Wednesday, December 22

SEC: The Evidence Against AEHI

Believe it or not, there are still people on the various stock forums defending Don Gillispie and Jennifer Ransom. They claim that this is just a huge mixup.

In reality, they claim, the SEC was conned by the anti-nuclear lobby or by people seeking personal revenge against Gillispie and Ransom to pursue a baseless case against these fine people and the company that will likely rival Exxon Mobil in profits. As example check out this post titled "Standing strong in what I believe is right", singing the praises of Gillispie and Ransom.

Of course the most rational explanation is that these are promoters paid by AEHI to suppress supply or (gasp!) create demand for the shares when they will be tradable again on the grey market on 12/28/10. But we do realize that some folks might just believe in Gillispie's story so much that they really think the SEC would just suspend a stock and file a case for securities fraud because of some "baseless" allegations from the internet.

Gillispie is doing what he can to maintain this illusion - likely in order to be able to offload more of his stock to his followers when the suspension terminates. Take this quote:

“I am saddened that officials with the SEC did not follow up with me or my staff on these allegations prior to filing civil charges. Had they done so and we were given the opportunity to confront these issues, I am certain we would not be in this position today. My first priority is to this company and our stockholders. So I believe it is critical that I take this step for the welfare of AEHI and for the company’s future in the nuclear power industry”

Sure, Don. All it would have taken is one call to you and you could have clarified this whole misunderstanding...  

Well, gladly in addition to the fraud charges we now have this declaration from the SEC which lists the evidence filed with the case. Read for yourself, but they have stock account statements from Gillispie, Ransom etc, they have bank account statements of Gillispie, Ransom and their fraudulent entities, they have emails and letters originating from Gillispie, Ransom and the other players - in short they have done their homework.

So no, there's absolutely no chance that the SEC has been conned by the rabid anti-nukes.

Monday, December 20

Martin Johncox: We Can Draft Written Testimony For You

On 11/22/2010 Martin Johncox posted the following on the Waldo Real Estate blog (only cached, it's been removed since):

Thank you so much for your support in our attempt to build a nuclear power plant in Payette County. This is a long process and one in which we need you continuing help.
As you may know, we face an important hearing at 7 p.m. on Thursday, Dec. 2, before the Payette County Planning and Zoning Commission. We are applying to rezone 5,100 acres of land, a crucial preliminary step. Thanks to your help, the P and Z and county commission earlier this year recommended amending the county's comprehensive plan to allow our plant; the Dec. 2 hearing is the next important step.
The Dec. 2 hearing will be be held at the Payette County Courthouse, 1130 3rd Avenue North in Payette. If the commissioners expect a large turnout, they may move the meeting to the Payette High School Auditorium at 1500 6th Avenue South and we will keep you updated on this.
Please show your support again by attending the meeting, and by offering your public testimony in person. Our opponents will definitely be in attendance, so all the support we can muster will be greatly appreciated.
However, if you are unable to attend, you may send written testimony to commissioners. The deadline for emailed testimony is end of the day by Friday, Nov. 26. You may send the testimony to either or If you need help with a letter please call me.
The proposed nuclear power plant will bring with it thousands of jobs, increase pay rates for the surrounding work force, improve business for hundreds of local companies, while proving a financially success venture for local investors.
But, none of this is possible without your support, so if you can, please attend the hearing and sign-up to speak, we would love to see all those seats filled with supporters.
Please forward this email to any other AEHI supporters who may also want to get involved.
Thank you,
Martin Johncox
AEHI community relations

And even with that encouragement they didn't come out on top in written testimony. Maybe for the next racket you could use language along the lines of: "Please be advised we'll be submitting written testimony on your behalf unless you explicitly tell us not to". Or did that already happen? I'm counting two submissions for Gordon Chambers and John Talbot each.  

Friday, December 17

SEC Brings Fraud Charges Against Don Gillispie, Jennifer Ransom & AEHI

Unfortunately I was out yesterday and couldn't yet comment on the fraud charges the SEC brought against Don Gillispie, Jennifer Ransom and Alternate Energy Holdings (complaint here).

Needless to say I'm very happy that the SEC moved so quickly in the end and protected new investors from falling for the lies and deceptions propagated by Gillispie and his associates. Many people complain about the SEC and its capability to move quickly against penny stock fraud. But this case proves that it is very possible for the public to submit enough evidence of a fraud to get the SEC's attention.

