Schedule 14A for Commonwealth Shareholders Group
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
[ ] Filed by Registrant
[X] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
COMMONWEALTH ENERGY CORPORATION
(Name of Registrant As Specified in its Charter)
COMMONWEALTH SHAREHOLDERS GROUP
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
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2) Aggregate number of securities to which transaction applies:
N/A
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (1)
N/A
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4) Proposed maximum aggregate value of transaction:
N/A
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and date of its filing.
1) Amount Previously Paid:
N/A
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2) Form, Schedule or Registration Statement No.:
N/A
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3) Filing Party:
N/A
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4) Date Filed:
N/A
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PROXY STATEMENT
This proxy statement will be given to shareholders on or about November 4, 2001.
The proxy may be revoked at any time by executing a new proxy with a later date.
New proxy forms may be attained from the registrant or from Commonwealth
Shareholders Group.
This proxy solicitation is being made by Commonwealth Shareholders Group.
Solicitations will be made by mail, phone and internet website. Funds expended
to date are approximately $1,500 and are expected to total $15,000. Solicitation
costs will be borne by Commonwealth Shareholders Group and reimbursement will be
sought from the registrant with approval of its shareholders.
There are, according to the registrant's proxy material dated October 5, 2001,
28,140,203 shares of Common Stock and 812,500 shares of Series A Preferred Stock
that are eligible to vote at the 2001 Annual Meeting. You get one vote for each
share unless cumulative voting is in effect. Cumulative voting may be invoked by
any one shareholder notifying the Chair of the Annual Meeting his or her intent
to cumulate votes at the Annual Meeting. Cumulative voting simply means that you
may cast as many votes as you have shares to vote multiplied by the number of
Board seats to be voted on. You may cast all of the votes for any one nominee or
combination of nominees. You need not evenly spread your votes over each nominee
you choose to vote for. Commonwealth Shareholders Group is soliciting for
discretionary authority to cumulate votes.
The registrant has indicated in its proxy material dated October 5, 2001 that
shareholders of record, meaning those who own shares, as of October 5, 2001 may
cast votes in the Annual Meeting.
The nominees of Commonwealth Shareholders Group are not currently compensated by
the registrant.
The following are the participants of Commonwealth Shareholders Group, none of
whom are being compensated:
Name & address Occupation Securities held
Joseph Saline Operations Manager 100,000 Preferred
19601 Nordhoff
Northridge, CA 91324
Kevin Biswell Accounting 160,000 Common
302-B W. Carrillo
Santa Barbara, CA 93101
Mike Doak Staffing Consultant 15,000 Common
3890 Adams Street
Carlsbad, CA 92008
Henry Gomez Retired 140,000 Common
9852 West Katella Avenue
Anaheim, CA 92804
Wayne Moseley Retired 20,000 Common
3846 Beverly Ridge Drive
Sherman Oaks, CA 91423
BOARD OF DIRECTORS
Commonwealth Energy Corporation
October, 2001
Dear fellow shareholder;
Enclosed is a letter no member of a Board of Directors should ever have to
write. However, as an elected member of the Board since last November and your
representative I need to advise you about my serious disagreement with the
conduct of the Corporation's business.
It is my opinion that the actions and inaction of Mr. Carter and several members
of the Board of Directors have seriously compromised your investment in
Commonwealth. The Form 10, filed with the SEC on August 9th, publicly reveals
some previously secret information that poses a real threat to your investment.
The two items that most seriously impact shareholder value are:
MANAGEMENT'S HIGH PRICED EMPLOYMENT AGREEMENTS
$25 MILLION COMMITTED TO SUMMIT ENERGY VENTURES
My experience on the Board and access to information that should be available to
shareholders has exposed me to other topics that need a complete airing out. I
have joined with several other shareholders who independently became alarmed at
the secrecy when the Company rejected their requests for information. It is
quite apparent that Mr. Carter is attempting to wrest control of the Company
from you while diverting attention by claiming "successes" in various recent
shareholder letters. We formed a Commonwealth Shareholder's Group, have
nominated a new slate of board members and will provide you with our analyses of
the issues. Some of the data in the Form 10 is complex and we urge you to do as
we have; consult your lawyer or investment advisor for advice.
SAVE YOUR INVESTMENT
TAKE YOUR COMPANY BACK
Please take the time to read the enclosed information.
Only informed shareholders can make the necessary decisions
to protect their money!
Sincerely and respectfully,
Joe Saline
Director, Commonwealth Energy Corporation
Why You Have Received This Package
It's about Commonwealth being run for the benefit of "Management" and not the
Shareholders
The Shareholders Group has found illegal activities and serious mismanagement of
SHAREHOLDER resources. Read in the attached letters where Carter ignored your
vote last year on 2 of the 4 proposals you voted on and it has taken legal
action to get his direction changed. Our recommendation to you is to support the
selection of Ernst and Young as auditors on the proxy you received but withhold
your vote for the proposed Board of Directors and disapprove the Bylaw amendment
for a "variable" Board. If you agree with us after reviewing the materials we've
prepared here and more that we'll send you shortly, please complete and mail the
enclosed proxy card. We're on your side!
Share Liquidity: Despite what Carter told you, your shares are not really
tradable. No market exists. Our Board candidates are committed to immediate
share liquidity such as a merger with a public company, which will provide
a stock symbol, market and market makers for us. After 4 years of promises
to go public, are you angry? Please read our letters.
Share Dilution: Carter frequently criticized Bloom for authorizing several
million options as being dilutive to shareholders. But, Carter has already
awarded 5 million and committed another several million (more than 3
million to himself). This is a 25% dilution to the 28 million shares
outstanding. Are you angry yet? Read our letters.
Earnings: Carter brags about how much money he is earning for us. He takes
credit for the Calpine contract signed by previous management. But, how
much more should we be earning? At least double! Are you as angry as we
are? Read the "Missed Opportunities" letter.
Gross Mismanagement: $25 million giveaway (1/2 of our cash assets) to
Summit Energy. Your money! Carter didn't allow you to vote on this! You
should be very angry! Read our letters.
High Costs & Waste: Triumph and high cost consultants ($1.5+mil/year)?
Excessive salaries and benefits? Reported losses in Pennsylvania?
Concerned? Angry? Read our letters.
Secrecy and Lies: Carter has lied to you and prevented you from seeing many
documents to which you, the owners, should have access if you want. He even
illegally withheld documents from, a Board member, which caused an
expensive lawsuit. Angry? Read our letters.
VIOLATION OF REGULATORY FILINGS: Carter filed the Form 10 two years late to
maintain secrecy. Also, by law, the CEC Annual Report with financials is
supposed to go to you BEFORE or WITH the proxy materials. Like last year
Carter will keep it secret till the meeting so you can't analyze it ahead
of time to ask questions. Insulted? Angry? Read our letters.
INTIMIDATION OF SHAREHOLDERS: Using your money, Carter has been threatening
to sue shareholders who ask too many questions, request documents or who
disagree with him and oppose his actions. His anti-shareholder "Legacy of
Litigation" is costing you millions in legal fees.
