After investing $250,000 in Twin Cities Power Holdings, a Minnesota executive got nervous when the little-known trading company disclosed in 2015 that it would be changing its name and moving most of its moneymaking assets into a private company owned by Timothy Krieger, the firm's majority owner.
The investor sent an e-mail to Wiley Sharp III, chief financial officer of the Minneapolis-based company, expressing his concern about the firm's move away from energy trading and into retail electricity. The retail business, the investor noted, had never generated a profit for Twin Cities Power. He asked about the prospects for retail sales, and for information about what would happen if the restructuring didn't work out.
Sharp expressed optimism in an e-mailed response reviewed by the Star Tribune, telling the investor he expected the retail business to become profitable "this year." Sharp said the company was protected from any defaults, and he predicted that Twin Cities Power would be going public in "a couple of years," making it possible to repay hundreds of small investors like him.
None of Sharp's predictions turned out to be accurate. The restructuring left the company, now known as Aspirity Energy, unable to survive. It was liquidated through bankruptcy proceedings last year, leaving 700 investors facing losses of about $30 million.
Now, claiming they were misled about the company's prospects, investors are fighting back. In March, a group of about 80 of them filed an involuntary bankruptcy petition against a Krieger affiliate known as Aspirity Holdings in a long-shot attempt at recovering their money.
Their frustration has been fueled by a Star Tribune investigation that revealed Krieger paid himself more than $18 million since 2011, mostly in the form of distributions from the trading company's dwindling cash reserves. Sharp, who earned $390,000 a year as Aspirity's CFO, gave up his right to severance for a $100,000 bonus in December 2014, Aspirity records show.
"I think this whole thing was a conspiracy to rip us off," said Mike Lawyer, a New York retiree who stands to lose $132,356. "They are trying to make it appear that they did nothing wrong, but I think Timothy Krieger is a scam artist."
Neither Krieger nor Sharp responded to requests for comment. But Krieger, a former college wrestling star who won two national titles at Iowa State, has denied wrongdoing in legal filings.