However it's also true that the SEC needs a bullet proof case before they can move forward. And that takes time. In retrospect I like the model I've pursued in this case: disclosing evidence to the SEC via the SEC tip form and to the public via a blog in parallel. This enables the SEC to gather enough evidence while warning investors early of potential scam.

I will later show how my disclosures on this blog and on Yahoo's AEHI message board warned investors exactly of the fraudulent acts described in the SEC complaint.

Meanwhile I'll answer a couple of questions people and press have asked me:

Q: Are you Joe Weatherby?
A: No, I'm not. I didn't even get to know Joe until late in the game and we worked largely independently from each other on this project.

Q: Do you use multiple Yahoo Ids to fake conversations?
A: No, I consider that unethical and would not engage in such tactics. I did have to change my id from to because someone with an interest to suppress my disclosures convinced Yahoo to terminate my previous Id.

Q: Tell us more about yourself? How can we trust your claims if we don't know who you are?
A: I try to present information with pointers to all sources so that anybody can follow my reasoning. I don't think more information about my identity would be helpful.

Q: Do you have a financial interest in the demise of AEHI?
A: I do have a short position and that initially kept my attention on this case. Over time though the fun of solving a puzzle became the dominant factor in my motivation. I do expect my position in AEHI to become profitable. However the cost of maintaining it has been really high, so it's not the home run you might expect. Overall my behavior of allocating so much time to AEHI was economically irrational.

Q: Isn't shorting a stock and publishing negative information about it illegal and unethical?
A: Not at all. It's not illegal unless you knowingly publish false or misleading information. Since the short side has the motivation to research the company deeply and to unveil its business practices it counteracts fraudulent and misleading promotions of the company. Therefore the short side actually works to protect investors interests in the long run.

Q: What's next for you?
A: This has been tremendously entertaining for me. One thing is certain: I'll continue to short and expose frauds. I've yet to figure out how to best take the experience from this case and apply it to future frauds. I know I want to get to a more scalable model. Stay tuned...

Tuesday, December 14

Joe Lucid Busts Martin Johncox And AEHI Again

Martin Johncox
Ok, given that the SEC has suspended trading of AEHI this morning there should be no more doubt about the true nature of AEHI and its associates. However in the interest of full disclosure I do want to share the following exchange between Payette County's planning and zoning commission and myself today.

See AEHI's blog entry titled "Joe Lucid fraud testimony uncovered" for some outrageous commentary which really only left the conclusion that AEHI's management was in a state of panic. Excerpt (authored by Martin Johncox):

"I’m told Payette County has rejected Joe Lucid’s testimony because he’s not using his real name. That is very gratifying, as Lucid is a particularly toxic individual who has persistently spread lies about AEHI, even harassing individual investors whose emails he harvested from public testimony. Lucid wants people to view him as a crusader, but it is clear to me his only motive is to enrich himself through stock shorting, a controversial practice to profit from a falling stock price."

Update: Johncox is now trying to paddle back. Don't believe it. This guys is guilty.

Then enjoy the following exchange:

RE: AEHI Written Testimony Joe Lucid
Lindsey N. Royston <>
Add to Contacts
To:Lucid Lucid <>
Cc:Isnarda Machuca <>

Mr. Lucid,
Your written testimony was included into the record and can be viewed and verified at However, per Isnarda Machuca-Rodriguez’s emailed notice to you, the zip file you also attached was not included as we could not open it. It was sent to our IT Department who could not open it either due to size or corrupted contents. You are more than welcome to send copies of the documents to:

Payette County P&Z

1130 3rd Ave. N. Rm 107
Payette ID 83661

Anything received will be included into to the record, along with all documents already received to date, and forwarded to the Board of County Commissioners who will ultimately make the final decision on the applications requested by AEHI.

Lindsey Royston
Administrative Assistant
Planning & Zoning
Payette County

From: Lucid Lucid []
Sent: Tuesday, December 14, 2010 7:03 AM
To: Lindsey N. Royston; Isnarda Machuca
Subject: AEHI Written Testimony Joe Lucid


I submitted written testimony about some of my concerns with alternate energy holdings recently. Yesterday the company called me a liar and said that my testimony had been rejected by Payette County (

Could you tell me whether my testimony has really been rejected and if yes for what reason?


Joe Lucid

SEC suspends AEHI trading!

Before the
Release No. 63535 / December 14, 2010

The Securities and Exchange Commission (“Commission”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Alternate Energy Holdings, Inc. (“AEHI”)), of Eagle, Idaho at 9:30 a.m. EST on December 14, 2010, and terminating at 11:59 p.m. EST on December 28, 2010.

