By Joel Warner
By Michael Roberts
By Alan Prendergast
By Michael Roberts
By Michael Roberts
By Amber Taufen
By Patricia Calhoun
By William Breathes
One of Colorado's most experienced entrepreneurs, Gathers has formed dozens of companies over the past thirty years, including Cybernetics and Gathers Software. He launched his first company at age 31, shortly after an eye-opening association with John Vincent Atanasoff, the inventor of the first electronic digital computer. He's had his share of triumphs and failures, but nothing has got him into earth-stopping mode more than the prosecution of his friend Bill Orr. Gathers is an investor in Octane and testified for the defense at Orr's trial; he's also studied the case like a fine-print contract drawn up by a Philadelphia lawyer.
"I spent several months full-time on this," he says. "I've written a lot of letters. I think somebody in the EPA got really upset with Bill."
Gathers first met Shires and Orr during the 1990 John Andrews campaign for governor. He knew he was getting involved in a high-risk venture when he invested in Octane and loaned Orr money. "It's a crap shoot," he says. "Most small businesses don't work. Bill does things in a different way than I would do it. But I believe he's fundamentally honest. When you invest in a small business, it's not like investing in GM. I was investing in Bill. The government people don't understand this."
As Gathers sees it, the reasons cited by the EPA for suspending NAFF's funding were petty quibbles about Bill Orr using a home office and charging the grant for part of his rent, not seeking bids for his office furniture, David Orr using his MBA to do some consulting work for the project, and a few thousand dollars in trips related to the project — operational expenses that Orr had no problem defending as legitimate. But the issues raised in the suspension notice had nothing to do with the criminal charges handed down by a federal grand jury a year later. Now Orr was being accused of defrauding investors and misrepresenting the science behind his product.
Gathers doesn't see how Orr could be found guilty of fraud if he was actually spending the money on research, regardless of the results. "It's the biggest travesty I've ever seen," he says. "This was R&D. You can get brilliant, honest guys who happen to disagree on an R&D issue. That doesn't make them criminals."
Yet part of the government's case is that money intended for research went for other purposes. Orr drew a six-figure salary from NAFF during the course of the federal grant — more than half a million dollars in three years. Money that investors poured into Octane went from company accounts to Orr's personal account. That didn't look right to government investigators; to make matters worse, Orr hadn't filed a tax return since 1988.
Orr attorney Grant responds that the EPA approved his client's salary, and that more than $300,000 of it ended up back in the project in services and costs that he paid for personally. His dealings with investors were more complicated, involving promissory notes and shares in Octane as collateral, but Grant insists that Orr saved the company a great deal of money on overhead and taxes through the arrangements. Orr didn't pay taxes himself for several years because he had net operating losses, he adds, and had documentation from the IRS stating that he didn't have to file a return.
"I didn't live lavishly," Orr says. "It doesn't mean that I didn't have beer in the refrigerator and went to Central City once in a while and spent a hundred bucks gambling. But everyone who knows me knows I don't spend money foolishly and I work like a dog."
Several investors say that the government agents who interviewed them insinuated that Orr was spending their money frivolously, that the screening lab in Golden didn't even exist. Grant says the agents tried to "poison" the investors in an effort to induce them to testify against Orr. "The special agent was telling them that Bill Orr had cheated them and was spending their money on foreign travel, women and gambling," he says.
Some investors didn't need much poisoning. They already had hard feelings about Orr and Octane, having waited for years for the golden payday when the new fuel hit the market. They had read Orr's upbeat newsletters, detailing his meetings with top officials from companies such as Enron, Exxon and Prudential Bache and their interest in investing in his technology. Some of these "confidential updates" suggested that a major infusion of cash was just around the corner.
"I thought they were moving forward, but it just never happened," says Charles Routh, who met Orr through Shires and invested a total of $80,000. "Any investment is a gamble, but I feel a lot of information was withheld. I didn't know what was a lie and what was real."
Routh began by loaning money to Orr. He was promised shares of Octane stock but didn't receive the certificates until nearly a decade later. He never received a prospectus. "They didn't know how many shareholders there were or how many shares they had," he sighs. "I was dealing with some narcissistic personalities. Sometimes I wonder if we were just paying for Scott to have a job and for Bill to pursue his fantasy. I don't think they were working for the investors at all. It was all about them and their dreams."