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PDFAlthough AEHI had spent just $1,000 on research and development during the previous two years, regulatory filings show, the company boasted all sorts of remarkable inventions. AEHI claimed that it had developed a breakthrough fuel additive that could slash the costs of natural gas-powered electricity, for example, and that it was also creating mini reactors that would “revolutionize nuclear power in an urban setting.” Even better, the company said that it was poised to become “the first company to harness the natural energy delivered in a bolt of lightning” – a goal later portrayed as “hopeless” by a national lightning expert interviewed by The New York Times.
While ambitious, however, those projects ranked as mere side shows for the young public company. If possible, AEHI had even bigger plans. Despite its minimal resources, skeptics say, AEHI promised to build a multibillion-dollar nuclear power plant – the first project of its kind for decades -- in a rural Idaho desert that lacked the vast water supply and available transmission lines normally required to make such projects work.
“They have no money; they have no plans,” a county commissioner told the local Owyhee Avalanche newspaper at the time. “Most (locals) think that it’s … a daydream or a fairy tale.”
Since then, records show, AEHI has announced funding deals with at least three obscure financial firms – including one whose leader would later be charged with alleged securities fraud – but still lacks the money required for even the equivalent of a down payment on a nuclear power plant. AEHI also keeps changing the planned location for its proposed plant, local news coverage reveals, currently settling on an Idaho county already ruled out by Warren Buffett’s MidAmerican Nuclear Energy because it made no economic sense.
Nevertheless, AEHI has still managed to sell its own investors on the massive project. The company’s volatile stock, which once fetched mere pennies, currently trades for 87 cents a share. With a share count of 320 million, up from about 40 million a few years ago, AEHI now boasts a market value of $280 million.
“I’ve thought about this a lot,” says Joe Weatherby, a former planning and zoning commissioner in the first Idaho county that AEHI targeted for its plant. “If I were going to design the perfect scam, what elements I would include?
“Gillispie has preyed on ignorance and greed. He has preyed on every little thing that might make people tick.”
Pitching Stock
Weatherby was busy preparing a long-term energy plan for Owyhee County, a region where 17.5% of the population lives below the poverty rate, when Gillispie suddenly burst onto the scene. The plan, which originally excluded high-priced nuclear power (favoring the county’s abundant wind resources instead), began attracting some unexpected resistance from locals at that point.
“I found out that Gillispie had hired a hay broker who traveled all over the county and knew all of the farmers around here,” Weatherby states. “This hay broker would offer contracts to farmers and ranchers promising them power at 1.5 cents to 1.7 cents a kilowatt hour (10 times cheaper than most nuclear power) if they bought the company’s stock.
“He actually solicited his drivers to help him sell the stock,” Weatherby continues. “So a lot of locals already owned the stock by the time we started our hearings on the energy plan.”
Weatherby identified the hay broker as Jason Sells, who shows up in AEHI filings as a major stockholder himself. In anInternet bio, Sells portrays himself as a successful entrepreneur who “was a licensed commodity broker in the state of Idaho.” Even if he remains licensed to sell commodities in his home state, however, he would still need a separate “Series 7” license in order to legally sell stock.
In a recent telephone interview, Gillispie described Sells as an AEHI fan who bought the company’s stock and voluntarily promoted it to others in the local community. However, Gillispie said, the company – rather than Sells – actually sold that stock. Moreover, he added, the company took steps to make sure that it sold no stock to those who lacked the means (either $1 million in assets, excluding primary residence, or $250,000 in annual income) that would qualify them as suitable investors.
“We’re not supposed to,” Gillispie explained. “But we really can’t know … They put down what they’re worth, (and) we have to trust them.”
Despite those restrictions, AEHI found plenty of investors in one of the poorest states in the nation. All told, Gillispie estimates, almost half of AEHI’s stockholders reside in Idaho.
Bruce Day, a former securities commissioner for the state of Oklahoma who previously worked for the U.S. Securities and Exchange Commission as well, sensed possible reason for alarm.
