Career History and Battles I've Won and Lost
Prior regulatory scrutiny – my name has
been cleared
While
I could write a book about the mistakes I've made in the past, this blog entry
is intended to focus on the events surrounding the securities matters in
Missouri and Kansas in the first half of the last decade. For those who have found online material
regarding these events and care enough to want to hear the other side of the
story from my perspective (and that of my lawyers at the time), then keep
reading. For those who are looking for
reasons to discredit my work or reputation in renewable energy, I am human and
you will therefore find that I've made mistakes that you can capitalize
on. However, I have realized recently
that I can do more good for the planet and the US economy if I provide 100%
transparency and not try to hide from my mistakes.
In
1998, I founded the 1st utility-scale wind power company in Kansas: Tradewind
Energy LLC (formerly Kansas Wind Power LLC). Early on, we struggled to learn the energy business, the utility-scale wind
development business, and to raise capital, while fighting intense (and
sometimes extreme) resistance from fossil fuel interests and surprisingly even
from some environmentalists. There were
a few times that my staff and I received death threats while trying to develop
wind projects, particularly a project to the northeast of Wichita. At that site, there were hunting clubs with
very wealthy members who claimed the wind turbines would scare off their birds
and deer. We later learned that fossil fuel “dig up stuff and burn it” die-hards were
affiliated with and/or members of that hunting club. Who knows if that played a part in that being
the first project where we were denied a conditional use permit by the
county? Nevertheless, we plowed on and
developed about a dozen sites in the state for wind farms. During this time early in the company's history, one of my staff members made the mistake
of sending emails out to an Opt-In list asking for interested parties that may
want to participate in a non-profit cooperative for ownership of wind turbines,
similar to a farming coop. We did so
based on pending legislation in the state of Kansas (House Bill 2018). But because that bill was not enacted yet
into law (it was a year later) we got our hand slapped by the overzealous
Kansas securities office for “general solicitation” (which is now legal
nationwide as part of the crowd-funding legislation passed by Congress) even
though no funds were ever raised from any party.
By
the time I sold my interest in the company in 2004, the company had raised several million dollars from angel investors
and had developed a few sites to a mature status, including the Smoky Hills
Wind Farm and Caney River Wind Farm sites.
Both of those sites went on to be operating wind farms of 250 MW ($500
Million) and 200 MW ($350 Million) respectively, and the former site was the
largest wind farm in Kansas for a number of years. And in 2012, Tradewind received the distinction of winning the Outstanding Commercial Achievement Award from the American
Wind Energy Association for helping to bring cost-effective wind power to the
Southeast.
I
get sentimental when I reflect back and admit to myself that I chose to “give
up my baby” by selling my interests in the company. But I do get a great deal of satisfaction knowing
that my former company has done well and the investors have earned a nice
return (based on what I’ve been told).
At
Krystal Energy, we did grow quickly: from a handful of energy sales consultants
in 2004 to over 2,500 energy consultants in 2005 and over 5,000 customers. But the margins were way too thin to make a
profit, and we were forced to raise outside capital to keep paying staff
salaries and serve our customers. My
personal investment in the company (from proceeds earned from selling my share
of Tradewind) was insufficient to keep the company operating at a loss for very
long. By that time, there were about 10
employees and a full complement of Board Directors. We cut costs as much as we could, but after a
few months we came to a crossroads: either raise money or go out of
business. We elected to raise money.
About
that time, I was approached by the Sierra Club and asked to be an Expert Witness
in their fight against Great Plains Energy (the parent company of Kansas City
Power & Light) and their plans to build three new coal plants. I accepted the pro bono engagement and
prepared thoughtful and well-documented remarks for the hearing that demonstrated
the financial attractiveness of wind energy as compared to new coal
plants. The Sierra Club law firm (based
in St. Louis, MO) and our team felt like my presentation made a compelling case
for wind energy, and that doing no coal and more wind energy would provide
substantial economic benefits to both the shareholders and ratepayers of Great
Plains Energy. The lawyers warned me
that the commissioners of the Missouri Public Service Commission were being
supported politically by the region's coal-based utilities, but I was cocky and
fearless and attacked their business model unapologetically. Another mistake. A big, dumb mistake.
Within
weeks of my testimony at the Missouri PSC, our company was approached by
seemingly every regulator in the state of Missouri, including the Securities
Division of the Secretary of State (Robin Carnahan), the consumer protection
office, the attorney general, and several others. Initially, many of them tried to say that
they had the jurisdiction to regulate green tags and wanted us to stop selling
our products & services. Obviously
we resisted that and provided comprehensive documentation to each regulatory
agency to refute their attempts to regulate us or claim we were not in
compliance with regulations. As a result,
fortunately, this regulatory scrutiny quickly evaporated from all agencies
except one: the securities division of the secretary of state. Although the investment offering was posted
on the U.S. SEC website, prepared by a large Chicago-based law firm, and filed
properly with the federal and state agencies, and the state of Missouri even
cashed our check to register the offering, the secretary of state's office
issued a damning and outrageous press release, accusing our company of
everything they could possibly think of.
