On 16 May 2013, the Insolvency Service announced that Hildon Green Energy Markets Ltd had been wound up after an Insolvency Service investigation. The Insolvency Service reports that the company “marketed near worthless carbon credits to the public for investment”, by “promising vastly exaggerated returns”.
This case is important, not only because it is another example of a carbon credit boiler room operation being forced into liquidation, but because the ruling in the High Court is also relevant to other companies selling voluntary carbon credits to the public as an investment. In his judgement on the case, Mr Registrar Jones said that selling carbon credits as an investment is “like selling a performance motor vehicle for driving but only providing a shell of a vehicle without an engine”.
Trading under the name H Group Green Energy Markets, the company sold carbon credits “at inflated prices with the promise of significant gains, raising at least £3 million,” the Insolvency Service states. The company duped one 79-year-old into buying 14,500 carbon credits for £85,550, even claiming to be his financial advisor and accompanying him to the bank, to help him withdraw the money from his account.
Another of Hildon Green Energy Markets’ clients was 94 years old, had suffered a stroke, and “was in no fit state to be making this sort of investment”.
The company was established on 14 April 2011 by the sole director, Donald Nelson. On 13 September 2012, Hildon Green Energy Markets resolved to go into voluntary liquidation and appointed Jeffrey Mark Brenner of B&C Associates Ltd as liquidator. The Insolvency Service reports that,
The grounds for winding up the company were lack of commercial probity by making misleading and unfounded statements and objectionable trading practices; lack of transparency and failure to co-operate with the investigation.
Hildon Green Energy Markets sold carbon credits at a mark up of between 80 and 400% of the price the company bought them. Yet on its (now defunct) website, the company claimed it offered, “really competitive prices”.
The company’s website included two misleading quotations about carbon trading:
- “Carbon Trading is one of the fastest growing specialities in financial services.” The New York Times
- “Carbon will be the world’s biggest commodity market and it could become the world’s biggest market overall.” Barclays Capital
These quotations are typical of websites set up by companies attempting to dupe the public into buying carbon credits as an investment. Both quotations are undated, but actually come from a New York Times article written in June 2007. Since then, things have changed dramatically. Not least, the global economic crisis.
The first quotation is a mis-quote and should read, “Managing emissions is one of the fastest-growing segments in financial services.” The second quotation is from Louis Redshaw, who was head of carbon, coal and iron ore trading at Barclays. Until he resigned in April 2013, that is. Ironically, his resignation was a result of the current crisis facing carbon markets.
Hildon Green Energy Markets was one of three companies that was ordered into liquidation in the High Court. The other two companies marketed plots of near worthless land in Hertfordshire in the UK.
Chris Mayhew, Company Investigations Supervisor at the Insolvency Service commented,
“Hildon Green claimed to be a leading global carbon management firm, a rather remarkable achievement so soon after being formed in April 2011. It had no investment expertise other than to enrich itself and to do so seriously misled the public into parting with their money.
“The Service has strong enforcement powers and we will not hesitate to use them to take action against rotten companies whose activities, as here, can devastate lives in particular vulnerable investors.”
On 10 May 2013, Mr Registrar Jones ordered Hildon Green Energy Markets into liquidation on the grounds of public interest. Jones explained that the main reason for winding up the company was “firstly lack of commercial probity in making misleading and unfounded statements and its objectionable trade practices”.
The judgement is damning, but not only of Hildon Green Energy Markets. It surely also applies to the many other companies selling voluntary carbon credits to the public as an investment. Here are some of the highlights from the judgement:
“The essence of concern is that the company has marketed and sold voluntary carbon credits as an investment opportunity whereas this is said to be contrary to the public interest as they are wholly inappropriate for investment and should not be described or used for investment opportunities. Connected to that underlying ground are that in carrying out that business the company has been misleading vulnerable individuals. Part of this misrepresentation is that the price of the credits is likely to rise in the future whereas the Secretary of State’s position is the contrary in that the value decreases with age.”
“The evidence is contained in a letter on 16 October 2012 to the investigation by a carbon credit registry giving their view of this market as one that is not suitable for individual investors. That unlike instruments approved for use in compulsory cap and trade programs, no entities are required to purchase and retire voluntary carbon offsets. Further, that entities that voluntarily seek to offset their GHG emissions footprint (such as corporations, governments and individuals), project developers, traders and investors are active participants in the VCU market. Therefore, there is little ability to accurately forecast demand and supply in the voluntary carbon offset space. As a result they strongly believe that VCU’s are not suited for individuals to target as a short, medium or long-term investment.”
“The business relies on credits being an investment, they are not. The company is selling something that is wholly based on a misrepresentation, much like selling a performance motor vehicle for driving but only providing a shell of a vehicle without an engine. Not only are there misrepresentations made to the public, vulnerable investors are contacted and persuaded to invest.”
“Potential investors are led to believe that the company’s source deals only in volume with commercial customers and therefore by investing in the credits customers are obtaining a unique benefit and very attractive prices. Contrary to very attractive, in fact the prices are exorbitant. Also contrary to the company’s assertion, no investment expertise is demonstrated and the business is a fraud on the public.”