“I would absolutely look into this,” says Day, who now serves as a partner for a major securities law firm based in Oklahoma City. “I would be shocked if Idaho regulators haven’t done that already.”
Marilyn Chastain, chief of the securities bureau for the Idaho Department of Finance, confirmed that her agency has fielded complaints about AEHI. She could not comment on the nature of those complaints, however, or discuss what actions – if any – her agency has taken in response.
Meanwhile, AEHI has long since abandoned its plans to build a nuclear power plant in Owyhee County. About two years ago, the local Mountain Home News reported, AEHI suddenly discovered fault lines – present for an estimated 500,000 years – on its proposed site and shifted its plans to nearby Elmore County instead.
Potential Conflicts
There, AEHI would face an even bigger showdown.
This time, records show, AEHI tapped Jim Tibbs – a retired Boise police officer and current member of the Boise City Council – to moderate the company’s public hearings. His appointment caught the attention of John Weber, a board member for a local environmental group known as the Snake River Alliance, who worried about possible conflicts and wanted to make sure that Tibbs could be trusted to be fair.
“All I do is run the meeting,” Tibbs assured Weber in an email ahead of the first hearing. “I don’t take sides.”
Even with Tibbs in charge, the Mountain Home News noted, that meeting proved to be explosive. Police officers arrested a prominent nuclear activist and led him away in handcuffs, the newspaper reported, triggering outrage from other environmentalists in the crowd. Skeptics also raised questions about Gillispie’s credentials, which turned out to be less impressive than they first seemed.
In its original regulatory filings, AEHI claimed that Gillispie held an MBA from the Massachusetts Institute of Technology. After Weatherby secured a fax from MIT stating that Gillispie had never earned an actual degree from the school, however, AEHI revised his bio to state that he simply “completed the senior executive program” – a short, non-degree offering – at MIT instead.
(On another note, filings show, Gillispie also claimed that he operated a firm called Grace Glens Consulting – which provided advisory services to senior nuclear executives – beginning in 2002. According to Internet records, however, Gillispie never even incorporated that firm until 2005.)
Meanwhile, Weatherby came under attack following that contentious hearing. In a letter to the editor of the Mountain Home News, James E. Cooper -- identified by Weatherby as an area stockbroker and the son of a major AEHI shareholder -- portrayed Weatherby as a conflicted activist involved in “a very large wind farm business venture (with) over 5,000 windmills.” At the same time, Cooper reported no connection to the company.
For his part, Weatherby has dismissed Cooper’s claims as ludicrous. He denies any financial conflicts, while pointing out that a 5,000-turbine wind farm would eclipse the record-breaking 2,000-turbine project once planned by legendary oilman T. Boone Pickens and therefore rank as the largest wind farm in the entire world.
To critics, AEHI supporters look like the conflicted ones instead. For example, they note, Tibbs -- the so-called “independent” moderator – wound up owning stock in the controversial company after all.
According to a company filing, Tibbs received 15,000 shares of AEHI stock a month after that heated mid-2008 meeting. That filing, which surfaced about three months after the hearing, indicates that Tibbs paid 10 cents a share – or about one-third of the market price at the time – for that stock. However, his comments suggest that he may have never paid for the stock at all.
“I was compensated by AEHI for being the moderator,” Tibbs explained in a November 2008 email to Weber. “I did not go out and purchase the stock on my own.”
Printing Press
Tibbs shows up (along with other locals) on a long list of investors who received unregistered AEHI stock – often deeply discounted and sometimes totally free – during the company’s first few years of operation.
By September of 2008, regulatory filings show, AEHI had issued almost 75 million shares of unregistered stock – or half of its authorized shares – through such transactions. Gillispie and his family received more than one-third of those shares. AEHI Vice President/Secretary Jennifer Ransom, a former insurance agent described by locals as Gillispie’s girlfriend (30 years his junior), picked up millions of shares as well.
