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Friday, July 22, 2011 2:38:18 PM
SEC Wins Summary Judgment Against Biofuel Scammer
Jul. 22 2011 - 10:05 am
http://blogs.forbes.com/danielfisher/2011/07/22/sec-wins-summary-judgment-against-biofuel-scammer/
The long, strange career of would-be biofuels pioneer John H. Rivera came to an end yesterday when a federal judge in Mississippi granted the Securities and Exchange Commission a summary judgment against Rivera, barring him forever from the penny-stock business.
From the beginning, the facts behind SEC vs. Rivera were almost too good to be true — for a journalist. I came across Rivera when I was poking into the the profusion of green-energy scams in late 2006 that sprang up in first flowering of biofuels mania. Rivera was a small-time hustler who had a history of promoting tires-to-energy schemes, among other things. He saw his main chance arrive when biofuels became a national priority. Faster than you can say “unregistered stock,” he whipped together a publicly traded outfit called U.S. Sustainable Energy Corp.
You gotta give the man credit: He was committed to his version of reality. In an interview Rivera would have been smarter to have skipped, he tried to convince me his magical process could convert soybeans into biodiesel at a rate that defied the laws of physics and chemistry. When I told him I had already consulted the leading experts in the exact process he claimed to be using, and they said his numbers were nonsensical, Rivera simply told me the experts were wrong.
The SEC followed a year after my story with a lawsuit accusing Rivera of penny-stock fraud.
The recitation of facts shows just how much a determined scamster can get away with in the public markets, especially when the SEC only pursues a fraction of these cases. One SEC lawyer told me the agency simply can’t justify the expense of going after penny-stock swindlers, since even a clear-cut case like Rivera’s can occupy a trial lawyer’s time for months or even years.
In Rivera’s case, he told bold-faced lies about how he had souped up a centuries-old process called pyrolisis to produce millions of gallons of biodiesel. He also put out a press release saying he’d secured the backing of a major investment bank — false — and that he’d recruited a director named Dr. David Crow, who promptly ordered Rivera to retract the announcement when he found out about it.
The biggest mystery in the Rivera case is why it didn’t involve John Stanton, the Tampa penny-stock promoter who provided financial backing to Rivera and many other dicey operations. Stanton put out press releases promoting USSE and lent the company $3.3 million. When I got him on the phone, briefly, he explained he didn’t back Rivera’s USSE but another company that just happened to have the same name. He couldn’t explain the public company’s filings identifying him as a backer, and quickly ended the interview.
Stanton’s name isn’t mentioned in the Rivera summary judgment. Nor are the names of any of the shady brokers and intermediaries who allowed Rivera to sell millions of shares in USSE during its prime. Instead of focusing on whether a longtime hustler with a history of making grandiose statements about his scientific process could really defy the laws of physics and chemistry, the SEC should have spent its time figuring out who facilitated the sale of so much worthless stock on the open market.
The summary judgment says Rivera could be ordered to disgorge his profits from the scam and pay fines and pre-judgment interest at an Aug. 8 hearing. It would be interesting to know how much money others made on the spread between what Rivera got for his shares and what the suckers on the other end ultimately paid.
http://blogs.forbes.com/danielfisher/2011/07/22/sec-wins-summary-judgment-against-biofuel-scammer/
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