IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Transcription

1 Filed 03/22/10 USDC Colorado Page 1 of Civil Action No.: 09-CV CMA-MJW IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. MANTRIA CORPORATION, TROY B. WRAGG, AMANDA E. KNORR, SPEED OF WEALTH, LLC, WAYDE M. MCKELVY, and DONNA M. MCKELVY, Defendants. DECLARATION OF STEVEN W. MCDONALD I, Steven W. McDonald, being of lawful age, and being first duly sworn, state and depose as follows: 1. I am an attorney licensed to practice law in the State of Colorado in good standing and represent Defendants Mantria Corporation ( Mantria ), Troy B. Wragg ( Wragg ) and Amanda E. Knorr ( Knorr ) in the above-titled action. I have personal knowledge of the matters stated herein. 2. I appeared on behalf of Defendants Mantria, Wragg and Knorr at the hearing on the Securities and Exchange Commission s ( SEC ) Motion for Preliminary Injunction on November 30 and December 1, At the Preliminary Injunction hearing, Mantria Corporation presented evidence and testimony through Mr. Daniel Rink concerning some potential prospects for the sale of carbon conversion systems. This evidence was presented in connection with Mantria s request

2 Filed 03/22/10 USDC Colorado Page 2 of that the Court allow some of the funds frozen in Mantria s bank accounts pursuant to the asset freeze granted as part of the Temporary Restraining Order to be used to keep the Dunlap, TN carbon conversion processing plant owned by an affiliate of Mantria Corporation to continue in operation so that the carbon conversion process could demonstrated to potential customers. 4. One of the prospects presented to the Court was a draft letter of intent between EarthMate Technologies, LLC ( EarthMate ), 50% of which is owned by Mantria Industries, LLC, a Mantria Corporation subsidiary (the other 50% is owned by High Temp Industries, Inc.), and Green Planet Power Solutions ( GPPS ) (the GPPS Draft Letter of Intent ). The GPPS Draft Letter of Intent was introduced at the hearing as SEC Exhibit 12. This GPPS Draft Letter of Intent was not presented as an asset of Mantria, but rather, as a potential opportunity for Mantria, through its subsidiary, to gain revenue from the sale of carbon conversion systems. 5. On or about December 15, 2009, I was advised by representatives of Mantria Corporation that a letter of intent had been entered into with GPPS. I received a copy of this letter of intent on December 18, 2009 and forwarded it to Mr. Krysa of the SEC. See Exhibits 2 and 3 to the Declaration of Allison H. Lee ( Lee Declaration ). The entity that entered into the letter of intent with GPPS was a company called Enantios, Inc. ( Enantios ). In my to Mr. Krysa of December 18, 2010, I stated that Enantios, Inc. was 50% owned by Troy Wragg and Amanda Knorr. That statement was mistaken. I was advised by Mr. Wragg that while that had been the original intent of Mr. Wragg, Ms. Knorr, John Seaner and Cary Widener, no shares of the company had in fact been issued. I was later advised that no shares of Enantios were ever issued. Thus, I am not aware of any evidence that Mr. Wragg or Ms. Knorr ever owned any shares of Enantios. -2-

3 Filed 03/22/10 USDC Colorado Page 3 of 6. I am not aware of any definitive contract being entered into between Enantios and GPPS, or with any other person or entity, for the sale of carbon conversion sytems or biochar. I understood that the GPPS opportunity disappeared on or about January 21, During the last week of December 2009 and in early January 2010, I was advised that a person named David Goosenberg was interested in exploring arrangements with Mantria or Enantios. I participated in a telephone conference on January 5, 2010 with the following participants: David Goosenberg, Scott (last name unknown, believed to be an associate of Mr. Goosenberg), John Seaner, Chris Flannery, former general counsel to Mantria, Joe Earle and Troy Wragg. Mr. Goosenberg presented certain potential scenarios about how his company might be involved with Enantios and the Dunlap, TN carbon conversion plant. Mr. Goosenberg said that he was aware of the SEC action against Mantria and affiliates, and the asset freeze order, and asked me to outline what would be necessary should his company wish to proceed, relative to this action. Mr. Goosenberg said that he understood from Troy Wragg that approval of any arrangement or contract regarding use of Mantria s plant or its patent pending technology would require SEC and Court approval. I was asked to comment on the process to get a proposal approved by the SEC and the Court in this action. I informed those present that once they had drafted proposed agreements, they should submit those to me for my examination. In addition, I told those present that any proposed arrangements of the type that were being discussed would need to be presented by them to the SEC and to the Court for approval. Mr. Goosenberg told me that he understood the required process. 8. During the telephone conference with David Goosenberg and others on January 5, 2010, Mr. Goosenberg asked Mr. Wragg, in effect, what is it that you will get out of any of -3-

