The departures come amid lawsuits and federal probes into the dealings of the insolvent energy company, which has a technology that promises to convert coal into natural gas.
The chief executive, corporate counsel and two directors of Bixby Energy Systems have resigned in the face of federal criminal and civil investigations and lawsuits alleging gross mismanagement of the Ramsey, Minn.-based company.
The departures of founder and CEO Bob Walker and the others were announced at a court hearing Tuesday, settling two civil lawsuits that revealed the 10-year-old company was insolvent and unable to supply customers in China. The company's technology promises to convert coal to natural gas.
Former U.S. Rep. Gil Gutknecht and Illinois businessman James Bergeron, whose suit against Bixby, Walker and others was dropped, will remain on the board of directors and be joined by Ronald Kinner, the company's chief financial officer and a former board member.
Matrix Associates Inc., a Minneapolis-based corporate restructuring firm, has been retained to manage the company.
In an unusual part of the deal that almost derailed it, two other people may join the board later after they are reviewed by, among others, the U.S. Securities and Exchange Commission, which is investigating Bixby. The directors will serve only until shareholders take a vote on a permanent board within 90 days.
Others leaving Bixby are Peder Davisson, corporate counsel, and board members Peter Wood, a former director of a British company who left its board after a business scandal, and Kenneth Casavant, a Washington State University agricultural economics professor who is Walker's brother-in-law.
Bixby also has terminated all relationships with Dennis DeSender, a consultant who helped raise $60 million from investors. DeSender has convictions for bank fraud and theft by swindle, and recently pleaded guilty to tax evasion.
Walker, who founded Select Comfort and invented the Sleep Number Bed, said he hopes Bixby survives and denied that he and others did anything wrong. He and his attorney, Sean Shiff, said they don't know what the federal government is investigating.
Attorneys for Gutknecht and Bergeron said their clients have been cooperating with the SEC investigation and are scheduled to meet with the agency again this week.
Jim Diracles, an attorney for Gutknecht, said federal subpoenas suggest the SEC is examining whether some of Bixby's estimated 2,200 investors had high enough incomes to qualify for stock purchases. Bixby's private offerings have taken place under an SEC rule that says only accredited investors, meaning millionaires or people with high incomes, are eligible to purchase the stock.
"You can't get to 2,000 shareholders with accredited investors," he said. "It's beyond the realm of reason."
Diracles also said the SEC is interested in whether Bixby should have limited stock sales to 500 investors -- a rule that recently snagged the privately held Facebook. Walker said the rule doesn't apply because the company didn't have the required $10 million in assets. The lawsuits alleged Bixby raised and spent significantly more than that.
Was there fraud?
The SEC also is interested in whether "there was securities fraud and whether the stock was sold through unlicensed broker-dealers," Diracles added. Bixby will cooperate with the investigations, he said.
In a letter last month to Bixby's criminal attorney, Bill Mauzy, Assistant U.S. Attorney Joe Dixon said the government had obtained documents from a former Bixby board member that are "material to an ongoing federal criminal investigation of actions taken by Bixby officers/agents."
Mauzy and the U.S. attorney's office declined to comment on the nature of the investigation.
The documents are in "several sealed boxes" and include the "draft of an internal investigation and forensic audit" launched five years ago at the request of former Bixby director Arnold Angeloni, according to his attorney, Bill Michael.
Angeloni, a retired business executive, was one of two board members who were ousted by Walker in 2006 after they questioned how investors' money was being spent, according to the Gutknecht-Bergeron lawsuit.
The two suits also alleged that Bixby had accumulated $141 million in losses and that Walker had put his relatives on the payroll, spent recklessly and left suppliers unpaid.
Global Partners United LLC, a company with a contract to market Bixby's technology in Asia, also dropped a separate lawsuit against Bixby and committed to $2.9 million in interest-free loans to Bixby to pay suppliers and assure the delivery, installation and testing of the first five coal-gassification units, said its attorney, David Davenport. With those payments Global Partners will have put nearly $9 million into Bixby, he said.
Even so, some investors didn't trust Global Partners, fearing it was trying to take over Bixby and steal its technology -- an allegation Davenport said is false. One of the three partners in the marketing company is a former aide to Gutknecht, which some investors see as a potential conflict of interest. But Davenport and others said Gutknecht, through that relationship, introduced Bixby to its most important business deal.
Alan Malley, a former Bixby employee from Coon Rapids who invested in the company in 2008, said "I cringe when I think of Gil Gutknecht and Jim Bergeron being on the board." He said he still believes that Walker worked on behalf of investors. He said he hopes shareholders eventually can elect a board they trust.
David Shaffer • 612-673-7090