SEC says Chicago firm misled investors on Energy Dept loan

Wed Sep 19, 2012 12:32am IST

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* SEC says Advanced Equities, co-founders misled investors

* Advanced Equities to pay $1 mln; co-founders also fined

* SEC says firm hyped an unnamed Silicon Valley alternative energy company

* Says firm overstated size of order backlogs, Energy Dept loan application

* Unclear if unnamed company got a Dept of Energy loan

By Sarah N. Lynch

WASHINGTON, Sept 18 (Reuters) - A Chicago-based investment firm will pay $1 million to settle civil allegations that it misled investors in private equity offerings about an alternative energy company's finances and loan application to the U.S. Department of Energy.

The Securities and Exchange Commission said that Advanced Equities, Inc., and its co-founder Dwight Badger made misstatements about a Silicon Valley-based alternative energy company in private offering sales calls from 2009 and 2010.

The SEC also charged Advanced Equities' co-founder Keith Daubenspeck for supervisory failings, saying he sat by silently on internal sales calls after hearing Badger make misstatements to investors.

The company and both co-founders agreed to settle the SEC's charges without admitting or denying the allegations.

In addition to the firm's $1 million penalty, Badger agreed to pay a $100,000 penalty and be barred from the securities industry for a year. He stepped down as the company's CEO earlier this year.

Daubenspeck, who is still serving as chairman of the board, agreed to pay a $50,000 penalty.

Attorneys for Advanced Equities and Badger could not be reached for comment.

Steve Scholes, an attorney for Daubenspeck, said his client is "very pleased that both he and Advanced Equities have this matter finally resolved so that they can continue their efforts to provide stellar business investment opportunities to their clients."

The SEC alleges that Badger told investors the energy company had more than $2 billion of order backlogs, but the backlog actually never exceeded $42 million.

The SEC also said that Badger told investors the company had been granted a loan from the U.S. Department of Energy for more than $250 million, when in fact it had merely applied for a $96.8 million loan.

"Dwight Badger misled investors by embellishing key facts about the energy company's sales orders and its loan application to the Department of Energy," said Merri Jo Gillette, the director of the SEC's Chicago Regional Office.

"The SEC will continue to be vigilant in uncovering fraud in private securities offerings and holding registered securities professionals accountable."

The Energy Department's renewable energy loans and grants have been the subject of political controversy over the past year, particularly in the presidential elections. Republicans have accused the Obama administration of using the loan program to unfairly pick winners and losers in the private sector.

The SEC's complaint does not identify the name of the alternative energy company in the private offerings, or indicate if the company was ever actually awarded a Department of Energy loan.

In June, however, Crain's Chicago Business reported that the SEC's allegations pertain to the financial projections of a Sunnydale, California-based fuel-cell maker called Bloom Energy Corp., citing people familiar with the matter.

Attempts to reach anyone at Bloom Energy were unsuccessful.

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