December 2006 Archives

We’d hate for anyone to think that we’re fixated on one company, but when we heard about Xethanol Corp.’s latest plan to make ethanol from citrus peels, we had to take a closer look.

Here’s what we found: Xethanol’s new partner, Renewable Spirits LLC of Boca Raton, Fla., was founded and financed by Raymond Scott Stevenson, former vice president of taxation at Tyco International Ltd. Two weeks ago, Stevenson was sentenced to three years in prison after admitting that he deliberately failed to report $170 million of income on Tyco’s 1999 tax return. Letters submitted to the judge on Stevenson’s behalf included one from a U.S. Department of Agriculture scientist who worked with Renewable Spirits on the citrus-to-ethanol technology, attesting to its potential benefits to society. As part of his plea agreement, Stevenson will make a different sort of contribution to society, by paying a $250,000 fine and cooperating in any further Tyco investigations.

Renewable Spirits filed a new annual report with the Florida Division of Corporations this week, listing Stevenson’s wife, Gwenn, as manager. The company also added a new president, Doug Westfall.

Xethanol Corp.’s partner in developing ethanol projects in New England has terminated their joint venture, citing concerns about the company and its technology.

Global Energy and Management LLC notified Xethanol (AMEX: XNL) of the decision late last week. Lee R. Tyrol, a principal of Global Energy, also resigned as manager of the partnership, called NewEnglandXethanol LLC.

Tyrol confirmed the termination to Sharesleuth.com on Friday. He said that Global Energy had lined up suppliers of raw materials for conversion to ethanol, had located plant sites and had identified buyers for the end product.

In the end, Tyrol said, Xethanol was unable to deliver a production process that would enable the plants to turn organic waste into ethanol on a large-scale, commercial basis.

Xethanol has billed itself as a leader in the race to develop a method for making ethanol from biomass, such as wood chips or plant material, instead of conventional feedstocks like corn

“They were supposed to provide us with technology, which they didn’t,” Tyrol said. “Obviously, there is no silver bullet.’’

Sharesleuth published an investigative report on Aug. 7 questioning Xethanol’s claims that it was poised to produce so-called cellulosic ethanol. The story noted that Xethanol had acquired nearly all of its technology from government and university labs, had spent relatively little on research and development and had offered no evidence that it was able to produce cellulosic ethanol in large batches or at prices competitive with other fuels.

The story also raised questions about the backgrounds of Christopher d’Arnaud-Taylor, Xethanol’s then-chairman and chief executive, and others involved in the company.

Xethanol and Global Energy had announced their partnership in April. At the time, the partners told the Associated Press that they hoped to use waste products from breweries, pulp from paper plants, grass clippings and other materials to make ethanol.

The agreement called for Global Energy to contribute $1.5 million to NewEnglandXethanol -- $250,000 on the signing of the organizational and operating agreements, $250,000 within 90 days of that event, and $1 million upon approval of the plan to build the first plant.

Xethanol, which is based in New York, has two other joint ventures in the Southeast. Those entities each have acquired an idled factory that they plan to retrofit for ethanol production. One is an Augusta, Ga.; the other is in Spring Hope, N.C.

Tyrol said Global Energy initially had no qualms about getting involved with Xethanol, because several big investment firms, including Goldman Sachs and Co., had already bought millions worth of stock in the company.

"I assumed that the folks on Wall Street had more than done their due diligence on this project,'' he said.

Xethanol’s shares have fallen from a high of $16.18 in April to a closing price of $2.39 on Friday. Tyrol said Global Energy, which got Xethanol warrants as part of its deal, suffered along with other Xethanol stockholders.