This shocking, unsubstantiated and damning announcement crushed our
sales growth and caused us to lose thousands of customers and hundreds of sales
energy consultants, even though nearly all of the allegations were false and
unfounded.
Our
Board authorized us to immediately engage a law firm and fight for our
survival. After about 18 months and
hundreds of thousands of dollars in legal fees, the state could not find a
single act of wrongdoing or misconduct.
And their star witnesses were two former Krystal Energy disgruntled employees
who had made false claims that were quickly proven to be unfounded. We had
reached a point where the state proposed a settlement where we would offer to
buy back the stock from the two Missouri shareholders who purchased stock, and
from the former employees (who were Missouri residents) that we had fired
months before the investigation and had received gifted (free) stock and/or
stock options. I immediately agreed to
assume all liability in order to shield my five independent Board Directors and
my six dedicated fellow management team members from any liability. Although my salary and all other forms of
compensation at the time were less than $65,000 per year (barely enough to
support my family), I invested as much as I could during this time to keep the
company afloat and often went without reimbursement of my company expenses and
went without pay on numerous occasions.
In
the settlement, there were no fines or penalties, no admission of wrongdoing by
any of our officers or Board directors, and no "victory" that could
be announced by Krystal Energy. We
considered going to trial to claim a true victory, but that would have cost
another $150,000 to $300,000 in legal fees and taken another 12-18 months (or more) with the outcome not guaranteed despite our very strong case. Although our lawyers told us we had a 95-99%
chance of prevailing in trial, by that time we had exhausted all of our
available financial resources for legal bills, had laid off nearly all of our
employees, and our sales had declined by more than 90%. This regulatory action had effectively put us
out of business, so we were forced to accept the settlement. So Missouri vacated the C&D Order (which
means it's as if it never happened at all) but the elected politicians got
their press releases the prior year and we got no coverage of being
vindicated. If you would like a copy of
the settlement signed by the Missouri officials or a copy of a letter from our
lawyers describing the matter and its outcome, please don't hesitate to email
me and I will send it to you will full transparency.
Read the summary letter from the law firm that represented Krystal Energy (including all of its officers & directors, myself included)
here.
What's
interesting is that Robin Carnahan, the secretary of state at that time, was
the sister of Tom Carnahan, the founder and CEO (at the time, although he subsequently stepped down) of our biggest competitor, Missouri-based Wind Capital Group. That firm was competing with us for power purchase agreements from the few
utilities in the region that were either willing or compelled to buy wind
energy. Coincidence? Maybe. And there were several people
who confirmed that some of the Missouri commissioners were "in the
pocket" of the utilities, so, in my opinion, this was a concerted effort to
discredit my company - and me, as the most vocal spokesperson and poster child
for wind energy in the region.
In
retrospect, I often think I should not have taken on the coal-based, ultra-conservative Midwestern utility executives because it put my company out of
business and it caused tremendous stress on my marriage, my family, and my
health. But every time, I come back to
the issue of integrity and conviction: if I'm unwilling to stand up for what I
believe in, regardless of the consequences, then who am I really? I've never been one to hide from conflict if
a wrong can be "righted" by my actions. So, despite the life-changing disaster that
befell me - and that I will never be able to escape due to the power of the
Internet - I have said that even now, almost a decade later, it's hard for me to
regret testifying against the coal plants.
Was it worth it?
Well, a few years after my testimony the
Sierra Club and Great Plains Energy (GPE) signed a landmark settlement. You can read about the settlement at the link
below, which has been widely used now as a template by the Sierra Club in their
battles against new coal plants.
Missouri: Sierra Club and Utility Agree
to Landmark Global Warming Plan
March 20, 2007
In a groundbreaking agreement that can serve as a model for
environmental groups and utilities working together, the Sierra Club, Kansas
City Power and Light (KCPL), and the Concerned Citizens of Platte County
(CCPC) have agreed on a set of initiatives to offset carbon dioxide (CO2) and
reduce other emissions for the Kansas City-based utility. Under the agreement
announced, KCPL agreed to pursue offsets for all of the global warming
emissions associated with its new plant through significant investments in
energy efficiency and renewable energy, and cut pollution from its existing
plants in order to improve air quality in the Greater Kansas City metro area.
The agreement proposes other investments in clean energy,
significant decreases in emissions and resolves four appeals pending between
the Sierra Club, CCPC, and KCPL. The most significant element of the agreement is the unprecedented commitment by KCPL to pursue the offset of
carbon emissions from its proposed Iatan 2 generating station, located near
Weston, Missouri. The estimated 6,000,000 tons of annual carbon dioxide
emissions are targeted to be offset by adding 400 megawatts (MW) of wind power;
300 MW of energy efficiency; and a yet to be determined combination of wind,
efficiency, or the closing, altering, re-powering or efficiency improvements at
any of its generating units. These proposed offsets will be partially implemented
by 2010 and fully implemented by 2012. The parties are also agreeing to work
together on a series of regulatory and legislative initiatives to achieve an
overall reduction in KCPL's carbon dioxide emissions of 20 percent by
2020.
Many people worked very hard for a long time to reach this settlement. I played a small part in this famous battle
within the Clean Power Revolution. So
yeah, it was worth it.
