Johnny R. Thomas, et al.
SEC Obtains Final Judgments Against Four Former Renewable Energy Industry Executives
Litigation Release No. 25197 / September 7, 2021
Securities and Exchange Commission v. Johnny R. Thomas, et al., Civil Action No. 19-cv-1132 (D. Nev. filed June 28, 2019)
On August 19, 2021, the Securities and Exchange Commission obtained final judgments against four former executives of Blue Earth Inc., a former alternative and renewable energy services company, for their alleged roles in defrauding investors by materially misrepresenting the company's relationship with a key customer, the scope of its business operations, and financial condition.
The SEC's complaint, filed in the United States District Court for the District of Nevada on June 28, 2019, alleged that Blue Earth's former executives - Johnny R. Thomas, John C. Francis, Jonathan Brett Woodward, and Robert C. Potts - materially misrepresented Blue Earth's ability to develop, build, own, and operate at least seven combined heat-and-power plants from at least March 2014 through at least March 2015. The defendants allegedly created the false impression that Blue Earth had secured contracts for these plants, which would purportedly transform its business from an unprofitable venture to a profitable one. Blue Earth allegedly bolstered this illusion by materially inflating by more than 400% the value of a "Construction in Progress" asset. As alleged in the complaint, Blue Earth ultimately secured contracts for only two power plants, and its ability to perform the second contract and to secure additional contracts diminished significantly by late 2014. Blue Earth filed for bankruptcy in March 2016.
Without admitting or denying the allegations against them, Thomas, Potts, Woodard, and Francis consented to the entry of final judgments which imposed officer-and-director and penny stock bars against all four defendants, ordered Thomas to pay a civil penalty of $240,000, Potts to pay a civil penalty of $125,000, and Francis and Woodard each to pay a civil penalty of $120,000, and permanently enjoined the defendants from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder and Section 17(a)(2) of the Securities Act of 1933, and from aiding and abetting violations of the reporting provisions of Exchange Act Section 13(a) and Rules 12b-20 (all), 13a-1 (all), 13a-11 (Thomas and Francis), and 13a-13 (Thomas, Woodard, and Francis). The final judgments further enjoined Thomas and Woodard from violating the provision requiring officer certification of filings with the Commission, Exchange Act Rule 13a-14; Woodard from violating the books-and-records provisions of Exchange Act Section 13(b)(5) and Rule 13b2-1 thereunder, and aiding and abetting violations of the books-and-records provision of Exchange Act Section 13(b)(2)(A); and Thomas from violating the corporate insider disclosure obligations under Section 16(a) of the Exchange Act and Rule 16a-3 thereunder.
On September 1, 2021, the Commission instituted a settled administrative proceeding against Woodard on the basis of the entry of a permanent injunction against him in the civil action. Without admitting or denying the SEC's findings, Woodard consented to the SEC's Order which suspends him from appearing or practicing as an accountant before the Commission pursuant to Rule 102(e)(3) of the Commission's Rules of Practice.
The SEC's litigation was led by Suzanne J. Romajas and Devon Staren, under the supervision of Jan Folena, with the support of John S. Crimmins, Margaret W. Smith, and Victor Tabak, who conducted the investigation under the supervision of Nina B. Finston and Carolyn M. Welshhans.
For more information, see Litigation Release No. 24522 (June 28, 2019).