SEC says Chicago firm misled investors on Energy Dept loan

Wed Sep 19, 2012 12:32am IST

* 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.

Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Earnings Season

Reuters Showcase

Obama In India

Obama In India

In parting shot, Obama prods India on religious freedom.  Full Article 

Market Rally

Market Rally

Sensex, Nifty hit record high for fifth straight session.  Full Article 

Restructuring

Restructuring

Max India to be split into three separate companies.  Full Article 

India’s Male Tenor

India’s Male Tenor

India’s lone male tenor wants to ‘Indianise’ opera  Full Article 

Indian Equities

Indian Equities

Hornbill raising $250 mln to invest in equities - partner.  Full Article 

Ratings Downgrade

Ratings Downgrade

S&P downgrades Russia's sovereign credit rating to "junk".  Full Article 

Facebook Outage

Facebook Outage

Facebook takes blame for service outages, which hit wider Web.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage