NEWARK – The New Jersey Bureau of Securities has ordered Extreme Energy Solutions, Inc. (“EES”) and its president and CEO, Samuel K. Burlum, to pay a $1.1 million civil penalty after finding that Burlum and the company engaged in the fraudulent sale of unregistered stock, warrants, and promissory notes, and misled investors through false statements and omissions of material fact, among other violations.
“The Bureau of Securities Chief found that Burlum misled investors with a series of lies about his company’s current and future prospects for success,” Acting Attorney General John J. Hoffman said. “This $1.1 million civil penalty will serve as a deterrent and a clear reminder that we are watching, and that investors must also do their homework before investing.”
EES, based in Ogdensburg, purports to be a green technology research company as well as an installation facility for emission reduction devices. It offers for sale and installation a device called the SMART Emissions Reducer, formerly known as the InterCharger, which purportedly reduces automobile emissions and increases motor fuel efficiency.
According to the findings of Bureau of Securities Chief Laura H. Posner, Burlum reached prospective investors in part through his membership in a group called the Global Information Network, currently an Illinois-based organization that describes itself as a “unique success club” whose members help each other achieve wealth, gain financial freedom, experience dynamic health, and reach high levels of overall emotional well-being.
“According to the Bureau of Securities’ findings, investors bought EES stock and other unregistered securities based on false representations about the company’s value, including that it was preparing for an initial public offering and had turned down a $300 million purchase offer,” Division of Consumer Affairs Acting Director Steve Lee said.
“Burlum’s scheme bears all the signs of affinity fraud, in which an individual gains the trust of a group based on a shared background or interest – in this case, the Global Information Network – and takes advantage of its members,” Bureau of Securities Chief Laura H. Posner said. “No matter who offers you an investment opportunity, it is vitally important to contact the Bureau of Securities and learn whether the seller and the security itself are registered. This is especially true for any offers like those at issue here that seem too good to be true.”
According to the findings of the Bureau of Securities Chief, as set forth in the Summary Order and Cease and Desist, Burlum and EES violated New Jersey’s Uniform Securities Law through the following activities, among others:
From at least March 2011 through August 2014, Burlum and EES sold at least $2.8 million worth of unregistered securities through the fraudulent offer and sale of EES common stock, common stock purchase warrants, and promissory notes to at least 225 investors, many of whom were members of the Global Information Network.
None of the EES securities were registered with the Bureau of Securities, nor were they exempt from registration. In addition, Burlum has never been registered with the Bureau to sell securities. EES employed at least 14 unregistered agents, including Burlum, to sell the unregistered securities. Many, like Burlum, also were members of the Global Information Network.
Burlum solicited Global Information Network members and others to invest in the EES Stock and Warrants through presentations at EES convention-type meetings and monthly investor conference calls, among other methods. These presentations resulted in Global Information Network members investing in EES stock and warrants.
Burlum and EES deceived prospective investors through various untrue statements and omissions of material fact. For example:
- Burlum repeatedly and falsely told investors and prospective investors, both via email and during monthly investor conference calls, that EES would conduct an initial public offering (IPO) of its shares by the end of 2012. However, at no time did Burlum or any other EES representative file a registration statement with the U.S. Securities and Exchange Commission, that was necessary for an IPO.
- Burlum, on at least one occasion, falsely told investors and prospective investors during a conference call that a particular boutique investment bank was handling the EES IPO. He failed to disclose that, at the time of the statement, EES owed that bank tens of thousands of dollars in arrears that Burlum refused to pay, and that the bank was not engaged in raising any capital on EES’ behalf.
- During at least one monthly investor conference call, Burlum made untrue statements about EES’ manufacturing and licensing rights to its purported emissions reduction device. He stated that EES manufactured the “intellectual property” part of the device, when in fact EES only manufactured small components of the device. He stated that EES could manufacture more than 180,000 units a month, when in fact, EES did not manufacture the device and received it from another company. He stated that EES had the authority to license manufacturing rights to original equipment manufacturers, when in fact, EES was only a licensed distributor and installer of the device, without authority over manufacturing rights.
- On at least one occasion, Burlum falsely told an investor, who was also an unregistered agent, that General Electric had attempted to acquire EES for $300 million. In fact, EES has never had any actual or potential business relationship with GE.
- At least one unregistered agent sent emails to prospective investors that included several of these untrue statements made by Burlum.
In the Summary Order and Cease and Desist, Bureau of Securities Chief Posner ordered Burlum and EES to pay a $1,125,000 civil penalty and to cease and desist from further violations of the Securities Law.
Burlum and EES may request a hearing within 15 days of receiving the Summary Order and Cease and Desist, by filing a written answer and request for a hearing.
The Bureau’s investigation was conducted by Chief of Investigations Rudolph Bassman, Supervising Investigator Michael McElgunn, and Investigators Richard Smullen, Thomas Dellatorre and Sanjiv Desai.
Deputy Attorneys General Isabella T. Stempler and Martin B. Gandelman of the Securities Fraud Prosecution Section in the Division of Law assisted the Bureau in this matter.
The Bureau can be contacted toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600. The public is encouraged to visit the Bureau’s website at www.njsecurities.gov.