The Arkansas Securities Department has issued a cease-and-desist order against a Texas company and its CEO over what the state called the illegal sale of securities involving a proposed wind farm in Northwest Arkansas.
The civil order from the Arkansas securities commissioner contends Chief Executive Officer Jody Davis misled three investors who together provided $120,000 to Dragonfly Industries, a company that planned to use a novel wind turbine design at a facility west of Springdale and just outside the city of Elm Springs.
Davis sold the investors unregistered securities, failed to tell the three individuals about his past federal conviction for embezzlement and also failed to tell them his company had failed to secure a $10 million grant from the U.S. Department of Energy, according to the order, which was filed Aug. 11. It directs Davis to stop any unregistered security sales in the state and to stop any securities fraud.
Davis can request a hearing on the action within 30 days. He didn’t respond to a phone message requesting comment Thursday afternoon. A phone number for the company was disconnected.
The order is a regulatory action that doesn’t bring criminal charges, department senior attorney Ted Holder said Thursday. Washington County Prosecuting Attorney Matt Durrett said he could decide to pursue charges if he chooses to do his own investigation. If Davis defies the order, the Securities Department can also seek a circuit court injunction, Holder said.
Davis and other Dragonfly representatives first approached Elm Springs officials with their plans in December 2014. They said they designed a wind turbine that resembled a jet engine and could generate electricity from lower wind speeds and with less noise or danger to wildlife. It would have been the state’s first commercial wind-energy facility.
The Elm Springs City Council granted the company’s request to annex about 300 acres that would be used for the project, but local opposition criticized the technology as untested and unproven, and successfully overturned the annexation by public vote earlier this year.
The cease-and-desist order states that the three investors lived in Northwest Arkansas and that one also lived in Florida. It doesn’t identify them, and Holder said the department won’t unless Davis asks for a hearing.
Davis told the investors he expected the company would bring in millions of dollars in profit, according to the order. He sold them a combined 5 percent of unregistered equity interest in Dragonfly in violation of state law. He also asked them to seek out other investors, another violation.
The investors didn’t get their money back, Holder said.
Davis failed to inform the investors he pleaded guilty in federal court in Oklahoma seven years ago to embezzling about $785,000, according to the order. He also claimed that the Dragonfly project would soon receive $10 million from the federal government even after the U.S. Energy Department’s Advanced Research Projects Agency-Energy division sent a letter saying the project was unlikely to win a grant.
Jim Lefler, whom Dragonfly listed on its website as chief sales officer, is from Jupiter, Fla., according to his LinkedIn profile. He said in an interview last year he had moved to Northwest Arkansas for the project. He didn’t return a phone message requesting comment Thursday.
Elm Springs Mayor Harold Douthit, who supported the project early on as a potential boon for the town of about 1,700 people, said he regretted the town had lost a chance to support renewable energy.
“I’m certainly glad that the dust has settled on it,” he said of the project, adding that the cease-and-desist order supported his assertion all along that the project would have state oversight. “They were the watchmen.”