Microsoft's response to my inquiry: "Due to recent attention around the possibility that someone may be able to discover shortened URLs that were not intended to be public, we have disabled existing shortened URLs of shared files in OneDrive. We apologize for any inconvenience that you may have experienced."
I've just replaced the "shortened URLs" with the "long URLs". (6/3/2016)
~ Matt Berry
·
Without a doubt someone in Clearsign has lied about the business and science experience of the Chief Science Officer ‒ the so-called “original inventor” of its technology. Without the inventor, what claim does Clearsign have for a “revolutionary” technology?
· Material information has been withheld from Clearsign Investors: the co-inventor on Clearsign’s “pending patent” was mixed up with a transparent technology scam. A recent attempt at a rebuttal to this exposure has misrepresented the facts.
· Clearsign inked an agreement with John McFarland for Investor Relations work. McFarland was permanently barred from the securities industry.
· CEO Rutkowski and McFarland are both co-members of a separate investor relations company which was formed this last June, just after McFarland got more than $50,000 worth of Clearsign shares and which was above and beyond the original agreement. I have found no disclosures of this in Clearsign’s filings.
· MDB Capital Group professes expertise with patents and claims to have done due diligence on Clearsign … yet Clearsign’s original inventor faked patents. How could MDB not know this?
· MDB Capital Group claims to have helped Clearsign with investor relations during the same time period that Clearsign’s banned investor relations agent was active. FINRA members such as MDB Capital Group are prohibited from having any association with barred members such as John McFarland.
Just what is a technology scam anyway?
A functional technology scam is rarely a complete
fiction. The scam is usually built upon a real technology. It is just
old, not well known, and tells a good story of both changing the world and
making investors rich. The actual scam
is in leading investors to believe (1) that the technology is unique to the
particular business, when it is not, and (2) that the technology is on the
verge of commercialization, when it is not.
David Goodson
Many false claims have been made about the
commercialization of David Goodson’s past technologies. This matters, because Goodson
is the so-called “original inventor” of ClearSign’s Technology.
— He is also the Chief
Science Officer.
— He is listed on
ClearSign’s first patent applications as an “inventor” of the technology.
— He is a co-founder of
the company.
— He is the largest
shareholder and a director.
The Critical Issue: Because someone in ClearSign has obviously lied at the outset
about the Chief Science Officer’s scientific and business experience, investors
are at risk of having put their money on a technology scam. Having no marketable products and
given that its technology has not been tested by a third party, ClearSign’s two
largest assets are intangible: the actual talent and the trustworthiness of its
original inventor and Chief Science Officer. How can one value these in light
of the following false statements?
In the Prospectus
and S-1
Registration Statement, Clearsign claims that Goodson commercialized
“a diverse array of technologies” ‒ and then Clearsign gives us a list of three
of them, without giving us the specific names
of the companies and technologies ‒ Why not? (Emphasis here and throughout
is mine.)
“During his career, Mr. Goodson has led the development and
commercialization of a diverse array of technologies including electro-optic
polymer materials, advanced combustion systems and fermentation
technologies.” ~ Prospectus
I did uncover three such ventures. However, far from finding them commercialized,
I’ve found a trail of evidence showing failed technologies, burned investors,
and abandoned businesses. [For a larger and more detailed presentation of the
evidence please see the slide show: ClearSign'sFalse and Misleading statements about David Goodson (pdf). There
are links to specific slides throughout this essay.]
First Technology: Goodson was indeed president of an
electro-optic polymer company. It was
called Connexus Corp. Did he commercialize a technology
here?
— Some of the following is painful
reading. The point however was not to
show someone down on his luck, nor (unfortunately) was it to direct sympathy
toward the victims of his broken promises.
To prove the misrepresentations, it was necessary to show how companies
and technologies which were declared successes were in fact extreme failures.
For this, I relied heavily on court documents.
