Continued Misrepresentations of Larry Shultz, David Feuerborn and Thomas Jennings

As many of you know I follow a lot of the internet chatter relating to the chemical scam being perpetrated by David Feuerborn, Thomas Jennings, Larry Shultz, ESS and their co-conspirators.  I have noticed that David, Tom and Larry have taken to the internet to promulgate their lies about the solvent, and defame those that have uncovered their fraud.  This is the standard modus operandi of their scam.  They claim that the California Department of Corporations is corrupt, they claim that the Ventura County District Attorney’s Office is corrupt, they claim that the IRS and United States Attorney’s Office is corrupt, they claim that the Louisiana Attorney General’s Office is corrupt, they claim that they Texas State Securities Board is corrupt, they claim that Petro-Sog is corrupt, they claim that the Utah Partners are corrupt, and now they claim that Freestone is corrupt.  Are we beginning to see a pattern develop?   

(Personal Note: I will not give David, Tom and Larry another forum (aka this Blog) to spew their misrepresentations and lies, but I want to acknowledge some of the recent information they have been posting on the internet, and on certain government documents.  That said, out of respect to those that have been damaged by this scam I will not publish links to their posts unless they are published by the parties they have defamed.) 

Mr. Larry Shultz filed a certain document with a government agency under penalty of federal criminal violations if misstatements or omissions of facts are contained within the government document (“Government Document”).  Mr. Shultz signed the Government Document and filed it of record so he can’t retract it.  In the Government Document he claims that Freestone is corrupt. (Remember that pattern I mentioned above?)  In the Government Document he claims that he (Shultz) is now a “whistleblower” because of the amended lawsuit that Freestone recently filed against him, David, and Tom.  (The amended complaint shows additional securities violations perpetrated by Shultz.)  Shultz also states that he wants his day in court to clear his name.  He claims that rights were given to Freestone by himself, David and Tom, and that they eventually took away those rights from Freestone.  He claims that the chemical is “non-toxic” and safe, and that it can be used for EOR (pumped into the ground to extract oil).  He also claims that Freestone let “billion dollar rights” slip away.      

1) To begin, I can’t imagine that their attorney (Neil Evans) advised Larry Shultz to file this Government Document that outlined their potential argument/strategy in the Civil Case.  More importantly I am sure that their attorney knows that judges do not appreciate defendants and plaintiffs trying to argue the merits of a lawsuit outside their courtrooms.  According to my attorney, the defamation that occurred in the Government Document is also very much frowned upon by the Courts (to say the least).  In the Government Document, Shultz claims that he is some kind of “whistleblower”, and that he is using that as a pretext to defame Freestone and its management.  This is the same tactic David and Tom have used against government agencies that have uncovered their massive fraud.  They claim that these government agencies are corrupt or have corrupt officials working for them.  They claim that the multiple government agencies and the companies that have indicted/sued them are involved with a vast conspiracy against them.

2) Mr. Shultz also stated that he wants his day in court to clear his name.  Thus, I ask you, Mr. Shultz, why do you keep trying to get the Civil Case dismissed on claims that jurisdiction does not exist?  Why haven’t you answered the lawsuit?  Your actions speak louder than your words.

3) Next, Larry Shultz claims that he gave Freestone certain “rights” and then took those “rights” away because Freestone didn’t fulfill some obligation.  Let’s see, you cannot pump toxic, chlorinated chemicals into the ground (EOR) so that is a “right” that didn’t exist in the first place.  More importantly, who wants to own rights to a toxic chemical?  If these “rights” are so precious and you have the ability to grant them or take them away, and you truly care about the company that is suing you, then why are you taking rights away from them?  In one breath you say that you are trying to help and protect this company, but in the next breath you say that you took rights away from the company and you won’t give them back unless new management renegotiates with you!  This makes no sense, unless you want to take away these fictitious “rights” as an excuse to sell them to another party in order to continue the con.  This seems to be what they did to ESS investors, because the ESS “rights” seem to overlap with Freestone “rights”.  Hmmmm.  I am beginning to see another pattern develop.

