A Congressional probe, a litigation-happy Swiss heiress, a German-Guatemalan millionaire and a series of patent disputes are a few of the details in one Braidy Industries board member's past, according to an investigation by The Daily Independent.
John T. Preston is the Secretary of the Braidy Board of Directors and holds 200,000 shares of stock in the company. Last month, in the wake of allegations made in a report against ex-CEO Craig Bouchard, the ousted CEO took to Facebook, where he accused Preston of being sued 17 times over the last 20 years. Bouchard claimed he only became aware of the suits in January, after receiving a litigation report.
Over the years, Preston has been accused of defrauding investors and business partners in a string of ventures dating back to the late 1980s. Some cases obtained by The Daily Independent resulted in settlements, while others found Preston not liable, according to court records.
None involved criminal charges.
The Daily Independent attempted to contact attorneys involved in some of these lawsuits, but no phone calls or emails were returned. When asked how Preston got linked up with Braidy Industries initially, a Bouchard spokesperson declined to comment. Inquiries made into Preston via a Braidy spokesperson were answered with a reply from his attorney Neil Hartzell at Boston-based firm Freeman, Mathis and Gary.
“Mr. Preston is an award-winning entrepreneur, having created more than 300 companies that impact every aspect of life and are estimated to employ over 300,000 Americans. Much of the work he has done has had significant impact on the lives of everyday Americans, including negotiating the U.S. standard for high definition television. As an entrepreneur, he has seen many successes and some failures. Clearly, our legal system enables any one to sue another person for any reason and unfortunately this opportunity is often used for inappropriate reasons. There has never been a finding of wrongdoing by Mr. Preston. He looks forward to continuing to get to know the Northeastern Kentucky community as he works with his fellow board members to make the Braidy dream a reality. As a closing comment, I have worked with Mr. Preston on a number of legal matters for over seven years and have only witnessed the highest ethical behavior in his interactions with me,” the attorney wrote.
In 1982, a chemical engineer named Christopher Nagel was working at a US Steel plant when he stumbled upon an idea. With his office between a blast furnace and rail cars, he saw hundreds of tons of hot metal pass by each day, according to a business study by Harvard. Just like the legend of an apple bopping Isaac Newton on the head and leading to the theory of gravity, those rails cars of white hot metal inspired Nagel to develop “Catalytic Extraction Processing.”
The premise was simple: bathe hazardous and radioactive wastes in hot metal, then recycle the end product. When he later enrolled in the Massachusetts Institute of Technology, Nagel already patented the concept.
Nagel approached Preston in 1987, who was then employed as the Director of Technology Development at MIT. As the lead marketer of inventions developed at the college, Preston was intrigued by the process. After all, with more stringent regulations on disposing toxic wastes, there was money to be had in a cheap and efficient disposal method.
Preston then connected Nagel with William M. Haney III, a 27-year-old millionaire who founded his first company while a freshman at Harvard. With Nagel acting as the lead researcher of the technology and Haney as the CEO, Molten Metals was born in 1989.
At first, Haney used a bit of his own money from the sale of a previous venture, a Boston University study shows. Within nine months of the company's founding, $2.3 million more was raised, securing the support of DuPont and former Secretary General of the 1992 UN Earth Summit Maurice Strong.
In addition to private funding, Molten Metal focused on getting government contracts and grants, with the first $1.2 million in grants coming under the Bush Administration. However, it was dealings under the Clinton administration that led to the company's unraveling.
When Molten Metals went public in 1993, it raised another $80 million, according to a study. Much of the stock valuation, according to a lawsuit filed by disgruntled investors, was due to the DOE grants received over the years. According to the suit, the company received $25 million in grants between 1993 and 1996, when it entered into a cost sharing agreement with the DOE in researching the technology.
The grants and contractors fell under the scrutiny of the Department of Justice and the U.S. Senate due to the closeness of Haney and Democratic operative Peter Knight. Knight, who worked on Al Gore's failed presidential bid in 1988 and his vice presidential campaign in 1992, was accused of helping facilitate a trade of grant money for campaign contributions in a congressional probe.
Bob Woodward of The Washington Post reported in 1997 that two days after Knight hit up Haney for a donation for chair at the University of Tennessee named in honor of Al Gore's deceased sister, the company received additional funds from the DOE.