4 Filed 03/22/10 USDC Colorado Page 4 of these arrangements? Mr. Wragg replied that he did not expect to get anything personally, but would contribute any money he was to receive for the benefit of the Mantria shareholders. 9. On January 8, 2010, I received a telephone call from Allison Lee and Kurt Gottschall of the SEC. Mr. Gottschall addressed various items concerning the accounting provided by Mantria, for which the SEC wished further information. Among these items were the dates commissions were paid, the equity interest of Mantria affiliates in unsold real estate, the status of loans issued by Mantria Financial, the funds held in certain bank accounts and the investments of Mantria and affiliates. Ms. Lee inquired about the Enantios letter of intent that was provided to Mr. Krysa 21 days earlier and two autoclaves that were being stored in Hohenwald, TN. Ms. Lee said that the SEC continued to receive information that Mantria was attempting to sell these autoclaves. I told Ms. Lee and Mr. Gottschall that I would address these issues with my clients and get back to them. 10. I also informed Ms. Lee and Mr. Gottschall in that telephone call about the discussions that had recently occurred between representatives of Enantios (mostly Mr. Seaner and Mr. Widener) with Mr. Goosenberg, and that I had told all parties involved that in the event that they came up with a definitive proposal that I would need to see it, and that the SEC and the Court would need to approve it.. I never received any proposals from Mr. Goosenberg and his company or from any other parties concerning Enantios (except from the investor committee, as described in paragraph 26, below). 12. I am aware that, in response to certain inquiries from the SEC, Mr. Wragg provided certain written statements, which included, Further information Requested by the SEC -4-

5 Filed 03/22/10 USDC Colorado Page 5 of on January 8, 2010, provided to the SEC on January 12, 2010, attached as Exhibit 4 to the Declaration of Allison H. Lee ( Lee Declaration ) (the January 12, 2010 Statement ); Response to Letter from Kurt Gottschall of the SEC to Steven W. McDonald dated January 15, 2010, provided to the SEC on January 21, 2010, attached as Exhibit 7 to the Lee Declaration (the January 21, 2010 Statement ); and Further Information Requested by the SEC on February 8, 2010, provided to the SEC on February 9, 2010, attached as Exhibit 10 to the Lee Declaration (the February 9, 2010 Statement ). 13. I am not aware that there has been any transfer of assets or rights between EarthMate, or any Mantria affiliate, and Enantios. Nor has the SEC shared with me any evidence of any such transfer. 14. I am not aware of any evidence provided by the SEC that Mr. Wragg established a blind trust or offshore account in which to place funds received from Mantria or Enantios after this action was commenced. Instead, Mr. Wragg and I discussed that if any funds were derived from operations of Enantios that generated any income to Mr. Wragg and Ms. Knorr, they intended to either place such funds in a trust account (or some account administered by a third party), or place such funds into the Mantria bank accounts already frozen by the asset freeze. Any such arrangements were contingent upon receiving SEC and Court approval. As there were no proposals that came to fruition that I am aware of, there was also no income received by Mr. Wragg or Ms. Knorr. See January 12, 2010 Statement, pp. 5-6, 10-12; January 21, 2010 Statement, particularly pp The SEC has not asserted any evidence to the contrary. 15. In summary, in connection with Enantios, I am not aware that any transfer, assignment, disposition, pledge, encumbrance, dissipation, concealment or other disposal of any -5-

