Xethanol Corp. has replaced Christopher d’Arnaud-Taylor as chief executive officer.

The new boss is Louis B. Bernstein, a member of Xethanol’s board and a retired assistant general counsel at Pfizer Inc. Xethanol said Bernstein would run the company on an interim basis while it searches for a permanent CEO, as well as a chief operating officer.

A spokesperson for Xethanol (XNL: AMEX) told Reuters that d’Arnaud-Taylor will remain an adviser to the company.

A standard background check shows that Bernstein has been a Xethanol director since June 2005, a few months after the company went public through a reverse merger with Zen Pottery Equipment Inc. of Denver. He recently retired from Pfizer after 30 years of service.

Bernstein also is a director at United Energy Corp., a New Jersey company that sells specialty chemicals used in oil and gas production, photo finishing and other fields. He joined its board in September 2003.

A check of United Energy’s SEC filings shows that five people connected to that company also have ties to Xethanol.

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Xethanol Corp. bills itself as a biotechnology-driven ethanol company that can turn wood chips, corn stalks and paper sludge into cheap alternative fuel.

But a Sharesleuth.com investigation found no evidence that Xethanol (XNL: AMEX) has produced significant quantities of ethanol from those raw materials. Combine that with Xethanol’s announcement that it’s poised to become one of the first companies to commercialize that technology – a sort of Holy Grail in the renewable-energy world – and you’ve got the type of inconsistency that Sharesleuth seeks to uncover with its stories.

When Sharesleuth identifies what might be considered corporate misdirection, we take a deeper look at the company, its history, its business and the people behind it.

At Xethanol, we discovered that the shareholders whose names appeared in the company’s SEC filings over the past year and a half included no fewer than eight current or former stock brokers who have been the subjects of disciplinary actions by the Securities and Exchange Commission, the National Association of Securities Dealers or other regulatory bodies.

One of the five biggest shareholders in Xethanol when it went public last year was William Scott Smith, who was charged by the SEC in 1995 with defrauding investors in a Denver-based shell company called Melbourne Capital Corp. The SEC said that Smith installed his nephew and two friends as officers and directors of Melbourne Capital, and that the group — at Smith’s direction — misused or misappropriated 70 percent of the $246,000 that the company raised from investors. The onetime stockbroker settled the charges in 1996, without admitting or denying guilt. The SEC assessed $256,000 in financial penalties and barred Smith from serving as an officer or director of any public company.

Xethanol’s SEC filings refer to him as W. Scott Smith and do not mention his past. We confirmed that he was the same person by comparing address records, birthdates, Social Security numbers and other identifying information.

Sharesleuth noted in its investigation that Christopher d’Arnaud-Taylor, Xethanol’s chairman and chief executive officer, claims to have gained “global senior corporate executive experience with multinationals including Unilever, Reed Elsevier, Northop Grumman and TKM Trading.”  Two of those companies – Reed Elsevier and Northrop Grumman — said they could find no information confirming his employment, in any capacity.

Sharesleuth also learned that one of Xethanol’s two conventional ethanol plants, a facility it once called its Biomass Technology Center, has been idle for more than a year and no longer has water or sewer service – two prerequisites for testing or production.

Other things that caught our attention include: 

• The company’s minimal spending on research and development.
• An absence of scientists on its staff.
• The relatively low price it paid for the outside technology upon which its waste-to-ethanol dreams are based.
• Key alliances with two companies founded by the same person — a former stock broker who now functions as a financial consultant  and promotor.

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