Gore even visited a $25 million facility the company constructed in 1993 in Falls River, Massachusetts, for Earth Day 1995. While Molten Metal executives testified before Congress three times in the mid-1990s regarding campaign contributions, they were never charged with any wrongdoing.
In 1996, Molten Metals asked the DOE to expand its funding by $20 million. The DOE said it could give only an additional $8 million between 1996 and 1997. The class action suit later filed against the company — Preston, Nagel, Haney and Strong, who became a director of the company — stated executives withheld that information from investors.
While supplying information all through 1996 that the funding projection from the DOE was strong, Molten Metals finally issued a report on Oct. 20, 1996, stating the company would not receive the funding it hoped for, the suit states. Shares in the company, then trading at $28 per share at the closing bell on Oct. 18, 1996, tanked by almost 50 % following the report, the suit states.
The month prior, Preston sold 40,000 shares of Molten Metals off, netting $1.26 million, according to the suit.
In December 1997, with funds dwindling away, Molten Metals filed for bankruptcy. According to the Stanford Securities Class Action Clearing House, Molten Metals settled the case for $11.8 million and the plaintiffs' lawyers got a nearly $4 million pay day in 2001.
According to the Boston Globe, Haney later went on to serve for various environmental non-profits and became a documentary filmmaker. However, Preston and Nagel continued on their pursuit of the technology.
From the Ashes
A month prior to ceasing all Molten Metal operations in 1998, Preston and Nagel set up a company called Quantum Catalytic, according to a suit filed in Massachusetts. The company bought up assets including the patent for Catalytic Extraction Processing, from the deceased company. In 1999, the two set up Electromagnetic Corporation and Atomic Ordered Materials, the former of which Preston was a minority shareholder and the later of which he owned a majority stake.
Quantum Catalytic then licensed out the patents bought from Molten Metals to AOM and Electromagnetic. The two companies worked in tandem for years, according to court records. In 2001, a Texas engineer Michael Collins approached Preston about a venture using the technologies developed by the companies to create natural gas from coal, court records show.
In 2004, Collins, Preston and a Houston attorney named Michael Sydow set up Texas Syngas LLC.
Per their agreement, Collins owned a majority stake in the company, records show. In exchange for licensing out the patents to the company, Quantum received a 10% stake in the company, records show. Texas Syngas then set up a company to buy the old Falls River facility, which Preston and Massachusetts realtor Paul Lohnes bought following the Molten Metals bankruptcy, records show.
Around the same time, Preston secured investments for AOM and Texas Syngas from a German-Guatemalan millionaire named H. Joachim von der Goltz, according to court records.
Across the ocean in Switzerland, Corrinna von Schonau-Reidweg inherited $500 million worth of stock in a pharmaceutical company following the death of her mother, court records. As the Boston Globe reports, while Schonau had a comfortable middle-class upbringing, she had no clue about her fortunes.
Wishing to preserve the money, she turned to family friend Baron Wilfrid von Plotho, who worked as a money manager for the prestigious Rothschild Bank AG, according to court records. Around 2003, von Plotho was introduced to Preston by von der Goltz, court records show.
That meeting would lead to a hefty lawsuit nine years later and the falling out between Preston and Nagel.
Swiss Heiress, Texas Business
Over the course of about eight years, Schonau claimed the baron convinced her to invest $77 million into various Preston ventures, including AOM (renamed Continuum Energy Technologies in 2008) and Texas Syngas, a lawsuit alleges.
After reviewing her accounts in 2011, Schonau claimed the money had been frittered away to $50,000, court records show.
Before Schonau filed her lawsuit in 2012, Texas Syngas was already mired in a series of legal maneuverings.
In 2008, Preston began injecting more capital into the company through a venture he set up called C-Change Investments, which Collins would later allege was a move to pull Texas Syngas out from under him.
C-Change ended up striking a deal with Louisiana Gas Company for a project in 2009, creating a company called NC12, records show. Texas Syngas then dissolved and its interests were transferred to NC12, in a move characterized as a name change, according to court records.
In that move, von der Goltz received a position on the board, with Preston and Collins departing — by that time, the two were having disagreements with the direction of the company, court records show. Sydow, who was the CEO under Texas Syngas, continued to serve in that position.
