Business experts say that energy company First Wind was within its rights to amend an SEC filing last week to declare that it did not, as the company had previously stated in an earlier filing, award Public Utilities Commission Chairman Kurt Adams an ownership interest while he was on the state payroll, a possible violation of state law.
But one expert says that the amendment, which came after the Maine Center for Public Interest Reporting published details of the grant to Adams, could itself raise questions with SEC regulators.
“The SEC is fairly liberal in permitting parties to amend their disclosure document,” says securities law expert Manning G. Warren III, of the Louis S. Brandeis School of Law at the University of Louisville. But the amended filing, says Warren, “suggests that the company is acknowledging a rather significant error in terms of granting him those restricted stocks while he was a public servant.”
First Wind is in the process of filing disclosure documents – called an “S1” – with the SEC prior to a public offering of stock to raise money for the company.
“They’re trying to fix it for the sake of making sure that the investing public believes everything was done properly,” says Warren. “These filings go into the [SEC’s] division of corporation finance when there’s an amendment like this. If it gives them concern that perhaps the issuer is changing the facts given the adverse publicity of your story, they might refer it to the enforcement division.”
State law regulates gifts to public servants. It’s a criminal violation if a “public servant … solicits, accepts or agrees to accept any pecuniary benefit from a person if the public servant knows or reasonably should know that the purpose of the donor in making the gift is to influence the public servant in the performance of the public servant’s official duties or vote, or is intended as a reward for action on the part of the public servant.”
The statute applies also to anyone who “knowingly gives, offers, or promises any pecuniary benefit” for the purposes of influencing a public official. To avoid any conflict of interest, Adams said, “I recused myself from anything related to First Wind from when I accepted employment to when I left. I followed the statute by the book, told my employer and my colleagues.” In fact, the Maine Center for Public Interest Reporting has determined that Adams recused himself from First Wind-related matters at the PUC beginning in December, 2007.
First Wind’s SEC filings from earlier this year show that the award was a complex transaction that essentially started a vesting period for 1.2 million “equity units” on the date that Adams signed an employment agreement with the company. That date was April 16, 2008, while Adams was still the chairman of the PUC. He went to work for First Wind, a developer of wind farms in Maine and across the country, on May 19, 2008.
But after the story broke that Adams had taken the units while still on the state payroll, company officials launched an internal investigation of Adams’ hiring. The result of that investigation was released last week.
“Neither First Wind nor Kurt intended for the vesting to begin on that date,” says company spokesman John Lamontagne. “The amended S1 reflects the original intent and the corrections that have been made to the employment agreement.”
The amendment contradicts earlier statements made by both First Wind attorney Paul Wilson and Adams.
Adams and company officials acknowledge that he signed an employment agreement with First Wind on April 16, 2008, while he was still chairman of the state’s PUC. In a story published on April —, 2010, Adams also said that he got what he called “stock options” as part of his employment agreement with First Wind.
“Those stock options, the grant date is on the 16th,” he said. But he claimed they had “no value” and therefore would not trigger any state laws barring improper gifts by industries to state regulators.
Similarly, First Wind attorney Paul Wilson also told the Center that what he called “restricted units” had been granted to Adams on April 16, 2008. “There was an offer letter that the company signed and he signed, a restricted unit agreement that he signed on April 16th,” said Wilson.
A coalition of groups opposed to large-scale wind power development in the state asked Maine Attorney General Janet Mills to investigate whether First Wind’s grant of equity to Adams violated state laws. Mills’ office would neither confirm nor deny whether or not an investigation was taking place.
S1 disclosure filings with the SEC customarily include statements about adverse circumstances that could affect the welfare of the company.
“So if there is a pending or threatened state action against the company, then that should be disclosed to investors in the S1,” said University of California at Davis Law School professor Robert W. Hillman. While the latest, amended version of First Wind’s S1 includes reference to a now-closed investigation of the company by New York Attorney General Andrew Cuomo, there is no reference to a possible investigation by Maine’s chief legal officer.”