The Commission temporarily suspended trading in the securities of AEHI because of questions that have been raised about the accuracy and adequacy of publicly disseminated information concerning, among other things, the stock sales of certain AEHI officers, the status and viability of funding to build a nuclear reactor, and executive compensation.

The Commission cautions brokers, dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.

Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not he has complied with the rule, he should not enter any quotation but immediately contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5777.  If any broker or dealer is uncertain as to what is required by Rule 15c2-11, he should refrain from entering quotations relating to AEHI securities until such time as he has familiarized himself with the rule and is certain that all of its provisions have been met. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.

If any broker, dealer or other person has any information which may relate to this matter, he should contact Michael S. Dicke or Tracy L. Davis of the San Francisco Regional Office of the Securities and Exchange Commission at (415) 705-2500.

Monday, December 13

AEHI Insiders In Panic Mode

Well, we kind of saw it coming: we've covered the actions of AEHI in quite some level of detail here on the blog:

We showed how AEHI lied about $3B in profits, how they lied about their credit line size, how they lied about the timing of their credit line, how they lied about never being late on a SEC filing, how Gillispie lied about his MIT degree, about his role at Browns Ferry, about his "Business man of the year" award.

We demonstrated how AEHI technically manipulates stock prices, how they pay 3rd parties to encourage individual investors to buy their stock, how Gillispie claimed to be the next Exxon Mobil, how AEHI violated the Securities Act of 1938 by soliciting the public for unregistered offerings and using materially fraudulent statements to entice retail investors to buy.

We showed that AEHI tried to hide 116M in unregistered stock sales from investors, how Gillispie solicited retail investors to purchase stock in AEHI using pressure sales tactics, how he's previously stated that the plan he's currently selling to Payette County can't ever be approved by the NRC and finally how he's not aware of basic trends in nuclear development and regulation.

You'd think by now they should be thinking very hard about what to do. Do they quickly sell remaining insider shares into the market to make the last few bucks before regulators strike? Do they leave the country to avoid prosecution? Do they move to a different state to hope for less scrutiny?

But no! AEHI is now officially in full blown PANIC mode, like a deer in the headlights. Their response on their official blog (hi there Martin Johncox): a post about me using my name in testimony. Title: "Joe Lucid fraud testimony uncovered". Seriously? That's how you think you'll calm your investors? Anybody ever hear of a company even posting anything like that on their blog? In defense of all the transgressions we documented very clearly here for all to see?

I didn't think so!

It's got to be hard though. They can't sue us because they're a fraudulent operation. And they would lose just as they did against the Snake River Alliance. And they can't silence us because of what communication is today. Doesn't look too good...

Sorry, Don.

But what do you expect from a guy who can't even be honest about his hair!

Greenfield Sites: AEHI Not Tracking Nuclear Industry

I've been mulling over AEHI's latest press release:

First look at the title ("AEHI Receives Final P & Z Approval for Proposed Idaho Nuclear Power Plant"). That sounds to me as if some final approval had been received, at least for the rezoning request. Not so, this is only the recommendation from the Planning and Zoning Commission to the County Commissioners who will have another public meeting and a vote next year. It's also hardly final since the recommendation can (and likely will) be appealed.

Just so you know, after the County Commissioners make a decision (which also can be appealed) the state needs to approve the plan. So we're a good distance away from local and state approval.

But now lets look at the subtitle ("Nationally Significant as First Proposed U.S. Green Field Site in 33 Years"). Hmm, that's a bit surprising! There are a bunch of other proposed US greenfield nuclear power plants:

For example there's Amarillo Power which has proposed a greenfield site in Texas. No NRC application yet. Then there's Levy County Station which already has state approval and a submitted COLA application. And lets not forget Victoria County Station, which had a COLA application submitted, but has now changed its approach and has an ESP application pending with the NRC. At least the last two are much further in the process than AEHI!

If we assume (boldly!) that this press release was put together in good faith, we do have to wonder how AEHI's leadership can be so ignorant of current trends in the nuclear industry. I mean, these are people about whom Martin Johncox has this to say:

"Every member of AEHI’s Board of Directors, Mr. Gillispie and even advisors to the board all have at least 40 years of experience in the nuclear industry, which includes building, operating, and maintaining nuclear power plants and utilities. Their reputations have been vetted by national and international governments, which is required to work at their level in the industry."

Which reminds me of another interesting slip-up of Gillispie on his blog:

"Every company that has undertaken the NRC application process has successfully completed it and received a construction/operation license."