In 2010, von der Goltz raised concerns about finances after vendors at the Massachusetts facility reported they were not getting paid and had an audit conducted by Boston accounting firm Elder, Gaffey and Paine, according to court records. The findings of the audit revealed misspending of company funds by Sydow and Preston, according to court filings.
Around this time, information came to light that Collins may not have been an engineer after all, according to court records. Sydow, Preston and others accused him in a lawsuit of misrepresenting his credentials.
Through a series of maneuvers, von der Goltz and another board member were removed from the board, to be replaced by Preston and German investor Christopher Henkle, court records show. NC12's assets were then stripped by a Luxembourg-based outfit called Meliora Energy Technologies, records show. A filing in the Harris County, Texas District Court shows Henkle, Sydow and Preston sat on the board of that company as well.
In 2011, Preston and Lohnes bought back the Falls River property for $2.6 million under a company called Brilliant Novelty LLC, according to court records. Property deeds in Massachusetts show the property was held under that name until 2016.
Records show the company was a 50/50 arrangement between C-Change and Chalsys Capital Partners, a UK-based private equity investment firm. The other members of the board in Meliora were Chalsys executives.
Lawsuits ensued — Collins sued the Meliora set for allegedly stripping him of his patents and technologies. Sydow and others filed a suit against Collins for allegedly misrepresenting himself. A shareholder suit brought in Texas against all executives involved in 2007 was eventually joined by Sydow and company against Collins, court records show.
Von der Goltz wound up filing his own suit against Preston and company in the middle of this, by joining Collins in his suit, court records show. Von der Goltz, as federal investigators learned years later, was holding his wealth in various off-shore companies in order to dodge taxes — at least two of the entities that joined the von der Goltz intervenor suit were off-shore shell corporations, court records show.
While in the midst of all this, Schonau initiated her lawsuit against von Plotho, Preston and his ventures, Collins and Sydow and Michael Porter, a Harvard Business professor who now sits on the Braidy Board of Directors. Porter at the time was the chairman of Continuum Energy Technologies, court records show.
In her suit, Schonau accused Preston, Porter, Nagel, Collins and Sydow of misrepresenting the progress the various ventures were making in developing technologies for commercial purposes and overvaluing the company by hundreds of millions of dollars when they had her invest. She also accused von Plotho of taking hefty finder's fees and receiving positions in the Preston ventures for securing her investments.
After whittling her claims down to $5 million — $72 million less than she initially sought — the case went to trial in 2016. Preston and company were found not guilty by a Massachusetts jury, according to court records.
Von Plotho, however, had to pay back $14 million to the heiress.
The Falling Out
By the tail end of 2014, the relationship between Preston and Nagel had deteriorated due to “protracted third-party litigation,” according to a lawsuit filed by Preston in Massachusetts. Unbeknownst to Preston, Nagel set up IDL, a Massachusetts company, and struck out on his own, court records show. After resigning from his position as the lead researcher at Continuum Energy Technologies, Nagel then ousted Preston as the vice president of Electromagnetic Corp., took technological information and hired out the research team from Continuum Energy in 2015, court records show.
This sparked a protracted legal battle that bounced between Massachusetts, Delaware and federal courts.
Nagel's attorneys argued that the former Continuum researcher had been laid off in 2014 because the company “effectively ran out of money” because of the Schonau lawsuit. Claiming IDL's research had nothing to do with liquid metals, Nagel stated in a court filing that IDL conducted 17,000 experiments on new processes.
In a settlement agreement filed in federal bankruptcy court, Nagel and IDL agreed to pay $4.8 million to Electromagnetic Corporation in March 2018. The two parties agreed to swap intellectual property held by Nagel for personal property held by Continuum Energy Technology. The company also entered into a licensing agreement with Continuum, although the settlement does not show the details.
However, a court filing by IDL shows the agreement was to pay $9.5 million to CET by Sept. 30, 2018. However, due to the losses incurred because of the suits, IDL could not pay that fee and had to file chapter 11 in December 2018.
Records show that not every venture associated with Preston has turned into a litigation. Preston has sat on the board of directors for Clean Harbors, an industrial cleaning company, since 1995. No lawsuits filed in federal court appear to involve him in that capacity.
He also manages a private equity investment firm called Transformative Energy Materials Capital. Aside from a lawsuit in Texas, the company appears to have functioned with little to no problems.
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