When
soliciting investors it doesn’t hurt to get a scientist with a Ph.D. to join
your team. Here is the history made
available to us through a suitfiled by a recently married PhD graduate. While Goodson was
being sued by creditors and obviouslyknew he had no funds,
he sent a letter which assured the graduate of
employment. The graduate passed up an offer from AT&T Bell Laboratories to
come to Washington for Goodson and Connexus. He was promised a salary but was not paid. He
was promised that his rent would be paid, but it was not. Goodson had promised that university tuition for
his wife would be paid by the company. A check was even written out to Seattle
University, signed by Goodson; it bounced, and the young couple
was next faced with collections. Time passed without a paycheck, the
couple was evicted, a complaint was filed and an angry resignation was submitted as an exhibit. Thanks to the court archives, we have the
background history of the state of affairs at Goodson’s Connexus ‒ a company which
was eventually dissolved by thestate of Washington
due to failure to file. It is safe to
say that there were no commercialized products here.
Second Technology: Clearsign claims that Goodson founded
an advanced combustion systems company.
He did. Next in Goodson’s history
appears a company called “Thermal
Energy Systems.” It
has a very small footprint however. The
company was awarded a patent in 1997, and two years later the company is dissolvedby the state of Washington due to a failure to file. The
patent itself expires early in under five years by similar fate: a failure to
keep up with the fees at the united states patent office. (Clickhere to see both company
dissolution date and patent expiration notices.)
It is very doubtful
that this technology was successfully commercialized.
Third Technology: Corporate
records show that Goodson next put together a company involved with fermentation:
Mycoferm
Technologies. Court documents, a letter written by Goodson, and Archive.org’s
preservation of Mycoferm’s
website reveal a stark contrast between the company’s “forward
looking” statements and the history
that has been left to us. Note the
contradiction between the promotional material for the public and the defensive
material submitted to the legal system.
In
a public context
|
In
the legal system
|
Mycoferm in 2002 archives, at the investor solicitation stage,
making revenue projections for 2004/2005
|
2004 rolls around and Goodson fends off Mycoferm’s landlord
|
“The company projects revenues of over $150,000,000/Yr. within
the first three years of operation.” ~
“Ethanol Production,” Mycoferm
Technologies, archived in 2002
“MycoFerm, which only recently began selling its EGT product,
projects net sales of $9 million this year. Goodson and Melville believe those
sales could grow to as much as $250 million by 2004.” ~ Startup's
future is fermenting - Enhanced Growth Technology could trigger firm's own
growth, Feb 22, 2001 Archive.org
|
“The only asset that I presently have is a TV, a desk and a
1995 Toyotta [sic] T100 truck. I am on
food stamps and have been in the care of the state of Washington Department
of Social and Health Services for a good part of this last year.” ~ Goodson’s
2004 letter to plaintiff’s attorney. (Exhibit 8, in Case 04-2-04625 SEA,
Superior Court of the State of Washington, County of King)
|
And what about the technology itself?
— Before, to investors, there is a message that the
technology has been tested and it’s going to succeed.
— After, to creditors, there is a message that the
company couldn’t succeed because it couldn’t demonstrate the technology.
In
a public context, the technology was tested
|
In
the legal system
|
Mycoferm during promotional stage
|
Goodson fends off Mycoferm’s landlord
|
“In Lab trials at MycoFerm, yeast
that produces ethanol grows three times faster using EGT when compared to the
same yeast growth in a control group using existing conventional methods.”
…
“EGT is showing exciting promise by improving
the biomass yield for ethanol in our lab tests.”
~ “Ethanol
Production,” Mycoferm Technologies (Archive.org)
|
“Our company had several major investors that were interested
in investing privately, but due to our need to demonstrate our technology,
they kept continuing to stall and force us into finding other ways of keeping
the company alive.” ~ Goodson’s 2004 letter to plaintiff’s attorney. (Exhibit 8 in Case 04-2-04625 SEA, Superior Court of the State of
Washington, County of King)
|
This is particularly disturbing because Goodson’s
technology at Clearsign also has not been demonstrated to independent third
party scientists … while Clearsign
appears to be suggesting that demonstrations have taken place. Which is it?
This red flag is as obvious with Clearsign as it was for Mycoferm.
