Creditor in Bankruptcy
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Was USFF a Scam lead by Rob Schwartz
Phantom X raised the question of whether USFF was a scam and whether shareholders should pursue some form of legal action. Rather than state an opinion or provide a recommendation, I thought I would respond by providing some informational ‘dots’ which shareholders can connect as you see fit and raise some questions to which shareholders may want answers. This post is not intended to be an all inclusive list of informational dots or questions; this is just some of the information available from public sources.
If, after reviewing this post, there are shareholders who are interested in more information regarding USFF, including non-public information, retain an attorney and have that attorney contact me.
Consider the USFF SEC filing, made on August 21, 2012, regarding a Stock Purchase Agreement (SPA) with G & A Capital and available online at [url]www.sec.gov/Archives/edgar/data/1116112/000139834412002707/fp0005402_8k.htm:
***
Item 1.01 Entry into a Material Definitive Agreement
On 10 June 2011, the board of directors ratified a Stock Purchase Agreement entered into between G&A Capital Development, LLC and Nuclear Solutions, Inc. on 12 May 2011. Under the terms of the Stock Purchase Agreement, G&A Capital paid Six Hundred Sixty-Two Thousand Five Hundred Forty Dollars And Thirty Seven Cents (US $662,540.37) for One Hundred Sixty-Four Million Four Hundred Two Thousand Seventy-Six (164,402,076) common shares.
To facilitate the transaction contemplated by the Stock Purchase Agreement, the board modified the corporate Articles of Incorporation and Bylaws, including the following resolution:
RESOLVED, that the corporation will have authority to issue Eight Hundred Fifty Million (850,000,000) shares of stock in the aggregate. These shares will be divided into two classes. The number of authorized common shares in the Articles of Incorporation is changed to 800,000,000 (Eight Hundred Million) shares authorized with a par value of $.0001, and the number of preferred shares is changed to 50,000,000 (Fifty Million) shares authorized with a par value of $.001
Under the terms of the Stock Purchase Agreement, the $662,540.37 was placed in escrow and used to retire in excess of 75% of the outstanding corporate debt.
***
The ‘facts’ in the last sentence of this filing are inconsistent with ‘facts’ in other USFF SEC filings and other public information: there never was a lump sum of $662,540.37, there never was an escrow and 75% of the USFF corporate debt was NOT retired.
The assertion that USFF conducted a transaction with G & A Capital Development contradicts the records of the NJ Secretary of State; there is no evidence that G&A Capital Development ever existed as a NJ limited liability company. Visit https://www.njportal.com/DOR/businessrecords/EntityDocs/BusinessStatCopies.aspx and conduct a business name search for a New Jersey LLC named “G & A Capital Development”; the search will return no records.
An edited version of the G & A Stock Purchase Agreement (SPA) was filed with the SEC in 2013 and is available online at http://www.sec.gov/Archives/edgar/data/1116112/000114420413042758/v351020_ex10-1.htm.
Examine the language in paragraph 1 and the dates of the ‘investments’ listed in attachment 1 to the SPA. If Attachment 1 is accurate, there could never have been a lump sum of $662,540.37 to put into escrow in May 2011 when the SPA was executed unless the $90,000 from March 10, 2010 and the $155,000 from April 13, 2010 was held, unused for over a year until the SPA was signed in May 2011.
Note that paragraph 1 of the SPA identifies an ‘Escrow Agreement’ which is purportedly attached to the SPA as Attachment 2. There is no Attachment 2 to the copy of the SPA USFF filed with the SEC, perhaps because, like G & A Capital itself, Attachment 2 never existed and there never was an escrow of any funds.
Note that paragraph 2(f) of the SPA calls for issuance of a warrant to purchase additional shares for an aggregate price of $2,000,000. While paragraph 2(f) recites that a form of warrant was included as Attachment 3 to the SPA, the copy of the SPA USFF filed with the SEC does not include an Attachment 3, perhaps because, like G & A Capital itself and Attachment 2 (the Escrow Agreement), Attachment 3 never existed.
