Johnny R. Thomas, et al.

The Securities and Exchange Commission today filed charges against four former executives of Blue Earth Inc., a now-bankrupt alternative and renewable energy services company, stemming from their participation in disclosure and accounting fraud.

The SEC’s complaint alleges that Blue Earth’s former executives, Johnny R. Thomas, John C. Francis, Jonathan Brett Woodard, and Robert C. Potts, defrauded investors by materially misrepresenting the company’s scope of business operations and financial condition. From at least March 2014 until at least March 2015, the defendants allegedly repeatedly misrepresented the certainty and status of Blue Earth’s construction, ownership, and operation of seven combined-heat-and-power plants. According to the complaint, the defendants created the false impression that the company 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 falsely valuing a $44 million “Construction in Progress” asset, which inflated it by over 400% and comprised approximately 51% of Blue Earth’s reported total assets as of March 2014. Contrary to this image, as alleged in the complaint, Blue Earth only secured contracts for two power plants, and its prospects of performing those contracts or securing additional contracts diminished significantly by late 2014. Further, the defendants allegedly persisted in portraying Blue Earth as a business that would generate significant long-term revenue. Blue Earth filed for bankruptcy on March 21, 2016.

The SEC’s complaint, filed in the U.S. District Court for the District of Nevada, charges:

• Thomas, Blue Earth’s former CEO and a Nevada resident, with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder, the certification provision of Exchange Act Rule 13a-14, the beneficial ownership reporting provisions of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder, and with aiding and abetting the company’s violations of the antifraud provisions of Section 17(a)(2) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, and the company’s violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder;
   
• Woodard, Blue Earth’s former CFO and a Utah resident, with violating the antifraud provisions of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, the books-and-records provisions of Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder, the certification provision of Exchange Act Rule 13a-14, and with aiding and abetting the company’s violations of the antifraud provisions of Section 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, the company’s violations of the books and records provisions of Section 13(b)(2)(A) of the Exchange Act, and the company’s violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder;
   
• Potts, Blue Earth’s former President and Chief Operating Officer and a Utah resident, with violating the antifraud provisions of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and with aiding and abetting the company’s violations of the antifraud provisions of Section 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, and the company’s violations of the reporting provisions of Section 13(a) of the Exchange and Rules 12b-20 and 13a-1 thereunder;
   
• Francis, Blue Earth’s former Vice President of Corporate Development and Investor Relations and a Nevada resident, with aiding and abetting the company’s and Thomas’s violations of the antifraud provisions of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, the company’s violations of the antifraud provisions of Section 17(a)(2) of the Securities Act, and the company’s violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder.

The SEC seeks against each defendant permanent injunctions, civil penalties, and penny stock and officer and director bars.

Today the SEC also instituted related settled administrative proceedings against two individuals:

• The SEC’s order against Utah resident R. Gordon Jones, a former accounting consultant to Blue Earth, finds that he willfully violated the books-and-records provisions of Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder, and willfully aided and abetted and caused the company’s violations of the books and records, internal controls, and reporting provisions of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. Without admitting or denying the SEC’s findings, he agreed to an order denying him the privilege of appearing or practicing before the SEC as an accountant, a cease-and-desist order and a $70,000 penalty.
   
• The SEC’s order against Utah resident S. Jeffrey Jones, the engagement partner on the external audit and review of Blue Earth’s financial statements finds that he engaged in improper professional conduct pursuant to Section 4C of the Exchange Act and Rule 102(e) of the SEC’s Rules of Practice by failing to conduct audits and interim reviews of the company’s financial statements in accordance with Public Company Accounting Oversight Board standards. Without admitting or denying the SEC’s findings, he agreed to an order denying him the privilege of appearing or practicing before the SEC as an accountant with the right to apply for reinstatement after two years.

The SEC’s investigation was conducted by John S. Crimmins, Margaret W. Smith, Victor Tabak, and William Scarborough. Nina B. Finston and Carolyn M. Welshhans supervised the investigation. The SEC’s litigation will be led by Suzanne J. Romajas under the supervision of Jan Folena.