The Alberta Securities Commission has announced it has found that former Saint Jean Carbon (SJL.V) CEO Paul Ogilvie misled investors in 2017 when he claimed his company had performed what was his ‘greatest accomplishment’ by securing an off-take deal with the giant electronics firm, Panasonic Corporation.
The finding, which is contained in a decision that the ASC released on Friday, Aug. 5, follows a hearing that lasted for 3-1/2 days before a three-member panel. The matter was a well-attended one, with Mr. Ogilvie sending two lawyers and ASC enforcement staff sending two as well. The decision does not contain any penalties for Mr. Ogilvie, as the ASC will convene a separate hearing for that purpose.
The ASC determined the news release was “patently untrue” in a merits decision that clearly points the finger of blame at Ogilvie.
For Equity.Guru, the decision, which has taken five years to land, is vindication of our journalism.
Back in 2017, when this site was still a young pup, our Gaalen Engen took a chainsaw to a news release put out by Ogilvie.
Booming Saint Jean Carbon, a self-described carbon science company with resource properties, has released news announcing the company had received its first order from Panasonic to supply graphite anode material to their manufacturing facility.
The company which had rode a steady $0.06 until the news broke, climbed overnight to $0.34 per share – a 466% jump.
That’s a big ass jump. But will it sustain? We say no. Because maaaaybe the news is bullshit.
The CEO was adamant he’d done the deal of a lifetime.
“After more than two years of working on material specifications, sampling and re working, we could not be more pleased than to finally ship finished material to our customer. The order is part of an offtake agreement to supply multiple tonnes of anode material monthly for a number of years. We are hopeful that the electric car business continues to grow at this rate; as that will continue to push our demand and create more and more opportunities for us. We consider today as our greatest accomplishment; to be recognized and awarded with an order to supply one of the world’s best technology companies, is a tremendous accomplishment for the team.”
Engen suggested, considering the lack of detail revealed about this ‘off-take agreement’, that the CEO appeared to be lying through his teeth.
If one were jaded, one might interpret this supposed Panasonic deal as being no ‘deal’ at all, or that a minor marketing discussion is being sold to the market as a bigger partnership. That in fact, Saint Jean Carbon is sending a batch or two of samples that, if they pass muster could lead to a deal down the line, but also might not because graphite usually makes good pencils and rarely makes good cellphone batteries.
I’m not saying this couldn’t materialize into an amazing investment opportunity, but word on the street is saying the company isn’t actually producing graphite material at all, and may well be currently using material sourced from outside the company (China perhaps?) as part of what may only be a marketing deal, or a scratch and sniff with a purchasing manager.
When a journalist questions the details of a company news release, they’re taking a big chance. Legal threats as a method of silencing critics are pretty standard practice, and can often put the frighteners on new media.
But Engen doesn’t shrink when he thinks he’s in the right, and Equity Guru has a long history of publishing dumb legal letters we receive, to the point where lawyers will often now include a copyright passage when they send them our way, so we don’t mock them publicly.
So, when a company claims to have put together a deal with a monster like Panasonic, but supplies little or no details beside a blue sky potential in the future, it leads a cynic (read: smart investor) to believe said deal could be complete bullshit.
You can jump all over this one if you like and my hats off to you if you make a killing, but I don’t think we’re getting the whole story and, as such, you may end up holding the bag on a day-trading nightmare.
Engen’s piece led a large and precipitous fall in Saint Jean’s share price, that didn’t stop as we piled on more information in the days to follow.
When we looked back at documents SJL has put out subsequently, we found a November news release from 2016, deceptively titled, “Saint Jean Carbon building a recycled high performance lithium-ion battery” (they’re not), that said the company would literally be supplying graphite for the anodes of two car batteries Panasonic is developing.
Not two models of battery, but two actual batteries, one with recycled car battery material and one without, so their ‘large partner’ can see if the recycled battery THEY are developing performs okay.
In short, SJL appears to be shipping a box of graphite. Not a container, not a crate. Make sure to sign the UPS slip, kids.
In addition, as SJL doesn’t currently produce graphite, it appears they’ll likely source their materials from a third party. We’re told by people closer to the CEO that Chinese graphite may be being resupplied as SJL material, though that’s unconfirmed at this time and, really, doesn’t matter since we appear to be talking about enough graphite to make three tennis racquets.