In
a public context, recent press release
|
In
a regulatory context, earlier prospectus
|
[Clearsign]
“… has successfully demonstrated its proprietary Electrodynamic Combustion
Control™ (ECC™) technology operating in a system with a thermal output of
1,000,000 Btus per hour.” ~ Press
Release
|
“Our technology has not been tested or verified by any
independent third party.” ~ In
ClearSign’s SEC filed prospectus
|
In any event, the evidence provided by court documents
and internet archives tells us clearly that Mycoferm was not a commercialized
technology.
Then there is another claim in the prospectus. According to Clearsign, Goodson’s company,
Air Pollution Systems, was sold to the Linde division of Union Carbide (UCC) in
1978. This was difficult to accept. Even the briefest
history shows that in precisely
1978 Union Carbide was in the cash
crisis of its existence: it was a year of divesture ‒ not acquisition. It
is always dangerous to declare that there is no needle in a haystack and so I try
to avoid that type of investigative risk, but I scratch my head with the
absence of information here.
After a phone conversation with the staff from Research
Services at the Washington State Archives and after our inability to find proof
of a sale to UCC, I ordered copies of the corporate file. In the annual renewal documents, no change in personnel
or management was recorded in 1977, 1978 and 1979. The officers are the same, year by year.
Additionally, there is a blank to be filled in on the
annual corporate registration for the address of out-of-state businesses. Nothing was filled in before or after the supposed purchase by
Linde. There was an extra fee
to be paid by out–of-state corporations, but there was no addition of fees on the renewal forms …
the fees were exactly the same in 1977, 1978, and 1979.
In the year when Linde/UCC was supposed to have purchased
Air Pollution Systems, there was no name change in the company or a
reassignment of the patents. Even four
years later when Air Pollution Systems changes its name to “Controlled Energy Systems Company,” there is no
mention of Linde or Union Carbide. The name of the assignee to
the patents also changes … not to
Linde or UCC but predictably, to Air Pollution Systems’ new name: “Controlled
Energy Systems Company.”
There is even a merger in 1982,
with no mention of Linde or UCC, and Controlled Energy Systems Company is the
surviving entity.
Finally, as it goes with other Goodson founded companies,
this one too is dissolved by the state due to failure to file.
In summary, it
is very doubtful that this company was sold to the Linde division of Union
Carbide in 1978.
In a previous report we
have already dealt with the false claim that Goodson once collaborated with Nobel Prize winners.
During the relevant time period, Crick and Watson had not yet won the Nobel
Prize and were still obscure. Additionally,
given the extreme age differences and the fact that Crick and Watson were
living at opposite ends of the Earth
at the time, such collaboration is extremely unlikely.
The claim that his “numerous” patents “include” the four mentioned in the prospectus was false. The
statement suggested that Goodson had many more than four patents when in fact he had less, and two of the four were
false claims. A third patent expires early due to nonpayment of maintenance fees.
And how many of Goodson’s “technologies”
involve electric fields? Is
Goodson adept at solving so many different scientific problems? … or was it
luck that electric fields just so happen to be the solution … every time? Or is it that
electric fields just tell a good story?
Company
|
Electric Field application
|
Fate
|
Citation
|
Connexus Corp
|
To polymers
|
Failed
| |
Thermal Energy Systems
|
To combustion, similar to ClearSign’s
ECC Technology
|
Vanished/ dissolved by state. Patent
expires early due to failure to pay fees
|
“… flames of the combustion process are
subjected to a high electrical field, thereby resulting in a reduction in the
quantity of particulates carried from the combustion process…” ~ Patent
5,702,244, US Patent Office
|
MyCoFerm Technologies
|
To fermentation for biofuel, health,
human consumption, and more
|
Failed
|
The
invention relates to cultivating a biological source cell in a liquid-medium
bioreactor and applying a waveform regulated electric field potential to the
source cell, wherein the liquid medium comprises one or more ionizable
components.” ~Patent Application 20020130050, US Patent Office
|
Human Energetic System’s Corp.
|
Detect human electric fields to identify
diseases
|
Recent and On going
|
“Does the human bioelectrical field exist? Can we work with it? The
conclusive answer: Yes.” ~ Human Energetic Systems Corporation web site, Chief Technology Officer
|
ClearSign Combustion Corp
|
To combustion, similar to Thermal
Energy’s patented technology
|
Recent and ongoing
|
“ClearSign’s Electrodynamic Combustion Control technology introduces
computer-controlled high-voltage (but very low power) electric fields to
manipulate the movement of electrically charged molecules (ions) that are a
natural product of the combustion process.” ~ ClearSign web
site
|
You can’t have a technology without an inventor. Goodson was said to be the original inventor
of Clearsign’s technology ‒ ECC.