These are only summaries. If you're tired of Carter's excuses and truly
concerned about your investment please read the detailed letters enclosed and
complete and return the GREEN proxy card.
Board of Directors
Commonwealth Energy Corporation
Dear concerned shareholder,
Commonwealth's Bylaws and California Corporation Code section 300(a) requires
members of the Board to be responsible for the conduct of the Company's
business. Our Bylaws state that "the business and affairs of this corporation
shall be managed by and all corporate powers shall be exercised by or under the
direction of the Board of Directors." They are the ultimate decision making body
of the company, except for one issue only and that is the number of Directors on
the Board, which decision is reserved for stockholders by Article VII, sect.2 of
our Bylaws. Unfortunately, current management has tried to take that right away
by amending the by-laws to read "the number of Directors may be changed.... by
approval of the Board of Directors". This is illegal. It is a blatant power grab
away from the stockholders by Mr. Carter. By reducing the Board size Mr. Carter
only needs 2 votes in addition to his own to pass anything he wants. He is using
that power today to run the Board by a subcommittee of three; rather than
bringing issues with complete documentation to the full Board. He intends to
continue that by nominating out of state, non-shareholder executives who won't
be able to focus on CEC shareholder needs. To further increase his power he
proposes a variable Board and wants to take away your right to elect directors
and turn that over to the Directors he controls. Please vote against that
proposal
Mr. Carter lied to you in his Jan.27, 2001 delayed election announcement when he
stated that the Board reduction (from 7 to 5) vote PASSED. In fact it got only
14,898,333 votes out of more than 32,000,000 shares outstanding. California
Corporate Code section 211 states that Bylaw amendments need a majority vote of
the "outstanding shares". So, legally today, our Bylaws still allow for 7
Directors. That's why we're nominating 7.
Mr. Carter lied to you (in another attempt to discredit me) in his Sept. 7th
letter when he told you I purchased my preferred stock for 50 cents WHEN other
shareholders were paying $1.00. Fact: I and 2 other venture capital investors
put in approx. $100,000 in early Sept.'97 to keep CEC afloat BEFORE other
investors could be solicited; BEFORE the Private Placement memo was issued,
BEFORE the Certificate of Determination was filed, BEFORE anyone was paying
$1.00. To the best of my knowledge the only person who purchased shares at a
"discount" was Ian Carter, on Feb. 27th,'98. He paid $1.00 per share nearly 2
months AFTER the Jan.1,'98 Placement Memorandum raised the price to $2.50. He
owes the shareholders the difference, more than $49,000.
Mr. Carter lied further in his Sept 7th letter when he stated emphatically that
"the company is not selectively buying back shares". Fact: those preferred
shareholders who did not turn in their legally split stock got a threatening
letter from him stating he'd cancel the shares and send the purchase price back.
If that isn't "buying back" then he's playing with words. He has used that
illegal tactic to cancel my shares. The court will soon affirm that I am one of
CEC's largest shareholders.
Mr. Carter lied when he said "all preferred shareholders received their
dividends through March 31, 2001." Fact: Only those shareholders that gave in to
his threats got paid. The others have not. According to counsel this is illegal;
paying some and not the others; another lawsuit in the making.
Mr. Carter illegally directed the Corporate Secretary to not provide requested
Corporate documents to me, a member of the Board. These are documents I need to
perform my fiduciary responsibilities to you. California Corporate Code 1602 is
very clear on the subject, "Every director shall have the absolute right to
inspect and copy all documents of every kind". He is attempting to hide many
records from me based on the fact that I don't agree with his giveaway of
shareholder assets and I was elected against his will by the support of the
former Chairman. He delayed notifying you of the results of the last election by
two months because he fought my seating. That violates our bylaws. He conducted
illegal Board meetings in the interim to pursue his personal agenda. He was
forced by the Superior Court to recognize my election. That continues Mr.
Carter's Legacy of Litigation, threats and intimidation of shareholders. It is
costing shareholders millions of dollars in legal fees. These will increase
because, to pursue my rights, I have instituted more legal action against Mr.
Carter. When the law firm he selected to fight me failed in a court battle, he
hired a second team to assist. He has no concern about wasting your money to
pursue his illegal activities to keep control. I gave testimony in another
shareholder lawsuit, was named in a vendor lawsuit and know of many other suits
and planned suits by former vendors, employees and shareholders.
Shareholders; I've spent hundreds of uncompensated hours in the your service
researching, investigating complaints, formulating positions, attending meetings
and answering shareholder inquiries. I am also investigating several employee
complaints against Carter. I have honestly tried to work with Mr. Carter to
little avail as you can tell from this letter. As a result of his activities of
questionable legality I am now spending my personal funds to initiate legal
actions as appropriate.
Here is my perspective from 10 months on the Board of Directors:
1) It is long past time to merge with a small public energy company to have real
liquidity, declare a dividend and elect a Board of shareholders & California
energy professionals (not big name out of the area politicians who can't focus
on CEC and won't question management's actions).
2) As smart as he might be and as convincing a speaker as he may be based on his
real estate sales background, we must remove Ian Carter with his punitive,
self-serving anti-shareholder arrogance.
3) Perhaps the most unprofessional and irritating thing to shareholders is to
listen to Mr. Carter blame all the current failures on past management while
trying to take credit for the Calpine profits which factually are almost
entirely a result of past management actions. The person primarily responsible
for that contract, Don Coltrain, a former Board member, is on our slate of
candidates.
4) We must replace Mr. Carter and the current Board with shareholder oriented,
competent leaders.
Our team of concerned shareholders, "Commonwealth Shareholders Group", welcomes
you to join us to re-establish shareholder control of Commonwealth. We have
nothing to do with Mr. Bloom. We have submitted an alternative slate of Board
candidates to the Board of Directors for inclusion on the official ballot, for
election at the annual meeting in November. Unfortunately, Mr. Carter refused to
include those names; he didn't want to give you any choice. We ask you to give
us your proxy. We will vote for our candidates and the auditors but against the
"variable" board. Our group has analyzed the recently released Form 10, which
includes Mr. Carter's employment contract and some details of the Summit LLC
investment. We will soon provide you with more startling information about what
current management is doing with your assets. Meanwhile, please send your Email
address to saline@commonwealthshareholders.com and check out the website
commonwealthshareholders.com so that we can keep you updated on events of
concern
Sincerely and Respectfully,
Joe Saline
October, 2001
Dear Shareholder,
As part of Commonwealth's proxy mailing you received a letter from two Board
Members, Gates and Perkins, giving you "reasons" why they don't support my
renomination to the Board of Directors. They accuse me of furthering my own
self-interests. However, they're the ones who've been compensated for their
services to Carter; I have not been compensated for my services to the
shareholders! Mr. Gates was appointed by Carter and never elected by the
shareholders. However, he has received secret pay and an enormous number of
options for rubber stamping all of Carter's proposals. In addition to secret pay
Mr Perkins has also enriched himself at stockholder expense even further by
receiving not only substantial pay but a quarter million options for granting
Carter the egregious employment contract you'll be hearing about. I use the word
secret because not only won't CEC disclose their pay despite my repeated
requests, but other than the options, they didn't disclose Board compensation in
the Form 10 or even the proxy statement. Have you ever seen a proxy statement
where Management and Board compensation is not shown?? What are they hiding??
