The Undercurrent: Too good to be true?

I’ve covered the business beat for more than 30 years, first at the Dallas Times Herald, then The Dallas Morning News, then The New York Times, where I remain a contributor, and Texas Monthly magazine, where I wrote a business column for several years and remain a contributing editor. After all those decades of reporting — on booms and busts, on promising technologies that soared and then fizzled like bottle rockets and on banking failures and investment opportunities that led people down a path to financial ruin — the adage “when something seems too good to be true, it usually is” was one thing that was true.

Kathryn Jones

Kathryn Jones

Remember the mortgage loan crisis? Banks deemed too big to fail and rescued by the federal government (and you and me)? Enron? Ponzi schemes? Bernie Madoff?

Unfortunately, a lot of people have to learn about getting snookered the hard way —  by losing lots of money or wasting a lot of time and energy.

I recall sitting in a meeting with editors at one publication where I worked. They were all giddy about the Internet dot.com boom and which company was going to be the next star. I remarked that it was all bound to come crashing down because some of the dot.coms had market capitalizations in the billions of dollars, but they had no products. Just a bunch of promises. It was all based on nothing tangible.

The people in the room looked at me like I had just rained on their parade. But we know what happened eventually. The dot.com boom turned into the dot.com bust and many investors lost millions of dollars.

So when a company called SR2O Holdings LLC came to town recently making a lot of enticing statements about building a plant to transform scrap tires into fuel, steel and other products using pyrolysis — but not having a product or track record — my “show me” button went off. It reminded me all too much of what happened in the dot.com boom when people so badly wanted to believe that all those companies had such great ideas and opportunities, they would be sorry if they didn’t get a piece of the action for themselves.

The dot.coms, though, at least had money from Wall Street. SR2O Holdings didn’t have that. Company officials came with their hands out, asking Somervell County to shoulder the burden of the financial risk by selling bonds to build a facility, then leasing the plant back to the company, which in turn would give the county a share of its profits.

Profits? Oh, they don’t exist yet. But they will, company officials insisted. It was a “win-win.” Somervell County would get jobs and revenues to help offset the dive from the devaluation of the aging Comanche Peak Nuclear Power Plant. SR2O finally would get its great idea launched courtesy of taxpayers.

SR2O was hedging its bets, too. It had been talking with the City of Alvarado about putting a similar facility there. But the folks in Alvarado had put on the brakes and were considering overtures by another company. So SR2O officials moved a bit farther west on U.S. Highway 67, hoping to get things moving more quickly. The matchmaker in all of this was Wes Jurey, business promoter and director of the Center for Innovation, a nonprofit offshoot of the Arlington Chamber of Commerce.

Some folks in Glen Rose rolled out the welcome wagon. Others, especially some of the people who live around the site SR2O was proposing to buy along Highway 56 about a mile from Comanche Peak, protested that they moved out to the country for peace and quiet and they didn’t want the facility in their backyards.

I went digging into public records and contacted regulators and suppliers, among others. What I found was troubling, to say the least. I was preparing to run a story as soon as I could talk to company officials and get their side of things and talk to Jurey about my findings. Jurey called me back, but SR20 officials did not respond to an interview request. I planned to keep after them, then word came down last week that SR2O was pulling out, blaming negative publicity for its decision. They wanted to be in a town that welcomed them, they said. Somewhere where folks would be so grateful they wouldn’t ask questions, perhaps?

At the same time they dumped Somervell County, SR2O officials were putting a ring on the finger of Alvarado, where they said they wanted to be all along, the Cleburne Times-Review reported.

I decided not publish my long investigative piece. I may write it for another publication. In essence,  I found that several predecessor companies with SR2O’s chairman and chief executive officer, Michael Clemons, at the helm made similar promises to towns around the country. To date, I could find no record that any of these companies ever built a facility. I also discovered inconsistencies in statements the companies made on its websites and in solicitations for private funding.

For example, SR2O currently is on a website called Fundable that lets companies pitch their business ideas to potential private investors and raise capital. To see it, click on this link: http://www.fundable.com/sr2o-holdings.

On that site, SR2O claims it has a “partnership” with major tire manufacturer Michelin “here in the U.S. and abroad to recycle their factories – Michelin alone will provide 20 tons/day of material.”

Fact check: I contacted the U.S. media spokesman for Michelin and gave him the same link above. He responded that Michelin had been talking with SR2O but nothing had been finalized.

That does not sound like a “partnership” to me. A partnership is “a legal form of business operation between two or more individuals who share management and profits. The federal government recognizes several types of partnerships. The two most common are general and limited partnerships.” This definition is from Entrepreneur.com. Even using the term loosely and not legally, a partnership still conveys that a handshake took place and an agreement has been reached.

I found many other things that didn’t add up. That doesn’t make a lot of difference now since the company has kissed Somervell County goodbye. But I hope other communities, before they dive into this business “opportunity,” will ask some hard questions.

Another truism I learned as a longtime business reporter is that more than technology, more than the reams of information generated by securities analysts, Bloomberg and all the other business media, the major factor driving many financial decisions is psychology.

When people feel confident and good about the economy, they tend to buy and invest. When they don’t feel confident or even are concerned or feel threatened about the future, they tend to sell and divest. Or they want to believe in something that they think will save their necks and don’t ask the questions they otherwise would ask.

Somervell County, when it did its due diligence, may well have discovered some of the same information I found that raised questions. Perhaps officials would have asked them, demanded answers and made an informed decision.

But when people feel under pressure to “do something” to turn things around, sometimes that doesn’t happen. And that’s when too good to be true turns into “I wish I hadn’t rushed into that.” History, despite all the cautionary tales strewn along the way, has a way of repeating itself.

Kathryn Jones is editor of the Glen Rose Current. 

 

 

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