This raises at least three questions:
1. What due diligence did USFF officers and directors conduct regarding G & A Capital Development?
2. Did Bagot sign and implement an incomplete agreement in May 2011?
3. Did Drinkwater, Bagot and Chady approve an incomplete agreement in June 2011?
Applying simple math to the provisions of paragraph 2(f) of the SPA establishes a share price of $0.004 per share ($2,000,000 to purchase 496,277,915 shares of stock). Using this valuation, 300,851,000 shares should cost $1,212,429, yet in multiple SEC filings, USFF asserts that G & A Capital obtained 300,851,000 shares by exercising a ‘cashless warrant’.
Note that paragraph 4.4 of the SPA omits the address for notices to G & A Capital Development, LLC. The address included in the actual SPA but intentionally deleted from the copy of the SPA filed with the SEC, was:
G & A Capital
One Miss America Way
Atlantic City, NJ 08401
That address is the address of the Atlantic City Convention Center and a phone call to the convention center will reveal that G & A never had an office there. Perhaps the address was intentionally omitted to avoid revealing a material fact that might raise questions about the existence of G & A Capital and the validity of the SPA.
Enquiring minds may want to look at corporate governance, specifically how the board that approved the G & A Capital SPA was ‘elected’ and maintained in power, supposedly acting as fiduciaries for you as a shareholder. Before you review the following, ask yourself:
• Do you recall ever receiving a notice of a USFF annual meeting?
• Did you ever attend a USFF annual meeting?
• Do you recall ever being asked to send, or actually sending, your proxy to vote in the board elections conducted at a USFF annual meeting?
Now consider one sentence regarding annual meetings and board elections that is repeated verbatim in multiple USFF SEC filings: “Each director is elected at our annual meeting of shareholders and holds office until the next annual meeting of shareholders, or until his successor is elected and qualified.”
(http://www.sec.gov/Archives/edgar/data/1116112/000114420413042758/v351020_10k.htm), at page F-20 of the 2010 10K;
(http://www.sec.gov/Archives/edgar/data/1116112/000114420413047620/v353019_10k.htm, at page 20 of the 2011 10K ;
(http://www.sec.gov/Archives/edgar/data/1116112/000114420413067721/v362810_10k.htm) at page 35 of the 2012 10K;
(http://www.sec.gov/Archives/edgar/data/1116112/000114420414009810/v368506_10-12g.htm) at page 10 of the Form 10 filed in 2014.
This statement regarding annual meetings and board elections was certified by Bagot in all of the 10Ks and Form 10s; Chady certified the statement in the 2010, 2011 and 2012 10Ks. One of the 10K certifications can be seen for Bagot at http://www.sec.gov/Archives/edgar/data/1116112/000114420413042758/v351020_ex31-1.htm and for Chady at http://www.sec.gov/Archives/edgar/data/1116112/000114420413042758/v351020_ex31-2.htm.
As you will see, the certification language includes, in part, that:
“(2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;”
This raises at least two questions:
1. If there was no annual meeting and no board election in 2010, 2011, 2012, 2013 and 2013, is certifying that an election was conducted at an annual meeting in each of those years an untrue statement of a material fact?
2. Is it possible that the CEO (Bagot) and the CFO (Chady) did not know that there was no annual meeting and no board election in 2010, 2011, 2012, 2013 or 2014?
Review the articles of incorporation and bylaws USFF filed with the SEC at http://www.sec.gov/Archives/edgar/data/1116112/000114420413042758/v351020_ex3-1.htm and http://www.sec.gov/Archives/edgar/data/1116112/000114420413042758/v351020_ex3-2.htm, respectively and then ask yourself at least two questions:
1. Is there any provision in the articles of incorporation or bylaws that provides an exemption from the requirement for an annual meeting and an election of directors?
2. If the board had a secret agreement to forego annual meetings and board elections, would failure to inform shareholders of that fact in SEC filings be an omission of a material fact that should have been disclosed in order to ensure that a filing was not misleading?
Look again at the G & A SPA; that transaction was proposed by Schwartz and approved by Drinkwater, Bagot and Chady. G & A obtained a total of 465,253,076 shares of USFF stock, 164,402,076 shares of stock from the SPA itself and another 300,851,000 shares from the ‘cashless warrant’.
