Alternate Energy Holdings Inc. also confirmed Friday it's being investigated by the U.S. Department of Justice.
SEC lawyers told U.S. District Judge Edward Lodge this week AEHI Inc. Chief Executive Officer Don Gillispie engaged in a "get-rich-quick" scheme involving his company's final $2 million without properly reporting the transaction.
In February 2011, Gillispie was ordered by Lodge to provide the SEC with monthly documentation of all AEHI expenditures exceeding $2,500, in exchange for lifting a previous freeze on the company's money.
But Gillispie disclosed nothing about $2 million he shifted into a bank account of a Nevada law firm in May in anticipation of AEHI's plan to participate in a "trading program" involving a New Zealand bank designed to reap "tens of millions," the SEC lawyers wrote.
They contend the purported investment was an obvious sham.
"No 'blocked account' was available for any 'trading program' that would earn tens of millions of dollars," SEC lawyers wrote. "Yet, contrary to their respective obligations as a public reporting company, and as the CEO of that company, AEHI and Gillispie sought to conceal from shareholders, the public, and the commission the arrangements by which they dissipated and transferred the company's remaining assets."
Within just weeks, the transaction "turned sour," SEC lawyers wrote; that's when AEHI demanded its $2 million back from the law firm, Las Vegas-based Black & LoBello.
But the $2 million is now tied up in a Nevada lawsuit, with Black & LoBello asking a state court judge in Clark County to determine its rightful owner.
Andras Babero, an attorney with the firm, said Friday his firm makes no claim to the money; he merely wants to be remunerated for his services.
"Including the monies we were entitled to, including the escrow agreement, we're owed $50,000," Babero said.
For years, Gillispie's tiny company has been promoting to investors that it aims to build a nuclear power plant somewhere in Idaho.
In December 2010, the SEC filed a civil lawsuit, alleging Gillispie and others had engaged in a fraudulent scheme to inflate the value of its shares to lure investors and enrich themselves. The case is ongoing.
On Friday, spokesman Dan Hamilton contends the SEC is yet again using the courts to put AEHI out of business.
He said the $2 million was placed in an escrow account controlled by the Nevada law firm as part of AEHI's plans to make investments and recoup some of the money that it's spent fighting the federal securities regulator's allegations. Hamilton said the money was transferred, not spent; consequently, the transaction that didn't violate Lodge's order two years ago.
"We never filed on this because we never spent the money," Hamilton said. "It was never supposed to be spent. We just moved it from one account to another."
The SEC contends AEHI committed its last remaining $2 million down from $7 million in February 2011 to what was a phony investment scheme.
Hamilton said his company has spent most of the difference on attorneys, trying to fight off the SEC.
"There's no doubt, this court action has taken its toll on the company," he said.
Hamilton confirmed AEHI's roughly 900 shareholders in August received questionnaires from U.S. Department of Justice prosecutors. While the SEC handles civil litigation, any potential criminal charges against AEHI would have to come from the Justice Department.
Prosecutors "asked stockholders about how they bought their stock," Hamilton said, describing the questionnaire.
Assistant U.S. attorney Ray Patricco in Boise on Friday afternoon declined to comment on the questionnaire. He said the office could neither confirm nor deny a criminal investigation.