Clearsign has lied about Goodson’s past business and science experience. What
basis do we have to trust what is said now?
Without the inventor what technology do investors have? … whether that
was Mycoferm’s EGT then or Clearsign’s ECC now?
“Revolutionary” EGT: Electric Fields to Fungus
|
“Revolutionary” ECC: Electric Fields to Fire
|
“MycoFerm Technologies is evolving its Enhanced Growth
Technology (EGT) to offer unprecedented value to the ongoing need for a more
fuel stable America. EGT is a revolutionary
process that enhances yeast growth and enables cells to grow much
faster than previous technologies allowed.” ~ “Ethanol
Pzroduction,” Mycoferm Technologies
|
“We are developing a revolutionary
new technology that promises to improve key performance
characteristics of industrial combustion systems including energy efficiency,
emissions control, fuel flexibility and overall cost effectiveness. ECC™ can
be used anywhere there is a flame, regardless of fuel type, in the world’s
commercial, industrial and utility combustion systems.” ~ Clearsign website
|
Are the
misrepresentations about Goodson’s history material? As Clearsign puts it in the prospectus,
“In light of
Mr. Goodson’s extensive science background and his experience in developing and
successfully commercializing new technologies, we believe that his membership
on our board of directors is of high value to the Company.” ~ Prospectus
What background? What experience?
Omission
of material fact: Thomas Hartwick’s involvement with John Rivera’s technology
scam
As mentioned earlier, a successful scam usually employs an
aspect of a genuine technology, but
falsely suggests that it is on the verge of commercialization. For example, John
Rivera was convicted in the summer of 2011 for fraud. But he was
not sued by the SEC for producing bio-oil through pyrolysis. Pyrolysis was not on trial. In fact this
technology has been around for over a thousand years ‒ (it’s how we can produce
charcoal and bio-oils for example). Rivera
fraudulently claimed that “his” technology was commercially viable. It was not.
Clearsign’s co-inventor and Technical Advisor, Dr. Thomas
Hartwick, was also recently an advisor for John Rivera’s technology at Sustainable
Power Corp (SSTP). Dr. Hartwick arrived
to summarize a scientific study of Rivera’s technology for investors and to advise
the company on how to commercialize its technology. His name was frequently used in SSTP press
releases to promote Rivera’s technology and its commercial viability. Clearsign’s
omission of this material fact leaves investors at risk.
(For source material and a more detailed treatment,
please see the slide show ClearSign's Omission of Material Factregarding Thomas Hartwick.)
Hartwick in SSTP Press Release
|
John Rivera, in Federal Court
|
"'When I was approached to review the SSTP process
and the utilization of the proprietary catalyst, I spent nearly five weeks
reviewing the technical data before I agreed to accept the position as
scientific and technical advisor. Only after I became convinced that the
technology was based on sound scientific principles would I accept this
position,' stated Dr. Thomas Hartwick." ~ Sustainable
Power Corp. Appoints Dr. Thomas S. Hartwick as Scientific and Technical
Advisor to the Company Dec 14, 2009
|
"The central fraud alleged involves claims by
Rivera that USSE could produce viable commercial biofuel and fertilizer
products." (Page 2.) (USSE = US Sustainable Energy Corp.)
"Rivera was also the principal shareholder of
SSTP. According to the Commission, Rivera used SSTP for misconduct similar to
that alleged in this case." (Page 3, Note 2)(SSTP = Sustainable Power
Corp)
"The defendants also argue that two purported
contracts filed with their response demonstrate that USSE (or, later, SSTP)
was commercially viable." (Page 20)
~ Summary Judgment against John Rivera in July 2011, (Case
5:08-cv-00245-DCB-JMR) An exhibit in the case included the
same Texas A&M study that Dr. Hartwick was tasked with. That report was
submitted as an exhibit
|
The SEC suit was already underway before Hartwick’s
arrival. How could he not know?