If your brain did not explode the first time you tried, pause here and take another shot at reconciling a cashless warrant for 300,851,000 shares with paragraph 2(f) of the SPA setting a share price of $0.004 ($2,000,000 for 496,277,915 shares).
Tracing the stock is important, for now just consider what the SEC filings show: 190,432,576 shares – over 40% - of the G & A shares went to parties involved in proposing and approving the transaction. After the G & A SPA was approved by Drinkwater, Bagot and Chady, Drinkwater received 76,050,000 shares, Bagot received 33,000,000 shares, Chady received 10,000,000 shares and Reyna & Associates, a company controlled by Rob Schwartz, received 71,382,576 shares. See, for example, pages 5, 39 and 40 of the USFF 2012 10K at http://www.sec.gov/Archives/edgar/data/1116112/000114420413067721/v362810_10k.htm.
Enquiring minds may want to identify the source of the funds described in Attachment 1 of the SPA and ask at least three questions –
1. What was the source of the $662,540.37 referenced in the SPA?
2. How much of the alleged $662,540.37 from the SPA was provided by Schwartz, Drinkwater, Bagot or Chady?
3. How often does an investor put money into a company so that stock can be issued to a third party?
Enquiring minds may also want to dig a little deeper to examine shareholder lists and track stock holdings and transfers, with a special focus on shareholder last names and family affiliations.
Phantom X said “I think we were all scammed” and that Rob Schwartz was the ringleader. If by “scammed” Phantom X meant being victimized by a scheme to make money by dishonest means, perhaps shareholders should consider conducting some basic background checking. This could include
1. Reviewing a February 21, 2014 article on Rob Schwartz available at http://www.nj.com/gloucester-county/index.ssf/2014/02/washington_township_man_gets_5_years_probation_for_stealing_in-laws_mortgage_money.html . Here is a portion of that article:
Schwartz — an entrepreneur who studied financial management at Drexel University — pleaded guilty in October [2013] to theft by deception. He admitted to stealing funds meant to pay the mortgage on the Gloucester Township home his sister-in-law, Karen Giosa, shares with her husband, Frank Giosa and their two children.
Frank Giosa said Schwartz took $175,000 from him and his wife in 2007, having agreed to use it to pay the mortgage. After some time, he stopped making the payments. But he didn’t tell the Giosas, Frank said.
“We didn’t know what was going on until we got a foreclosure notice,” he explained after Friday’s sentencing. That foreclosure notice came in 2009.
2. Scrutinizing the timing of Rob Schwartz’ ‘resignation’ from the USFF executive committee in August 2012 (http://www.sec.gov/Archives/edgar/data/1116112/000139834412002954/fp0005501_8k.htm) and his indictment for theft by deception in October 2012 (http://www.nj.com/gloucester-county/index.ssf/2012/10/gloucester_county_indicts_30_s.html).
3. Reviewing Civil Action No. 09-CI-00931, Franklin Circuit Court, Commonwealth of Kentucky; the end result is that a USFF investor obtained a $728,677.60 judgment against Schwartz for breach of contract relating to a USFF investment.
4. Investigating the facts behind the ‘settlement’ with Larry Harris referenced in SEC filings.
5. Examining the filings made in the USFF Chapter 7 bankruptcy, pending in the US Bankruptcy Court in the Eastern District of New Jersey, Case Number 14-35701-GMB – US.
So there is no misunderstanding, I have no intention of engaging in an endless debate on this forum regarding anything and will not communicate with people who keep their identity hidden behind a forum pseudonym.
On the other hand, if a shareholder or a group of shareholders decide to investigate USFF, retain an attorney and have that attorney contact me; I am prepared to share what I have with your attorney.
A New Approach to Answering Questions From IHUB
I am not quite sure how to convince the doubters that PFA is Paul F. Adams, COO of US Fuel. There does not appear to be much benefit to posting directly, if people are going to question my identity and argue about my credibility as a source of information. When I first posted on this message board, there were those who complained that my appearance on the message board was completely inappropriate. Finally, since I do not check this board regularly, I might miss questions, or not be timely in responding. Admitting that this attempt at interaction is not working, I will take a new approach.