4) If you are going to continue the claim under penalty of federal criminal violation (which has been refuted by multiple scientists at various state agencies and private companies) that your chemical is non-toxic and that it works, then produce your “bona fide” chemists willing to vouch for it.  I didn’t see an expert witness with a chemistry background listed on the motion in the Criminal Case.  I only saw an introducer and an investor that have a vested interest in the toxic chemical.  If your chemical is so amazing then why don’t you take the chemical to Exxon, Chevron, Shell, BP, etc.?  In the Civil Case Freestone states they wish to rescind the Agreement you signed with them.  Forgive my ignorance, but doesn’t that mean you can get all your “rights” back?  As is the case with most ESS investors I don’t think Freestone or anyone wants your “rights”.  The current actions of David, Tom and Larry don’t make any sense unless it was a scam to begin with.

**Criminal Case Update** 

The Criminal Case has been postponed until February 22, 2011.  The Government agreed to give Feuerborn and Jennings one last continuance with their agreement that they would not request any more continuances in this case.   

-ESS Investor                    

Payday

The United States Attorney filed the “Government’s Motion to Admit Business Records Under Declarations of Custodian of Record Pursuant to 902 (11) and 803 (6)” in the Criminal Case against David Feuerborn and Thomas Jennings (Case 2:10-cr-00346-SJO: Document 53. Pages 234-239).  It was a busy weekend for me, because there were approximately 300 pages of exhibits attached to this Motion.  These exhibits give a clear picture of the fraud, and the extent of the fraud, that Feuerborn and Jennings perpetrated against ESS investors and others.  You won’t believe how much money went to friends, wives, decorators, cabinet manufacturers, etc.  It looks as if they used ESS money to buy items such as a Lexus and an RV as well.  I wanted to remain impartial, but I can’t help becoming extremely frustrated by the indisputable evidence that the U.S. Attorney’s office has compiled.

(Note: The personal information listed below was derived from the W-2 Forms published by the government as exhibits to the Motion.)

Let’s first look at Suzanne Jennings from Anaheim, CA.  She is the wife of Tom Jennings and for some reason she received $35,000 from ESS Environmental, Inc. in 2005 (Case 2:10-cr-00346-SJO: Document 53-4. Page 299).  I’d like some explanation of what she did for ESS to deserve that money.  I would also like an explanation as to why Suzanne and Tom purchased an RV that cost $62,143 with money diverted from ESS (Case 2:10-cr-00346-SJO: Document 53-4 and 53-5. Page 310 and Page 333 respectively).  There are also copies of checks written from “Ecologic” to Trinity Cabinetry by Tom Jennings for a new set of cabinets for their house.  If you don’t remember, Eco-Logic is the company that was purportedly building an oil sand machine.  They had ESS investors believe that they were paying the real Eco-Logic while they were actually diverting money into the fake “Ecologic” bank account they created so they could buy an RV and cabinets for their house (Case 2:10-cr-00346-SJO: Document 53-5. Pages 322-324).

Do you remember my blog entry that listed a company called Jewelry by Asa?  I didn’t know what the connection was.  (Note:  When I Googled the Lantana address David Feuerborn used for the "Cleansal" domain name "Jewelry by Asa" came up under the same address.)  Well, I found that connection buried within these exhibits.  Asa Kilander of Camarillo, CA was paid $28,000 dollars by ESS Environmental, Inc.  Somehow she is connected to Dave and Tom and the chemical scam (Case 2:10-cr-00346-SJO: Document 53-4. Page 300).  What if her “Swedish jewelry and clothing business” was a front company to hide ESS money?  What if there is hidden ESS money in Sweden?!?!  I find it odd that her website no longer exists. 

I am anxious to see the exhibits that will be filed in the Civil Case.  While the Criminal Case deals with tax evasion and tax fraud, the Civil Case deals directly with the chemical scam.  Once both cases make some more progress I think ESS investors will have a lot of information to sift through. 

