NELHA CEO Moves Slowly to Acquire Hawai`i Residency

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In January of 2005, the Board of Directors of the Natural Energy Laboratory of Hawai`i interviewed three prospective executive directors recruited by a head-hunting firm. Among them was Ronald Nelson Baird of Sedalia, Colorado, near Denver. Baird was given the nod by the NELHA board; two months later, he signed a contract and on April 18, 2005, he began work for the state agency. His initial base salary was $110,000 a year, but rising to $120,000 in six months if he received a favorable performance review from the NELHA board. In addition, the letter offering him the job held out the prospect of an annual bonus of up to 20 percent of his base salary “upon accomplishment of specific business and organizational goals.”

Earlier this year, the NELHA directors gave Baird another bonus. The board vote was to affirm a figure discussed in executive session; Baird told Environment Hawai`i the amount was $10,000.

State law (Chapter 78 of Hawai`i Revised Statutes) requires all employees “in the service of the government of the state” to be residents of Hawai`i “as a condition of eligibility for continued employment.” Residency in Hawai`i includes, among other things, “absence of residency in another state,” the law says.

One of the standard tests for residency is voter registration. Elections officials in Douglas County, Colorado, confirmed that Baird remains on the county voter rolls. As of mid-July, he had not registered to vote in Hawai`i County, although records in Colorado indicate he sold his house there last April.

When asked about his primary residence, Baird said it was in Hawai`i. “It took fourteen and a half months to move my ill wife out here,” he said. “It was always our intention to be residents” of Hawai`i, he added, saying he and his wife had family here.

He said the only reason he had not registered to vote in Hawai`i in the year and a half since he moved here was “a lack of time.” As to whether he continued to own a llama ranch in Colorado, he said, “What we did with our business is not your concern.”

Baird’s resumé listed years of experience in the energy field, including stints at several energy prospecting firms and a short period of service (less than two years) as director of a Colorado business incubator. On his resumé, Baird said he had received a master’s in business administration from Texas Tech, had authored or co-authored four volumes on the nuclear power industry, five volumes in the energy industry, and was supervising author of an investment study on gold in South Africa.

Baird did not list on his resumé his close involvement with id-Confirm, Inc. On June 15, Environment Hawai`i asked Baird about his affiliation with the company, which is publicly traded as a penny stock. Baird said that when he submitted his resumé for the NELHA job, it was “in August or September” of 2004, and he became president of the company “subsequent to my resumé being sent in.” Baird insisted that at the time of his interview he had informed the NELHA board of his association with id-Confirm (at that time he was its chief executive officer and president, according to filings with the Securities and Exchange Commission). Baird also said that he disclosed his involvement with the company on his financial disclosure forms with the state Ethics Commission; those forms are not available for public review.

After his employment with NELHA, Baird told [i]Environment Hawai`i,[/i] “I became chairman of the board [of id-Confirm], and then just a consultant. Now my ties are totally severed except I am a large shareholder.”

According to a company filing with the SEC on June 19, however, not until June 15 – the same day Baird was questioned about id-Confirm by Environment Hawai`i – did he resign as director and chairman of the board.

In a later interview, Baird acknowledged that he did not resign his position with id-Confirm until the same day he was asked about it. However, he said, he had effectively severed his ties with the company in early January 2006.

Baird was asked to confirm the company’s reports that it paid him as a consultant his expenses plus $10,000 in the fourth quarter of 2005 and $8,000 in the first three months of 2006. He disputed the second figure, saying it was only half that amount. In any case, what he does on his own time, “when I’m not working for the state – like when I’m asleep, or 8 p.m. to midnight,” is his own business, he said. “I checked with the Hawai`i Ethics Commission and they said it was OK.”

Baird seemed taken aback when questioned about his association with the company. “I don’t see what this has to do with my work in Hawai`i,” he said when the subject came up. “That company has nothing to do with NELHA,” he said. “It doesn’t make any products NELHA would use.”

id-Confirm advertises three products on its website: a “biosecure” flash drive memory stick with fingerprint reader, and two employee time clocks that rely on “biometrics” (e.g., a palm print) to ensure that dishonest employees don’t clock in for slacking coworkers. Last fall, the company signed an agreement to provide 220 of the flash drives and 20 of the time clock devices to Best Brands of Bucharest, Romania, for distribution in the Black Sea Region.

Baird described himself on his resume as an “executive experienced in building and managing emerging organizations, recognizing and developing new technologies, implementing strategies for success.”

Since 2004, Baird has been involved with id-Confirm and, since 2005, with another start-up company, HS3 Technologies Inc. (the HS3 stands for Homeland Satellite Security Systems, according to its website). Before id-Confirm took over Fidelity Capital Corp. in October 2004, the takeover target, whose only business activity was selling silk undergarments, had been losing money – some $27,000 in the year before the takeover. Since the takeover, under id-Confirm’s management, what had been a steady trickle of money out the door has become a roaring deluge. In id-Confirm’s filing for the quarter ending March 31, it reported gross sales of $6,491 since its inception. Losses for the quarter were $906,823, while cumulative losses since the takeover came to $3,727,554.

Baird and another large stockholder in id-Confirm, Robert Morrison, together hold 27 percent of stock in HS3, which Morrison and Baird started up in much the same fashion as they did id-Confirm – by taking over another flagging company. Baird’s wife, Lougene, was an officer of HS3 until earlier this year, when she resigned (according to a letter forwarded by the company to the SEC) because it had dismissed an employee named Dennis Baird.

While Baird and others involved in the two companies may be true believers in the companies’ products and services, the world of penny stocks attracts unethical touts and investors hoping to make a quick buck. Because trades involve generally high volumes of low-value shares, a change in stock price of a fraction of a cent can result in substantial profit – or devastating loss. To drive up the price, investors will often hire stock touts to send out fancy brochures, faxes, emails, and newsletters intended to draw investors to one or another company.

Both id-Confirm and HS3 have been promoted in this fashion. When Baird was asked if his company paid for one such “critical investor alert” published by OTC Growth Stock in December 2004, he replied, “Hell, no. What people want to publish is their business, not mine.”

In type too tiny to read without a magnifier, the OTC Growth Stock “alert,” issued less than a month after id-Confirm had started operations, states that it is “an independent paid circulation newsletter,” yet adds that it “was paid forty thousand dollars for the costs of distributing the report.” Another OTC Growth Stock “Special Situations Report” pushing id-Confirm as a good investment appeared in July 2005, for which OTC Growth Stock was paid $95,000 – for distribution costs.

Even more elaborate and expensive marketing techniques were used to push sales of HS3 stock, prompting Hartley Bernstein, an ex-tout himself who now publishes a column on unethical practices in the penny stock market, to publish last March an “investigative report” on the company and efforts to push its stock. The report, which also serves as a good introduction to the often sleazy world of penny stocks, is available on Bernstein’s website.

— Patricia Tummons

Volume 17, Number 2 August 2006