Where is Clearsign’s disclosure of Hartwick’s role as
Scientific and Technical Advisor for Rivera’s technology at Sustainable Power
Corp? (SSTP)
“Dr. Hartwick's function at Sustainable Power Corp. is to
provide advice and counsel on the commercialization of SSTP's Green Energy
Vertroleum® process utilizing the Company's proprietary catalyst to produce
biofuels, biogases, and biochar.” ~ Sustainable
Power Corp. Appoints Dr. Thomas S. Hartwick as Scientific and Technical Advisor
to the Company
Although David Goodson is said to be the original
inventor of Clearsign’s technology, Hartwick is the first named inventor on
ClearSign’s first patent application. He is also the top listed Technical
Advisor in Clearsign’s prospectus
and S-1
Registration Statement. This
is a problem because this patent application was the first expression of
Clearsign’s technology. One can’t have a real technology without an inventor.
This has been a critical failure in
Clearsign’s technology story. There are no credible inventors for its “revolutionary technology.”
"In Dr. Harwick's own words:
'Regarding SSTP, Berry's assertions are totally incorrect. Rivera, the former CEO, was thrown out by the good guy directors who wished to rehabilitate the company. First, they had to find out if the technology was worth saving. So they got a contract with Texas A&M to measure and characterize the conversion process and got me as referee/advisor to critique the A&M results and comment on the business viability. Surprise! The basic technology was even better than the Rivera claims, but the company was too far gone with the lawsuits to recover. I never received my full compensation. I was on the team opposing Rivera, not supporting him. He was thrown off the board in Spring of 2009 before I even signed up to scrutinize the manufacturing process in October. Any contention that I was in league with Rivera is hardly credible...never even met the man. All of this is fully documented and available for scrutiny.'" ~ Padnos: “The Future Is CLIR: Why The Shorts Are Wrong About ClearSign Combustion” ~ Seeking Alpha
Either Padnos’ citation is correct and Hartwick has
misrepresented the past … … or Padnos’ has misrepresented Hartwick.
Summary
of claims made about Hartwick and of evidence to the contrary
Padnos’ citation of Hartwick
|
My refutation
|
“I was on the team opposing Rivera, not
supporting him.”
|
I found no evidence to support this claim. But in any
event, it is meaningless. SSTP was a technology
scam: SSTP/USSE investors were led to believe
that Rivera’s technology was commercially viable. It was not.
Hartwick was here to summarize
the report on Rivera’s technology and advise the company on its commercialization.
|
"... got me as referee/advisor to critique the
A&M results and comment on the business viability. Surprise! The basic
technology was even better than Rivera claims.”
|
The SEC commissioned Tunstall Adams, Inc. to examine
John Rivera’s technology. Tunstall Adams concluded
that Rivera’s technology was not commercially viable. The report was
submitted in federal court as an exhibit. The SEC won
the case in a summary
judgment. Both
Hartwick’s team and Tunstall Adams evaluated the same technology and both took the same Texas A&M report
into account.
|
“He was thrown off the board in Spring of 2009 before I
even signed up to scrutinize the manufacturing process in October.”
|
Rivera and Hartwick were contemporaries. Rivera officially
steps down as Chairman; however, he is still the largest shareholder and
is still very active after Hartwick arrives. Here is some of the evidence of
Rivera’s involvement with SSTP during and after Hartwick’s arrival:
—
In
an email, the CEO consults with Rivera on a press release
which highlights Hartwick’s report on Rivera’s
technology. This shows not only a contemporary and a common purpose, but also
Rivera in a de facto leadership role during Hartwick’s involvement.
—
Rivera
revokes a voting proxy from an officer; the officer complains that he was never really in power, but had only inherited liabilities,
and then includes Rivera in his resignation notice.