As we've heard this claim has also been used when selling shares to investors. Now check out the following NRC FAQ. Check out 1.1.8:

"1.1.8 Has the NRC ever denied an application for a license?

During the 1980s, the NRC refused to issue operating licenses for the William H. Zimmer Nuclear Power Station, in Ohio.  The NRC issued this ruling based on a charge that the plant had failed to meet construction and safety codes.  Because of the high cost of completing the Zimmer facility and the uncertainty that it would eventually meet the Federal regulations, the utility, Cincinnati Gas and Electric, decided not to continue to pursue an operating license.  In other cases, applicants elected to amend or revise their requests for approval in order to receive a license from the NRC and its predecessor, the Atomic Energy Commission."

Hmm, strange.

But hey, we're talking about a guy who can't remember which reactor unit he worked on and in which capacity.

And who can't even be honest about his hair!

Friday, December 10

AEHI's Don Gillispie: "NRC Won't Approve Our Site"

Forgive me if we have to switch down a gear today. But after revealing AEHI CEO Don Gillispie's most serious securities fraud yet discovered yesterday, topping the earlier revelations of two (here and here) other instances of severe violations of federal securities laws we'll have to make do with simple perjury today.

Maybe I wouldn't have bothered today since this is relatively minor by Don Gilllispie's standards. But since Martin Johncox accused me of perjury and called me a liar for using my name, Joe Lucid, in my written testimony (note: he had no comments on the testimony itself!) I think some retribution is appropriate and necessary.

First we look at the "Preliminary Water Availability Analysis" which is part of the rezoning application AEHI submitted to the Payette County administration. Step forward to page 45, 7.2.1. Snake River Diversion and Alignment. I quote:

The final alignment distance from the Snake River to the proposed site will likely be between about 14 to 24 miles.

What are they talking about? Since the planned site in Payette is rather distant from the Snake River a huge water pipeline would have to be built to transport the cooling water for the plant to the site.

Now let's take a look at the always entertaining and juicy blog of Don Gillispie, CEO of AEHI, the only known opportunity for a direct nuclear plant investment in the US today (Oops, smells like another public investment solicitation). Take this entry in which Gillispie talks about problems of a potential site in Elmore County:

On Jan. 12, I was invited to make a presentation before the Mountain Home City Council on our efforts to develop a large advanced nuclear reactor in Elmore County.

In November, the Elmore County Planning and Zoning Commission recommended against rezoning approximately 1,400 acres of land to accommodate our plant, saying heavy industrial development should be located in a zone near Simco Road, even as wind, solar and natural gas power are permitted elsewhere in the county.

In response to a Mountain Home City Council member’s question regarding siting of the plant in the Simco Road area, the following is my reply:

After some research we have concluded the Simco Road site does not qualify for a nuclear plant and even if it did, there does not appear to be any property available. The following are some of the reasons.

The Simco Road site has no water supply so a dedicated water line of more than 20 miles would need to be constructed. A large safety-related pipeline would add hundreds of millions in expense and create security and right-of-way concerns; the Nuclear Regulatory Commission would disapprove the Simco Road site for the water supply security issue alone. Our current site is one mile from the Snake River, an ideal location for water access without a security issue.

So Gillispie is selling Payette County on a plan he knows could never get accepted by the NRC. Now that, my friends, is perjury.

But what do you expect from a guy who can't even be honest about his hair?

Thursday, December 9

AEHI's Don Gillispie's Most Serious Securities Fraud Yet

Ok, I've got to admit I was starting to feel that I needed to take some time off the blog to do more research. The last two days were just too good to be followed by some regular business irregularities at AEHI.

As you remember in these two days:
  1. We caught AEHI's Don Gillispie publicly soliciting investors in the Investor's Business Daily using materially false statements.
  2. Then we showed how AEHI used materially false information to con an investor into a private placement.
  3. And finally we showed how Don Gillispie "forgot" to mention 116 million in unregistered stock sales in the 10-q he signed.
Enough to put anyone to jail, not even mentioning the ongoing technical manipulation and paid promotion.

But they just make it too easy, and I think I can top it one more time. 

I need to give a little background so this will fully sink in: we step back and examine the core purpose of the Securities Act of 1933.