Also, I'm investigating a report that last year, a competitive process was
started to select a new provider for the CEC's employee health insurance and
after much objective analysis of formal proposals with the competition down to
two finalists, Ian abruptly ended the process and awarded the contract to a 3rd
party, a lifelong friend of Perkins. And this year, after Perkins and Gates said
Directors shouldn't involve themselves in day-to-day CEC business Perkins
interjected again increasing his friend's commission to almost three times what
the previous agent made. So much for fiduciary duty.
As to Perkins and Gates statement that I'm suing CEC to gain control of
documents; that's the only truth in their letter. As to the statement that the
court "rejected his request"; that's another lie. My local young lawyer beat
both teams of Ian's high priced Beverly Hills lawyers. I have access to the
documents. The only thing Carter won was to prevent my disclosure of that
information to you, the shareholders, before the annual meeting. I'm back to
court fighting for that right. Again, there is nothing in those documents that
I've seen that should be "confidential" from the shareholders; only the
embarrassment they would cause to Ian and the Board because of all the lies
they've been telling you. Let me note some statements directly from the
transcript of the case with Judge Brooks on Sept10. (Gabor is Ian's lawyer).
Gabor: He's a director today. Brooks: You put all kinds of qualifiers in front
of that word "director" which offended me since Judge Colaw said he's a
director. Gabor: He is a director.
Brooks: He's a director and he can look at all the corporate records, Right?....
Gabor: ... director intends to use the list that he might get to solicit proxies
against the company and the Board he sits on. Brooks: What I heard was put out
the truth. I heard they're going to look in the records and put out the truth to
the shareholders.
As to Perkins and Gates statement that Bloom withdrew his support for me, read
the enclosed memo. Ian was so paranoid about my challenging his actions that he
put in the settlement agreement that Fred must ask me to resign. Please read my
reply which also went to the Board.
They accuse me of not upholding my fiduciary responsibility to you. Let me tell
you the real story. When I was nominated to the Board as a shareholder
representative I accepted with the understanding that I would push for immediate
stockholder liquidity (public stock trading) and partial return of profits to
stockholders (dividends). I am pleased to tell you that I have kept that promise
by: 1) introducing a company (New World Power) to Commonwealth for a possible
business combination. If effected, we would have been a public company today, a
large part of the purchase cost would have been free to shareholders, paid for
with tax loss carryovers and we would be in a low overhead (25%+ gross margins)
power generation business and by 2) presenting motions at several Board meetings
for a small (5cent/10cent) common stock dividend. These were both highly
pro-stockholder initiatives. I am sorry to report to you that Carter and the
rest of the Board did not support those proposals. In fact, Ian went to the
extent of accusing me of conflict of interest because of my personal investment
in New World. Here is a copy of my April 9th reply to Carter and the Board on
that issue: "Absolutely not! My legal counsel agrees with Barthrop that as long
as I disclose my interest and refrain from voting on any final agreement it is
my fiduciary responsibility TO pursue this if it's such an apparently good deal
for CEC. The main reason I'm on the Board is to help get us public. Potentially,
this is an unbelievably rapid and low cost way to accomplish that AND get into
the distributed energy business AND do it almost FREE legally, at the expense of
the IRS. We as a Board would be making a terrible mistake and violating our
fiduciary responsibility if we DID NOT get outside investment analysis." Ian did
no negotiation or due diligence on the proposed terms but rather, embarrassed
CEC with an unprofessional telephone reply to the President of New World. I
wondered why until I read in the Form 10 that in his original employment
contract his self serving options wouldn't kick in with a merger. It was
restricted to an IPO. He has since gotten the Compensation Committee of Gates
and Perkins to change that provision.
Further, this is my lawyer's reply to Barthrop. "You claim that at a Board
meeting, you asked Mr. Saline to recuse himself from any vote on matters
concerning New World and Mr. Saline purportedly refused. This is incorrect.
Initially, so there is no misunderstanding, let us be entirely clear what
"recusal" means. Recusal does not mean that Mr. Saline may not fully participate
in the negotiations, investigation, discussion, etc. of the matter. Further,
pursuant to Corporations Code section 310,... With these clarifications, what
actually happened at that Board meeting was that Mr. Saline voted to further
investigate the possible acquisition of , or investment in New World. Since the
vote did not involve a "contract or transaction" between CEC and New World, no
conflict of interest issues arose. Notably, you agreed. Mr. Saline was also
perfectly clear that if and when the Board ever did vote to enter a formal
business relationship with New World, Mr. Saline would recuse
himself....However, Mr. Saline is informed that after you prepared the minutes
of that Board meeting accurately reflecting the foregoing, Ian Carter
subsequently altered those minutes.... We expect that you will preserve all
records of the minutes of this Board meeting, including any drafts or notes you
or anyone else may have prepared"
So, Perkins and Gates lied to you, there was never a motion to support New
World's offer, only a motion to not consider it, which I voted against. I wanted
further investigation and outside investment advice for the reasons noted
above. They also lied about my not disclosing my interest in New World. I did so
in the Board meeting called to discuss the issue and earlier, in my meeting with
Carter, on Feb.15th.. Not only did I disclose to him but offered to help set up
a telephone meeting. Carter then disclosed to certain Board members and "leaked"
it to David Barnes, who prepared a letter on the subject before the Board
meeting on Feb.23rd.
Perkins and Gates also lied to you when they said I purchased shares "when New
World's offer was pending". I did not! Unfortunately for them, they believed
Carter's fabrication and didn't check out the facts. They are now subject to a
libel suit. My stock records will clearly prove that they got sucked in again by
Ian's lies.
They also lied to you when they said I publicly attacked the company via on-line
"chat rooms". I responded to chat room concerns ONE time, July 28th, and
supported the company position of no liquidating dividend. I'll be happy to fax
anyone a copy of that "chat" with shareholders and let you judge whether I
disclosed anything confidential. Here's my reply to the Board members on Aug.
20th. "I can assure you all that I never would publicly malign or disparage CEC.
I invested in it and have great hope for its future. All disparagement was
directed at Ian Carter and the way he has treated me as a member of the Board
and his lack of fiduciary responsibility to the stockholders. All of you had
better go through Ian's heretofore secret employment contract as finally
disclosed with the Form 10; then think about your fiduciary responsibility to
the stockholders who we're supposed to represent."
Sincerely and respectfully,
Joe Saline
Dear fellow shareholder,
I will presume you have read Mr. Saline's letter prior to reading mine. His
perspective is that of a Director being directly exposed to the conduct of Mr.
Carter. I will share my perspective as a shareholder. I own 160,000 shares, paid
for with my own money, and have investigated the behind the scenes actions of
the company for the past year or so. What I have discovered goes well beyond
what has been presented in the shareholder communications sent to us by the
company, most of which are signed by Mr. Carter.