—
At
the very time Hartwick is tasked with summarizing Rivera’s technology, an SSTP press release quotes John Rivera, demonstrating that Rivera is not only
active and influential but working on the same project at the same time as
Hartwick. Rivera is said to be
“focusing his efforts on innovations that will further the success of SSTP.”
SSTP’s technology is Rivera’s technology and is precisely what Hartwick is
also focusing on at this time.
—
In
his deposition with SEC attorney Alex Rue, Rivera talks like one who is in
control, explaining that he could just take his technology to Europe and
become a billionaire if he wanted to, but he has chosen to keep everything in
the US for the sake of his investors. (Video)
|
Padnos also said he “spoke with [Hartwick] at
length to verify the timeline.” Then the
citation claims that Hartwick and Rivera were not contemporaries. As is
plain in the slide show of evidence, this
is clearly not true. That was only what
Padnos said that Hartwick said. What
does the evidence say? Just what brought Hartwick to
Sustainable Power Corp anyway? The
actual timeline shows a ridiculous race between two science teams.
— The SEC
was prosecuting Rivera for making fraudulent claims about the
commercial viability of his technology.
— In March 2009, the SEC requested an onsite examination of Rivera’s technology, to be performed by
Tunstall Adams, Inc.
— Shortly thereafter,
in April 2009, Sustainable Power Corp arranges for a study of its own,
forming an agreement with researchers from Texas A&M University.
— Hartwick is brought
in
to interpret the report for investors and to advise the company on the
commercialization of Rivera’s technology.
— SSTP declares its
product and technology to be validated. They say that they
are now preparing to begin commercial production.
— The summary of Texas A&M’s
report is published by the Scientific
Advisory Board, headed by Hartwick. “Confidentialinformation” has been removed from the original. (Who would actually fall
for this?)
— The SEC commissioned
study, by Tunstall Adams, is completed in March 2010 and concludes that Rivera’s
technology is not commercially viable.
It is submitted in court as an exhibit.
SSTP
press release
|
SSTP
press release
|
Tunstall
Adams, for the SEC
|
Sustainable
Power Corp. (PINKSHEETS: SSTP)
is pleased to report that testing conducted at the world-renowned Texas
A&M University confirms the validity of its proprietary Green Energy
Technology.” ~ Sustainable
Power Corp. Reports That Texas A&M University Confirms Validity of Its
Green Energy Technology, December 21, 2009
|
“Sustainable
Power Corp.'s President and CEO, M. Richard Cutler, Esq., said, ‘It has been
an arduous process of getting validation of the SSTP technology because the
reporting of such high yields of oil and gas really seemed unbelievable. We
are excited that one of the finest, most prestigious research universities in
the country, Texas A&M, has been able to validate the efficacy of the
process and the yields.’” ~ Sustainable
Power Corp. Reports That Texas A&M University Confirms Validity of Its
Green Energy Technology, December 21, 2009
|
“In
conclusion, USSE/SSTP does not produce an approved or certified liquid or
gaseous fuel that is suitable for commercial sale and use in reciprocating
and combustion turbine equipment. “ ~ SEC commissioned report submitted as an exhibit in the Federal
case against Rivera, March 3, 2010
|
John Rivera’s technology was never commercialized and
SSTP’s stock now trades at a fraction of a penny.
Next Padnos claims that Hartwick has advised over 700 companies ‒ and
when you look at it that way, it sounds impressive. But just 3 years ago, in an
SSTP press release, Hartwick was said to have advised 500 companies over the
previous 50 years.
When you step back and calculate the amount of time
available to each company, it appears that somebody is not being straight with
somebody else.
What would be the ratio of money received to scientific
contribution delivered? Let’s do the math.
According to SSTP and Padnos, Hartwick advised 500 companies until three
years ago and 700 companies to date.
That comes to 200 new companies over the last 3 years, or 66.6 companies
per year. If this is all true, then Hartwick can dedicate, on average, a total of 5.5 days to each company. (This presumes that Hartwick never takes a
day off, gets sick, or travels.) How much scientific effort is actually
involved with cutting edge science? …
“world changing” science, like solving the world’s energy problems by applying a secret catalystto a thousand-year-old technology or re-inventing fire by
applying an electric field like WilliamBrande did 200 years ago? Given the time constraints, is it
possible for Hartwick to make a meaningful contribution to the majority of
these companies, is he only lending his name for a fee, or is someone lying?