The 1933 Act has two basic objectives:
  1. to require that investors receive significant (or “material”) information regarding securities being offered for public sale; and
  2. to prohibit deceit, misrepresentations, and other fraud in the sale of securities to the public.
The mechanism that was implemented to achieve these objectives is that of registration: generally no stock can be sold to the public without being registered with the SEC. The registration statement includes the risks, the financials, background information, large shareholders and so on and needs to be filed with the SEC. The SEC checks the document and if necessary forces clarifications. If and when they're satisfied they declare the registration effective and the company files the prospectus.

After that step there is a 20 day cooling-off period before shares can actually be sold. The rationale here is to give the potential investor time to consider and weigh the information provided in the prospectus and make an informed investment decision.

With that background, what would be the most outrageous violation, both in letter and spirit, of this foundation of federal securities legislation?

I'd say if a representative of a company contacts potential retail investors directly and in public, tells them a couple of very material lies about the companies immediate prospects, offers them new unregistered securities in the company for purchase, and uses pressure tactics to close the sale, that'd be as bad as it gets. Well actually - maybe he could also say that investors might send cash to the company directly. Or maybe he could encourage the public to solicit additional investors as well. 

Get a cup of coffee, sit down, relax, and read the following blog post by AEHI's Don Gillispie, CEO of Alternate Energy Holdings, which releases a newsletter to the public. He had previously sent it directly per email to potential shareholders (original here). There is no disclaimer whatsoever:

Letter to investors September 11, 2009
Posted by cleanidahoenergy in AEHI, China, Chinese nuclear energy, economic benefits, Elmore County, international, Investment news, nuclear industry. 
Tags: AEHI stock, Idaho, local process, nuclear power, nuclear reactors, stockholders, AEHI, Elmore County, rural nuclear, China
I sent a letter to investors recently. Keeping people informed about our company, its goals and status is an important to us.
September 9, 2009

Dear AEHI Stockholder,

First, let me thank you so much for your investment in AEHI. The company has several nuclear projects underway including our lead site in Idaho, as well as Colorado, a desalination reactor in Mexico and a Tar Sands reactor in Canada to remove trapped oil.

We also formed Energy Neutral, Inc last year to install wind, solar and geothermal heat pumps on homes and offices to eliminate energy bills. Currently, we plan to build our first energy free model home starting the first of October to demonstrate we can construct buildings with no power bills at essentially the same price as those with energy bills. This will help launch our first energy neutral subdivision. The Energy Neutral Trade Mark name is pending as well.

The Idaho reactor, Idaho Energy Complex, is in the process of seeking local approval and we expect it by year’s end. After the Elmore County site approval was delayed due to process problems, we began looking at other sites and now have three additional Idaho counties who are extremely interested in having our plant. A little competition is always healthy. In addition, we are reviewing state lands for potential sites. After two years of educating Idaho citizens along with support from the national media and key state leaders, we have no doubt that an approved site will happen in Idaho soon and we will be adding staff locally to accommodate. We have a funding commitment from Source Capital for the site.

In July, we opened an office in Beijing, China with some investors as AEHI China to facilitate joint ventures for nuclear components among other things and large institutional investors. With the support of the Chinese government nuclear officials, we have several companies who are interested in working with us. I now travel to China every couple of months to facilitate these deals. Also, we are in the process of negotiating on the price to bring the Korean advanced reactor, APR 1400, to the US. This reactor will be lower than the cost of the other reactors currently in the US market making us more than competitive with any new source of electricity in the country. As a backup, we have begun to talk with Mitsubishi Heavy Industries about their advanced reactor as well. Further, we have a large energy trust that is willing to loan us up to $5 billion for the plant construction phase.

Lastly, in lieu of going on the London Plus Exchange as mentioned in my last letter, we are starting the process for our first public stock offering (IPO) for later this year and a move to the American Stock Exchange. This will open the stock up to institutional and more international investors by the first quarter of 2010 allowing us to leave the penny stock category.

As you can see there is plenty of positive news in the making, we will publicly announce this information as it unfolds. If you would like some more AEHI stock or have qualified investor friends, the price is at its lowest from the company at 5 cents per share with no broker fee or volume limit like in the market. This offer will end October 31 when we file for our public offering. We doubt this price will ever be available again. Also, if you have an unrestricted investment 401K or any IRA you can transfer funds to AEHI stock as well.

Just send an e-mail to or call 208-939-9311for more information and PPM, or you can just mail a check to AEHI if an existing investor. If you are an investor you can add to your holdings for as little as $1000 or any amount above that minimum. New investors need to review the PPM.

Again, thanks for your support as we try to help the country with jobs and clean, low cost energy that will also assist us with energy independence.

