High salaries and trips abroad: lawsuit alleges fraud by executives of failed Enerblu

A Florida investor group has filed suit against the leadership of a failed battery manufacturing plant in Pikeville, alleging the company’s executives made fraudulent misrepresentations and squandered investments while lining their own pockets and taking fruitless trips overseas.

State court records include emails and text messages between executives of Enerblu and a representative of Dapco LTO Investment, LLC., the Florida group, which gave $3 million to Enerblu between August and October of 2018. The suit seeks to recoup the investment, along with at least $27 million in compensatory and punitive damages.

Calling Enerblu “a bogus Eastern Kentucky battery plant that was never more than drawings on a piece of paper,” the suit provides a detailed and critical glimpse into how the now-bankrupt company raised millions by promising hundreds of jobs in Kentucky coal country.

In 2017, Enerblu, alongside Kentucky Gov. Matt Bevin and U.S. Rep. Hal Rogers, announced plans to invest $400 million in a battery plant at an industrial park near Pikeville. The project promised 875 jobs, and spurred hope among local and state officials clamoring to rejuvenate the economy of Appalachian Kentucky.

Officials approved $30 million in tax incentives and later pledged $6 million in grant funding to help prepare the building site.

The project never came to fruition. Enerblu declared bankruptcy earlier this year, and its executives are facing another lawsuit from a group of Pikeville investors, who also claim that executives misrepresented the company’s finances.

The suit brought by Florida investors, which was filed in Jefferson Circuit Court, makes nine allegations, including fraudulent misrepresentation, fraud by omission and unjust enrichment, against Dan Elliott, former president and CEO of Enerblu; Michael Weber, executive chairman of Enerblu; Darren Marino, Enerblu’s chief financial officer and executive vice president for corporate development; and Najib el Khoury, an agent of Tri-Valley Qatar, a group of companies owned by a member of the Qatari royal family.

According to the suit, Enerblu officials began a series of discussions in May 2018 with Dominick Pagano, a manager of Dapco, to encourage him to invest.

Over the following weeks, the lawsuit alleges that Enerblu officials led Pagano to believe the company had already secured contracts, orders and other agreements, when in fact the company had no formal agreements.

In one case, Elliott told Pagano that Enerblu had an order contract with Ashok Leyland, an Indian automobile company, that would have generated $228 million between 2019 and 2024. In reality, Enerblu had no contracts or hard orders with Ashok Leyland, according to the suit.

At a meeting in June, Pagano met with Khoury, the Qatari official, who said he represented the Qatari royal family, and that a number of companies tied to the family planned to invest in Enerblu, according to the lawsuit. When Pagano asked whether Khoury was being paid by Enerblu to help secure his investment, Enerblu said he was not, the suit alleges.

In fact, the lawsuit contends, Enerblu had already promised to pay Khoury a 4 percent fee if he could convince Pagano to invest. In the end, Enerblu paid Khoury $120,000 for Pagano’s investment, according to the suit.

At another meeting, Khoury allegedly showed Pagano a copy of a three-page “Commitment for Funding” letter allegedly signed by Khoury on behalf of the Qatari group. The letter showed the group would invest $25 million in Enerblu, and Khoury told Pagano that Enerblu would have the $25 million by the end of the day, according to the lawsuit.

The suit alleges there was no real agreement between the Qatari group and Enerblu, and that Khoury and Enerblu officials manufactured and signed the letter to convince Pagano that the company would be a secure investment.

Jeremy Rogers, a Louisville attorney representing Enerblu in the suit, said the lawsuit’s allegations are untrue, and that “EnerBlu’s investors were all highly sophisticated, were given complete and accurate information about the company, and knew full well the inherent risks of investing in a start-up enterprise.”

“EnerBlu’s management team worked diligently to make the venture a success, but, ultimately, the company failed due to circumstances beyond the control of its management,” Rogers said.

Ultimately, Enerblu raised about $9.6 million from three major funding sources, according to the suit.

The company’s bankruptcy filings show that it had just $929 in its bank account, along with about $109,000 of machinery and other equipment.

According to bankruptcy records, Elliott received a $240,000 salary in 2018, along with $30,000 in consulting fees, $77,000 in reimbursed expenses, and a $53,000 relocation fee. Weber received a $231,000 salary, with $42,000 in consulting fees and $7,800 in reimbursed expenses last year.

In the Enerblu officials’ response to the suit, the defendants argue that Dapco’s claims should be filed against the company, not individual defendants. The response also argues that Dapco and Enerblu have a contract that overrides the suit’s claims, and that Elliott, Weber and the other defendants are “not in the business or profession of supplying information for the guidance of others.”

The response argues that the defendants were simply doing their jobs by trying to raise money for Enerblu, and that it is up to Dapco to decide whether it should risk investing in a new business venture.

Dapco made its final investment in October 2018, bringing its total investment to nearly $3 million.

From December through early January, Elliott continued to ask Pagano for more money, according to the suit, and also continued to deny that Khoury had received any payment from Enerblu for Pagano’s investment.

On Jan. 17, Elliott gave a wary speech in Pikeville saying the project would be delayed for at least one year because of problems at the industrial site. The next day, Weber told Pagano that Elliott had been fired.

Less than a month later, officials said the project had been officially suspended, dashing the hopes of residents who had believed the company would be a major job creator in Eastern Kentucky.

The Dapco lawsuit alleges Enerblu used “little to none” of the $9.6 million it raised for developing products or technology.

Instead, Elliott and the other defendants “were traveling around the world at great expense, purporting to be closing in on investments from some of the wealthiest people and entities on the planet.”

“The EnerBlu Defendants were paying themselves salaries and were paying Khoury undisclosed commissions,” the lawsuit reads. “Two relatives of Weber, his daughter and a son-in-law, were on the EnerBlu payroll. Such spending, it appears, is where the $3 million invested by Dapco largely went.”

Will Wright is a corps member with Report for America, a national service project made possible in Eastern Kentucky with support from the Galloway Family Foundation. Based in Pikeville, Wright joined the Herald-Leader in January 2018 and reports on Eastern Kentucky.