Going forward, I will not be checking this message board for questions or engaging in the discussions. If someone on this message board has a question for me, email it to me at padams@usfuelcorporation.com and I will reply as best as I can. There are those on this message board who have emailed me directly in the past and they can acknowledge that I do respond.
As long as the inquiry is civil and there are no edits to the email chains containing the original questions and the complete answers, they will be suitable for posting on this message board.
When discussions start going down a rabbit hole based upon some unsupported factual assumption, feel free to inquire about the validity of that assumption.
No doubt there are questions about many things, including the company stock situation. As I tried to explain in my last posting the process of preparing the financial information for filing with the SEC to cover the years 2010, 2011, 2012 and the first quarter of 2013 is tedious, but ongoing.
Until that financial information is approved for release, I cannot and will not provide any interim commentary about the results of the audit. Once our CFO, outside auditor and SEC counsel agree on what should be properly disclosed, the disclosure will be made through SEC filings, noted on the website. This message board will never be the forum for an announcement of previously undisclosed information.
Thank you for your continued interest in and support of US Fuel.
Info@USFuelCorporation.com is the best generic address to use
Direct emails are rather straightforward, mine is in the press releases - padams@usfuelcorporation.com.
You can probably guess the address of others from that. If you guess wrong, it goes to Info@USFuelCorporation.com as a catch-all account.
There was NO dinner with Joe in NJ
I do not know if Joe was in New Jersey, but I do know that I have never met or communicated with Joe and certainly have never had dinner with Joe in NJ or anywhere.
People wonder why I stopped appearing on the board - it is because of exchanges like those of 13 June, a whole day of message board exchanges around a false premise.
The website, along with press releases and SEC filings, will contain current and accurate corporate information. If something important happens, it will be made public quickly. So, if you cannot find it on the website, it is nothing more than a rumor.
May I suggest that you consider attempting to confirm information before spending time publicly discussing and analyzing what are unfounded rumors. Granted, we would not publish information on a shareholder dinner, but that could have been easily confirmed with an email inquiry.
If you did not see the press release about retaining SEC advisors , note the following:
An Update on the US Fuel CTL Plans
Since my last post, US Fuel activities have continued toward our goal of building coal to liquid fuel facilities, but there are no new announcements that have been made. Of course, this message board is not and never will be the forum for the first release of any new public information. The information in my post of 26 January contained nothing new, it was all from public information, taken either from the website or from SEC filings and assembled in a way to address certain specific questions.
As someone pointed out, it is unusual for a corporate officer to post on a message board; having agreed with that proposition, I am not aware of any prohibition to such actions. I am choosing to spend some of my time on this message board, out of courtesy, not obligation. Oddly enough, some here complain that corporate information is not forthcoming and others complain that a corporate officer is posting corporate information on a shareholder message board. I tried to reconcile that, but it made my head hurt. My first post was made to correct a false statement relative to project engineering and permitting. That led to questions being posted to me which, as a courtesy, I chose to answer in the same way I would have answered an email or phone inquiry with similar questions.
Regarding financial information, such as stock ownership, that needs to be examined in a proper context. Please recall what I said on 26 January:
PFA is the US Fuel Chief Operating Officer
PFA = Paul F. Adams, my bio is on the website.
I have been updating the website regularly.
My post was not in the form of a shareholders letter because I wanted to address issues raised on this message board.
A Framework for Discussion of US Fuel Plans
In checking this message board, I noticed several posted questions were directed to me. Please understand that I only check this message board periodically, so pardon any delay between your posting a question and my posting an answer.
As a general proposition, the best source of information is the US Fuel website www.usfuelcorporation.com; in an attempt to make it easy find new content, we note the changes to the site on the home page. There are also a number of services that will notify you when sites are changed (google “sign up to monitor website changes” to see some examples.) All SEC filings are linked from the Investor Relations page.
If you hear a rumor of an event, but do not see it posted on the official website, that rumor is probably unfounded.
Our goal is to be truthful and accurate in all statements and to announce events that occur, not issue statements of speculation on what might occur. In other words, as we achieve milestones, we will make announcements.
