Wednesday, July 1, 2009

$10.4 Million Jury Verdict returned in Breach of Contract & Fraud case

A jury ordered Cello Energy to pay $10.4 million over allegations the firm fraudulently claimed it could produce cheap fuel from hay, waste wood and other material.

Cello Energy is based out of Bay Minette and owned by the former head of the Alabama Ethics Commission, Jack Boykin.

The federal lawsuit was filed by Cello Energy bio fuel investors, Parsons & Wittemore Enterprises; a New York based paper company which also owns a pair of pulp mills in southwest Alabama.

Although Cello Energy built and staffed a plant, Parsons & Wittemore insisted the plant never accomplished what Boykin had long promised—deriving motor fuel from wood chips, crop residue and other biomass.

The jury ruled Monday that Cello Energy and Boykin Trust, the partnership that owned it, were liable for $2.8 million for breach of contract with Parsons & Whittemore. The jurors also decided that the companies, along with Jack Boykin and his son Allen Boykin, were personally liable for another $104,537 for fraud and awarded $7.5 million in punitive damages against all the defendants.

Boykin vowed to move forward with his process for producing fuel. His attorney, Forrest Latta, said Boykin's method has the potential to transform the world.

Parsons & Whittemore invested $2.5 million in Cello Energy and had another $10 million option for a one-third ownership share. Unknown to Parsons & Whittemore, however, Boykin struck a deal with a California firm, Khosla Ventures, which invested $10 million in the construction of a plant in Bay Minette to turn wood chips, hay and other cellulosic material into diesel fuel.

Parsons & Whittemore claimed the deal diluted the value of its investment. And George Landegger, CEO of Parsons & Wittemore, described Boykin's promises about the fuel plant as being lies.

"The jury has spoken clearly in condemning the Boykins' fraud against Parsons & Whittemore. I am gratified that the jury has put a stop to the Boykins' deceit," he said.

Parsons & Whittemore also sued Khosla, accusing the company of interfering in its business relationship with Cello Energy; however, the jury found in favor the Silicon Valley company, Khosla.

Source: Mercury News