As the share price shredded, we received the usual list of abusive terms from bagholders who seemed to be more angry at the guys who busted the scam than those who engaged them in it.
Shorters. Bashers. Assholes.
Yet, a day later, the company was forced to come clean.
At the time of the March 3 Press Release, the Company was proceeding on the basis that Panasonic and Saint Jean were working together to finalize the proposed offtake agreement. The Company was informed by regulatory authorities on March 8, 2017 that Panasonic had advised them that it was considering cancelling the Order and that Panasonic did not intend to enter into the Company’s proposed offtake agreement.
You catch that? It went from,” The order is part of an offtake agreement to supply multiple tonnes of anode material monthly for a number of years” to “the Company was proceeding on the basis that Panasonic and Saint Jean were working together to finalize the proposed offtake agreement.”
And, oh yeah – now there was no deal.
On or about March 13, 2017, Panasonic advised the Company that it will not sign the Company’s proposed form of offtake agreement. When Panasonic reconfirmed its Order by email dated March 15, 2017, it also confirmed that in case of mass purchase of Anode Material from Saint Jean, Panasonic will do so under its own form of standard purchasing agreement. Even though Panasonic is proceeding with the [5kg] Order, there can be no assurance that Panasonic will proceed with a large purchase of Anode Material from the Company, nor that Panasonic will enter into any other type of commercial agreement or arrangement with Saint Jean.
Later it would be revealed the order:
(a) Claimed a value of $6.64 for a 5 kg quantity sample;
(b) Was for one specification, “Grade A Flakes”; and
(c) Was declared as having no commercial value
..and that an email communication between Ogilvie and Panasonic Corporation, dated February 23, 2017, showed Ogilvie expressly requested that the sample be provided under a form of “purchase order,” presumably to be able to claim the corporation as a customer and not a group looking for a free shoebox of graphite.
Then it got worse: When the regulators looked deeper, they found a lot of insider trading appearing to have gone on.
Following the Press Release (Feb 28), but before the Press Release (Mar 3), a number of suspicious trades occurred by “reporting insiders” and/or persons in a special relationship with “reporting insiders”, as that term is defined at section 1.1 of NI 55-104.
- Leona M Callihoo-Pearson (Callihoo-Pearson), is the spouse of Director, Pearson. [..] On March 1, 2017, Callihoo-Pearson sold on the public market 150,000 common shares for $0.275, for total gross sale proceeds of $41,250 CDN.
- Jo Ann Madill (J Madill) resides at the same address as Director, David Madill. [..] On March 2, 2017, J Madill sold on the public market 200,000 common shares for $0.30, for total gross sale proceeds of $60,000 CDN.
- Dick van Wyck (van Wyck) is a self-reported insider of the Company vis-à-vis serving as a senior officer. [..] On March 1, 2017, van Wyck sold on the public market 600,000 common shares for $0.22, and 300,000 common shares for $0.21, for total gross sale proceeds of $195,000 CDN.
Van Wyck was listed as in-house legal counsel at the time.
It should be noted current CEO and President, William Pfaffenberger, was a director at the time this all occurred, and resigned for a period, though he has not been directly implicated.
David Madill, who is currently interim CFO and a director, resigned as director alongside Pfaffenberger (and Ogilvie) in early 2019, only to return alongside Pfaffenberger a year and a half later.
Last week, Ogilvie argued he shouldn’t be held responsible for the release in question, which he sent out, and in which he was extensively quoted, but that defense went down like a graphite balloon when other directors and officers pointed to him as the culprit. That may be why the ASC allowed the company to settle for a $50,000 cash payment with $12k costs.
For what it was worth, Ogilvie twitched in the drawers at the markets morgue for a few more years, even claiming he was going to spin out five companies with all his tremendous technology. High comedy.
So whatever happened to that Zip-Loc bag of graphite, sent through the post and considered to be Ogilvie’s greatest ever achievement?
The ASC:
As for the graphite sample, Panasonic did eventually perform its evaluation. It informed Mr. Ogilvie that the material had some satisfactory qualities, but there was a “deficiency in discharge.” Mr. Ogilvie attempted to get an explanation, but received no response. There was no further communication with Panasonic.
Indeed.
— Chris Parry
FULL DISCLOSURE: Not a client. Not a short. Hope they figure out how to do it right going forward. And to the bagholders who chose o target the messenger.. 🙂