Reporter Unmasks Phony Xethanol Claims

It shouldn't have fallen to Chris Carey to notice that there was something suspicious about Xethanol. The company, which claimed it had a process to convert garbage into vast quantities of energy-rich ethanol, could have raised the eyebrows of any newspaper reporter. The company's original name — FreerealTime-quote.com — didn't exactly augur a long-term commitment to energy. Xethanol's SEC filings showed that several of its major investors had previously been disciplined for fraudulent activities. The company's balance sheet was another red flag. In two years, Xethanol had spent just $239,651 on research and development, while its competitors were investing tens of millions annually.

But scan Xethanol's press coverage during the first half of 2006 and you'll find mostly glowing reports. Local newspapers and trade magazines repeated the company's claims that it would triple capacity at its plant in Blairstown, Iowa. The Atlanta Journal-Constitution plugged Xethanol's stated ability to wring ethanol from stale butterscotch candy. The Associated Press put a story out on the wires saying Xethanol planned to convert homeowners' grass clippings into auto fuel. All that press helped send Xethanol's shares soaring; its stock price grew almost fivefold in six months, despite the fact that its research scientist had never made more than a couple of liters of ethanol in the lab.


Wired, Sept. 27, 2007