First, let me say that because of my investigation, my understanding of the real
story has grown tremendously. I have spent a great deal of time talking to
people directly involved with Commonwealth as well as with people associated
with the electric industry and even those in whom I place trust regarding
investing in general. I have also read many electric industry news items, the
recently filed Form 10 and, of course, the shareholder communications. I now
have ample information from which to make informed decisions about my company in
the shareholder meeting next month. I can unequivocally say that the most
important action I can take to protect my investment is to replace the current
Board of Directors with individuals that will make shareholders' interest their
number one priority. I implore you to do a modest amount of investigation on
your own and perhaps even consult your lawyer or investment advisor. I predict
that you will conclude that the story, as told by the company communications, is
incomplete and far from the real one.
All of my investigation led me to ask...Who is Ian Carter and what has he done
for my interest in this company? In any company, the CEO is responsible for the
execution of the business plan. And, nothing of importance occurs without his
knowledge and approval. So, let me bring up a few items that I encourage you to
investigate for yourself.
What are Mr. Carter's qualifications? If you read all the available resume
material, there is no mention of electric industry experience. Now, many
productive CEO's do not have experience in their company's industry, but without
industry experience, one would expect a successful history of CEO positions. I
could not find one. The only reference to a previous CEO position was for his
business and that was not even named. Is this the biography you want your
company's CEO to have? For your research, the best review of his qualifications
I could find is in the company communication dated February 13, 2001. As far as
detail is concerned, it surpasses that shown in the Form 10.
Now, what has Mr. Carter done for my interest as a shareholder? Before I get
into answering that question, take a look at his employment contract. You will
see that his interests have been taken care of. As an example, he has been
awarded options to purchase 500,000 shares because an audit was completed.
That's almost 2% of the outstanding shares for a task he delegated to an outside
firm. Another example is in the event of a merger or acquisition that calls for
his termination, Mr. Carter receives 8 times his then current salary plus 2
times the value of his option shares based on a formula too complicated to spell
out here. There is much more to this employment contract that we will be sending
you in the near future. But what about the shareholders? What profit centers
have been created under Mr. Carter's reign that would justify his employment
contract? I could not find one of significance. Think back to the many
communications you have received. Were there any of significance?
The Calpine contract is the only significant generator of profits. This contract
was entered into before Mr. Carter became CEO, and Commonwealth's retail sale of
electricity in California was turned profitable by the rudimentary accounting
exercise of eliminating the retail customers that could not be serviced by the
power purchased under the Calpine contract. In fact, The company communication
dated February 13, 2001 says "the new management team eliminated unprofitable
accounts. This was accomplished by the hard work of Jim Oliver, our CFO." I
don't count this as a profit center `created' by Mr. Carter.
Mr. Carter has continually praised TRIUMPH as the preeminent back office
software billing system for the electric industry. Here's a quote from an
attachment to Mr. Carter's letter dated March 14, 2001..."We are confident we
will soon sign several major accounts that will continue to build on TRIUMPH's
initial market penetration." And from Mr. Carter's letter dated April 12, 2001,
"Let's get one thing straight. We don't need to do "alpha testing" and "beta
testing" for this product because it is far past that stage. It is a finished
product, fully functional in two different environments." It has now been 6
months since those statements were made. Where are the signed accounts? If the
system were truly that good and needed by the industry, don't you think several
contracts would have been signed by now? I would surmise that from the $4.5
million spent on Triumph, as disclosed in Mr. Carter's letter of March 14, 2001,
it would take quite some time and many contracts before TRIUMPH can be
considered a profit center.
I previously mentioned the `real story'. What is the real story? We have read
much from the company in the form of shareholder letters. Yet, I find myself
having more questions than were answered by the letters. Then there is the lack
of information on significant actions taken by management as approved by the
current Board of Directors. We should not have to first find out about
significant items via the Form 10.
How about going public? What does "going public" mean? According to the SEC
Rules, Commonwealth became a "public" company in 1999. In his letter dated
September 7, 2001, Mr. Carter states "We are pleased to announce...the filing of
our Form 10 (soon to make Commonwealth a public company)...." By the way, the
Form 10 is required by the SEC to be filed 4 months after achieving certain
milestones and, accordingly, was due November 30, 1999. Why has it been filed
almost 2 years late? What's the real story?
In that same letter, Mr. Carter states that as a result of the Form 10 filing,
"Shareholders may be eligible to sell their common shares in the public
marketplace in a rule 144 transaction." This is far from any formal exchange
and, as such, share prices will likely disappoint most shareholders.
In Mr. Carter's letter dated June 18, 2001, an attachment titled `Going Public',
mentions the issue of an IPO as well as a merger. This is somewhat confusing
since the underlying reason for an IPO is to raise capital to allow the company
to expand its business operations. Do you wonder, as I do, what capital needs
Commonwealth has? And, do you wonder why a merger would be considered if capital
is required? Assuming the merger is with a publicly traded company, both avenues
are liquidity events, but with a very different rationale or purpose for each.
What's the real story?
Now, how about the Summit deal. Why was the $25,000,000 commitment to an
outside, newly formed company not mentioned until after the Form 10 was filed?
The original Summit document was signed as of June 29th, 2001. Commonwealth did
not disclose its existence to us shareholders until August. We found out about
it by reading the Form 10. Why? I would think that if a deal of such magnitude
were to be of significant profit potential, management would release information
about it as soon as possible. Also, in Appendix 4 of his letter dated March 23,
2001, Mr. Carter states "The company has detailed plans and financial forecasts
- all based on clear-eyed analysis of real world conditions and market
opportunities...". How does a deal entered into more than 3 months later with an
undetermined use of capital by an outside party fit into a `detailed plan'? This
$25,000,000 represented about half of the cash on hand at the time it was
committed. Why is such a significant amount given to someone outside the company
to expand operations? Why can't existing management put this capital to
profitable use thereby saving management fees and shared profits that could
potentially be in the millions of dollars? What's the real story?
Finally, there are two items that are personal to me. One is that I have made 3
requests for a shareholder address list. California Corporations Code section
1600(c) allows for any shareholder to acquire the list "for a purpose reasonably
related to such holder's interests as a shareholder". This mailing is a prime
example of such a purpose. Yet, the company has denied this right. Why?
And, for me personally, the most pungent action Mr. Carter has taken was the
purchase of shares at $1.00 when the then effective offering memorandum called
for a selling price of $2.50. This point is particularly sensitive to me as I
paid the $2.50 price days after Mr. Carter paid only the $1.00. You will note in
a letter issued by the law firm McDermott, Will & Emery dated March 23, 2001
that the price of $1.00 was not denied. Instead, attention is drawn to the
approval by previous management and alleges that other investors purchased
shares in February 1998 for the same price. While this may be a legal purchase,
I believe the morality of such a purchase suffers greatly. Assuming Mr. Carter
did not find out about this error until it was investigated, why did he not
correct the terms to match other shareholders' terms? Logic dictates, from the
tone of the law firm's letter I reference above, that the issue has not been
corrected. If that is the case, how could Mr. Carter now look other shareholders
in the eye, especially ones like me who paid more than double his price, and
suggest that such purchase terms are moral?
