Biofuel Firm CEO Accused of Bilking Investor

     (CN) – The former CEO of New Generation Biofuels duped a foreign investor into pumping more than $2 million into the company, and then dumped his own shares and made a “lucrative exit,” the investor claims in Federal Court.
     Lichtenstein-based Alpha Capital Anstalt filed a federal lawsuit in Manhattan accusing the now-defunct biofuel company and its former executives, including CEO Lee S. Rosen, of securities fraud, negligent misrepresentation, fraud, breach of fiduciary duty and conspiracy.
     Alpha Capital says Rosen was the mastermind of a “fraudulent plot” to offload his controlling role in New Generation Biofuels Inc. (referred to in the 37-page complaint as “NGBF”).
     Rosen hyped the company’s “cutting edge patentable technologies,” despite knowing that some of its patent applications “already had been rejected for reasons that would apply across the board to all of NGBF’s patent applications,” the lawsuit states.
     Rosen allegedly promised to pay a foreign inventor $11 million for a vegetable oil additive that the inventor touted as “patentable,” sustainable and capable of mass production.
     “By promising to overpay for the license, albeit with no intention to make such payments, Rosen created the illusion that the technology … actually had a value of $11 million or more,” Alpha Capital claims.
     Those intellectual property rights “had little or no value,” the investor adds, and Rosen and his crew knew it. Alpha Capital says Rosen and his company “did not pay anything close to $11 million” to the inventor.
     While Rosen was the “principal architect of the fraud,” Alpha Capital says, he was helped by his team, former executives John Mack, Andrea Festuccia, David Gillespie, Cary Claiborne, Dan Saglio and David Goebel.
     To hype the worthless technology even more, the defendants filed patent applications that they knew would fail based on previous rejections, according to the lawsuit.
     But the defendants never disclosed those 2007 rejections and even filed reports with the Securities and Exchange Commission over the next four years stressing the importance of the company’s intellectual property rights, Alpha Capital claims.
     “In the end, none of these patent applications were granted by any major market country,” the European investor claims.
     It says the publicly traded New Generation Biofuels was merely “an avenue” for Rosen and his co-conspirators “to liquidate their investments.”
     “Plaintiff is informed and believes that Rosen concealed his true ownership and sales of NGBF stock from Alpha and from the public by holding and liquidating his stock holdings in NGBF through undisclosed trusts, the funds from which were used to benefit Rosen directly, including purchasing a yacht for Rosen,” the lawsuit states.
     The SEC sued Rosen for alleged securities fraud last December. Rosen agreed to pay more than $900,000 to settle those claims without admitting or denying the allegations.
     Alpha Capital notes in the complaint that this isn’t the first — or last — time that Rosen hatches a scheme like this.
     “Rosen participated in founding a similar fraudulent bio-driven ethanol company that purportedly had new proprietary technology to turn wood chips, corn stalks and paper sludge into cheap alternative fuel called Xethanol Corp.,” Alpha Capital claims.
     It then alludes to a “different scheme,” involving a company called BeesFree, that Rosen and Festuccia are allegedly “continuing … to this day.”
     Alpha Capital is represented by Stanley Morris of Corrigan & Morris in Santa Monica, Calif., and Anthony LoPresti of Jenkins & LoPresti in Manhattan.

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