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SEC Files Court Complaint Against Parent Of Retail Supplier, Alleges, "Fraudulent Scheme ... To Mislead Investors"

December 14, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The U.S. Securities and Exchange Commission has filed a complaint in federal district court alleging that Premier Holding Corporation ('Premier' or 'the Company') engaged in a, "fraudulent scheme," to, "mislead investors about Premier's success and prospects, hide Premier's losses, inflate its assets and artificially prop up its stock price."

Premier Holding Corporation recently completed the acquisition of retail supplier American Illuminating Company. The SEC complaint relates to alleged activity which allegedly occurred prior to Premier Holding Corporation's acquisition of American Illuminating Company. Premier Holding Corporation is also the parent of broker The Power Company, and certain alleged actions related to Premier's acquisition of The Power Company are the subject of the SEC's complaint

Premier Holding Corporation said in a statement that, "The Company has reviewed the SEC’s complaint and believes that it is without merit. The Company intends to defend against the claims vigorously, and continues to work closely with its legal counsel and advisors to defend the Company."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "Premier and [CEO Randall] Letcavage wove an illusory web of economic activity and purportedly important transactions designed to create the appearance of an active company with a vibrant business."

"Thus, they orchestrated various deals while misrepresenting the value or significance of those transactions to the Company. These transactions provided fodder for Premier and Letcavage to mislead investors about the financial health of the Company, and created opportunities for obfuscation and fraud in the Company's financial statements," the SEC alleged in its complaint

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "In addition to devising a series of transactions with related parties with little to no economic substance, Defendants used an unsecured promissory note with a $5 million face value (the 'Note') to which the Defendants assigned a value which they knew, recklessly disregarded, or should have known was incorrect. At all relevant times, based on the Company's valuation, the Note was Premier's most significant tangible asset. Premier and Letcavage misled investors about the value of this Note, among other things, in filings with the Commission, press releases and a shareholder letter. [Joseph] Greenblatt, a formerly licensed certified public accountant ('CPA'), assisted Premier by preparing certain of its fraudulent financial statements which included a valuation of the Note that he knew, recklessly disregarded, or should have known was inadequately supported,"

Letcavage and Greenblatt were named as defendants in the complaint in addition to Premier

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "In December 2011, Letcavage and a friend, Individual A, acquired a majority of Premier's outstanding shares, paying $175,000 in cash to the Company's then-CEO and majority shareholder. Prior to that time, Premier was purportedly in the business of selling low-priced caskets. Letcavage and Individual A then caused Premier to acquire certain assets from two purported green energy companies controlled and owned, entirely or in large part, by either Letcavage (Green Central Holdings Inc.) or Individual A (WePower, LLC) in exchange for more than 30 million restricted shares of Premier stock (the 'December 2011 Related-Party Transaction')."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "Using these assets (the 'Related-Party Assets'), and through a new wholly-owned subsidiary, WePower Ecolutions, Premier's business changed to providing clean energy products and services. Letcavage and Individual A installed Individual B as CEO of WePower Ecolutions and as president and CEO of Premier. Although Premier issued a total of 30 million shares to WePower, LLC and Green Central Holdings Inc. in exchange for the Related-Party Assets, the Company never conducted any due diligence or obtained any independent valuation of the assets before entering into this transaction. Ultimately, in Premier's 2011 Form 10-K, filed a few months after this transaction, the Company valued the Related-Party Assets at zero."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "As part of [a] scheme, on January 7, 2013, Premier effectively sold certain money-losing operations of WePower Ecolutions to newly-formed New Eco, to be run by Individual B, who also agreed to resign from the Company. In exchange, New Eco gave Premier the Note, and purportedly assumed certain Premier liabilities (the 'January 2013 Money-Losing-Operations-for-Note Swap'). Neither the face amount nor the terms of the Note were based on any due diligence or a valuation, independent or otherwise, of the assets transferred to New Eco. The terms of the Note were also extremely favorable to New Eco." [referred to by the SEC as the "January 2013 Money-Losing-Operations-for-Note Swap"]

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "Letcavage also knew or should have known that there was little, if any, possibility that New Eco would pay. To the contrary, Letcavage knew or should have known that the Note was essentially worthless."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "Indeed, in an October 3, 2012 email to Individual A, Letcavage confided, 'I believe the [WePower Ecolutions] spinoff will result in nothing to our investors.'"

