64. In an incredible act of hubris, Bordynuik allowed a colleague of James Gately to forge the firm’s signature on an audit opinion letter attached to JBI’s Form 10-K filing representing that an independent audit had been conducted. In fact, as Bordynuik planned and knew, no independent audit was ever conducted by Gately, LLC. Bordynuik and Baldwin then approved and certified JBI’s financial statements contained in its year end Form 10-K filed on March 31, 2010 that included the erroneous and inflated value of the Media Credits.
65. Defendant Baldwin reviewed JBI’s Form 10-K for the year ended 2009 prior to its filing on March 31, 2010 and actually expressed concerns to Bordynuik about the valuation of the Media Credits and was fully aware that they were improperly valued. Baldwin was also aware of the concerns expressed by the business consultant. Baldwin also knew that the Media Credits were the single largest item on JBI’s balance sheet. Despite being aware of all these issues regarding the valuation of the Media Credits, Baldwin failed to exercise any due diligence regarding the appropriate accounting method to value the Media Credits and improperly certified the financial statements contained in JBI’s Form 10-K for the year 2009.
66. Likewise, the Audit Committee, comprised at the time of defendants Bradshaw, Wesson, and Goldberg, took no steps to ensure the financial statements were accurate and conformed to GAAP. Instead they did exactly what Bordynuik had appointed them to do, applaud his every move while questioning none of them.
67. Because of the false statements concerning the Media Credits made by the defendants Bordynuik, Baldwin, Smith, Bradshaw, Wesson, and Goldberg and the false and misleading financial statements JBI filed, JBI was able to attract significant private capital from investors that it otherwise would not have been able to attract. Beginning in the fall of 2009 through May 2010, JBI raised approximately $8.4 million in capital from private equity investment. The Individual Defendants used marketing and presentation materials including PowerPoint presentations that represented the Company’s assets as including Media Credits valued at $9.997 million. The inclusion of the Media Credits on these sales materials and in the Company’s public filings served to present a misleadingly strong financial picture of the Company’s assets to potential investors. Defendants Bordynuik, Baldwin, Smith, Bradshaw, Wesson, and Goldberg knew and/or should have known that the financials and presentation materials for JBI that listed the Media Credits at a value of $ 9.997 million were false statements not reflecting their actual value and inconsistent with GAAP and standard independent auditing standards.
68. Baldwin also made willful misrepresentations about the value of the Media Credits at JBI’s annual General Meeting held on April 24, 2010.
69. Bordynuik and Baldwin also falsely asserted that JBI’s financial statements were prepared according to GAAP.
70. On May 21, 2010, JBI filed a Form 8-K stating that its previously issued financial statements for the year ended December 31, 2009, filed on Form 10-K with the SEC on March 31, 2010, and the interim financial statements for the period ended September 30, 2009, filed on Form 10-Q with the SEC on November 16, 2009, should no longer be relied upon due, in part, to questions regarding the valuation of media credits acquired by the Company during 2009. On July 9, 2010 and November 17, 2010, the Company issued two restatements. In these restatements, JBI wrote down the media credits to zero and disclosed that the credits had been improperly valued.
71. In a separate deception, on July 9, 2009, Bordynuik put out a press release saying the Company “Files Patent Application for Plastic2Oil Technology.” A year later in the SEC filings, Bordynuik admitted that no patent protection was ever sought.
72. In April 2010, Bordynuik told shareholders that he had an offer from Somerset Refinery to purchase oil from his P2O process for the price of West Texas Intermediate crude oil minus $3 per barrel. The problem—Somerset Refinery had already been shut down for two months when he said it. It’s an odd coincidence that the only refinery ever mentioned by Bordynuik as having made an offer for JBI’s oil just happened to go out of business. No other refinery offering to buy Bordynuik’s oil has surfaced since then. See http://seekingalpha.com/article/319080-john-bordynuik-revolutionary-company-or-can-ofworms
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