-ESS Investor          

Courtroom Drama

I put a phone call in to Freestone’s office to ask if anyone from the company attended the hearing on Wednesday.  I spoke to an individual at the company that attended the hearing, and he gave me a play-by-play of what occurred.  I will keep his identity anonymous out of respect for his privacy.  I have no ill will towards their company, because they have been hurt by this scam just as all the ESS investors have been hurt.    

Usually federal court hearings are pretty bland, but I am told that this one had a little excitement.  To begin, David Feuerborn and Thomas Jennings did not show up.  Neil Evans (David Feuerborn’s criminal attorney) was present as well as the new third partner, Larry Shultz. 

It sounds as if this hearing was more exciting than an episode of Law & Order.  I would have loved to have been a fly on the wall at this hearing, because according to my source at the company Larry Shultz was thrown out of the courtroom by Judge O’Connor for speaking out of turn while in the gallery.  Now I am more inclined than ever to get a transcript of the proceedings so I can find out exactly what was said that angered the Judge.  Shultz wasn’t just warned.  He was thrown out!  Not the best first impression on a Judge that will be presiding over your case if you ask me.  I wonder if the Judge knows about the criminal charges that have been brought against Feuerborn and Jennings by the U.S. Attorney's Office.  It looks as if this guy Shultz is now completely intertwined in their chemical scam, and if he has been involved in raising money for them he might be involved in their criminal activities which include defrauding the federal government, and tax fraud.  I hope someone investigates and follows the recent money transactions.    

   

(Note: The Judge allowed Shultz to come back in to testify as a witness in the hearing.  While on the stand Shultz apologized for his outburst.  It will be interesting to see what he said on the stand, and if it conflicts with any information that is known about the chemical scam.)

After the discovery of this news I am going to order a complete transcript of the proceedings.  I will update everyone when I get it. 

-ESS Investor

Death and Taxes

“In this world nothing is certain but death and taxes.” – Benjamin Franklin

How true this quote must ring to David Feuerborn and Thomas Jennings.  I have been asked why the United States would indict David and Tom for tax fraud rather than indict them for their chemical fraud scheme.  If you talk to David and Tom I am sure you will hear responses such as, “these are trumped up charges” and, “they are only going after us on tax fraud because they can’t prove our chemical business was a scam.”  One should ignore those biased responses.

Instead it is well known that tax fraud is very easy to prove.  Take for instance the criminal case that brought down the infamous mobster Alphonse Gabriel “Al” Capone.  Al Capone was a ruthless gangster, but the tax evasion charges are what finally put him away for good.  The tax fraud might be the best way for ESS investors to finally get justice.  So the government will need to prove the following in the Criminal Case against David Feuerborn and Thomas Jennings:

1.        Did David file a tax return in the past five years?  If he did it should be on file with the IRS.  If he didn’t then it won’t be on file.  That is very easy for the Government to prove.  I don’t think the excuse “it got lost in the mail” will work this time.

2.       Did Thomas Jennings file his tax returns incorrectly over the past five years?  All the Government needs to show is that he misstated his income based on the forensic accounting of their bank accounts. 

3.       Did Feuerborn and Jennings open a bank account with the name “Ecologic”?  (This is spelled deceivingly similar to a company that built a machine that is currently who-knows-where.  The real company is spelled “Eco-Logic” with a hyphen.)  The government is alleging that they created this “bogus” bank account in order to divert money into their personal accounts without investor knowledge. 

4.          Did Dave and Tom ask their CFO to classify the ESS money paid to them as “loans” so they wouldn’t have to record it as regular income?  I am sure they have sworn testimony of the CFO to validate this allegation.  The IRS doesn’t take kindly to loans that have no term or interest rate.

5.       Did Tom pay for interior decorating at Interiors by KC, Inc. with investor money?  That should be easy to prove.

