Sunday, September 04, 2016
Analysis of a Bogus SEC Lawsuit - By Donald V. Watkins - Sep 4, 2016 - The SEC questions the value of the business. Interestingly, when I applied for an opportunity to purchase the St. Louis Rams seven years ago, international financing institutions with much more sophistication in valuing businesses than the SEC reviewed my financial submission to determine if I was a capable buyer. The Wall Street bank that represented the seller qualified me to compete for this purchase opportunity at every stage of the process.
https://www.facebook.com/donald.v.watkins/posts/10210364819538996
Analysis of a Bogus SEC Lawsuit
By Donald V. Watkins
©Copyrighted and Published (via Facebook) on September 4, 2016
©Copyrighted and Published (via Facebook) on September 4, 2016
We finally got a copy of the Securities and Exchange Commission's September 1, 2016, lawsuit against three of my companies and me. Now I understand why a copy of the lawsuit was released to the media before it was served upon us. The normal courtesy between lawyers of sending a copy of the lawsuit to the opposing attorney was not extended in this case. We got a copy from the news media.
The lawsuit is busting at the seams with bogus claims and false allegations. Now it makes sense why the SEC did not come to my offices to review the thousands of corporate documents it had subpoenaed in 2014. If they had, the agency would have been required to evaluate its bogus claims in light of those documents. The SEC had no interest in finding and presenting the truth in its lawsuit regarding the nature and scope of the economic participation transactions at the center of their lawsuit, as well as the prior lawsuit I filed against the SEC last October. The SEC wanted to publicly slander me with false allegations that I "duped" professional athletes. In stereotypical fashion, the SEC views the handful of athletes in my business circle as lacking in business acumen. They are wrong. These guys are highly educated and smart.
The SEC conveniently left out the crucial fact that the 29 stakeholders in my businesses include a sibling, life-long friends, two former pro athletes (with degrees from Georgia Tech and Notre Dame) who are now senior management executives in my businesses, a former judge, three lawyers, CEOs of national and international businesses, a top executive of a public energy utility, two doctors, experienced businessmen/women, and other highly intelligent individuals who believe in my businesses, work ethic, and integrity.
Even the athletes who the SEC says were "duped" are personal friends of mine who had financial advisors at the time of their transactions. One of the so-called "duped" athletes was represented in his transaction by a high-powered Wall Street investment bank.
The SEC complaint acknowledges that my waste-to-energy business is ongoing and global in nature. The agency does not challenge the fact that the this business owns: (a) $4.8 million in engineering plans and specifications; (b) domestic and global process patents for a waste-to-energy process that took millions of dollars to develop; (c) a waste conversion process that has an established system performance insurance value of $225 million; (d) proprietary software containing algorithms for converting solid waste from more than 60 countries into fuel grade ethanol, and (e) a host of other tangible and valuable assets.
The SEC questions the value of the business. Interestingly, when I applied for an opportunity to purchase the St. Louis Rams seven years ago, international financing institutions with much more sophistication in valuing businesses than the SEC reviewed my financial submission to determine if I was a capable buyer. The Wall Street bank that represented the seller qualified me to compete for this purchase opportunity at every stage of the process. The cornerstone of my financing package was the value of the same energy assets now questioned by the SEC. The Rams did not sell to me, or any other outside purchaser. The team sold to Stan Kroenke, the sole limited partner in the Rams at the time. Kroenke exercised his preferential right to buy the team and moved it to Los Angeles.
The SEC claims that I spent "investor" money for personal items. This is the SEC's biggest stretch of all. The SEC knowingly disregards the plain language of the two-page purchase agreement and the fact that the stakeholders referenced in its complaint purchased economic participations in my block of equity interest. These purchases occurred in a manner authorized by corporate governance documents that predated all of the transactions in question. When the purchases were consummated, my economic interest in the companies was diluted down to accommodate their collective purchases. In other words, I sold a part of my entitlement to certain economic benefits to these stakeholders. The money from the sales transaction belonged to me, not the corporations. The money was reported on my tax returns, not the parent company's returns.