It is time for us shareholders to elect a group of people who will truly direct
the CEO down a path that will reward shareholders first instead of management.
Kevin Biswell
Shareholder
Missed Opportunities
Ian Carter has repeatedly taken credit for our profits, which are solely a
result of the Calpine contract negotiated by previous management and for
"saving" the company from bankruptcy by his last minute "crisis" shedding of
half our accounts in early July 2000.
Fact: During the first quarter of 2000, Carter and Director, Don Coltrain
discussed loads and resources when it was apparent CEC didn't have sufficient
power to meet customer demands. Carter noted that there were several offers of
power including additional power from Calpine at $55/MWH. Coltrain, with 30
years of energy experience, who negotiated the earlier contract with Calpine,
urged the extra purchase should be pursued because the clearing price would soon
greatly exceed $55 and in fact, the effective price would really be only $40
because of the "green power"credit. Carter, with no energy experience, disagreed
and the purchase was not made. The rest is history and a $50 million loss to
you.
Fact: Shortly after, as prices continued to rise, in early May 2000, CEC had
negotiated an agreement with Enron to purchase 100MW of electricity for $55/MW
hr. The electricity was in support of acquiring the San Diego Area Govt.
(Sandag) contract and was to be backed by Sandag's credit rating. The Sandag
deal fell through but if CEC was under other management they would have kept the
100MW and re-negotiated the credit backing. Management knowledgeable of the
power market would have raised the necessary capital by selling additional
shares or establishing a larger credit facility with our banks. At that point
CEC had $25Million "in the bank". Carter did nothing. Another $50 million loss?
The net effect of either of these opportunities would have been the near
doubling of the profits being generated by today's 125MW Calpine contract.
Conservatively, Carter's lack of energy experience and unwillingness to listen
to experts cost the shareholders $50-100 Million in added profits.
Even if CEC shed those unprofitable contracts (which cost us $680,000) we could
have sold the extra power into the wholesale market. At that time, in May 2000,
the handwriting was on the wall; prices were rising rapidly. The unprofitable
contracts should have been shed earlier in an orderly manner instead of waiting
for Carter's lack of decision making and the resulting "crisis" for which he
claims to be a hero.
About the same time, May 2000, Don Coltrain presented a proposal from a company,
Primary Power, to sell an interest in their 18MW Imperial Valley power plant.
After Carter showed an interest based on the pro forma financial statements, two
of Primary's executives flew in from Michigan for discussions. Carter abruptly
ended the discussions because he had to fly off to the U.S. Open. The executives
were aghast at their treatment by Carter and withdrew their interest. Today,
that plant is operating profitably without Commonwealth's participation.
Similar opportunities came up this year as well. Another 18MW opportunity,
Mesquite Power Plant and a small generator named New World Power. Carter's lack
of courtesy and professionalism is highlighted in the termination of offer
letter from New World sent to CEC's Board of Directors, shown on the reverse of
this letter. Please take the time to read it; I suspect you'll be as embarrassed
for CEC as I was.
NONE of these opportunities and probably others as well, was given proper due
diligence.
Recent Shareholder Testimonials
Susan Lansdorp, September 3, 2001 writes: I invested in this company as a
grandmother raising two grandchildren, hoping for an early return. As it is I
may lose my investment, which I paid $5.50 per share. Keep working hard for us.
Thanks.
Steven Harris, September 2, 2001 writes: Thank you for the heads up, for the
information, for letting me know that I am not alone and that my 54,000. has not
been dumped in the toilet.
Monica Navarette, September 1, 2001 writes: Thank you for keeping the
shareholders informed. I think we learn more from you than Commonwealth. Keep up
the good work...my family of investors really appreciates it. Sincerely,
Chuck Ruzicka, August 27, 2001 writes: It was good hearing from you. ... I have
been suspicious of Ian ever since the last shareholder's meeting. ... Personally
I feel we should liquidate the Co. and let Ian go his way and those who what to
follow him can and those who don't can at least walk away w/ their investment +
some profit. Believe me when I say I don't think that will happen. In fact I'll
become Pope before that happens. ... By the way I support you in your quest for
it is mine too. Also, I am concerned about our investments....
Rajkumar Kadium, August 27, 2001 writes: Thanks for sharing and the stockholder
concerns. I am at a loss as to what we can do after Mr. Bloom is out of the
picture. How can we safeguard our investment when one man can do all this much
damage. I would like to see a stockholders meeting and vote him out if at all
that is possible before he pockets his own. Please keep me posted for anything I
can do as a stockholder....Thanks...raj.
Michael Garren, August 27, 2001 writes: My name is Michael Garren. I too am a
shareholder in CEC, and have posted several notes on both sites. I want to thank
you for your informative letter and your efforts...... Frankly, although I don't
understand the motivation, it seems that they must have their own agenda. My
agenda is to hear all I can about CEC, be it positive or negative about present
or past management. We have been left in the dark for so long now that ANY
information to me is appreciated. I think I am intelligent enough to sort out
the truth if I can only get some facts. I thank you again for your efforts
Felix Grimm, August 27, 2001 writes:, Thanks for providing all these
information. I live and work in Hamburg, Germany, so I'm far away from the whole
story, also geographically. Of course I received all the different letters which
I didn't really understand as they were quoted out of context, at least for my
understanding. Hearing all these different points of views makes me also
concerned about the investment. But I'm also happy to see that you and others
keep an eye on the whole development. If there is something I can do from the
other side of the globe, please let me know.
Del Castilo, August 26, 2001 writes: Thanks for the info and God Bless
Ken Showalter, August 26, 2001 writes: Thanks for sending me this e-mail. I
think this is a good way to communicate what CEC Investors is doing now that
Fred Bloom is out of the picture. Are you sending e-mails to all shareholders? I
am specifically interested in myself and those friends and family that I
influenced in investing in Commonweal the Energy Corp. ... The things Ian Carter
is planning to do to keep CEC in business may work and may not work. Like too
many investors, we have been invested too long and have zero to show for it.
Everything is always "wait a little longer" or "an IPO is going to happen soon"
from Commonwealth and Ian Carter in particular. I will be supportive of your
efforts, but I don't see how much can happen before the shareholders meeting
scheduled in November. The chances of a "special" shareholders meeting are about
zero! Will you and CEC Investors be putting together a "plan" for the November
meeting? There had better be a new plan, BOD nominees, liquidity event strategy,
etc. or Ian Carter will monopolize the meeting like he did last year
J. Frederick Medford, August 26, 2001 writes:: Your e-mail is very timely for
today I was going to write Ian Carter and tell him I wanted a dividend paid now
since I have been invested for 4 years and haven't received a return on my
$75,000 investment but the Company is setting on 75 million dollars. I am
retired with a Social Security check and a small pension from an aerospace
company and can't cover my expenses. All my money is tied up in two companies
who will not go public even thought they said they would do so. Burton, I
appreciate the truth finally coming out. There has been so many lies about Fred
Bloom. Can't you do something to see that we get a dividend soon or could us
stock holders together do something. I have it on good word Ian Carter is
opposed to it but he gets his big salary and perks and I get nothing. I am a
Christian and appreciate you telling me the truth about the Company. I'll be
praying for you and CEC Shareholders. I did not know that the Company had
settled with Fred Bloom. Could you give me the particulars? May God bless you in
your endeavors for us stockholders. Sincerely,
Alex Solomon, Solomon Technical Sales Inc., Scottsdale, AZ, Sunday, August 27,
2001 writes:, Thank you so much for the update. I have been constantly wrestling
with dilemma of who is really telling the investors the truth. Can you tell me
your opinion of where the investors are in all this and when, if ever, you think
we will be able to capitalize on our investments? Thank you again,
Wayne Moseley, Sep 3, 2001 states; I have been worried about my investment and
appreciate all the information you provided to me about Carter's contract.