Best regards,

Don Gillispie

Wednesday, December 8

AEHI's Gillispie "forgets" to disclose unregistered sale of 116 million shares

Running a multi-billion merchant nuclear power company is no picnic. You're under constant attack by the rabid anti-nukes, Joe Lucid, His Dudeness and all the other lowly folks who dare to question you. Then there's all the bureaucracy, the filings, the finances, ...

So sure, it wears you down, and sometimes its difficult to keep track of all the details of the job. The printout of your annual report might not come out real straight. Sure, you could reprint it, but there are lightning bolts to harvest and there's that promising fuel additive. In other words there might just be a few more important demands on your time.

Then people don't think it's appropriate that only your daughter Taylor signed off on that annual report. And you have to refile it, now backed by an actual accountant. It sucks, you get sick of it. In other words at some point you might just start to cut corners a bit.

Enter AEHI's form 10q for this year's first quarter, forward to PART II, OTHER INFORMATION, Item 2:

"There were no unregistered sales of equity securities during the fiscal quarter ended March 31, 2010."

Hmm, interesting, I thought they were printing like crazy? Let's check the number of outstanding shares on the balance sheet:

"Common Stock, par value $.001, 500,000,000 shares authorized; 252,361,764 issued and 251,961,764 outstanding [as of 3/31/10] and 136,150,108 issued and 135,750,108 outstanding [as of 12/31/09], respectively."

Ok, Don, you never registered any shares, so any outstanding shares must be unregistered. Between 12/31/09 and 3/13/10 you roughly doubled the share count, issuing 116 million shares. Yet there were no unregistered sales? None?

Well I'm sure there was a more important demand on your time again.

Now, I've told you this before but maybe you don't remember all that well. If you breach the covenants in section 5 of the Roswell agreement you lose the ability to raise funds from Roswell automatically and permanently. And unfortunately section 5 contains this:

"such Commission Document did not contain any untrue statement of a material fact"

116 million shares - material? Naaahhh. Termination of funding agreement - material? Naaahhh. 

Securities Fraud 2: AEHI's Land Value Estimate

One of AEHI claims that has raised eyebrows is that the land in Payette County which it intends to purchase for $5 million will be worth $1.5 billion when the NRC has approved it for construction of a nuclear power plant. And that's before the construction even starts!

Let's think about that for a moment: why should the value increase? The reason is that one could bring a power plant to market four years earlier than if starting from scratch (assuming four years for the permit process).

However $1.5 billion is a mind-boggling number and you've probably wondered how they come up with it. Well, wonder no more. A potential investor who was equally curious asked the company for the justification when considering a private placement. Here's the appraisal the company provided.

J. Eric Cooper (Doctor of Philosophy, no less) is the author and we learn that AEHI was actually very conservative in the number it uses with investors: Cooper comes up with a range of estimates between $1.5 billion and a whopping $13.5 billion.

Cooper uses a 1600 MW power plant and assumes 94% availability.

The appraisal references a couple of papers two of which we provide for convenience:
  1. "The resurgence of nuclear power in the U.S."
  2. "Monte Carlo Methods for Appraisal and Valuation: A Case Study of a Nuclear Power Plant"
A quick look at them reveals that they are concerned with the valuation of nuclear power plants, not just the land on which they are built. The appraisal does not provide any further details on how "Monte Carlo" or "Comparable Sales" were used to arrive at the given results. The resulting numbers for the land are higher than what the cited papers come up with as value for entire nuclear plants so lets just say some reasonable doubt exists about the claims.

In one area however Cooper does go into enough detail that we can reverse engineer the argument: NPV and IRR at EBITA. That's finance vocabulary for determining today's value of the cash the plant would generate during the first four years (remember by buying the land a power producer could bring a plant online four years earlier). 

The IRR is the interest the company wants to earn on its investments (Cooper uses 20%), so the first years cash is discounted by dividing by 1 + 20%, second years by dividing by ( 1 + 20% ) * ( 1 + 20% ) and so forth. Applying that to the $1.185 billion in cash (EBITA) per year yields a total present value of $3.07 billion, just as he provides in the appraisal.

Sounds good, right?

Well, until you look at the assumptions: 
  1. Cooper assumes AEHI can sell electricity at 12c per kWh but the current market price in California is 3.5c per kWh.
  2. Cooper uses EBITA (Earnings before interest, taxes and amortization) as cash per year. However interest for a $5B power plant is a very real cash outlay. 
Let's see if we can fix the calculation:

First what's a realistic interest on a 30 year loan? The US government pays 4.78%. Lets just say AEHI gets really, really lucky and gets a loan of $5 billion for 7.5%. That'd be a yearly cash outlay of $375 million. That's 2.7c per kWh.