Furthermore, I was the equity member who financed an impressive seven-year global expansion of the business to 47 countries. I built a global company in record time and without violating any laws. This growth occurred during and after a crippling global recession. I never took a salary during this period. The SEC also knows that Secretary of State John Kerry authenticated one of my Middle Eastern business alliances on February 13, 2013.
The economic participants in my block of equity contributed no further money to my company beyond their initial purchase price. Their downside was capped at their purchase price, but their upside was replicated each time we entered into a business alliance covering new markets in different countries, at no cost to them.
The SEC does not allege that my companies' business plans were not implemented. In support of its dubious allegations of fraud, the SEC talks about a potential business alliance with Waste Management. This is another area where the SEC's failure to inspect and review our corporate documents allows them to leapfrog over the real facts surrounding this potential alliance. Waste Management went from being our competitor in the waste-to-energy space to becoming a potential business alliance partner. The subpoenaed documents, which the SEC never bothered to obtain and review, will support our version of this matter.
The SEC's allegations cast my efforts to keep my business alive and growing during and after the Great Recession of 2008 in a negative light. We managed to stay alive and grow during the recession. Rather than asking the U.S. government for a taxpayer-sponsored bailout like the Wall Street banks, GM, insurance giant AIG and other businesses did, we made it through the recession using a combination of my personal resources and the help of close friends.
Today, we are still working in countries across the globe. The SEC's 2-year investigation has not collapsed our company, despite the agency's best efforts to accomplish this goal. For the most part, our business alliance partners understand the SEC's efforts to smear me and sabotage my businesses.
The good news for my stakeholders and me in the SEC lawsuit is this: Through the process of formal discovery in the litigation, we will learn exactly who our enemies are and we will expose them for what they are. We will also have the opportunity to file and prosecute a counterclaim against the SEC (and those who aided and abetted the agency) for monetary damages because of the SEC's abusive agency conduct in this case.
Finally, the SEC's lawsuit is paper thin, bogus and malicious. I will not let the SEC's lawsuit intimidate me or chill the exercise of my First Amendment right to criticize ethically challenged public officials, or anybody else.
Donald V. Watkins
The SEC Strikes Back - By Donald V. Watkins - Sep 2, 2016
https://www.facebook.com/donald.v.watkins/posts/10210346559802514
The SEC Strikes Back
By: Donald V. Watkins
©Copyrighted and Published (via Facebook) on September 2, 2016
©Copyrighted and Published (via Facebook) on September 2, 2016
Yesterday, the Atlanta office of the U.S. Securities and Exchange Commission "SEC" gave Alabama Governor Robert Bentley, First Mistress Rebekah Caldwell Mason, presidential candidate Hillary Clinton, and other subjects of my published investigative reports a helping hand in their battles to escape the heightened scrutiny of their conduct in government. The SEC filed a baseless lawsuit against three of my privately owned companies and me alleging that we defrauded "investors". The SEC distributed a press release across the nation to make sure everybody knew that the lawsuit had been filed.
The lawsuit and press release were designed to smear my name using the imprimatur of the SEC for legitimacy. This was a cheap PR stunt carried out by SEC insiders for the benefit of my adversaries in government and an opposing party in a 2013 federal lawsuit filed against me in New Jersey. This stunt will not work.
The SEC avoided any mention of the following material facts in its lawsuit and press release:
1. The SEC's lawsuit was filed only after I filed an October 22, 2015, lawsuit against the agency and one of its regional office executives in Atlanta federal court seeking a declaratory judgment, monetary damages and attorney's fees regarding the same legal issues. My case has been pending since October with not much action by the SEC and no publicity. Yesterday's lawsuit was an obvious act of retaliation by the SEC for the filing of my October lawsuit. The outcome of both lawsuits will depend upon the documentary evidence and not the SEC's spin in its press release or lawsuit.
