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PDFIn a formal complaint this week, issued just days after halting AEHI’s stock, the U.S. Securities and Exchange Commission flatly accused the company and two senior executives – CEO Donald Gillispie and his girlfriend Vice President Jennifer Ransom – of scamming investors while secretly enriching themselves. Since it went public four years ago, the SEC says, AEHI has raised millions of dollars by promising to build a nuclear power plant even though the company has “no realistic possibility” of ever achieving that goal. Meanwhile, the SEC says, AEHI insiders have quietly dumped big chunks of stock while publicly expressing strong confidence in the company.
“The company has made multiple misrepresentations, including claims that its executives had such confidence in AEHI that they had not sold a single share of company stock,” the SEC stated on Thursday. However, “records obtained by the SEC show that Gillispie and Ransom have instead secretly unloaded extensive stock holdings and funneled the money back to Gillispie.”
According to the SEC, both Gillispie and Ransom have sold at least 1 million shares of AEHI stock through secret accounts and then used the money for “lavish personal expenses.” With Gillispie paying stock promoters to manipulate AEHI, the SEC claims, the defendants managed to cash in their shares at artificially high prices.
In fact, the SEC says, Gillispie began hiring promoters to manipulate the stock shortly after AEHI went public more than four years ago. However, the SEC indicates, Gillispie began stepping up his efforts sometime last year.
“Gillispie coached promoters on how to manipulate AEHI’s stock price, instructing them to buy at the end of certain trading days to increase artificially the stock’s price and trading volume,” the SEC explained in its complaint. “In 2009, Gillispie became frustrated with some promoters he retained because they were not buying enough AEHI stock to manipulate sufficiently AEHI’s stock price …
“He tried to incentivize the promoters to manipulate the stock more aggressively,” the SEC continued, “by offering them additional AEHI stock if they could get the stock price up to specific targets and keep the price there for a specified period of time.”
Based on AEHI’s stock chart, Gillispie’s alleged strategy worked for a while. After languishing below 20 cents through most of 2009, AEHI suddenly took off earlier this year. In fact, the stock rocketed from 21 cents to $1.45 in a single day– fueled by a particularly effective promotion in May – although it later lost most of those gains. It had tumbled to 58 cents a share by the time that the SEC stepped in this week and finally halted the stock.
Before that, the SEC indicates, AEHI continued to hire promoters in an effort to reignite the company’s shares. For example, the SEC says, AEHI paid Pinnacle Digest – a firm that attacked TheStreetSweeper for exposing the company – to issue favorable news while suggesting that Pinnacle had received no money in return. But Pinnacle itself disclosed financial conflicts, including a long position in the stock, when fiercely defending AEHI and its leaders followingTheStreetSweeper’s first report on the company two months ago.
“As shareholders who clearly know much more about AEHI than the author of this unfortunate article, we felt compelled to write our side of the story,” Pinnacle Digest stated at the time. “We’ve been following AEHI for roughly two years and researched it for over six months before buying a single share … This article was clearly written with the intent of casting a dark cloud over, from what we can tell, is a reputable company.”
For its part, the SEC has obviously reached a far different conclusion about AEHI and its team. After halting the stockon Monday, the SEC wasted no time filing charges against AEHI and its leaders and seeking an emergency court order to freeze the defendants’ assets. The agency also aims to block the defendants from destroying any evidence that might document their alleged scam. It hopes to secure financial penalties from Gillispie and Ransom, while banning them from future involvement in the penny-stock industry, as well.
Meanwhile, some of AEHI’s loudest fans are now scrambling to distance themselves from the company. Shortly after learning about the fraud charges, for example, longtime AEHI consultant Martin Johncox – who spent almost four years promoting the company -- suddenly withdrew his support for the now-tainted firm.
“My stock in this company, about 40,000 shares, is now worthless, as is the stock of many other people,” Johncoxwrote on his website upon hearing of the SEC crackdown. “But that’s the least of my concerns. My faith and the faith of many other people have been broken.
“Needless to say,” he concluded, “my work for this company ceases immediately.”
To AEHI critics, however, the company’s collapse has come as no surprise. After all, they note, TheStreetSweeperpublished three detailed investigative reports – packed with red flags about the company – before the SEC officially cracked down on the firm. Moreover, they add, other skeptics have issued multiple warnings about the company as well.
Within hours of terminating AEHI as a client, Johncox was already fielding feedback that pointed out as much.
“A company whose main product was press releases should always cause you to pause,” stated one response. “Learn from the lesson, apologize to those you harmed, and move on.”
At this point, however, the SEC itself remains quite focused on AEHI. This week, the agency clearly stated that its “investigation is continuing” when announcing its fraud case against the company.
* Note: No member of TheStreetSweeper’s staff or advisory board has ever taken a financial position in Alternate Energy (AEHI.PK) 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.
