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Published October 28, 2013, 10:08 AM

Former Energae LP officer subpoenaed

A former president of Energae LP of Clear Lake, Iowa, confirms to Agweek that the Internal Revenue Service had subpoenaed him to testify to a grand jury on Oct. 23 in federal court in Cedar Rapids, Iowa.

By: Mikkel Pates, Agweek

FARGO, N.D. — A former president of Energae LP of Clear Lake, Iowa, confirms to Agweek that the Internal Revenue Service had subpoenaed him to testify to a grand jury on Oct. 23 in federal court in Cedar Rapids, Iowa.

Energae is a biofuel manufacturer that in 2012 tried in vain to develop a beet-to-ethanol plant in Grafton, N.D., and has sold company shares and tax credits in North Dakota.

Osmund “Bud” Jermeland, a farm equipment dealership sales manager in Estherville, Iowa, who served as president of the company from July 2008 to July 2010, says the IRS served him a subpoena at his place of business on Oct. 17. The subpoena asked him to bring any Energae company records he has.

Jermeland says he doesn’t know the specific target of the grand jury, but thinks it isn’t him. He says he knows of at least two other officials or former officials of the company who have received similar subpoenas.

Jermeland earlier told Agweek he resigned from Energae because he wasn’t able to acquire satisfactory financial records from other company officials, and because of issues of company control. In particular, he says he got insufficient information from Darrell Duane Smith, a former stock broker and insurance man from Forest City, Iowa, who often spoke on behalf of the company in public meetings, and from Randy Less, who ran a small, commercial-scale noncorn-ethanol plant in Hopkinton, Iowa, and a wood waste-to-electricity generation plant in Cedar Rapids.

Peter Deegan, a spokesman for the U.S. Attorney’s office for the Northern District of Iowa in Cedar Rapids, could not confirm or deny the existence of an investigation, nor discuss any grand jury activity. Federal officials typically don’t respond to requests for information on grand juries.

In ND

In March 2012, Smith came to Grafton, N.D., where he promoted a sugar beet-to-ethanol project by Energae at the former Alchem Ltd. corn ethanol plant in that town. Farmers then were told how they could invest $10,000 for the privilege of selling beets to the company, which Smith claimed would process beets year-round.

The Iowa Insurance Division on April 13, 2013, suspended Smith’s licenses to sell insurance and ordered him to cease activities with Energae. In July 2013, Smith dropped an appeal and agreed to permanently stop selling stock or insurance in the state. Energae and its predecessor companies raised funds from North Dakotans and promoted tax credits to company shareholders.

The Fishman Haygood Phelps Walmsley Willis & Swanson LLP firm, with an associate in Cleveland, Ohio, has represented two succeeding sets of North Dakota plaintiffs in petitions to put Energae into receivership. The company has settled one of those actions and the other is pending, according to attorney Alan L. Rosca.

A second, separate case by John S. Chapman of the Chapman LLC firm in Cleveland is representing a separate set of concerned investors that on July 16, 2013, filed a case with Financial Industry Regulatory Authority for compensation from Multi-Financial Securities Inc., the company that employed Smith as a stock broker. That action claims Multi-Financial failed to properly oversee Smith’s activities. It, too, is pending.

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