47. These actions prompted the SEC to file a complaint against JBI, Bordynuik, and Baldwin in the United States District Court, District of Massachusetts (the “SEC Complaint”). The SEC Complaint alleges that the Media Credits were actually properly valued at zero as of the close of the reporting periods on September 30, 2009 and December 31, 2009. Given the unreliability of any future economic benefit attributable to the Media Credits, GAAP required that the Media Credits initially be recorded in JBI’s books at the $1,000,000 consideration paid by 310 Holdings on August 24, 2009 and subsequently remeasured on September 30th and December 31st of that year at $0.
48. In truth, there was no probable economic benefit to JBI from the Media Credits since the ads had limited distribution and would be unlikely to increase sales and profits. Accordingly, by September 30, 2009, Bordynuik and Baldwin knew the Media Credits were in fact worthless. As such, GAAP required that the Media Credits be written off in their entirety as of September 30, 2009, let alone December 31, 2009. However, Defendants Bordynuik, Baldwin, Bradshaw, Wesson, Henry, and Goldberg did not do this because they knew that without inflating JBI’s assets they would be unable to attract the level of investment they desired for the Company to purportedly expand its operations and increase the share price of JBI.
49. In his public statements since the release of the SEC Complaint, defendant Bordynuik has insisted that any mistakes in JBI’s filings were innocent accounting mistakes and that he had no idea as to the true valuation of the Media Credits. Bordynuik’s statements are not credible. In reality, Bordynuik and Baldwin took specific steps to make sure their improper valuation of the Media Credits would never be questioned.
50. Neither JBI nor its predecessor 310 Holdings ever hired a professional accounting firm to assist with its financial reporting. Instead, 310 Holdings hired a woman who was not a certified public accountant and who did not have a formal degree in accounting. In fact, her only accounting experience was six hours of an accounting class a community college. Her relationship as a consultant to 310 Holdings continued after it was merged into JBI.
51. At the time 310 Holdings acquired the Media Credits, Bordynuik had discussions with the consultant about the valuation of the Media Credits and indicated that she was responsible for ensuring that the financial statements valued the Media Credits at the inflated figure of $9,997,134. Bordynuik sent her an instant message instructing her to “please get the pro formas as juicy as you can so I can acquire a chemical company for less.”
52. Bordynuik intended to use JBI and its inflated balance sheet as a vehicle to obtain more companies. He also knew and intended that JBI would file “pro formas,” financial statements that would not conform to GAAP and would be used to communicate information about JBI to investors. The consultant followed Bordynuik’s instructions and valued the Media Credits at nearly $10 million.
53. Prior to the filing of the Form 10-Q for the quarter ending September 30, 2009, the consultant expressed concern to Bordynuik about the proper valuation for the Media Credits. The consultant told Bordynuik that she thought GAAP required that the Media Credits be recorded at their cost to JBI of $1 million, as opposed to their face value of $9.997 million. During that same time period, other individuals, including a business consultant (“the business consultant”) and the CEO of a company that Bordynuik was trying to purchase, informed him that the valuation of the Media Credits contained in the pro formas submitted to investors was incorrect.
54. By mid-September 2009, and prior to the filing of the third quarter Form 10-Q, Bordynuik learned that Domark’s CEO had mislead him about the valuation of both Javaco and the Media Credits in an attempt to induce him to acquire Javaco. One of the misleading statements made by Domark’s CEO which Bordynuik learned about was the fact that the CEO of NewsUSA, the parent company of Media4Equity (the company that originally sold the Media Credits to Domark in what was purported to be an arm’s length transaction), was previously a member of the Board of Directors of Domark. According to the SEC Complaint, the consultant informed Bordynuik of the suspect relationship and Bordynuik responded in a message stating, “I saw that. Yuk.”
55. The business consultant was the Assistant Secretary of JBI who was working on Plastic2Oil projects. He was also a CPA and a former auditor at Deloitte & Touche. He told Bordynuik in clear unambiguous terms that his valuation of the Media Credits was improper and would lead to issues with the SEC. The proper course was to book the Media Credits at the lesser of cost or market value. By booking the Media Credits at an inflated value, Bordynuik was representing that JBI had nearly $10 million in assets, even though the day before JBI had almost no assets on its balance sheet.
56. Bordynuik’ s response to these concerns raised by the consultant and the business consultant, as well as to similar concerns raised by the former CEO of one of the companies JBI acquired, was to tell the business consultant that the Media Credits were “audit proof.” Since Gately, JBI’s so called independent auditor was in no position to challenge or question Bordynuik’s booking of the Media Credits, there was no effective check on his attempts to manipulate investors and falsify JBI’s financial statements. Bordynuik’s only concern was, as he put it in an e-mail to the consultant, “we need a chemc company bad … ” (sic).
Those allegations mean nothing to me because the processor has been improved which will lead to more fruitful partnerships. Everyone can be over optimistic from time to time, you could go after any startup company for being too optimistic in there predictions. Good thing for jbi shareholders they are out of the development stage and on to actually delivering in there business plan and fuel.
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