The company that is proposing to build five oil refineries in Montana and North Dakota — projects that would require funding of $2.5 billion — appears to have very few assets itself.
Bloomberg was reporting as of Wednesday afternoon that Quantum Energy Inc.’s market capitalization — the number of outstanding shares times the value of a share — was about $3.8 million.
Quantum’s stock was priced at .545 cents per share as of mid-afternoon Wednesday, with about 7.1 million outstanding shares.
Representatives of Quantum and its partner, Bilfinger Westcon Inc., went before the Yellowstone County Commission on Tuesday morning to talk about their hopes of locating one of the five refineries in Billings.
A story that ran on Page 1 of the Billings Gazette on Wednesday morning was headlined, “County officials roll out welcome mat for proposed refinery.”
Even before that story was published, a local blogger posted documents from an Arizona divorce case involving Quantum CEO Andrew Kacic, in which the presiding judge referred to Kacic’s “false claims” and “apparent tax fraud” and accused him of using a “purported charitable foundation” as a source of “personal funds for payment of his personal obligations.”
Kacic could not be reached for comment, but Russell Smith, Quantum’s vice president for communications, dismissed the blog post as the work of a “very serious environmentalist and activist.”
That was in reference to Alexis Bonogofsky, whose East of Billings blog makes no secret of her conservationist point of view. Smith also said that a judge in a divorce court — in this case Judge Dean Fink of the Superior Court of Arizona, Maricopa County — is not a judge of a court of “competent jurisdiction over IRS issues.”
And though he hadn’t yet read Bonogofsky’s post nor the court document to which she linked, Smith said, “I would take that with a grain of salt. It’s a divorce proceeding.”
County Commissioner Jim Reno was similarly dismissive of the blog post, saying “a lot of people don’t like the extraction industry or carbon.” As for allegations about Kacic’s financial dealings, Reno said, “Their investors would need to do their own due diligence, but we’re not one of them.”
“I’m not an investor,” he said a bit later. “If there’s tax fraud, call the department of revenue. We’re simply open for business.”
Commissioner John Ostlund, who asked to have the Quantum Energy presentation put on the commission’s agenda, said he was approached by a “mutual friend” who told him about Quantum’s plans.
He said he got some very basic information about those plans before the meeting Tuesday, but knew little beyond what was presented publicly. Asked whether Quantum appeared to have the financing and background to put together such a large group of projects, Ostlund said, “those questions are legitimate. I just don’t have the answers.”
He said the two companies asked nothing of the county, and that it is up to private investors to decide whether the projects are viable. “The process now is really in their hands,” he said.
Commissioner Bill Kennedy said he was cautioned by a local businessman to ask the Quantum representatives about their finances, which he did at the meeting. He said Kacic responded by saying that Credit Suisse was considering getting involved, as were some private investors.
“His said his financers are people who, once they have the land in place … that’s when the creditors, the investors, will jump on board,” Kennedy said.
According to the Gazette, Kacic told the commissioners he hoped to have more information about a real estate purchase in Yellowstone County by the end of the week. He said the $500 million refinery, with a 20,000-barrel-a-day capacity, would produce diesel and various other petroleum products.
Steve Arveschoug, executive director of Big Sky Economic Development, the county’s economic development agency, said the agency usually does “significant due diligence before going public” with an economic development proposal.
“Some companies turn that process around a little bit,” he said, and go public before that due diligence is done. It’s entirely up to the company as to when they announce their plans, he said, and in this case Quantum moved first.
“We have a very thoughtful due diligence process with every project we work on, and we’re just into that due diligence process right now” with Quantum, he said.
“We pay attention to credible information,” he said, “so we’ll continue to do our homework.”
Smith, the Quantum vice president, said Quantum and Bilfinger Westcon formalized a joint development agreement just a few weeks ago. He said Quantum is a development company that is raising money for the project, while Bilfinger Westcon is a “very reputable” company that would do the engineering and construction of the proposed refineries.
Bilfinger Westcon, a subsidiary of Bilfinger Industrial Services, is doing the project management and construction of the Dakota Prairie Refinery being built in Dickinson, N.D. Unlike Quantum, Bilfinger Westcon is not a publicly traded company, so information on its finances is harder to come by.
Quantum Energy Inc. has not filed a quarterly report with the Securities and Exchange Commission since the last quarter in 2010, but it has filed reports to conform with provisions of “the Pink Sheets Issuers Disclosure Statement.”
The Pink Sheet is a daily publication compiled by the National Quotation Bureau. It publishes information on companies that are not on a stock exchange, and which do not have to meet minimum requirements or file with the SEC.
According to Quantum’s latest Pink Sheets quarterly report, Kacic became a board member and the CEO of Quantum Energy in March and is assisting the company “in its efforts to develop refinery and rail transload facilities” in the Bakken region. It also says Quantum signed a letter of intent on June 18 to purchase a 400-acre site near Baker where it hopes to build a refinery.
In June 2013, the report says, Quantum bought out FTPM Resources, “a Texas corporation engaged in the fuel trading and petroleum marketing business.” With that purchase and the nearly simultaneous appointment of Stanley F. Wilson as Quantum’s president, secretary and treasurer, the report continues, Quantum “redirected its oil and gas efforts to the Williston North Dakota region and the Bakken formation activity.”
Last October, Quantum’s stock was valued at .0036 a share, or 36/1,000ths of a cent per share. In November, the company did a reverse split of its stock, after which 150 shares were worth one share.
That slowly increased the value of Quantum stock. It went to 3 cents a share by January, and by mid-afternoon Wednesday it was trading at .545 cents a share, or just over 54 cents.
The divorce proceedings in Arizona involved the end of Kacic’s marriage to Cynthia Christie-Lee. Superior Court Judge Fink was no easier on Kacic’s wife than he was on Kacic.
He wrote in his “Findings of Facts and Conclusions of Law”: “Despite an unusually lengthy five-day trial of this dissolution matter, as a result of both parties’ willingness to lie and failure to make full disclosures, the Court lacks confidence that it has a clear, accurate picture of: either party’s financial situation, either party’s true holdings, the value of Husband’s sole and separate businesses at the time of the marriage … (and) the true extent to which community income was commingled with either party’s sole and separate property.”
The judge said Andrew Kacic “runs substantial personal expenses through his businesses, falsely claiming them as business expenses. Husband also appears to hold personal assets in entities, for the purpose of creating confusion and creating the appearance of a right to deduct expenses.”
He further said that Kacic “engages in inter-entity accounting entries (many of which do not appear to be consistent) apparently to deprive taxing authorities of revenue due.”
And here’s what the judge said about that charitable foundation:
“Husband operates his business interests through a maze of interrelated business entities, which appear to have business and tax avoidance purposes. Husband’s web of businesses also appears designed to create barriers to creditors from pursuing Husband for claims. Among those entities is a purported charitable foundation, Sterling Foundation, which the evidence indicates Husband uses, at will, as a source of personal funds for payment of his personal obligations whenever he deems it necessary to do so. In fact, Husband testified that Sterling Foundation had made only $2,000.00 worth of charitable contributions since its creation, but had been used to purchase vehicles and to make Husband’s payment of temporary attorneys’ fees to Wife.”