Then lets look at the other costs. Here's a good paper on the topic. Operation and maintenance is currently at 3c per kWh and fuel costs are at 1.5c per kWh for a total cost of 2.7c + 3c + 1.5c = 7.2c per kWh.

Now lets look at our profits: for each kWh we sell to California we get 3.5c and pay 7.2c. For a loss of 3.7c per kWh or $487 million per year. And a current present value of - drum roll - negative $1.26 billion.

In other words if you had the power to force AEHI to build the above plant and sell the electricity to California it would make sense for them to pay you $1.26 billion so they could start incurring the losses four years later!

Maybe a doctor in philosophy is not the right background for appraising nuclear power plants after all? 

After we've shown that the only verifiable calculation is completely off base, and if only to show that AEHI's associates are not only crooked, but also intellectually extraordinarily challenged, let me point out the following logical problem in Coopers appraisal:  

Cash flows will only be generated once the plant is operating, so after its construction is complete. Even in AEHI's rosy world construction takes four years. So any cash flow will start coming in four years after the site's been acquired and needs to be discounted by dividing by 1.2^4 = 2.07.

In summary: 
  1. Cooper assumes electricity will sell for 343% of its current price in high priced California.
  2. He ignores the interest on the loans required to build a plant.
  3. He underestimates the maintenance and fuel costs by 1.5c per kWh.
  4. He ignores the construction time which cut the value of the property in half. 
And this document is used in context of selling securities to an investor. Should sound familiar, because just like yesterdays case this is an "untrue statement of a material fact" "in connection with the purchase or sale of any security" (illegal according to rule 10b-5). Or just simply Securities Fraud.

Tuesday, December 7

AEHI In Securities Fraud - Broadly Violates Rule 502(c) And 10b-5

As already teased yesterday I have discovered a truly egregious transgression by AEHI and Don Gillispie. You will remember that as I've outlined here and here "Don - no-comp - Gillispie" is on a crusade to con individual investors into purchasing shares from what can only be assumed to be insiders of the company.

In my view yesterday's paid promotion in which Don stated that "I can rival Exxon Mobil in profitability" was clearly misleading and fraudulent. But what would turn this into a full blown violation of rule 502(c) and rule 10b-5 - that is securities fraud - is a general solicitation of investors to purchase publicly traded stock or contact the company about private offerings.

Get this: AEHI distributed this flyer on Saturday, 11/13, to all 210,708 readers of the Investor's Business Daily, a national investor oriented newspaper in the US. The newspaper confirmed the advertisement and provided it by fax to me (excuse the low quality).

Please read it in full, but here are a few excerpts:

"Our plant is estimated to generate about $3 billion dollars a year."

"Be part of it. Turn this page to learn about investment opportunities."

"Other sources like coal and hydro are being closed down at dramatic rates, which makes nuclear power the only option that can fill the void. It also means nuclear becomes a tremendous investment opportunity with excellent return potential."

"In addition to the opportunity to purchase publicly traded stock, there are a number of investment options - with participation from direct investments between 100 million USD and two billion USD and approximately eight billion USD in financing."


Other than a statement that this is advertisement there is no disclaimer whatsoever.

If this isn't an offer by general advertising in "Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio" I don't know what is (illegal according to rule 502(c)).

And together with the claims in yesterday's promotion and the fraudulent claim of $3B in annual profit it's clearly an "untrue statement of a material fact" "in connection with the purchase or sale of any security" (illegal according to rule 10b-5).

We're entering the end game. To borrow from "Monopoly" it will soon be: Go to jail. Go directly to jail. Do not pass go, do not collect $200.

Monday, December 6

AEHI's Gillispie Risking His Neck To Manipulate Stock Price

Bad timing! Yesterday I wrote about AEHI's paid stock promotions and today Gillispie appears in a paid interview and says a couple of things that might just be enough to put him behind bars.

First note that the disclaimer admits that the interview is paid for by AEHI but does not specify the exact amount. That's illegal under federal securities law (quote: "The federal securities laws require the newsletters to disclose who paid them, the amount, and the type of payment. But many fraudsters fail to do so and mislead investors into believing they are receiving independent advice.").

