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Saturday, December 17, 2011
As Delisting Looms, Material Misrepresentation by Hoku Solar?
By Andrew Walden @ 1:55 PM :: 10678 Views :: Energy, Tax Credits

by Andrew Walden

Act 221 Tax Credit baby Hoku Corporation is in violation of NASDAQ minimum stock price and equity requirements and is threatened with delisting at the end of the month.

Solar panel prices are crashing worldwide.

Hoku’s polysilicon plant in Pocatello, ID remains unfinished.

Federal tax credits which support the solar industry are expiring December 31.

After Hawai`i Free Press exposed Hawaii Department of Taxation (DoTax) rules facilitating solar tax credit abuse, DoTax has suddenly reversed itself and now threatens to audit homeowners claiming more than one Hawaii solar tax credit. Similar practices by industrial scale solar installations may be hit as well.

In light of all these realities, Hoku’s December 16 news release announcing the departure of Chief Financial Officer is mind blowing for what it doesn’t say:

Mr. Nakamoto has been Hoku Corporation's chief financial officer since 2005, managing all finance, accounting, public company reporting, and internal controls for Hoku Corporation and its subsidiary companies: Hoku Solar, Hoku Materials, and Tianwei Solar USA. Some of Mr. Nakamoto's key accomplishments include Hoku's 2005 initial public offering on the Nasdaq Global Market, and raising over $300 million in debt and equity capital, including the Company's transaction with Tianwei New Energy that resulted in Tianwei becoming Hoku's majority stockholder in 2009.

"Taking a company public is a significant accomplishment, as were Darryl's contributions in transitioning Hoku from fuel cells to solar and helping to raise capital during these tough economic times," said Dean Hirata, a member of Hoku's board of directors, and audit committee chairman. "There is no challenge too big for Darryl; he has earned my respect and admiration. I wish Darryl nothing but continued success in the future."

Commenting on his resignation from Hoku, Mr. Nakamoto said, "As we have moved from a start-up to an emerging growth company, I feel that now is the right time for me to move on to my next challenge. I'm extremely proud to be a part of the many accomplishments of Hoku, and I am thankful for all that that Hoku has done for me over the past seven years. I'm confident that Hoku is positioned to become a leader in the global solar market."

In the entire news release, there is not a single mention of delisting, crashing solar panel prices, expiring tax credits and subsidies, difficulties in completing the Pocatello plant, nor the crashing price of the polysilicon Pocatello is supposed to produce. In fact the news release states:

Hoku Materials manufactures, markets and sells polysilicon for the solar market from its plant in Pocatello, Idaho.

The claim to manufacture polysilicon from Pocatello directly contradicts (see update below) a November 22 Hoku news release which states that the big milestone at Pocatello is getting the construction crews off generators and makes it clear that production is not ready to commence for several months:

Hoku Corporation's CEO, Scott Paul, said, "Connecting to the 82-megawatt Idaho Power grid-connected substation is a critical milestone. The power infrastructure for the plant is complete, and we now have continuous electricity. Previously we have been using temporary power and portable generators for localized construction and commissioning activities. Connecting to the substation enables us to complete system-wide commissioning activities, including our instruments and control systems, and power-hungry equipment like pumps, compressors, and our polysilicon deposition reactors. These reactors are the largest consumers of power on-site, requiring very large loads of continuous power -- they cannot be run on temporary power or portable generators."

Mr. Paul continued, "There are a number of items that need to be completed by our operators, engineers, and construction contractors before we can bring chemicals on-site and begin the continuous production of polysilicon. These items include finalizing our internal safety checks, and completing the installation of various fire protection, alarm, and safety systems. However, with the addition of permanent power, we are able to start-up the plant."

It is illegal for a publicly traded company to make material omissions and material misrepresentations of fact. If done with the intent to profit from stock sales or purchases, the material omissions and misrepresentations may be an element of the crime popularly known as “insider trading”. Insider trading can lead to prison sentences for perpetrators. Here is the relevant insider trading law:

Securities and Exchange Rule 10b-5: Employment of Manipulative and Deceptive Practices:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security."

Fortunately for the cause of justice, SEC rules are a Federal issue. If somebody is attempting to profit from material misrepresentations of facts, Hoku won’t be able to hide behind the State.


UPDATE: Xinhua Dec 22 Claims Hoku Began Polyslilcon Production Dec 1

Full Text: Hoku’s December 16 news release



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