Top Photo: Philadelphia Energy Solutions; Photo Credit: Chris Giuliano
Philadelphia Energy Solutions was one of the nation’s oldest refineries and the largest of its kind on the East Coast. That all changed on June 21 when an explosion so huge it could be seen from outer space rocked the facility.
Not long after the eruption, the company declared bankruptcy. It then laid off nearly all of its 1,100 workers without severance pay or health care benefits, while giving its executives millions in bonuses. The only workers still on the payroll are the dozens shutting it down. And many workers say they are having problems accessing their company retirement savings accounts.
Two months after the explosion, Philadelphia Energy Solutions announced it was opening a formal process to sell the site to a new owner. Some area residents envision the facility, once the largest institutional polluter in the city, transforming into something which generates cleaner energy and creates green jobs.
Enter SG Preston.
The little-known company has pitched its proposal to convert the site into a biofuels refinery. It is run by a man one mayor has dubbed the “Flim Flam Man,” and the company has never actually opened such a facility.
SG Preston has a history of seeking public money to finance projects, and in at least one case never paid back the cash and never opened the plant. Randy LeTang, the founder and CEO of SG Preston, had no energy industry background before incorporating the company in 2013.
The company, which has a mere six team members, says it could create jobs and revitalize the site by refining “renewable diesel, marine diesel and jet fuel,” Reuters reported. The newswire added that “raw material for the fuels would be fats, oils and grease acquired mainly from surrounding communities.”
SG Preston already has deals with two major airliners to provide jet fuel by 2019 and 2020, respectively.
“We can use the existing equipment, labor and regional waste streams to show the rest of the country how to bring back our jobs and industries,” Randy LeTang said in a statement provided to Reuters.
Reuters further reported that SG Preston has begun meeting with local trade associations, union officials, and members of the Philadelphia Industrial Development Corporation to pitch its proposal. The Philadelphia Industrial Development Corporation offers various tax incentives, business loans and financing packages for companies seeking to open manufacturing and industrial facilities in the city.
Ryan O’Callaghan, the president of the United Steelworkers union that represents workers at the shuttered refinery, confirmed to The Real News that he met with LeTang. He conveyed that LeTang said his facility will create 750 jobs, with many of them in the “supply chain to the plant.”
“He just wanted to meet to talk and to say what his plan was, and that’s basically what it was about, so I gave him my ear,” said O’Callaghan. “It seems interesting and it seems plausible, but I just don’t know. I’m willing to listen to anybody.”
But others who had interacted with LeTang over past proposals walked away with a bad taste in their mouths. In at least one high profile example, a city council voted to oust SG Preston after initially welcoming the company in with open arms.
And prior to his time in the energy industry, LeTang was named as a defendant in a federal civil lawsuit in which a judge ruled that he and others had siphoned money without permission from a professional baseball player whose money they were managing.
LeTang did not respond to repeated requests for comment sent via email, text message, and voicemail. SG Preston’s Special Project Director Sherrie Lodge, whose cell phone number is listed as the company headquarters number on SG Preston’s website, also did not respond to multiple requests for comment.
“Flim Flam Man”
One of SG Preston’s first forays into the energy industry was a proposal made in 2014 to retrofit a coal-fired power plant in Logansport, Indiana, a city between Chicago and Indianapolis that’s home to just over 17,000 people. The company aimed to transform the power plant into a $400 million biofuels refinery, creating 100 jobs and 600 additional “indirect” ones.
SG Preston convinced former Logansport Republican Mayor Ted Franklin that it would need a $550,000 loan. And it never paid $400,000 of it back. Further, SG Preston never even documented that it had the ability to pay a mandated $1.75 million escrow payment to Logansport.
Neglecting to pay off $400,000 of the loan—worth about 3.7% of the city’s tax levy for 2018 and given by the City of Logansport in 2014 as part of a Memorandum of Understanding (MOU) signed between the city and SG Preston to open a biofuels facility—appears to be part of a broader trend for the company as it pertains to its procurement of public money.
SG Preston also secured a jobs creation tax credit of 55% for eight years from the Ohio Tax Credit Authority in 2014 to open a similar facility in Lawrence County, Ohio. Like the prospective Philadelphia refinery and in Logansport, SG Preston said the facility would create 100 jobs.
Katy Farber, the Vice President for Appalachian Partnership for Economic Growth—an Ohio public-private partnership organization which was initially listed as a partner of SG Preston for the prospective facility—told The Real News that the organization has not had contact with the company since 2015.
