SEC Charges Willis-Endorsed City Vendor, FogFuels, with Fraud
(APN) ATLANTA — The US Securities and Exchange Commission (SEC) filed an emergency action on September 11, 2013, “seeking a temporary restraining order and other emergency relief in federal court in the Northern District of Georgia, charging Paul Marshall… a state-registered investment adviser representative, and three Atlanta-based companies that he owned and controlled – Bridge Securities, LLC, Bridge Equity, Inc. (collectively, the Bridge Entities) and FOGFuels, Inc. … with violations of the federal securities laws for misappropriating client funds,” according to a press release from the SEC obtained by Atlanta Progressive News.
In September 2012, the City Council of Atlanta authorized the City to enter into a controversial sole source contract with FOGFuels to convert grease into fuel on behalf of the Department of Watershed Management.
Councilman Lamar Willis (Post 3-at-large) aggressively and emphatically lobbied the Council during meetings of the Full Council and its Committees to support the contract.
As previously reported by APN, an email dated August 03, 2012, from Marshall to top employees of FOGFuels, referred to Willis as a “new team member… on the Government side,” noting that Willis’s profile would be made available shortly.
APN’s News Editor–the present writer–filed an ethics complaint against Willis for lobbying for, and voting for, the FOGFuels contract, despite an apparent financial interest. However, the Ethics Office was not able to find any evidence to show that Willis had received any financial benefit from the company.
Still, Willis was FOGFuels’s biggest public advocate. Other chief proponents were Mayor Kasim Reed and Watershed Commissioner JoAnn Macrina.
The Council authorized the sole source contract on September 04, 2012. Only Kwanza Hall (District 2), Natalyn Archibong (District 5), Yolanda Adrean (District 8), and Felicia Moore (District 9) opposed the authorization.
Moore was the most vocal critic of the legislation. Moore argued the City should have put the contract out to a request for proposals, noting that there were several other Atlanta firms who appeared able to do the work.
According to the SEC’s complaint, “since at least 2011, Marshall, an investment adviser representative of the Bridge Entities, misappropriated at least $2 million from advisory clients. In its complaint, the Commission alleges that Marshall instructed clients, some of whom were elderly, to transfer funds to bank accounts under his control for purported investment in various securities, including mutual funds. Instead, Marshall used those client funds to pay personal expenses, including luxury vacations and private school tuition for his children. The complaint further alleges that Marshall concealed his fraud by providing advisory clients with fabricated account statements.”
“Additionally, the Commission’s complaint alleges that Marshall, currently the majority owner and Managing Director of purported alternative fuel company FOGFuels, misappropriated $100,000 from an advisory client who invested in that company,” the SEC wrote.
“The Commission’s complaint alleges that, through their misconduct, Marshall, the Bridge Entities, and FOGFuels violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and that Marshall and FOGFuels violated Section 17(a) of the Securities Act of 1933. Finally, the complaint alleges that Marshall and the Bridge Entities violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940,” the SEC wrote.
“On September 11, 2013, the Honorable Timothy C. Batten, Sr., United States District Judge for the Northern District of Georgia, granted the Commission’s request for emergency relief, issuing an order temporarily restraining Marshall, the Bridge Entities and FOGFuels from further securities laws violations, freezing their assets, preventing the destruction of documents, requiring an accounting, and expediting discovery,” the SEC wrote.
“The Court also set a hearing date of September 20, 2013 for the Commission’s request for a preliminary injunction. The Commission’s complaint also seeks a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. Those claims will be adjudicated at a later date,” the SEC wrote.
As previously reported by APN, Willis is also well-known for his practice of converting funds to his personal use, whether funds intended for college scholarships, or funds intended for an injured child whom he represented in court. It is ironic, then, that Willis and Marshall worked so closely together over the past two years.
Willis praised FOGFuels in a press release in February 2013, where he and Marshall were quoted in regards to a purported new “partnership” between FOGFuels and the City of Atlanta.
“Today FOGFUELS™ announced a new partnership with the City of Atlanta. FOGFUELS will use its patented process to transform fats, oils and grease (FOG) into usable B100 biodiesel fuel that can be used to power school buses, city vehicles and machinery,” the press release, reprinted on the Business Wire website, states.
“FOGFUELS is excited to be working with the City of Atlanta, offering a new and cleaner way to power the city,” Marshall said in the release.
“Atlanta is the first city that FOGFUELS will partner with to create B100 fuel from trap grease. The company plans to work with other municipalities around the country to help clean up the problem of illegal grease dumping and create a better living environment,” the release stated.
“Atlanta is excited to be working with a company like FOGFUELS that can help clean up the city’s water and wastewater system and make it safer for the citizens,” Willis said in the release.
“Along with Mayor Kasim Reed, we believe that there are many benefits to creating a source of clean, sustainable and renewable energy by working with companies like FOGFUELS,” the release said.
Scheree Rawles, a spokeswoman for the Department of Watershed Management, told APN, however, that there is no contract between FOGFuels and the City of Atlanta.
When asked why there was no contract, when the contract was authorized by the Council, and when a company press release quoting Willis as stating a new partnership had been entered into, Rawles referred APN to the City’s Law Department.
City Attorney Peter Andrews, who was out of the office today, did not immediately return an email seeking comment.
Councilwoman Archibong said the City may need to reevaluate its posture towards FOGFuels.
“If their assets have been frozen and they have no capacity to perform, the City should look into some action to make sure that we are not affiliated with a company that is in trouble with the SEC and is unable to do what we intended for them to do,” Archibong told APN.
Councilwoman Moore, who opposed the FOGFuels legislation, declined comment. Andre Dickens, who is challenging Willis for his seat in this November’s election, declined comment.
Councilman Howard Shook, who chairs the City Utilities Cmte, did not return an email seeking comment.
A spokesperson for FOGFuels did not return a voicemail seeking comment.