Solar Hydrogen Energy Corp. under regulator’s spotlight
Saskatchewan securities regulator and investors question company's accountability
Solar Hydrogen Energy Corporation, a Saskatchewan solar power company that raised $20 million in cash and kind from 1,100 investors with a promise to change the world, is now under scrutiny by Saskatchewan’s securities regulator and under pressure from investors.
SHEC has been raising money from people across Canada and around the world since it was formed in 1996 by Tom Beck.
He’s an entrepreneur and inventor who believes he has found a way to generate solar power at competitive rates. Beck says it’s patented technology.
“We can lower the solar concentrated costs by almost 90 per cent over conventional technology,” Beck said.
“That’s a game changer for the whole planet.”
The company recently relocated to a vacant school in the village of Milden, 120 kilometres southwest of Saskatoon, where the president and CEO continues to pitch his investment opportunity.
“In a way it’s kind of an ideal time to get in before a company hits it big,” Beck said. “Just imagine if you were able to buy into Apple before they went public.”
Beck, the majority shareholder in SHEC, said he’s studied the life of Apple’s founder Steve Jobs and feels a “kinship” with him. He’s tried to emulate Jobs’s success.
“So he really did change the world,” Beck said. “And I feel that we have the ability to do the same in a different way — ours is in relation to energy. His was in relation to these incredible devices that they’ve invented. So, I do see a parallel.”
SHEC investors becoming impatient, concerned
Pius Pfeiffer, an 84-year-old businessman with ventures in Saskatchewan and Alberta, said he invested $200,000 about 12 years ago and hasn’t seen any return. He considers his investment “a mistake” and likely a write-off.
“If anything takes that long it just isn’t worthwhile having. This is just way too long. Way too long.”
And he’s not the only one losing patience.
Investor Joe Lapointe, a Saskatoon businessman, recently filed a court action against SHEC because, in his view, the company has failed to be transparent and accountable.
“He has seen no return on his investment, has been receiving very little information from the company and really he would like to get some answers,” said Lapointe’s lawyer, Michael Krawchuk.
Krawchuk said his client has asked SHEC for a series of corporate documents like bylaws, a current shareholders list and the minutes of shareholder meetings.
In addition, he said he is concerned that SHEC hasn’t held a shareholder meeting for many years.
He said corporations are required by law to hold annual meetings and that without them shareholders have lost an opportunity to hold SHEC to account.
Regulator also demanding disclosure
The regulator’s public records show that in the past, SHEC regularly reported shares it sold. But since 2007, the company hasn’t reported anything.
When first interviewed by CBC, Beck told the iTeam he’s not obligated to report when investors buy shares. But the FCAA has a different view.
“The obligation is on the issuer raising the capital to file their reports of trade, which is a report of what sales they’ve made, within 10 days of making the trade,” Dean Murrison, director of the securities division of FCAA, told CBC’s iTeam.
Murrison said that within the last few weeks, SHEC has acknowledged it has been raising money since 2007 and not reporting.
“The fellow [from SHEC] said that he has been raising capital and that he thought that he didn’t have to file the reports,” Murrison explained. “So we said you have to file the reports.”
Murrison gave SHEC a deadline of Jan. 16, 2015. As of publication, nothing has been filed.
Beck blames bad advice and obsolete technology
“We followed their guidance. Apparently their guidance was in error.”
Beck said since 2007 there have been an additional 100 to 200 new investors. He said he’s working hard to gather all that information and submit it to the regulator.
Beck acknowledged he’s obligated to have an annual shareholder meeting, but said he hasn’t held them for years in order “to save money and time.”
He said he consulted with some of SHEC’s largest shareholders and they agreed to forgo the meetings.
“It’s a very costly undertaking and when talking to shareholders … they’d rather have us put this money toward advancing the corporation.”
However, Beck said he is now planning a shareholder meeting for June.
He admitted many of the company’s records are not currently available for shareholders' scrutiny, as they should be by law.
Beck said many documents became inaccessible a few years ago when the computer platform the company was using was suddenly discontinued.
He said he asked a SHEC director at the time to move the data to a new accessible service, but that the “director has left the corporation and has not returned the information to us.”
Beck said he’s now personally trying to retrieve his company’s corporate records.
“It’s a very very difficult process. It’s going to take months actually to transition.”
Beck also acknowledged that SHEC doesn’t have a board that he must report to. But he said as the company expands, he will establish one.
“The kinds of people I want on that board we really don’t find locally. You have to go and get high-profile people with certain expertise in California or New York or whatever.”
Despite all that, Beck said “there is always accountability. I’m totally open to the shareholders. I report everything they want to know. I am a servant to my shareholders.”
He said he updates investors every three months and posts annual financial statements on his website.
Beck still promising results
He said the company’s investment is “a drop in the bucket compared to what our competitors spent.”
Developing cutting-edge technology is costly, he said.
“You have drug companies that spend hundreds of millions, billions of dollars developing a new drug without having any sales in years. Sometimes decades. OK?”
In SHEC’s 18 years, it hadn’t sold a product until this past December when the company sold its first solar panel, which it manufactured in Milden. Beck said he has sold 14 more since that time.
He said the money he’s raised has gone into research and development, equipment, supplies and labour. SHEC currently has about six full and part-time employees, he said.
Beck said he’s also racked up huge legal bills patenting the technology he’s developed.
Some investors still hold out hope
Bill Frerichs invested $60,000 in SHEC in the mid-1990s and continues to have confidence in Beck and the company.
“They’ve had their ups and downs, but it’s not so abnormal by any means,” Frerichs told CBC’s iTeam. “I feel there is a chance of return. I don’t feel like I have been cheated or anything.”
In fact, he said, if he had more money, he might buy more shares.
Beck, for his part, said he’s both confident and patient.
“Our goal is to make a major impact on the world. It might take a while.”
With files from CBC's Roxanna Woloshyn