The origins of the Company’s dispute with the SEC began in 2001 when Mr. X, a regional attorney in the Fort Worth, TX office of the SEC became aware that the Company was attempting to develop a vehicle referred to by the press as a “flying car”. It is apparent by his subsequent behavior that Mr. X was convinced that raising money to develop such a fanciful vehicle must involve fraud.
For example, as a self-appointed aeronautical expert he alleged that “In September 2001 the Company filed a fraudulent registration statement with the Commission that exaggerated the true scope of the patents the Company held for the Skycar”. After becoming aware of the respect held for the Company’s technology by government and industry (see references) the term fraud or fraudulent was never mentioned again either in discussions leading up to the settlement agreement or in the agreement itself. The only charge raised by the SEC that was seriously discussed was whether the Company allowed persons to invest in the Company as sophisticated investors, who while claiming to be, may not have been qualified. The normal remedy for this is called a rescission agreement where the investor can get his investment back plus interest. Mr. X rejected this approach apparently anticipating that the investors were comfortable with their investment and this would have ended his case.
In 2002 the Company entered a settlement agreement with the SEC, which was summed up by Mr. Craig Christensen, the Company’s corporate attorney as follows:
“Moller International, Inc. and Dr. Moller agreed to the settlement terms proposed by the SEC in order to bring the matter to an early resolution, since approval of the company’s 10-SB registration statement was essentially stalled by the SEC corporate division pending a resolution of the Texas investigation. Moreover, the company determined that defending an SEC formal investigation or lawsuit would dissipate company assets and prolong its ability to have an effective and approved registration statement. Finally, I believe we were able to demonstrate to the SEC that Dr. Moller’s activities did not constitute his acting as an underwriter within the meaning of the federal securities laws. IT SHOULD ALSO BE NOTED THAT THE MOLLER INTERNATIONAL, INC. 10-SB REGISTRATION REGISTRATION STATEMENT RECEIVED A “CLEARED COMMENTS” NOTIFICATION FROM THE SEC CORPORATE FINANCE DIVISION INS AUGUST 2002, WITH THE SEC’S FULL KNOWLEDGE OF THE FACTS AND PROPOSED DISPOSITION OF THE TEXAS INVESTIGATION.”
Following the settlement agreement the SEC issued a press release that misleadingly restated the charges put forth in the original complaint rather than the details of the settlement agreement. Charges like the example above had been shown to be substantially without merit during the negotiations leading up to the settlement agreement. TO PREVENT CRITICISM FOLLOWING THE ISSUANCE OF THIS MISLEADING PRESS RELEASE, THE SEC HAD THE COMPANY STIPULATE THAT IT WOULD NOT CRITICIZE THE SEC, THE SETTLEMENT AGREEMENT OR THE CHARGES IN THE COMPLAINT. Any criticism would cause the settlement agreement to be withdrawn. By stating the earlier charges rather than the results of their resolution, the SEC misled the public while preventing the Company from defending itself without severe consequences.
We believe the SEC placed this restriction on the Company in order to prevent it from revealing the egregious behavior by Mr. X during his initial interview with Dr. Moller, which was taken under oath (see summary deposition). The SEC also used this misleading press release to retaliate for earlier pressure placed on it when the Company enlisted the help of a US Congressman who was very familiar with the Company’s technology and the Ambassador from Oman who represented one of its largest stockholders. The Company had asked for their help in order to get the SEC to meet the terms of the settlement agreement. Their help brought immediate compliance but with the clear indication from Mr. X that the Company could expect severe future consequences for putting pressure on the SEC.
Mr. Christensen also stated that “THE SEC MADE NO FINDING OF FACT INDICATING THAT EITHER DR. MOLLER OR MOLLER INTERNATIONAL HAD VIOLATED ANY SECURITIES LAWS.” However anyone familiar with the awesome power of the SEC to bring unlimited resources to bear against a small company will understand that signing a Consent Decree under duress was the only realistic option available to the Company and its president.