Bill Dingus, the Executive Director of the Lawrence Economic Development Corporation—also listed as a collaborator with SG Preston when it announced its project proposal in Ohio—said he “didn’t realize that they were still in business.” He further stated that “It has been a long time since we have heard from them.” Dingus said he could not give any other details about the proposal or partnership because the two entities had signed a non-disclosure agreement.
Because the facility never opened in Ohio, SG Preston did not actually bank the public dollars, as it did in Logansport. Still, it lists the Ohio facility in its online business portfolio even though it never opened.
Logansport Mayor Dave Kitchell, a Democrat and former journalist, was not in office when the city signed the agreement with SG Preston. But when he ran for office in 2015, the loan to SG Preston became a key election issue. So did the issue of whether or not SG Preston could pay the escrow payment it owed the city.
Just days before the election, a representative from Millennium Energy Corporation, purportedly an oil drilling company with global reach, wrote a letter to Franklin saying it had the funds necessary to pay the $1.75 million escrow fee. Franklin promoted the letter both on the city’s Facebook page and on his own page.
The City of Logansport confirmed today that $3 Million dollars has been deposited by Millennium Energy Corporation and…
Posted by City of Logansport, Indiana on Friday, 30 October 2015
That letter refers to an “attached document” from a Bank of America account, but nothing is actually attached. The local news publication Cass County Online reported that the escrow money was never deposited into the city treasury.
What’s not clear is what Millennium actually is.
Though it sells shares, Millennium is listed on the over-the-counter market, the least transparent market. Therefore, it does not have to file documents with the U.S. Securities and Exchange Commission as a means of informing investors and the broader public of its business activities. As of June 28, the stock was trading at 3 cents per share.
The letter to Franklin also lists a business address in New York City matching that of the company Davinci Virtual Office Solutions, which advertises that it offers office rentals for meetings and business addresses on its website. Millenium no longer has a web presence, but the Web Archive shows that it claimed to have oil and gas drilling operations throughout the world.
The author of the Millennium letter, then-CEO Michael Fuoco, did not respond to repeated requests for comment.
The Philadelphia company address for SG Preston also matches that of a rentable office, this one owned by the office-sharing company Regus.
By the time Kitchell won the mayoral race, SG Preston decided to leave town. SG Preston cited the “toxic and unwelcoming business environment” in explaining its exodus.
LeTang called it a “a tragic ending to a promising economic development opportunity for a struggling American town.”
Kitchell came to a different conclusion.
“The thing that’s clear is this election was not a mandate for S.G. Preston,” Kitchell said after the election. “And the people that have supported it have been excused, from the mayor’s office to the council.”
Kitchell told The Real News that the previous administration destroyed almost all of the documentation pertaining to the $550,000 payment to the company. He added that this may be a felony under state law. The MOU for the loan called for it to be paid back within four years.
Kitchell also called SG Preston “big hat and no cattle,” saying it “makes greats promises” but then “takes the money and goes.” While in Logansport, the company refused to identify its investors due to “negativity” arising within the City Council and opposition to the project by the state chapter of the Sierra Club. LeTang told a local news outlet, “They just don’t want to participate in this banter.”
Sierra Club Executive Director Jodi Perras called the proposal in Logansport “neither environmentally friendly nor renewable.”
“According to the manufacturer, these waste pellets contain up to 40 percent plastics, which is neither renewable nor clean-burning by any common-sense definition,” wrote Perras in a letter published in Logansport’s local newspaper. “The Sierra Club seriously doubts that the project, as proposed, will ever prove to be either economically viable or environmentally sustainable.”
Ultimately, said Kitchell, it is up to the Indiana State Board of Accounts to examine the issue. Depending on what they find, the agency could refer the case to the Indiana Attorney General or the Federal Bureau of Investigation and U.S. Department of Justice, because it involves interstate commerce. The city also has the option of bringing a civil lawsuit to attempt to recoup the money, Kitchell explained.
Kitchell compared the CEO of SG Preston—Randy LeTang—to the “Flim Flam Man,” a 1967 comedic movie about outlandish business scams in the southern United States.
“You know, you might as well just go to Las Vegas and go to the roulette wheel and spin, or go buy lottery tickets,” said Kitchell. “In fact, the lottery tickets will probably have greater success, because that’s better than zero. And right now, this is a situation where the government has a 0% return for their investment.”
MLB Heist, Jet Fuel Deal
According to his official biography, LeTang says he began his career working for two years at Goldman Sachs after graduating from Temple University’s business school.