6.       Did Dave by motorcycles and/or cars at Hahm Motorsports with investor money?  That should be easy to prove.  (Grand Jury Indictment, Page 1-25; Case: CR 10-00346)

Do you see how easy it is to prove tax fraud?

The U.S. Attorney had indicted them for tax fraud, but I am sure he will use a broad brush to paint a picture that includes the chemical fraud as well.  The U.S. Attorney has already used the Civil Case in his motions, and he can continue to use it.  He can also use the sworn testimony and additional discovery gathered in the Civil Case.  Additionally, one has to ask if they paid taxes on the money paid to them by Freestone.  I doubt it.  This shows a continued effort to defraud the U.S. Government.      

Thus, there is little gray area when it comes to tax fraud.  If convicted, one might assume that they will go back to their chemical scam after they get out of prison because that is all they know.  Here is my analysis of that scenario.  If Dave and Tom go to prison they are looking at terms of up to 20-30 years.  If they get the minimum sentence or a decreased sentence and they return to their chemical scam then the Civil Case might be the answer.  Freestone can ask certain questions in their interrogatories and discovery portion of the litigation that can prove that criminal acts took place and even bring the new guy, Larry Shultz, into the mix.  If they try to perpetrate the chemical scam again, then the U.S. Attorney can go after another indictment based on the sworn testimony gathered in the Civil Case.  This may happen anyway if enough evidence is amassed.  Only time will tell.   

- ESS Investor 

The Eyes of Texas are Upon You

It looks as if we have some life in the Civil Case.  Judge Reed O’connor has ordered both parties (Plaintiff and Defendants) to appear for a hearing on November 17, 2010 to hear verbal arguments on the jurisdiction challenge submitted by Neil Evans, the attorney for David Feuerborn, Thomas Jennings, Larry Shultz, and Environmental Services and Support, Inc. (“Defendants”). 

On November 17^th Freestone will argue that the Defendants had the minimal contact needed in the state of Texas to keep the jurisdiction in the Northern District Court in Texas.  According to my research, minimal contact is usually all one needs to prove in order to keep the original jurisdiction in which the complaint was originally filed.  According to Freestone’s response to the Motion to Dismiss, the Defendants had minimal contact with Texas in that they originally solicited a Freestone consultant and resident of Texas while he was in Texas, made multiple phone calls to Freestone’s Texas office, sent multiple emails to Freestone’s Texas office, visited Freestone’s office in Texas on multiple occasions where they gave misrepresentations during demonstrations of the solvent, a demonstration trip in Houston, and the Petro-Sog case indicating that at least one of the Defendants (David Feuerborn) has previously directed this scam at the state of Texas.

Neil Evans, the attorney for Feuerborn in the Criminal Case, argued that he didn’t have enough time to prepare a proper defense for his client, and requested a continuance multiple times in the Criminal Case.  Now, how are we supposed to believe that he has time to travel to Texas to represent all of the Defendants in the Civil Case?  What are the odds that he will come up with some obtuse reason to postpone the jurisdiction hearing in the Civil Case?  But then again the Judge must to approve his reason before he will allow the hearing to be postponed.  I have a feeling that Judge O’connor will not have a lot of patience for these guys if they attempt delay tactics when he hears about their criminal indictment. 

So now the Defendants’ attorney is going to fly back and forth between California and Texas on ESS investors’ funds.  This is the biggest travesty of them all.  On a phone conference with ESS investors David Feuerborn claimed he was looking for a joint venture partner, and that construction was underway on another machine.  Instead, it looks like any new money that might come into this venture will be spent on defending David Feuerborn and Thomas Jennings.    

Personally, I would like both cases to move forward as quickly as possible.  My goal is to collect any and all evidence in the Criminal Case and Civil Case that proves that Feuerborn and Jennings used fraud in their chemical scam in the hopes that an ESS class action can be put together.  If there is evidence that criminal actions have occurred then the authorities might even get involved and stop them once and for all!  No one else needs to get hurt by these guys and their scam. 