Since then, AEHI has issued even more company stock – much of it to insiders -- and dramatically increased both its authorized and outstanding shares. In January of this year, for example, AEHI awarded Gillispie and Ransom a combined 11 million shares of stock even as the company approached its new 250-million share limit. AEHI then doubled its authorized share count to 500 million the following month, filings show, and awarded Gillispie and Ransomanother 12 million shares a couple of days later.
According to regulatory filings, AEHI covers "living expenses" for Gillispie as well.
“Last summer, Gillispie started driving around in a Porsche 911 twin turbo that costs around $150,000,” Weber says. “And he still has his Maserati parked out in front of the company’s office.”
At first, regulatory filings show, AEHI operated out of Gillispie’s home in Virginia before leasing a small office in Idaho. Back then, AEHI employed Gillispie’s young daughter – whose thin work experience included a stint as an undergraduate college tutor and a job as a pharmacy technician – to serve as secretary of the nuclear power company. Ransom officially assumed that post in May of 2008, company records show, quickly scoring 3.5 million AEHI shares for the favor.
At that point, AEHI had already inked at least two financing deals for its ambitious project. In mid-2007, AEHIsuddenly announced that an outfit known as Cobblestone Financial Group had agreed to secure a handsome $3.5 billion for the company’s nuclear power plant. Within weeks of that news, however, the Associated Press had raised questionsabout Cobblestone – which normally caters to small operations like bars and gas stations – and its ability to fund such a deal.
Later that year, AEHI announced a more modest $150 million funding deal with a firm called SilverLeaf Capital Partners. This spring, records show, SilverLeaf Capital President Shane Baldwin wound up charged with securities fraud for alleged misconduct related to a separate investment deal. (Baldwin managed to escape jail time, The Salt Lake Tribune reported, by repaying his alleged victims in full.)
Meanwhile, local news coverage reveals, AEHI went on to ink yet another financing deal. In mid-2008, the Idaho Business Review reported, AEHI tapped a mysterious firm known only as “Powered Corporation” as its new financing partner. Powered had completed no other projects at that point, the newspaper noted, and had seen its previous multibillion-dollar deal – calling for five nuclear power plants in Yemen – killed by allegations of corruption.
The Snake River Alliance predicted, quite correctly, that the new deal would end in failure as well.
“AEHI’s latest pronouncement of financial support for this power project should be treated with the credibility it deserves – none,” the group stated in the article. “Powered Corporation’s financial health seems to be on par with AEHI’s … The fact is there’s still no money in this project, and for good reason.”
Less than a year later, The Oregonian reported, Powered quietly disclosed that it was “winding up” its business and disappeared from the scene.
Act Three
By then, the local Times-News reported, Elmore County zoning officials had already rejected AEHI’s plans for its nuclear power plant. If the Elmore County commissioners followed suit, AEHI warned in the article, the company would abandon Idaho and take its project to another state.
As it turns out, however, AEHI simply shifted its project to yet another Idaho county instead. (While most states employ a strict review process, experts say, Idaho can approve a proposed nuclear power plant with favorable votes from just two county commissioners.) This time, AEHI chose tiny Payette County – the same county Warren Buffett’s company had ruled out for economic reasons, the Snake River Alliance noted, after spending millions on a detailed study the previous year.
“He just did the math on it, and he couldn’t make it work,” Weber says. “And the economics have gotten even worse since that time.”
Specifically, Weber says, nuclear projects need help from three absent forces – carbon taxes, high natural gas prices and a booming economy – in order to succeed. AEHI’s own project in Payette County faces even more formidable challenges, he says, due to limited water supplies, constrained transmission lines and an obvious lack of financing. (Arjun Makhijani, president of the Institute for Energy and Environmental Research, has issued a detailed report challenging the economic viability of AEHI’s proposed nuclear plant as well.)
For his part, Gillispie strongly disputes such arguments. He says that AEHI will have access to a nearby river with a “gazillion” gallons of water and will simply connect its power plant to a new transmission line that’s currently being built. He also claims that “mistakes” – rather than economics – drove Buffett’s firm away. As evidence, he points out that Buffett is now investigating the possibility of building a nuclear power plant in Iowa. (While true, an industry report reveals, Buffett’s firm actually owns a utility in Iowa, and that state – unlike Idaho – uses nuclear-generated power already.)