National Student Clearinghouse documents obtained by The Real News show that LeTang did indeed graduate from Temple in 1996. A Goldman Sachs human resources representative said it does not respond to external verbal background checks of any employees other than those in managerial positions. The company said the request had to be faxed in and then would respond to it by conventional mail. The workforce verification company Equifax Verifications Services said it could not confirm or deny LeTang’s Goldman Sachs background either, citing Fair Credit Reporting Act regulations.
According to federal court documents reviewed by The Real News, while working at a firm called Jean Finole LLC, Major League Baseball player Ray Lankford sued LeTang and a group of others in federal court for receiving an unauthorized $475,000 payment from Lankford’s agent. A judge eventually ordered the defendants in that case to pay that money back, plus interest accrued.
The Lankford case has been cited in two different scholarly legal papers as examples of agents defying the fiduciary duty and trust of a client.
Jean Finole LLC and Letang also have a U.S. patent to their names, though not in the energy sector. In 2009, LeTang and one of the other named defendants in the Lankford case obtained a patent for an integrated oral hygiene system. In essence, the patent was for an all-in-one style kit.
“The present invention provides an oral hygiene system including one or more oral hygiene products, instructions for proper usage of the oral hygiene products in accordance an oral health regimen and coupon means providing a user either or both of discounted or complimentary professional health services for facilitating access to medical care experts (dentists, physicians, and the like) to ensure compliance with the regimen,” explains the patent.
More recently, in 2016 the aviation company JetBlue and SG Preston announced a partnership. And in 2017, SG Preston got involved in a similar partnership with the Australian aviation company Qantas.
For JetBlue, according to the joint press release, SG Preston said it will produce “renewable jet fuel made from rapidly renewable, bio-based feedstocks that do not compete with food production,” calling it the “one of the largest renewable jet fuel purchase agreements in aviation history.”
JetBlue said it will purchase 33 million gallons of fuel per year for 10 years, starting in 2019. But given SG Preston has yet to open a single facility, that will likely not happen.
Asked about the fact that the SG Preston had yet to produce a single ounce of biofuel to date, JetBlue said it stands by its partner.
“We continue to support our partner SG Preston on the development of sustainable aviation fuel and its adoption by the commercial airline community,” said Tamara Young, Manager of Corporate Communications for JetBlue. “We’re excited about their proposed acquisition of a refinery as it will further support the production of renewable fuels planned for the New York Metro Area airports.”
The Qantas deal was similar. It is also a 10 year agreement, set to begin in 2020, with Qantas stating its commitment to purchase 10 million gallons per year of a 50-50 blend of traditional jet fuel and SG Preston’s biofuel “produced from non-food plant oils.” That blended fuel, the press release claimed, will power flights between Los Angeles and Australia.
“Qantas is showing great leadership in its commitment to biofuels,” said LeTang in the press release. “We look forward to providing a high-performance renewable fuel for one of the most important routes on their international network.”
Qantas did not provide a comment for the story in response to repeated requests.
“Rules of Engagement”
Mike Ewall, the founder and director of the group Energy Justice Network, said he questions the entire premise of biofuels as a clean energy source to begin with. Instead, he says, society should shift away from “burnable fuels” altogether and toward “electrification” of the energy grid.
Some studies show that over their entire life cycles, biofuels emit more greenhouse gases than even coal.
“And I see a lot of that in other industries, where they’re just like, ‘We can do everything!’ Or they’ll sound like Disneyland and throw a bunch of ideas at you, but they haven’t actually done any of it yet,” said Ewall. “It’s very typical of these companies to point to examples that they barely have a relationship with, and barely work if at all, and say ‘That’s the model’ while ensuring you can barely get any information about it.”
And Logansport Mayor Kitchell said he believes that when government agencies forge ties with businesses, the ethos should be “If it seems too good to be true, it probably is.”
“I don’t see anything that prevented our community form being taken advantage of by investors,” said Kitchell. “We’re just flying by the seat of our pants here and the bottom of the plane fell out. This was the most highly speculative investment there was because there was no evidence, at least presented publicly, that there was any investments from stock investors or mutual funds or hedge funds.”
Kitchell said losing money to SG Preston has meant less money for things like renovation of infrastructure, public safety expenses and park maintenance in the city budget.
And though Logansport lost money, Kitchell says that in the end, things have turned around. He pointed to the city’s recent permitting of two solar panel farms. Kitchell also said that since the Logansport facility began running on natural gas, consumer rates have dropped by over 11 percent.
“I think we’re better off, we’re certainly more street smart and savvy when it comes to utilities than we were six years ago,” said Kitchell.