Future murky at waste-to-energy plants in Hopkinton, Cedar Rapids

No information on federal law enforcement officials visit to facility

Darrell Smith poses for a portrait inside of Permeate Refining Company in Hopkington in April 29, 2013 (The Gazette)
Darrell Smith poses for a portrait inside of Permeate Refining Company in Hopkington in April 29, 2013 (The Gazette)

The wheels have come off the operation of two pioneering waste-to-energy plants in Iowa, one at Hopkinton in Delaware County and a second one in Cedar Rapids.

Both plants, owned in part by the same company, have been out of service, company representatives said this week.

On Thursday, federal law enforcement officials visited the Hopkinton plant, a company office in Clear Lake, and a company associate’s office in Mason City as well as his Clear Lake home, those familiar with the company said.

Pete Deegan, spokesman for the U.S. Attorney’s Office for the Northern District of Iowa, said Friday he couldn’t comment on any law enforcement actions because of funding issues tied to the partial shutdown of the federal government.

Darrell Smith, 57, a securities and insurance salesman, has landed in the center of the problems at Energae LP and its Permeate Refining plant in Hopkinton and its BFC plant in Cedar Rapids, in part because of his role is convincing people to invest in the company.

Attorneys Joe Peiffer and Alan Rosca, with law offices in New Orleans and Cleveland, are representing unhappy investors. Peiffer this week estimated that investors may have put $5 million to $7 million into Energae LP.

He said he wasn’t sure if they’d recover much of what they invested.

The two attorneys run the website Darrell Smith Investor Center to keep investors informed of their litigation against Smith and against Energae, and to recruit other investors who have lost money.

Rosca on Friday said investors they are representing had direct knowledge of the Thursday federal searches.

In recent months and as recently as Wednesday, a defeated Smith said in lengthy interviews with The Gazette that he had invested and lost money in Energae himself. He also said that his full-time entanglement in the company’s operation and affairs has been fueled by an effort to protect the assets of others who had invested in the company.

However, some investors have complained about how he has handled their money and, in July, the Iowa Insurance Division revoked Smith’s securities agent license and his insurance producer license, barred him from providing the services in Iowa, ordered him not to contact clients and imposed a $5,000 civil penalty on him.

Smith agreed to the action without admitting wrongdoing.

Smith did not return calls on Thursday and Friday.

Smith has said as recently as Wednesday that the Hopkinton plant still needed some pieces of additional equipment to make it operate more efficiently and profitably. So, too, did the BFC plant, at 4120 Booth St. SW off Bowling Street SW, which was damaged and put of service after a wind storm earlier this year, he said.

Dennis Roland, who has worked for AEGON USA in Cedar Rapids in the past, is a key point of contact for Energae as he works to try to secure new capital to reopen both plants.

He said that 270 to 300 people have invested in the company and that he met with them two weeks ago.

A plant employee in Hopkinton reported federal law enforcement officials had visited the facility on Thursday, Roland said. He added that he wasn’t sure what the law enforcement matter entailed, or what the ramifications of it might be on any new investment.

Bud Jermeland, former president of Energae LP, said that investors in the company informed him on Thursday that federal officials visited the company’s Clear Lake office and Smith’s home and office.

Jermeland said he was an investor in Energae when he joined the company in July 2008, and Smith then named him president.

He said Energae then purchased 49 percent ownership in the Hopkinton plant from Permeate Refining and Hopkinton  resident Randy Less, who retained a 51 percent ownership in the plant.

Jermeland left the company in July 2010 after Smith shifted his support to Less. Smith has said Less was the operational brains at the plant and so he supported him.

Energae purchased BFC after Jermeland left Energae, he said.

He and Smith disagree about much, but both said that the Hopkinton plant could be profitable with better management. Smith said as much about the Cedar Rapids plant.

Both plants rank as pioneers in the still-active dream of converting waste into energy.

Just in August, Fiberight LLC, a Maryland-based company, signed a contract with the city of Marion, where the company intends to build a garbage-sorting operation to turn some trash into compressed natural gas on site and some into ethanol at the company’s now-idle ethanol plant in Blairstown in Benton County.

Plasma Power LLC of Fort Lauderdale, Fla., also has been working on a plan to build a plasma-arc plant in Marion to zap garbage into energy while turning a waste product into insulation.

The ethanol plant in Hopkinton opened in 1989 as a cheese plant to convert cheese waste into ethanol. The plant has passed through different owners until, in 2008, it was purchased by Permeate Refining and Randy Less.

It is set up to turn syrups, industrial starches and other waste products into ethanol.

Energae’s Roland and Smith said Energae has offered to buy out Less and take 100 percent control of the Hopkinton plant, but the sale has not been finalized.

Less said Friday that he has not been at the plant for a while and has nothing to do with its bookkeeping or any investment in it.

The BFC plant in Cedar Rapids opened in 1998 to turn a variety of agricultural residues, seed corn, pallets and other biomass-based materials into electricity in a gasification process. It closed in 2006 and reopened again in 2008 under a new ownership arrangement.

Attorneys for the Energae investors said this week they are asking a judge in Cerro Gordo County District Court in Mason City to appoint a receiver to take over Energae to find where the investors’ money has gone and what future the company’s two plants might have.

Jerard Meyers, assistant director of the Iowa Division of Criminal Investigation, said on Friday that the DCI was not involved in the service of any federal search warrant on Thursday.But he added the North Central Iowa Narcotics Task Force did assist the Federal Bureau of Investigation to serve a search warrant in the task force’s area of service. The task force helps on matters unrelated to narcotics, Myers said.

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