2. Mr. Walter Jospin, the Regional Director of the SEC's Atlanta Office, issued a statement in the press release accusing me of duping investors. What Jospin omitted from his carefully crafted comments was the fact that he is a personal friend of the New York attorney who represents the plaintiff in the New Jersey case that raises the same baseless SEC allegations. In fact, Jospin and his lawyer buddy both worked as high-level executives for the SEC and are tied together in other significant ways. Jospin has failed to recuse himself from agency decisions in my case based upon of his conflict of interest. Now, Jospin is leading the SEC fight against me for the benefit of his former agency colleague.
3. Last year, my political adversaries referred the economic participation transactions that are the focus of both lawsuits (mine and the SEC's) to the Economic Crimes Unit of the U.S. Attorney for the District of New Jersey. The U.S. Attorney opened an active criminal investigation into my business and personal affairs. After we were contacted about the investigation and submitted a detailed explanation of my business affairs, corporate records, and personal conduct in November, the U.S. Attorney properly closed its investigation in January 2016 with no action taken against me.
4. The same political adversaries had launched earlier regulatory investigations of my bank by the Alabama State Banking Department, the Federal Deposit Insurance Corporation, and the Federal Reserve. These investigations were coordinated attacks on my character and business reputation. They were based upon a common set of flawed facts that are flatly contradicted by thousands of pages of corporate documents. My adversaries have been unsuccessful in their efforts to destroy my bank. Today, the bank is a profitable and sound business operation. It never sought or received federal bailout money and is one of 19 black-owned banks in the U.S.
5. The SEC launched its "non-public" inquiry into my companies in June 2014. It engaged in impermissible "twisting" conduct in witness interviews. The SEC took a sworn statement from me that month. It also subpoenaed personal and corporate documents dating back to January 2001. After my staff took the time to gather, organize and make thousands of pages of responsive documents available to the agency, the SEC informed my Atlanta attorney that it had no interest in reviewing these documents. No legitimate investigator subpoenas relevant corporate and personal documents and then refuses to review them. This is when we knew the SEC inquiry was a farce and was undertaken for personal and retaliatory reasons. As such, we sued the SEC in Atlanta federal court in October 2015. This case, which was not mentioned in the SEC's lawsuit or press release, is ongoing.
6. The SEC's complaint summarized a handful of business transactions that were cherry picked, deliberately slanted by the agency in the worst light possible, and taken completely out of context. Furthermore, the business records subpoenaed by the SEC, which the agency never reviewed, squarely refute the allegations of fraudulent conduct.
7. The SEC has never been interested in learning the truth about my businesses, their global reach, their value, or me. Instead, rogue officials within the SEC have hijacked the agency's investigatory powers and complaint process for malicious purposes. Since 2014, the agency's sole focus has been on destroying my businesses and me, and on hurting the financial interests of my stakeholders. The SEC has no interest in letting the true facts get in the way of this misguided focus.
8. We have consistently contested the SEC's jurisdiction to regulate my private business affairs and operations. I do not own or run publicly traded companies. I do not solicit investors in the open market. The individuals who are stakeholders in my businesses are very small in number and are friends of mine. The SEC conveniently ignored my businesses' "private company" exemptions from agency regulatory oversight so that it could get media headlines that impugned my character.
9. Finally, I can put my record in business and in life up against anybody's. I kept a global business functioning and growing during and after the Great Recession of 2008 without any government bailouts, without violating any domestic or international laws, without taking a salary since 2006, and without losing economic value for my stakeholders. Yet, the SEC has portrayed me as a person who defrauds investors. Ironically, the SEC's lawsuit against me is the biggest fraud of all.
The SEC's lawsuit was not written or filed to win in court. Its complaint is the legal equivalent of a scud missile. It is nothing more than a smear sheet gifted wrapped in legal jargon that was launched by friends of my adversaries to undermine my reputation and character. This smear tactic will not work because the documentary evidence is on my side.
Finally, I appreciate the tremendous outpouring of support that I have received in this matter. I have been fighting people like Walter Jospin and his cronies in the SEC all of my life. My closet is cleaner than theirs. I am standing on truth; they are standing on politics, spin and cronyism.
Donald V. Watkins
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