Next Gillispie launches into truly unbelievably disingenuous misrepresentations. Read it yourself, but here are the highlights:

Claim: "We announced that we wanted to look for a western site and we were contacted by a group of farmers in Idaho who were trying to form an electricity co-op to get cheaper energy. "

Reality: Gillispie was contacted by a repeat securities fraudster. Farming was in the name of his operation only.

Claim: "We have the first phase financing to get it up through the NRC (Nuclear Regulatory Commission) approval already."

Reality: The funding agreement has already automatically and permanently terminated and would not suffice to cover the estimated expenses at all.

Claim: "Between our calculations, the price we want to get it at, and we believe that we can, we are looking at $3 to $4 billion a year in profits per site."

Reality: A realistic calculation shows that claim to be completely indefensible.

Claim: "One of the things that I tell people is that you want to think about profitability; if I build six units in Idaho and are able to build them at the cost that I think I can and sell at current market prices on the west coast, then I can rival Exxon Mobil in profitability."

Reality: At current prices nuclear energy is borderline profitable. Legitimate businesses have given up for the time being. This is just crystal clear securities fraud.

Sunday, December 5

AEHI Paid Distribution: The Third Factor In Penny Stock Fraud

Let's see how far we've come: I summarized some of the misrepresentations behind AEHI. In a sense this is the original sin in penny stock fraud. I also talked about how technical market manipulation is used in the case of AEHI to directly manipulate the share share price.

But if you want to make money selling shares to retail investors you also need to get the news in front of them. Let's call that aspect "Distribution", it's mostly accomplished via email, fax or mail. Paid distribution is related to astroturfing which AEHI is also engaged in as we've discussed in an earlier post.

It's important to note that paid distribution's only purpose is to drive up or hold up the price for someone who's selling.

No real company would engage in paid distribution campaigns for the following reasons:

  1. They hurt the company because of the direct costs.
  2. They hurt incoming shareholders long term because they buy at inflated prices.
  3. They don't bring in money for the company, only for the sellers.
  4. They are unethical and borderline illegal.
Luckily paid distribution campaigns without disclosing compensation are illegal. That makes it easy to identify them. But the disclosures are buried in the fine print so you do have to look for them.

Lets look at the news coverage about AEHI on Google Finance. In addition to the exaggerated, fluffy and misleading releases of the company we find the following releases:
  2. 12/2/10: Lucky Picks of The Day: (PINKSHEETS:MMUH) - (OTCBB:AEHI ... 
  4. 11/30/10: Lucky Picks of The Day: (PINKSHEETS:SPPH) - (OTCBB:ECRY)- (OTCBB:AEHI) 
  5. 11/22/10: OTC Tip Reporter: Hall of Fame Beverages, Inc. (PINKSHEETS: HFBG), China Medicine Corporation (OTCBB: CHME), Alternate Energy Holdings (OTCBB: AEHI)
  6. 10/14/10: Lucky Picks of The Day: (NASDAQ:GNBT) - (OTCBB:AEHI)- (OTCBB:MNDP) 
  7. 1011/10: OTC Stocks with Top News: AEHI, GMTD, NUBL and MXOM 
Most of these releases are distributed by email to anybody who signed up to their mailing lists. And lets see whether AEHI paid for these distribution campaigns:
  • AEHI — Alternate Energy Holdings, Inc.: We have been compensated $5,000 from Alternate Energy Holdings, Inc.
  • AEHI — Alternate Energy Holdings, Inc.: We have been compensated a total of $10,000 from Alternate Energy Holdings, Inc.
  • Otc Advisors: AEHI - Alternate Energy Holdings, Inc.  We have been compensated a total of $10,000 from Alternate Energy Holdings, Inc.
  • Otc Tip Reporter: Doesn't disclose compensation by company. However the release itself contains this disclosure: Since receives compensation and its employees or members of their families may hold stock in the profiled companies, there is an inherent conflict of interest in statements and opinions and such statements and opinions cannot be considered independent.
  • OTC Stocks with Top News: Because Omni receives compensation for LBNEWS’s dissemination of the Information (as disclosed in our Compensation Disclosure Section), predominately in the form of common stock shares (the”Shares”), our publicy disseminated publications should not be regarded in any manner whatsoever as independent. 

In summary there's overwhelming proof that AEHI does in fact use paid distribution to entice retail investors to purchase its stock.

Note how the promotions have become more intense recently, just as the technical manipulation, yet none of the two have created a sustained advance in the stock price. These are signs that we're close to the end of the life cycle of this operation. There are other signs which I'll discuss in a later post.