Unbelievable! Also, what he did to ignore stockholders questions at last years
annual meeting was an insult. I'm volunteering to help you remove him. I'll make
phone calls here in the San Fernando Valley and will send you a check for $200
to help with your mailings. Don't give up till Carter's out!
Board of Director Nominees
Attention Shareholders: The Commonwealth Shareholders Group has selected a slate
of candidates for the Board of Directors for 2001. They are listed below. On
September 27th, we asked for those candidates to be placed on the official
ballot that you received from the company. Mr. Carter refused to give you that
choice. We also asked for our accountant to participate in the vote counting and
were refused again. If you believe as we do that we need to replace the current
Board majority with members who will focus on shareholder interests instead of
management's self-interest, please fill out the enclosed green proxy card and
mail the card to us for voting at the annual meeting. No postage stamp is
necessary.
Commonwealth Shareholder Group Candidates for the Board of Directors:
1. Joseph Saline (Shareholder, Businessman and Current Director)
2. Kevin Biswell (Shareholder and Businessman)
3. Mike Doak (Shareholder and Businessman)
4. Don Coltrain (Shareholder, Energy Professional and Former Director)
5. John Schroeder (Businessman /Lawyer)
6. Frank Kostlan (Businessman /Human Resource & Staffing Professional)
7. Steve Kumar (Businessman /Energy & Computer Professional)
Brief Resumes:
Joseph Saline received a B.S. in Mechanical Engineering from the University of
Detroit and a M.S. in Industrial Administration from Purdue University. Spent
30 years in the USAF where he received numerous awards and decorations including
the Legion of Merit. He retired with the rank of colonel. During this time he
graduated from the Industrial College of Armed Forces, Command & Staff College
and Air War College. He planned and managed Air Force base power plant
construction, operation and maintenance. He also has 40 years experience in
energy and high tech investments. In addition, Mr. Saline has 30 years
experience managing aerospace manufacturing, utilities, environmental and plant
siting & maintenance operations. He currently serves as Director of Commonwealth
Energy Corporation and InterBill, Inc. Mr. Saline is an Operations Manager for
Northrop Corporation.
He is a former Chairman of the Board of the Orange County Chamber of Commerce.
He also served as Chairman of the Energy Committee and Chairman of the
Environmental Resources Subcommittee as well as authoring the "Energy Policy
Report". Mr. Saline was appointed by Orange County Board of Supervisors to their
Technical Advisory Council.
Kevin Biswell has over 20 years experience in investment analysis, accounting
and business. He graduated from UCLA with a BA in Economics. Mr. Biswell has
spent 17 years in the financial planning and investment consulting field having
run his own business for 10 of those years. He has extensive experience in
limited partnership analysis and terms structuring. He also has developed an
understanding of public company regulatory issues such as the exchange listing
and reporting requirements of the SEC. Mr. Biswell served 4 years on the Board
of Directors for the Summer Solstice organization and has spent the last 6 years
as the financial manager of a prominent radio station in Santa Barbara,
California.
Mike Doak, studied Pre-Law and Real Estate Finance at Fullerton College, the
University of California at Berkeley and at Cal State University at Fullerton.
Since 1977, Mr. Doak has been an Executive Search Consultant and has been
President of Camelot Resource Group, in Carlsbad, CA, since 1984. His employment
placements have included CEO's, CFO's, COO's, Presidents, General Managers and
Senior Marketing Professionals. He has extensive experience in analyzing
employment contracts, having performed compensation studies, as well as
corporate organizational planning. Mr. Doak currently has placement candidates
for high level energy professionals for CEO, COO, Finance, Technical,
Administrative, Human Resources and Systems Management.
Don Coltrain, received a BS in Economics from Cal State University at Long
Beach. Mr. Coltrain has been Senior Vice President, a member of the Board of
Directors and the Advisory Board at Commonwealth Energy Corporation. He was the
person who secured the Calpine contract for Commonwealth in 1999. Mr. Coltrain
spent 25 years at Edison during which he negotiated over 90 power contracts with
many utilities in the western United States and Mexico. Such contractual
arrangements include joint participation for power generation and entitlements,
power exchange and power displacement agreements, power purchases and power
sales. After his employment with Edison, he worked for the Imperial Irrigation
District performing similar duties. Mr. Coltrain has testified before the
Federal Energy Regulatory Commission and the California Public Utilities
Commission.
Steve Kumar, attended Alexander Hamilton Institute in NY where he received an
MBA. He also earned an MS in Metallurgical Engineering from Michigan State
University. Mr. Kumar has worked for IBM, National Cash Register Corporation and
Rockwell International. He has numerous inventions and new technologies to his
credit, many of which are related to the energy sector such as photovoltaic
cells to power satellites. These inventions also include computer memory chip
designs requiring precise power formulas and technologies in clean coal. Mr.
Kumar decided to leave that industry and move into finance. He now has extensive
experience in mergers, acquisitions and IPO's. He also has set up a number of
strategic alliances as well as securing loans for companies.
John Schroeder, is the lead partner with the law firm Schroeder and Associates,
in Brea, CA. He graduated from California Polytechnic University, at Pomona and
went on to earn his JD Degree at the University of California at San Diego. He
has practiced law for the last 10 years in California.
Frank Kostlan, has BS and MS Degrees in Human Resources Management, from the
University of Southern California. Mr. Kostlan has over 40 years of experience
in benefits administration, employee relations, staffing and organizational
planning. He has worked for Denny's Corporation, Westland Lands and Cattle and
Edison Security Services, formerly Westec Security Services. Mr. Kostlan has
successfully managed the vertical personnel integration resulting from numerous
mergers and acquisitions.
Ladies and Gentlemen;
Ian Carter reported to you at the end of June that we had $50 million in the
bank. Without shareholder approval, he has committed to spend $25 million of
that on a limited liability partnership venture experiment called Summit Energy
Partners, Seattle, Washington.
The details of this project have been held secret until they were partially
revealed in the recent public disclosure in CEC's Form 10 filing. Two of the
five current Board members, Junona Jonas and Joe Saline, the only two with
energy related experience before joining the Board, were not part of the
committee investigating this supposed "energy" deal. They never had access to
the details of the contract until it was published with the form 10.
What is Summit? Summit is not an energy producer; not an energy wholesaler; not
an energy retailer; not a standby or distributed generation activity; and not an
energy product sales operation.