“Dr. Hartwick will be
elaborating on and consolidating some of the vast scientific test data that
has been compiled. He will assist the Company and potential investors in
interpreting the data and advise the company on how to present the
technical information to finance sources and commercialize the technology.”
~
MarketWire: Sustainable
Power Corp. Appoints Dr. Thomas S. Hartwick as Scientific and Technical
Advisor to the Company
"... got me as referee/advisor to critique the A&M
results and comment on the business viability. Surprise! The basic technology
was even better than Rivera claims.” ~ Hartwick, as cited by Padnos: “The
Future Is CLIR: Why The Shorts Are Wrong About ClearSign Combustion” ~ Seeking
Alpha
|
“USSE, SSTP has not developed processes for refining the crude
organic liquids and gases produced by the pyrolysis processes. No such
equipment is known to exist. Results from independent analyses of the
products originating from the company’s pyrolysis process indicate that the
products do not meet any known standard for use in reciprocating engines or
power turbines and were different from product test results reported in the
USSE press releases.” ~ SEC commissioned study which was submitted as an exhibit in
the case against John Rivera: Case
5:08-cv-00245-DCB-JMR.
|
Richard Rutkowski
Clearsign's CEO -- Richard Rutkowski -- signed
an agreement with John McFarland for "investor relations" work --
stock promotion. But John McFarland had been permanentlybarred from the securities industry in 2009. In securities law it's
referred to as a "statutory disqualification."
Here are some official documents on the case:
·
http://brokercheck.finra.org/Search/Search.aspx
check “individual” then insert “JOHN CHRISTOPHER MCFARLAND” or CRD# “2313648”
·
http://www.sec.gov/about/offices/ocie/aml/finra-awc-turnerbaumanmeyer.pdf
McFarland’s supervisors are caught up in the mess and their disciplinary
documents provide additional material as well.
According to the FINRA Letter of Acceptance, Waiver, and
Consent, McFarland’s customers had multiple accounts under a single name and
there were indications of possible stock manipulation and possible unregistered
stock sales.
Notably, …
“Numerous transactions where large blocks of penny stocks
and other low-priced securities of issuers with questionable operating and
financial histories were transferred into accounts, and then sold and the
proceeds wired from the accounts.”
… and …
“Customers with significant securities-related regulatory
histories delivering and liquidating penny stocks, including one individual who
had been barred by the SEC from participating in the trading of any penny
stocks."
....
"During 2005 - 2006, on numerous occasions, with
respect to at least 13 customer accounts, McFarland cause violations of
Regulation S-P by J.P. Turner by disclosing nonpublic personal information to
non-affiliated third parties ...”
It was serious enough for McFarland to receive a “statutory
disqualification” ‒ which means that he was barred from the securities industry..
It is very difficult to make the excuse that Rutkowski might
not have known about McFarland’s past.
Just this last June, Rutkowski and McFarland joined up and formed a separate Investor Relations company
called, Ormont LLC. This might cause some problems. First, I
have not found a disclosure of Rutkowski’s other relationship with McFarland.
Second, there is a sudden increase in McFarland's compensation in April, above and
beyond what was outlined in Clearsign's agreement. McFarland was to receive
4,500 shares for March (and each quarter thereafter), but a later filing
declares that he received 18,000 shares for March and April. That's 13,500
shares on top of the agreement. At $4 a share, that would be more than a
$50,000 bonus. Then in June, McFarland and Rutkowski suddenly show up on the
original formation record for a new investor relations company. Given that
starting a business takes some planning, how many months before the June formation
of Ormont did Rutkowski and McFarland agree to become partners in an investor
relations company? How close together was this agreement and McFarland's
increase in compensation? There have
been two 10-Q filings since the formation of Ormont LLC. ‒ June
2012 10Q and Sept
2012 10Q.
