Hello Blog World! We had a lot of documentation filed today in the Criminal Case, and I have been sifting through it since early this morning. The U.S. Attorney filed its Government’s Trial Memorandum (“Memorandum”) and it was approximately seventy-four pages long. It goes into detail on the eleven counts of Fraud, Tax Evasion and Subscription to a False Tax Return.
Below are some of the pertinent excerpts from the Memorandum:
Status of the Case:
“Trial is set for January 18, 2011, at 9:00 a.m.”
“The estimated time for the government’s case-in-chief is approximately four court days, excluding cross-examination.”
“The government expects to call approximately twelve witnesses in its case-in-chief.”
Background:
“Since at least the early 2000s, defendants Jennings and Feuerborn have owned and operated a series of companies that purportedly developed technology that could separate oil from dirt and other materials without producing any hazardous waste. The names of defendants’ companies were usually some variant or expansion of the abbreviation ‘ESS’ -- for example, Environmental Soil Sciences, Inc.; ESS Environmental, Inc.; and Environmental Services and Support, Inc. Specifically, defendants claimed that they developed and were in the process of patenting a chemical solution that, when used in conjunction with specialized machinery, could quickly and efficiently remove oil from huge volumes of contaminated soil. Defendants have used various names for their chemical solution -- for example, ‘Renue,’ ‘R6000,’ ‘RTS-11,’ and, more recently, ‘Cleansal.’
Defendants have pitched the technology to potential investors as the panacea to oil spills and soil decontamination and remediation projects. Defendants’ marketing materials projected that annual revenues would exceed a billion dollars by ESS’s second year of operation. (E.g., Bates No. IRS-028405.) Despite numerous warning signs that defendants’ claims about the technology were false, defendants managed to convince hundreds of people to invest tens of millions of dollars in ESS. These warning signs include the following:
In 1996, defendant Feuerborn and a company called Federation of Research Chemical Engineering, Inc., or ‘FORCE’ (a predecessor to ESS) were sued in Harris County, Texas, for fraud in connection with the marketing of a chemical solution that, like those later pitched by ESS, purportedly could separate oil from other materials without producing hazardous waste. In October 1998, a final judgment for approximately $40,000 (including $5,000 in punitive damages) was entered against defendant Feuerborn, with the court finding that defendant Feuerborn had “committed actual fraud.” (Bates No. IRS-042944.)
In March 2003, the Texas State Securities Board fined and issued a Cease and Desist Order against ESS and defendant Feuerborn for illegally selling securities.(See http://www.ssb.state.tx.us/Enforcement/files/1499.pdf (last visited December 20, 2010).)
In August 2005, defendants Jennings and Feuerborn were indicted by state authorities in Louisiana for, among other things, fraud, conspiracy, and racketeering in connection with the sale of securities in ESS. (See http://da.countyofventura.org/091505.htm (last visited December 20, 2010).) Defendants pled guilty, and ESS was fined $150,000 and required to buy back ESS shares defendants had sold to investors. (See http://www.deq.state.la.us/portal/Portals/0/Legal/cis/ENV%20CRIMES%20PROSECUTED%2004_02_08%20upd.xls (last visited December 20, 2010).)
In November 2006, the California Department of Corporations issued a Desist and Refrain Order against defendants Jennings and Feuerborn, as well as ESS, for ‘offer[ing] and s[elling] securities . . . by using untrue statements and/or misrepresentations or omissions of material facts.’ (See http://www.corp.ca.gov/ENF/pdf/2006/ess.pdf (last visited December 20, 2010).)
On July 9, 2010, defendants Jennings and Feuerborn, as well as ESS, were sued in the Northern District of Texas for making material misrepresentations and concealing materials facts regarding the sale of securities in ESS. See Freestone Resources, Inc. v. Shultz, et al., No. CV 10-01349-O.
[T]he Louisiana indictment caused defendants to change how they executed their tax fraud scheme. Whereas from at least 2003 through 2005, defendants primarily funneled unreported investor monies to themselves through the Bogus Ecologic Account, following the Louisiana indictment, defendants instead paid themselves 'management fees' but mischaracterized them as 'loans.'” (Case 2:10-cr-00346-SJO; Page IDs 592-596)
Discussion Points:
Basically the U.S. Government gave a synopsis of just a few of the scams that David Feuerborn and Thomas Jennings have been perpetrating over the last few years. It makes me sick to my stomach. Hopefully these men will be put behind bars so they cannot scam anymore innocent victims.
I will post more from the Memorandum ASAP.
-ESS Investor
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