I trust everyone realizes that the intro portion of this message board is grossly out of date; US Fuel management does not control that content. In early January, someone commented to me that we were not providing updates – during December, the website was updated three times, coupled with two SEC form 8k filings.
Please do not infer from any period of silence that work has stopped; negotiations take time, should not be conducted in public and are only complete when an agreement is signed.
As I am sure everyone understands, I cannot divulge non-public or sensitive information in responding to a question, nor would I be able to explain why I would not answer a particular question. Many responses will include forward looking statements. Any and all forward looking statements will be made in good faith and be based upon the best information available at the time of the posting. Needless to say, any forward looking statement is subject to change. I will not engage in speculation on stock price per share, stock pricing trends or trading volume.
I acknowledge in advance that whatever I post will likely never be acceptable to those on this board who dwell only in the past, assume that bad faith is behind all corporate actions and only see the dark side of any announcement. I was not part of the past, am only looking forward and will never attempt to dissuade you from your fundamental pessimism. I will not engage in speculative discussions, especially those derived from anonymous internet postings that libel members of the US Fuel team without any factual basis.
For example, what we announced last week was that two offers to acquire sites were accepted and would go into escrow. That is a precisely accurate statement of what happened. True, things fall out of escrow; real property acquisition is a process that starts with a written agreement, involves an escrow during which additional due diligence is performed and culminates in a closing and transfer of funds for title. We have started that process for a site in Muhlenberg County and a site in Perry County. In good faith, we believe we will complete that process for both sites. The proof will be at closing and that is a future event.
Nevertheless, those who choose to do so are welcome to wallow in negative speculation between now and the actual production of the first barrel of fuel; my choice is to ignore such postings in their entirety.
With that as a framework, I will attempt to respond to several of the questions I have noted in various messages.
Coal to Germany
The original coal-to-gas pyrolysis technology was from Germany. To obtain the performance guarantee offered with their equipment, we were required to ship 2,000 pounds of coal to their facility in Germany. They would test and characterize the syngas produced from that coal feedstock and use those test results as the basis for their performance guarantee. Siemens was never involved in the process. We shipped the coal and it arrived in Germany; before we needed to expend funds for testing, we found an improved process.
When we were able to improve our process (by increasing output from 400 to 525 barrels per day at a reduced capital cost), we changed technology vendors. That change made the coal testing in Germany irrelevant. We will be able to obtain the same form of performance guarantees from the new vendor, without the need to send the coal to Germany.
The cost of shipping the coal to Germany was minuscule compared to the long term savings achieved from the technology change. The benefits of the change in technology more than compensate for the slight slip in the original project timeline.
The Audit
We are in the midst of a comprehensive audit by our outside, independent CPA which is scheduled for completion on or before February 28, 2013. There are a number of questions that cannot be answered until the audit is complete, including but not limited to precise information on stock ownership and management compensation packages. There is no point in speculating on answers at this time, when we will have audited information in the very near future.
All information that is supposed to be public will be made public, as soon as we verify the truthfulness and accuracy of the information by completing the audit.
As for those who hypothesize that the books should not be too complicated and wonder aloud why it is not already complete, consider the following statement from the SEC form 10Q filed on November 11, 2012:
We must complete the audit to prepare the updated SEC filings.
Once those updated filings are made, we still must wait on the OTC Market compliance department to review those filings and determine if a tier change is appropriate or if something more is needed.
Our best good faith estimated on completing the audit is on or before 28 February 2013. Actual filings will occur as soon as possible after completion of the audit.
Since US Fuel cannot control either the timing of the completion of the audit or the decision on the upgrade, we cannot accurately predict a date for the upgrade. All we can truthfully and accurately say at this point is that a tier upgrade is a priority and we are moving it along as quickly as we can.
The website has been corrected.
I do not know to whom you spoke, but your information on engineering is incorrect. It is not completed enough for to commence the permitting process.
The website project timeline says
March 2013 Due to the change in technology vendors, the commencement of engineering was delayed. A full permitting package should be completed in mid-March 2013, still in time to potentially obtain the Air Quality Permit in June 2013.
That is the accurate statement regarding permitting.