By PETER HUSSMANN
Central Iowa Energy company notified its shareholders through a Securities and Exchange Commission filing on Thursday about a past independent business arrangement several of its current and past board members had with the company now in the process of acquiring the Newton biodiesel company's assets.
The company first made note of the situation in its latest quarterly report filed in August saying the information just became known to Central Iowa during the period ending June 30, 2009. Thursday's filing amends its September 2008 quarterly report to "provide additional information regarding transactions with related persons."
The SEC filing indicates that The Biodiesel Group (TBG) is an entity currently owned by Warren Bush, Denny Mauser and William Horan, all current board members of Central Iowa Energy. In addition, Tom Schroeder was an owner of TBG through 2007 and sat on the Newton biodiesel company's board of directors until April 2008.
The SEC amendment notes that not only did Central Iowa contract with TBG for services, but that TBG had a contract with Renewable Energy Group, Central Iowa's operational management firm and now potential asset purchaser, for development services in connection with the construction of the Newton plant.
"In addition to its principals serving on our board of directors, we contracted with TBG for consulting services, including assistance with negotiation of various contracts, assistance in the planning of our equity marketing effort, and assistance in securing debt financing services," Thursday's filing states.
"Certain principals of TBG informed us that Renewable Energy Group (REG) and TBG had an agreement pursuant to which TBG received a total of $450,000 from REG for development services and expenses incurred in connection with the development of our plant and several other biodiesel projects. The $450,000 was paid by REG to TBG in multiple installments made from Dec. 6, 2005 through Oct. 12, 2007. It is our understanding that the Oct. 12, 2007 payment was the last payment."
The filing goes on to spell out other contractual arrangements Central Iowa Energy had with REG, including its management and operational services agreement and design build contract. Central Iowa eventually agreed to provide REG with 1,000 of its membership units as payment for the last $1 million of its design-build services on the construction of the $39.3 million facility.
"The payments received by TBG from REG may have given Messrs. Bush, Schroeder, Mauser and Horan an interest in transactions between REG and the company," Central Iowa wrote in its filing.
The filing also makes note that Mr. Bush's position on Central Iowa's audit committee does not qualify him as an independent member as required by the company's charter.
"Warren Bush is not independent under our Audit Committee charter because he previously received approximately $65,000 in compensation and membership unit awards under our consulting agreement with The Biodiesel Group, of which he is an owner, and an additional $20,000 for legal services previously rendered to the company," the filing states, acknowledging that the other two members of the committee are independent as defined.
In its August notation of the recently discovered business arrangement, Central Iowa wrote in its quarterly report to shareholders that "had we been informed by TBG and its principals of the agreement between REG and TBG at the time it was made, the agreement may have been disclosued in our previous reports."
The complete SEC filing can be read here.
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