-          ESS Investor    

Back to the Basics: The Civil Case

Let's take a look at the Civil Case currently pending in the Northern District of Texas: 

On July 9, 2010 Freestone (the "Plaintiff") filed a lawsuit in the United States District Court for the Northern District of Texas, Dallas Division, Civil Action Number 3:10-cv-01349-O against Lawrence Shultz, Environmental Services and Support, Inc. (“ESSI”), David Feuerborn and Thomas Jennings (the "Defendants").  The Plaintiff is alleging that the Defendants committed "fraud by nondisclosure, the common law tort of conversion by pretext and swindling, deceptive trade practices, common law fraud and fraud by misrepresentation/statutory fraud."

On August 3, 2010 documents were filed with the Court to show that all of the Defendants had been served.  The documents indicate that the Defendants (and members of their families or live in companions) tried to avoid service by either denying their identities, or claiming a false identity.  (The service documents can be read on PACER under Pages 81-88.)

On August 19, 2010 a Stipulation was filed with the Court by Neil C. Evans, esq. who is representing all Defendants in the Civil Case.  (Note: He is also David Feuerborn's attorney in the Criminal Case.  Evans has also filed documents on behalf of Tom Jennings in the Criminal Case.)  The Stipulation states, "all Defendants will file their responsive pleadings to the Complaint in this action by Thursday, August 19, 2010" (Civil Case, Stipulation to Set Deadline for Filing Response to Complaint by all Defendants. Page #101, Paragraph 1).  Further it states that, "all Defendants waive any objection to process service" (Civil Case, Stipulation to Set Deadline for Filing Response to Complaint by all Defendants. Page #101, Paragraph 2).  (Note:  A response to the Complaint has never been filed by the Defendants.)

On August 19, 2010 the Defendants filed a "Notice of Motion and Motion to Dismiss  for Lack of Personal Jurisdiction" with the Court.  The Defendant's main argument is that "the Defendants lack the requisite contacts with the state of Texas" (Civil Case, Notice of Motion and Motion to Dismiss  for Lack of Personal Jurisdiction. Page #91, Paragraph 1).

On September 9, 2010 the Plaintiff filed a Response to the Defendant's Motion to Dismiss.  This Response states the Plaintiff's belief that jurisdiction is proper in the Northern District of Texas, because (i) Lawrence Shultz was working as a finder and consultant for Feuerborn and Jennings and made multiple unsolicited calls to a consultant working for the Plaintiff in order to pitch their solvent and structure a deal, (ii) Feuerborn and Shultz called and sent multiple emails to the Plaintiff before and after the Stock Purchase Agreement was signed, (iii) Jennings made multiple calls to the Plaintiff, (iv) Feuerborn and Shultz made multiple visits to both Houston and Dallas where the fraud occurred and the aforesaid misrepresentations were made to the Plaintiff and others, and (v) Feuerborn made business cards with the Plaintiff's address.  (Civil Case, Plaintiff's Response and Brief in Opposition to Defendant's Motion to Dismiss for Lack of Personal Jurisdiction (Docket #10). Pages #106-115)  The Response goes into further detail, but those are the main points I noticed.

The parties are now awaiting a ruling from the Judge hearing the Civil Case.


-ESS Investor

Criminal Case Update

Happy Monday everyone!  This blog entry will be a long one so bear with me.  First I will go through the motions that have been filed by the United States Attorney and by the attorneys representing David Feuerborn and Thomas Jennings.  If the judge has already ruled then I will also give his ruling.

"Conflict of Interest"

On August 23, 2010 the United States Attorney filed a "Notice to the Court of Potential Conflicts of Interest and Request for Hearing."  In summary, the Notice stated that there might be a potential conflict of interest on the part of the counsel representing David Feuerborn (Neil C. Evans, esq.) in the Criminal Case and his dual representation of both David Feuerborn and Thomas Jennings in the Civil Case.  The U.S. Attorney states that there is a potential overlap of the Criminal Case and the Civil Case because Feuerborn and Jennings used the same pitch to Freestone that they used to the ESS investors in order to induce an investment.  The U.S. is further alleging that the ESS money was then funneled to Feuerborn and Jennings, whereupon they didn't pay taxes on that money.  Thus, the potential conflict arises because both cases "arise out of similar conduct -- namely, misrepresentations to investors regarding defendant's companies...and the technology defendants and those companies claim to have developed" (Criminal Case Page #98, Lines 22-26).

