s status.
We’ll keep fighting
In the letter to shareholders on Sept. 5, signed by Alexandres, Energae tells investors that Smith “took nothing out” of the business, and Alexandres’ and Smith’s “personal investments” have put up money to keep the company going. Alexandres in the letter says the share units “have value — the values have increased.”
He says the values have been “fully documented and qualified by a lender we contracted to review our assets and liabilities.” But it does not identify the lender. As for Smith’s regulatory status, Alexandres says, “Mr. Smith willingly volunteered to give up a securities license (he was not using) in order to continue to help these companies.”
“As we have in the past, we continue to advise investors to consult with an accounting professional when offered any type of tax credits, before investing in such tax credits, and to contact the Iowa Division of Securities regarding offers to invest in securities issued by Energae or its affiliates,” Peiffer says.