6 Filed 03/22/10 USDC Colorado Page 6 of assets, funds or property belonging to Mantria or its affiliates (regardless of whether derived from investor funds) occurred. Further, to my knowledge, other than the GPPS letter of intent with Enantios (which was only a letter of intent), I am not aware that any agreements, partnerships, joint ventures, license agreements, or the like arrangements were finalized that would use or impact the assets, funds or properties of Mantria or its affiliates regarding Enantios. 16. On January 14, 2010, I sent an message to Ms. Lutz, Ms. Lee, Mr. Gottschall and Mr. Krysa of the SEC, which forwarded an message I received from Cary Widener. My message and the message to me from Mr. Widener, along with an attachment to Mr. Widener s , are attached as Exhibit 1. Mr. Widener states in his that he was contacted by the representative of a forklift company, Manny Flint, who had received communications from Earl Decker, who I understand to be an associate of Michael Mentikov and Tisa Dixson, requesting assistance in gaining possession of six large containers being held in Florida. Mr. Decker was seeking to have these containers moved to Dyersburg, TN, where, as Mr. Widener says, these persons Carbon Black Global business is located. Mr. Widener concludes that it is very obvious to me that this group is attempting to steal these assets from Mantria. Unless there is a cease and desist order placed on Carbon Black Global they will continue to interfere with the assets and operations of Mantria and affiliates as well as the plant in Dunlap, Tennessee. This group referred to by Mr. Widener is the same group that Mr. Wragg believed were trying to steal two autoclaves from the Dunlap, TN plant, as identified in my December 15, to Mr. Krysa, attached as Exhibit 1 to the Lee Declaration. 17. On January 21, 2010, I received an message from Mr. Wragg, which forwarded an message from John Seaner to Mr. Wragg dated the same date, which is -6-

7 Filed 03/22/10 USDC Colorado Page 7 of attached (along with another from Mr. Seaner to Mr. Wragg of the same date) as Exhibit 2. In that , Mr. Seaner provided a transcript of a text message exchange between Earl Decker and Cary Widener. Mr. Seaner states that Mr. Widener told him that Earl Decker told Mr. Widener that Mr. Decker had called the SEC and had received permission to take the containers in Florida. Further, Cary was contacted by a transportation company representative, who told Mr. Widener that Mike Mentikov called him and told him that Carbon Black Global was a subsidiary of Mantria and he was authorized to request transportation of the containers. The second from Mr. Seaner dated January 21, 2010 refers to a statement of Earl (Decker), an affiliate of Michael Mentikov, that Mr. Decker had received permission from the SEC to move the containers and is trying to make Cary (Widener) release them. 18. In my to the SEC staff on January 14, 2010, I stated that Troy Wragg and Amanda Knorr collectively own a controlling interest in Carbon Diversion, Inc. It has been pointed out to me that I misunderstood a communication from Mr. Wragg. The correct information, per Mr. Wragg, is that The Mantria Renewable Energy Fund, LP owns approximately 88% of Carbon Diversion, Inc. and Troy Wragg and Amanda Knorr are directors. 19. On January 15, 2010, I received a letter from Kurt Gottschall of the SEC. The letter is attached as Exhibit 5 to the Declaration of Allison H. Lee ( Lee Declaration ). 20. On January 21, 2010, I responded to Mr. Gottschall s letter on behalf of my clients. My letter is attached hereto as Exhibit 3. In addition, on that same day, I delivered to Mr. Gottschall Mr. Wragg s statement entitled, Response to Letter from Kurt Gottschall of the SEC to Steven W. McDonald dated January 15, 2010, which is attached as Exhibit 7 to the Lee Declaration. -7-

8 Filed 03/22/10 USDC Colorado Page 8 of 21. On February 8, 2010, I received a telephone call from Kurt Gottschall and Allison Lee. Mr. Gottschall had some follow up questions about the accounting and Mantria s real property holdings. Ms. Lee stated that she had been told by a person named Joseph Danielle, that Mr. Danielle claimed to have a contract signed by Mr. Wragg which released Mantria from certain lease obligations in exchange for the two autoclaves that had been moved to Hohenwald, TN for safekeeping. See Lee Dec. Exh. 1. Ms. Lee stated that Mr. Danielle did not have a copy of such contract. Further, Ms. Lee stated that Mr. Danielle had apparently been trying to sell the two autoclaves. I also received a follow up from Kurt Gottschall on February 8, On February 9, 2010, I sent an message to Mr. Gottschall of the SEC, and enclosed a statement from Mr. Wragg entitled, Further Information Requested by the SEC on February 8, This statement responded to the matters raised by the SEC on February 8, On February 10, 2010, Ms. Lee, on behalf of the SEC, requested copies of s from Mr. Wragg, Ms. Knorr and Mantria and Mr. Spitzer, Mr. Danielle and Mr. Steele related to the transactions between the parties as set forth in Mr. Wragg s February 9, 2010 Statement. 24. Responsive messages were provided to Ms. Lee on February 12, 2010, which included an message from Mr. Spitzer that had been stored in a junk folder on Mr. Wragg s computer. Mr. Wragg had also provided a screen shot, showing that the resided in his junk mail folder. The screen shot, and the other electronic copies of responsive s, were provided to Ms. Lee on February 12, Copies of my cover message to Ms. Lee, and two messages from Mr. Spitzer, and the referenced screen shot, are attached as Exhibit