Third, McFarland’s regulatory penalty is called a “statutory
disqualification” and with that there are certain exemptions that Clearsign and
McFarland may not qualify for. There are
also business relationships that FINRA members are not allowed to have. For example, MDBCapital said that it performed IR and PR services for Clearsign, so how did
they do that without teaming up with Clearsign’s investor relations’ man ‒ John
McFarland?
McFarland has been employed by Clearsign since at least
September of 2011 and here he is again as Clearsign’s Investor Relations’
contact, almost exactly a year later -- September 2012 -- when Clearsign
announced that it would be ringing the NASDAQ bell.
McFarland and MDB’s time at Clearsign
overlap.
It would take a legal team and an inside look into
McFarland’s role with Clearsign, MDB Capital, investors, and retail brokers to
know the extent to which Clearsign and others might be legally vulnerable.
What are we supposed to think? There were five inventors on Clearsign’s
first patent application. This is the first expression of what is known as
Clearsign’s ECC technology. One
inventor was the patent agent, who is prosecuting the application through the
USPTO.
Two of the other inventors are experienced in investor
relations and business management, not combustion science. These two are the
CEO and CMO of Clearsign – Rutkowski and Osler. Why are they listed as inventors?
There are questions when a company officer experienced in
stock promotion has a financial interest in declaring "patent pending
technology." But there is a flaming
red flag when he also lists himself on the patent application as an
"inventor." This was supposed
to be a "revolutionary" technology -- the "reinvention of
fire." But where is Rutkowki's and
Osler's experience with combustion science? After seeing their names on the
patent applications, why should we believe anything else they have to say?
Come to think of it, just as every commercial institution is
well advised to perform credit checks on their customers, and just as credit
ratings depend upon the history of debtors in order to make assessments of
risk, why aren't investors informed of a CEO's credit history? ... with
investor owned funds?
After Mr. Rutkowski left Microvision, Inc:
"The Company has sued its former CEO and President
Richard Rutkowski and his spouse to collect $1,733,000 in outstanding loans
from the Company that were due in January 2007 and remain unpaid."
"In January
2006, one officer left the Company and his outstanding loans became due in
January 2007. In May 2007, we foreclosed on 50,000 shares of Lumera common
stock pledged as collateral for the loans. In October 2009, we entered into a
settlement agreement with the former officer. We have received total proceeds
of $237,000 to date, and the officer has committed to make additional payments
of $30,000 over the next two years."
If officers involved with public companies were required to
disclose something equivalent to a credit check, I think investors, being the
landlord of the assets, would be well served.
At
the minimum, out of the five inventors listed on
Clearsign’s pending patent, we are left with Goodson and Hartwick as inventors,
neither of whom are credible. Clearsign simply has no credible inventors for
its claimed “revolutionary” technology.
At
the maximum, investors face the risk of an organized
Intellectual Property scam.
MDB Capital Group
What’s a little more than ironic is that MDB Capital professes expertise with patents,
says it has its own patent database and patent experts. MDB Capital Group also claims
to have done due diligence on Clearsign and to have advised it on IP strategy. Yet Clearsign’s original inventor faked patents.
How could MDB both take its due
diligence seriously and not know this? A simple Google patent search was enough to
expose the lie.
MDB Capital’s analyst claimed, "No existing technology
currently competes directly against ECC." (MDB Capital: ClearSign Combustion Corporation Research Initiation) Yet many inventors have already patented inventions which apply electric fields to flames. More
irony: Clearsign
itself has a duty to supply a list of relevant patents to the USPTO as part of
its patent application. This form is called the “Information
Disclosure Statement” (IDS). Click here to see Clearsign’s IDS and how the
listed patents conflict with MDB Capital’s report (slide #5). In short, Clearsign’s technology is not alone and a real patent-pro would know
it.
Sometimes I wonder if Clearsign and MDB are just having a lot of fun at everyone else’s
expense. Nonethess, at its
core, Clearsign is a fairly simple case.
Clearsign has no credible inventors to account for its technology. This critical failure in Clearsign’s story has yet to be addressed.
How is it possible to have a technology without an inventor? I believe that Clearsign’s founding
constitutes a technology scam, and I believe that the evidence I have dug up
makes this case prosecutable: Lies have
been told in the S-1Registration Statement.
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