On September 2, 2010 Neil C. Evans filed a response to the U.S. Attorney's Notice.  In summary, Evans argues that the two cases are completely unrelated.  He also states that his clients have signed waivers of conflict.  His main argument is that the allegations in the Civil Case occured after the allegations in the Criminal Case.

On September 20, 2010 the Honorable Judge Otero stated that he wanted supplemental briefs from the defendants and that this matter would be continued until October 1, 2010.

On September 24, 2010 Neil C. Evans filed his supplemental briefs where he states that, "[t]he alleged potential conflict of interest asserted by the Persecutor in this case, does not involve the joint representation of Defendants by an attorney in the instant case" (Criminal Case Page #179, Lines 7-10).  (Personal Note: Evans has filed motions on behalf of Jennings in the Criminal Case.)

Lastly, the main reason that the U.S. Attorney made this notice is to avoid any appellate argument that the Defendants Feuerborn and Jennings did not have "conflict free" counsel.  I will update everyone once the Judge's ruling has been posted on PACER.

"Application to Travel"

On September 3, 2010 Evans filed an "Ex Parte Application to Expand Travel Restrictions as Conditions of Release" on behalf of Feuerborn AND Jennings.  Currently, Feuerborn and Jennings are restricted to the Central District of California, Texas and Louisiana prior to the trial date in the Criminal Case.  Evans asked that the restriction be modified so that Feuerborn and Jennings can travel throughout the continental United States.

On September 3, 2010 the U.S. Attorney responded by stating that, "publicly available records indicate that defendant's 'business' activities are fraudulent in nature" (Criminal Case Page #146, Lines 18-19).  Thus he asked that the court deny this request to expand travel privileges.   The U.S. Attorney cites the following:

http://www.ssb.state.tx.us/Enforcement/files/1499.pdf | http://da.countyofventura.org/091505.htm | http://www.corp.ca.gov/ENF/pdf/2006/ess.pdf

On September 20, 2010 the Judge vacated their application and directed them to the Pretrial Service Office.  (Personal Note: We are unclear if the Pretrial Service Office has the ability to extend their travel privileges.)

"Continuance Request"

On September 20, 2010 Neil C. Evans filed an "Ex Parte Application to Continue Trial" citing that, [his] ability to devote time to [the Criminal Case], which includes about 50,000 pages of documents produced by the Prosecutor, was materially affected by personal events" (Criminal Case Page #154, Lines 25-28).

On September 24, 2010 the Judge vacated this application as well.  (Personal Note:  We are unsure if there has been any continuance granted, but as of now the trial date is still scheduled for November 9, 2010.  Also, despite his request for a continuance in the Criminal Case, Mr. Evans is still the only counsel representing them in the Civil Case.)

Personal Note:  I have observed that Neil C. Evans is the only attorney filing anything in the Criminal Case, and Steven M. Neimand, esq. (attorney representing Jennings) has yet to file anything.  Additionally, an attorney named Dennis Berry attempted to "specially appear" for Jennings on the hearing that occurred on September 20, 2010.  The Court stated that special appearances were not allowed and ordered Neimand appear.  I just think that this is very odd, and, as an outsider looking in,  it appears that one attorney is representing both Feuerborn and Jennings in the Criminal Case.
 

The Defendants (including Feuerborn and Jennings) in the Civil Case asked the court to dismiss the case because they claim that Freestone does not have jurisdiction over them.  Freestone filed a response giving their reasons why they do, in fact, have jurisdiction over them.  This has yet to be ruled on, and I will read both the motion and response to give a detailed account of the Civil Case as well.

-ESS Investor