9 Filed 03/22/10 USDC Colorado Page 9 of 25. On February 12, 2010, I forwarded an from Mr. Wragg to Mr. Spitzer, because when Mr. Wragg had attempted to send this message it was rejected. I received no message indicating that my transmission of this message to Mr. Spitzer had been returned or rejected. My message to Mr. Spitzer is attached as Exhibit 5. I also forwarded this message to Ms. Lee on the same day. In the to Mr. Spitzer, among other things, I requested a copy of the agreement that Mr. Wragg was coerced into signing. I have received no response from Mr. Spitzer to date. To my knowledge, Mr. Wragg has not received any response to his message that I forwarded to Mr. Spitzer. 26. In February 2010, I was made aware that a group of former Mantria investors had formed some sort of alliance and were exploring the possibility of acquiring or taking over the remaining business operations of Mantria and its affiliates. I was told, and received copies of draft written proposals, from which I understood that among the former investors involved were: Marcus Motte, Merril Rowe, Bruce Yates, Lori Morrell, Bill Evert, Dr. Mary Phillips, Daniel Klein, and others. Ultimately, I understood that these former investors had formed a committee called the Mantria Investors Validation and Review Committee and planned to submit a proposal to the SEC. I received a copy of the proposal that I understood was sent to the SEC. The Committee stated that it had been in contact with Troy Wragg and Amanda Knorr, as well as the individuals who formed Enantios, (John Seaner and Cary Widener). The Committee reported to the SEC in the proposal that Troy Wragg and Amanda Knorr were willing to relinquish their interests in all Mantria entities to the Committee. The Committee proposed that it would own 50% of Enantios and John Seaner and Cary Widener would own collectively the other 50%. A copy of the letter from the Committee to Kurt Gottschall which comprises what I was -9-

10 Filed 03/22/10 USDC Colorado Page 10 of informed was the Committee s proposal to the SEC, is attached as Exhibit I spoke to John Seaner on March, 2010 on the telephone. He told me that he had received at least two versions of the Declaration that he ultimately signed, which were prepared by the SEC staff. He stated that the first version contained many purported statements with which he could not agree. He also stated that Mr. Wragg had told him many times that any monies derived from his participation with Enantios, if any, would be contributed for the benefit of the Mantria investors. He also confirmed that during the telephone conference described above with Mr. Goosenberg on January 5, 2010, I told all those present that no arrangement or contract with Enantios impacting assets of Mantria could be completed unless the parties involved sought and received the approval of the SEC and the Court. He also confirmed that he and Cary Widener had been working with the investor Committee described above, and that in connection with the investor group s proposal to the SEC, Troy Wragg and Amanda Knorr had agreed to assign all of their interests in Mantria and related entities to the investors. 28. On March 16, 2010, I sent a letter to Tom Krysa of the SEC regarding the Commission s motion for an order to show cause against my clients. A copy of my letter is attached as Exhibit On March 16, 2010, I sent an message to Ms. Lee. In the message, I mentioned that the Declarations of Messrs. Spitzer, Danielle and Steele filed in support of the SEC s Motion all referred to one agreement. I mentioned that Mr. Wragg s February 9, 2010 Statement referred to documents and papers that were put in front of him for signature. I asked Ms. Lee to advise whether the SEC had received any other documents from Messrs. Danielle, Steele and Spitzer and whether they had received any copies of pages showing -10-

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