Answer: A newly formed limited partnership in which CEC puts up essentially all
the capital for an unknown out of state investment advisor with a small staff to
maybe find a good investment for us, not necessarily in the energy field.
You can read most of the contractual details in the Form 10 which we can provide
to you or your lawyer/investment advisor if you give us your Email address. Send
us a request to: saline@commonwealthshareholders.com
To best summarize the complex terms we'll use an analogy of giving $25 million
to a bookie to bet on a horse. Only in our case, we don't have a horse, or a
specific race to run or even a racetrack selected. We're asking the bookie to
hold our money, to investigate racetracks, individual races and good horses for
us.
And oh, by the way: we'll be happy to pay him for the investigation costs out of
the $25 million and for his trouble we'll give him an additional annual fee of
3% of the $15-$25 million ($450,000 to $750,000).
And oh, by the way: since he's such a great bookie he only has to give us even
money if we win. - our $25 million back and then he only has to give CEC 40% of
the excess we may win on the longshots.
And oh, by the way: since the bookie is such a great guy and we have so much
money we can be big tippers with the shareholders money. We'll give the bookie
40% and the remaining 20% to his good friends at the track.
And oh, by the way: Ian Carter is best friends with Larry Abler, a Seattle
lawyer, who Ian has had on the CEC payroll as his private consultant at a cost
to shareholders of more than $60,000 per year. Larry in turn, is reported to be
a friend of Steve Strasser, another Seattle lawyer who is Ian's hand selected
"bookie" at Summit.
And oh, by the way: Ian and our high priced President, Dick Paulsen, are among
those associated with Larry Abler as executives in the Affinity Card business
that Fred Bloom warned us was getting benefits from "parking" and conducting
Affinity business on CEC time.
And oh, by the way: Ian won't tell us who the 20 percenters are, despite a
request by Joe Saline for that information. It's not even disclosed in the Form
10. Article 3, sect. 3.1 states that "the names, addresses, Capital Commitment,
Capital contributions, percentage interests of the Members are set forth on
schedule A hereto". Unfortunately, when you go to an obviously abbreviated
Schedule A, they conveniently forgot to discuss capital contributions and
commitments as well as the names and addresses of the 20 percenters.
And oh, by the way: When Saline couldn't get the information from Carter he went
directly to the bookie and Strasser's reply was he didn't care if he was a Board
member. He only deals with Carter who's on the Partnership Board.
And oh, by the way: early on Ian even admitted he was one of the 20 percenters
but claims he backed off after CEC managers and Board pointed out to him that he
was in blatant violation of his fiduciary responsibilities by "enriching"
himself (further) on investments of shareholder funds.
Folks, this blatant limited partnership rip-off of stockholders by Carter makes
Al Capone look like a boy scout. If you don't feel violated by this clandestine
deal we can probably invest the rest of our CEC shareholder money in buying a
few Brooklyn Bridges.
Dear Commonwealth Shareholder,
As you may know, Commonwealth has settled all claims that Fred Bloom, our
founder, had against the Company.
I am bound by confidentiality to not disclose details of the agreement which I
voted to accept. However, one of the provisions, which was made to me as an
individual, prior to my having access to the agreement, I can discuss.
Fred was required to ask me to resign from the Board, even though no one has the
legal authority to do so. I also received a letter from the Company lawyer at
Ian's behest, to try to intimidate me into resigning because I opposed many of
Ian's anti-shareholder activities. I was also asked to resign by Ian at my first
meeting with him following Superior Court Judge Colaw's order forcing him to end
his illegal delay of my election to the Board effective Nov. 28th, 2000. My
answer and that from my lawyer has been a consistent NO! I ran for the Board as
a shareholder rep to try to expedite the process of becoming a publicly traded
company and to return to the shareholders some of the profits in the form of a
dividend. These attempts have failed because Ian and other directors are not
shareholder oriented.
I am providing you below, a copy of my reply to Bloom and Carter. Unlike Carter
who has instituted a Legacy of Litigation at your expense and secrecy from
shareholders I believe in compromise, open discussion and input from
shareholders. You are the owners, not Carter (yet). There is very little that
can justifiably and legally be denied to shareholders. Ian has made a career out
of marking everything confidential and denying access to shareholders.
Sincerely and respectfully,
Joe Saline
Dear Fred,
I received your letter dated 8-15-01 and its formal request for me to resign as
a director. This follows your telephone request last week.
My answer is that I decline your request. It is obviously a paranoic whim of Ian
Carter. In fact, for the same reasons I accepted your nomination last year, I
intend to run again for a Board position; despite the consistently
unprofessional treatment I have received from Ian. I know now, after the Form 10
disclosures of his employment contract and details of the Strasser fiasco which
he consistently hid from me as a director, that he is far more anti-stockholder
than I ever could imagine.
Ian used my friendship with you as a red herring to convince other board members
I was somehow working for you and "leaking" information to you. In fact, I
proved on several occasions that he was leaking to his supporters. I explained
to him several times that about the only time I contacted you was to get
information like By-laws and shareholder lists which I am entitled to and which
Ian personally, illegally, prevented Barthrop from giving me.
The experience and insight I have received as a Board member has convinced me
that Ian is not deserving of a position of leadership at CEC. It was obviously
the worst decision you ever made to trust him with the shareholder's interests;
far worse than your emotional outburst with Steve Pease. I only regret that I
can no longer count on your shares to help remove Ian from office.
I also decline your request to return the shareholder list, by-laws or any other
documents I asked you to provide to me. I am absolutely entitled to those
documents and more. Whether you know it or not I have had to institute formal
legal action against Ian to gain access to any CEC documents I care to review. I
will in the near future be instituting several other legal actions against Ian
for his illegal intimidation of shareholders and his continuing costly (to
shareholders) Legacy of Litigation instead of leadership and management. Isn't
it sad when a Director has to resort to legal action to get justice for
shareholders. Isn't it sad that the other directors are blind to Ian's self
serving activities.
Best regards in your retirement from CEC,
Joe Saline
CONRACT WITH SHAREHOLDERS
The proposed Shareholders Group candidates for Board of Directors of
Commonwealth Energy Corporation have created this covenant. "We will use our
best efforts to implement the following contract proposals in a fiscally prompt
and responsible manner":
o Pay a dividend to all shareholders and develop a long-term dividend payment
plan.
o Investigate various share liquidity alternatives and choose the avenue that
provides the best pricing and quickest entry for publicly trading shares on
a legitimate exchange.
o Re-negotiate the excessively generous executive employment contracts.
o Rescind the Summit Energy Ventures, LLC agreement and seek the return of
all Commonwealth Energy Corporation funds.
o Settle pending litigation quickly, in a manner that is fair and equitable
to all parties involved.
o Seek beneficial power purchase opportunities.
o Seek profitable opportunities to invest in power generation facilities.
o Re-evaluate the true profit potential of the TRIUMPH system as a marketable
product.
o Develop both short and long-range strategic business plans, making use of
industry consultants and advisors to ensure the plan creates the most value
for shareholders,
o Disclose to the shareholders all pertinent information regarding the
operations of the company, within the boundaries of the recently enacted
SEC's Fair Disclosure Rule for public companies.
o Comply with the filing requirements of all regulatory entities in a timely
manner.
o Conduct the annual meetings on Saturday as previous management did to
accommodate more working shareholders.