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "After the deal closed, Premier repeatedly and inaccurately reported, in filings with the Commission, that the Note had a value of $869,000. Although this valuation was inconsistent with Generally Accepted Accounting Principles ('GAAP'), Defendants used the $869,000 number to enable Premier to mislead investors about the success of its operations."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "Through this contrivance -- reporting that Premier had obtained a Note valued at $869,000 along with the purported elimination of debt in the January 2013 Money-Losing-Operations-for-Note Swap -- the Form 10-Q for the first quarter of FY 2013 falsely reported net quarterly income of $466,147, instead of reporting a loss."

In its complaint filed with the United States District Court for the Southern District of New York, "The misleading valuation of the Note ultimately resulted in the overstatement of the Company's income for FY 2013 by almost $1,000,000 and by at least 12.5% in each quarter of FY 20I3."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "Contrary to the Defendants' representations about the value of the Note in Commission filings, internally the Defendants treated the Note as worthless. For example, Premier never attempted to collect on the Note or to properly account for the Note on its books."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "On February 28, 2013, Premier acquired an 80% interest in TPC, a privately-held deregulated power broker, along with an option to purchase the remaining 20% interest within 120 days, in exchange for 30 million shares of Premier common stock (the 'TPC Transaction')."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, in a Premier May 30, 2013 earnings release, "Premier also falsely stated that there was a 'preliminary' valuation of $4,500,000 of some of the contracts Premier had acquired in the TPC Transaction."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "In its financial statements for the first three quarters of 2013 and its audited FY 2013 financial statements, Premier valued its interest in TPC at $4.5 million -- the purported value of the 30 million shares issued to the sellers as consideration for the acquisition -- and allocated the entire amount to goodwill, which then constituted a majority of Premier's assets."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "In its financial statements, the Company explained that it had allocated the $4.5 million amount to goodwill because an independent valuation of the identifiable assets and liabilities it had acquired was 'still in process.' Premier did not disclose that it was actually preventing the Valuation Firm from completing its work by failing to provide the firm with the needed information."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "Premier's accounting for its stake in TPC did not conform to GAAP in several respects. First, according to ASC 805, Business Combinations, before recognizing goodwill from an acquisition, all identifiable assets and liabilities acquired (including identifiable intangible assets) must be assigned a portion of the purchase price based on their fair value. Only after this valuation of, and allocation to, identifiable assets is performed can the remaining unallocated purchase price be recorded as goodwill. If, as the company represented in public statements around the time of the TPC Transaction, Premier had acquired certain customer contracts and receivables that purportedly had value, in order to comply with GAAP the company should have assigned a portion of the purported purchase price to such assets."

In its complaint filed with the United States District Court for the Southern District of New York, the SEC alleged that, "Second, after recording the $4.5 million in goodwill for its stake in TPC, Premier later failed to adequately assess that goodwill for impairment, in accordance with ASC 350-20, Goodwill, Subsequent Measurement. For example, Premier determined, incorrectly, that as of December 31, 2013, the $4.5 million of goodwill attributable to its TPC stake -- which constituted approximately 99% of its goodwill and 65% of its total assets reported as of December 31, 2013 -- was not impaired. It was not until the fourth quarter of 2014 that Premier recognized any impairment to its TPC-related goodwill."

Through the conduct alleged by the SEC, the SEC alleged that Premier violated Section 17(a) of the Securities Act of 1933 (Securities Act) [15 U.S.C. § 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act (15 U.S.C. §§ 78m(a), 78m(b)(2)(A), and 78m(b)(2)(B)] and Rules 13a-1, 13a-11, and 13a-13 thereunder (17 C.F.R. §§ 240.13a-1, 240.13a-11, and 240.13a-13].

Case 1:17-cv-09485-LGS

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