Identifying, Avoiding Scams in Large Biodiesel Project Funding
by Peter Brown (Biodiesel Magazine/Euro Marketing Tools Inc.) Financing large projects that include biodiesel processors, crushers and support equipment has become very complex, attracting a new type of predator with clever tricks to fraudulently divert investment revenue streams to him.
…An inside scam is more painful because biodiesel projects are built up over time. They may have started in a casual conversation with friends, or a hobby becoming more serious. The types of people working in biodiesel are close to their sources and usually very trusting. This is the ideal setup for a worm to enter the apple. In rural America and Canada, the medium-sized biodiesel facility is often a cooperative effort with local shareholders. The group’s technical and financial expertise is often low and boards are peppered with local bigwigs used to having their way in small-time politics.
…In a well-run scam the actual fraud and guilty people are hard to pin down because of the numerous avenues and documents generated to cover everyone’s tracks. We assume those funds in a currency-short market have real value beyond their intended ability to build projects, provide jobs and pay taxes. Large amounts of money can be loaned out by whoever has their finger on the trigger and generate obscene amounts of revenue in short-term loans. And it’s no surprise that the sharks are swimming most convincingly in the banking cesspool.
…Another scam that often occurs is the pay-to-play idea. For a monthly fee between $5,000 and $22,000 the financing group will peddle your business plan to its stable of investors. After three to six months it will announce that your project is being considered for inclusion in a $200 to $500 million financial pool or a hedge fund for renewable energy projects.
Your investment firm will go to the end of the world to promote your project at your expense. We know one project has spent more than $400,000 to keep its team in the hunt, even flying the finance team from Switzerland to live for a month at the project’s expense in a three-star hotel. One hot spot seems to be Geneva, but others have gone to Dubai, Bahrain, Moscow, Singapore and Zurich to meet with fund managers.
…Simple steps can be taken to avoid getting sucked in by these people, and they’re all based on your need to know and your ability to find out. First, be certain you know why they are talking to you. They were either invited by you or an outside source that knew about your project.
This is not a casual question because if someone who you thought was under NDA is discussing your business plan with strangers, you need to know. It’s important to know who brought them to your table and why they are eating your lunch.
If someone recommends a financier to you, make sure to try understanding the nature of the contact.
…Verify everything they tell, show or refer you to.
…Always insist on deadlines so as the various excuses pile up, you still retain the option to terminate and recuperate.
…So the final but first piece of advice is start with your attorney to ensure that it will not end with your attorney. READ MORE