PROXY
Commonwealth Shareholders Group
The undersigned shareholder(s) of Commonwealth Energy Corporation, a California
corporation, appoints Joseph P. Saline Jr., Kevin Biswell and Michael Doak, any
one acting alone, as proxy and attorney-in-fact, with full power of
substitution, to represent the undersigned at the annual meeting of shareholders
to be held on November 27, 2001 at 10:00 a.m. at Irvine Marriott Hotel located
at 18000 Von Karman Avenue, Tustin, California 92612, and at any adjournment of
that meeting.
The proxy holder shall be entitled to vote all shares of Common Stock and/or
Series A Convertible Preferred stock that the undersigned would be entitled to
vote if personally present, for or against any proposal, including the election
of members of the Board of Directors, and any and all matters that may come
before the meeting, in accordance with the instructions noted on the proxy card.
SHAREHOLDER: YOU HAVE RECEIVED THE OFFICIAL COMPANY BALLOT IN AN EARLIER
MAILING. THE SHAREHOLDER GROUP RECOMMENDS YOU RETURN THAT PROXY BUT VOTE TO
WITHHOLD AUTHORITY FOR THE BOARD NOMINEES LISTED; TO DISAPPROVE THE PROPOSED
AMMENDMENT OF BYLAWS AND TO APPROVE THE SELECTION OF ERNST AND YOUNG AS
AUDITORS. IF YOU HAVE ALREADY SUBMITTED THAT PROXY AND WISH TO CHANGE YOUR VOTE,
YOU MAY SUBMIT A NEW PROXY WITH A LATER DATE OR ATTEND THE ANNUAL MEETING OF
SHAREHOLDERS AND VOTE IN PERSON. THE COMPANY WILL SEND YOU A NEW PROXY IF YOU
CONTACT THEM.
IF YOU AGREE WITH THE RECOMMENDATIONS OF THE SHAREHOLDERS GROUP AS NOTED ABOVE
AND DO NOT WISH TO REQUEST A NEW PROXY FROM THE COMPANY AND WISH TO VOTE FOR THE
ALTERNATIVE SLATE OF SEVEN BOARD MEMBERS WHOSE NAMES AND RESUMES ARE INCLUDED
WITH THIS PROXY SOLICITATION, PLEASE COMPLETE AND RETURN THE PROXY CARD
ENCLOSED. YOU WILL THEN BE DEEMED TO HAVE GIVEN THE PROXY HOLDER COMPLETE
DISCRETION IN VOTING WITH RESPECT TO THE MATTERS LISTED ON THE COMPANY PROXY AND
TO CUMULATIVELY VOTE YOUR SHARES FOR SOME OR ALL OF THE CANDIDATES FOR THE SEVEN
OPEN POSITIONS. THIS PROXY IS FOR ALL SHARES HELD BY THE SHAREHOLDER.
COMMONWEALTH ENERGY CORPORATION
Annual Meeting - November 27, 2001
The Commonwealth Shareholders Group requests that you complete, sign, date and
mail this proxy card as soon as possible. You may submit it even though you may
have already submitted an earlier proxy as long as this bears a later date. This
card authorizes the holder to vote in your name for the Board candidates and
such other business as may be properly be presented to the meeting or any
adjournment, postponement or continuance thereof.
I authorize the holder of this proxy to vote all my shares for what the holder
judges to be in the interest of the shareholders.
Signature: ________________________ Date signed: ______________________
Name Printed: _____________________ # of shares (if known): ___________
Title (if Trustee or Corp): _______________________
Please sign exactly as your name appears on your stock certificate. When shares
are held by two persons, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please provide title as such. If corporation
or partnership use authorized signature. Signer hereby revokes all proxies
previously given for the 2001 Commonwealth Annual meeting.
Phone solicitation for Proxies
My name is __________. I live in _______, Ca. I am a long time shareholder in
Commonwealth Energy Corporation. I have joined a group of very concerned
shareholders called "Commonwealth Shareholders Group". Our only agenda is to
study what's been going on and give Commonwealth Energy Corp. back to the
shareholders.
Our group has nothing to do with Fred Bloom, the founder of Commonwealth Energy
Corp. He sold his shares back to Commonwealth on Aug. 14, 2001 and will never
again be associated with Commonwealth Energy. Please send your e-mail address to
commonwealthshareholders.com so I can send you copies of the employment contract
of Ian B. Carter and the contract Carter signed with someone from Washington
state which committed $25 million or almost half of our retained earnings. You
can have your own attorney or financial advisor analyze them. When you read
these egregious contracts, it will boggle your mind. These self-serving
contracts are outrageous. If Commonwealth energy closed down tomorrow, Ian B.
Carter and his other officers could receive up to 43 million dollars from
Commonwealth for their contracts. Shareholders might not receive one red cent.
The total assets of C.E.C, could go to Carter and his management team. Ian
Carter came into Commonwealth for an interim 90 days with the mandate to find a
Fortune 500 C.E.O. to run C.E.C. period. But he has stayed on as C.E.O. and for
the last 18 months has done very little except to collect a huge salary and
benefits and dilute the assets of C.E.C.
At the beginning of August, Commonwealth had 50 million dollars of profit in the
bank. It has now shrunk to less than 30 million. Ian Carter wrote a check to a
newly formed outside company for 15 million of your dollars run by a man whose
name is "Steven Strasser" to find companies to buy or a merger candidate. This
is to be followed by two more payments of 5 million dollars each for a total of
25 million of stockholder's money. This was all done with questionable due
diligence and without the approval of shareholders. We will soon be sending you
more information on the malfeasance of Ian Carter.
Our goal is to remove the current Board of Directors with the exception of Joe
Saline, who is supporting the rights of all the shareholders, and give
Commonwealth Energy back to the shareholders. Shareholders invested 64 million
dollars in Commonwealth Energy Corp. and if we do not take Commonwealth back for
the shareholders, your investment may soon be worthless. After you receive and
read the information on your e-mail, we will be sending you more information by
regular mail including a proxy form. We will need your signed proxy to remove
the current Board of Directors at the annual stockholders meeting on Tuesday,
Nov. 27th, 2001.
When you receive the proxy material from Commonwealth Energy Corporation, we
suggest that you return the proxy card. We recommend:
In Item 1- check the box WITHHOLD Authority to vote for nominees listed.
In Item 2- check the box DISAPPROVE changing the company's by-laws for a
variable board of directors. It only takes away your right to elect directors
and gives Carter more power.
In Item 3- check the box APPROVE Ernst and Young as auditors. Be sure to date,
sign and mail your proxy.
Carter refused to give you a choice when we asked him to also list our
candidates on the ballot. Our group will be sending you a proxy card so we can
elect Board members whose only motivation is to lead and manage CEC for the
benefit of the shareholders.