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Ousted chairman says stock issue was to pay for wind-power work

The former chairman of alternative energy company McKenzie Bay International Ltd. claims the alleged unauthorized stock transfer that precipitated his resignation this month was to pay a contractor.

Gary Westerholm, 63, of Brighton, was replaced as chairman and resigned his board seat following a discussion with other McKenzie Bay board members regarding a stock issue of 30 million shares.

McKenzie Bay was previously based in Brighton, then Farmington Hills, but last year moved into the Midland offices of M.A.P. Mechanical Contractors Inc. M.A.P. chairman John Popp also is a McKenzie Bay board member.

The board alleges Westerholm obtained the shares of stock from a company transfer agent by claiming he had board authorization to issue shares, when he did not. But Westerholm said Friday he secured 28 million shares to pay Brighton-based MTI Energy Management Inc. on a contract involving a wind turbine project in Ishpeming.

“Now the company is trying to take the position that we (McKenzie Bay) can negate the contract and blame me, when the president (John Popp) and CFO were part of the whole process,” he said. “It’s a convoluted situation, and I just happen to be in the middle because I’m the one who had to release the shares to fulfill the contract.”

A statement from McKenzie Bay said Westerholm directed a transfer agent to issue shares without the board authorization, and “MKBY intends to vigorously seek the return of the improperly issued shares and to hold Mr. Westerholm accountable for his actions …”

Westerholm said he only owns about 4 million shares of McKenzie Bayand did not retain any shares from the transaction.

“The MTI agreement has not been reported to shareholders by the Board. Compensation due MTI per the agreement are the shares in question,” he said in a statement Friday. “My resignation … is because of my belief that the board’s reasoning for attempting to negate the MTI agreement is baseless and not in the best interest of shareholders.”

By Chad Halcom

Crain’s Detroit Business

21 December 2007