“Economics was just a smokescreen for the media,” Gillispie insists. “He’s an ‘economic guy.’ What else is he going to say?”
Regardless, AEHI critics continue to cast doubt on the company’s grand plans. If anything, they state, AEHI’s planned project looks less attractive now than it did when the company first arrived in Idaho several years ago.
From the start, they note, AEHI has touted generous federal loan guarantees promised for the first nuclear power plants built under a new government program. But AEHI has failed to clear any major hurdles since that time, they say, so the company has yet to even secure a place – behind much larger players – in that growing line. Moreover, they add, the company still faces a national application process that literally takes years to complete.
“The actual likelihood of that reactor being built is incredibly low,” says Liz Woodruff, an energy policy analyst for the Snake River Alliance. “AEHI has been successful in polishing the edges to make itself look more appealing to investors. But the company remains financially in trouble, with a project that’s unviable, so people should steer clear.”
Exit Strategy
By issuing 132.9 million shares of discounted stock (and essentially selling one-third of the company -- now valued at $280 million -- for less than $10 million), filings show, AEHI has at least managed to put a decent chunk of change in the bank this year. For example, records show, AEHI sold 50 million shares of 10-cent stock in April and May alone. While that deal cushioned AEHI’s bank account, however, it could also hurt investors who’ve been paying market rates for the company’s stock.
Based on current prices, investors who bought that cheap stock in early April (and have now held it for the mandatory six months) could start selling their stake – for a hefty 770% gain -- and put serious pressure on the shares.
For his part, Gillispie says that he has no plans to sell any AEHI stock himself. Although he filed paperwork in Augustsignaling the possible sale of 3 million shares, he says he never actually sold the stock but simply lifted the restrictions on it so he could use it as collateral for a home loan instead.
That stock looked a lot less valuable, with the shares stuck around 20 cents apiece, until a powerful promotion this May. After talking with an AEHI shareholder in a bar, Gillispie says, a newsletter writer “got excited” and penned a report that portrayed the company as “the greatest thing since sliced bread.” Fueled by that promotion, AEHI’s stock soaredfrom 21 cents to $1.45 a share in a single day. While AEHI failed to hold onto most of those gains, dropping back to 60 cents by the close, the stock has remained well above its pre-promotion price since that time.
Alternative Energy Speculator, which issued that tout, followed up with another ringing endorsement – forecasting 18,375% gains – a few weeks before Gillispie lifted the restriction on his shares. Two other outfits, the KonLin Investment Letter and WallStreetCorner.com, chimed in with bullish AEHI calls shortly afterwards.
While some investors have taken big profits at this point, however, Gillispie says that he sees no reason to do the same.
“I would be foolish to sell it at 80 cents,” Gillispie told TheStreetSweeper last week. “This stock is going to be worth a lot of money. It will probably be $2 by the first quarter – and $4 or $5 by the end of next year.”
For AEHI, Gillispie predicts, the third time will prove to be a charm. He expresses total confidence that Payette County will approve the company’s nuclear power plant by December and, once that happens, financing for the multibillion-dollar project will finally arrive.
AEHI continues to issue a steady stream of press releases, touting its nuclear power plant and other business ventures (which now include water purifiers for Pakistani flood victims), in the meantime. But at some point, critics say, the company will need to deliver some actual results in order to support its lofty market value.
“Gillispie keeps writing press releases every couple of days, trying to pump up the stock,” Weber says. “But you can’t keep a company alive with just press releases.
“Eventually,” he declares, “you have to do something.”
* Note: No member of TheStreetSweeper’s staff or advisory board has ever taken a financial position in AEHI or received any compensation from others who have positions in the stock. As editor of the site, Melissa Davis will never take a position in any of the stocks that she covers. To contact Ms. Davis, the author of this story, please send an email to editor@thestreetsweeper.org.
