The Biggest Green Scam in America
Denver’s Wayde McKelvy raised tens of millions of dollars for a new, clean-energy company that the SEC says was nothing more than an old-school Ponzi scheme.
The spring day had been a warm one, but as Taylor Romero walked from his Centennial office across the parking lot to the Embassy Suites, the sun was setting and the air chilled. His employer, Wayde McKelvy, had been holed up in a room at the hotel for days. Romero knew this likely meant one thing—well, two things: booze and hookers. For as long as Romero had known McKelvy the guy exhibited hedonistic, self-destructive tendencies. Lately, though, he’d been on a Charlie Sheen–like tear. The 46-year-old McKelvy had taken to showing up at work drunk, holding the waist of whichever working girl he’d flown in. He was so blatant that even his wife, the mother of their twin girls, knew about it all. By then, late spring 2009, Donna McKelvy had grown accustomed to her husband and his prostitutes. What she could not abide, however, was the whore du jour banging up the Mercedes-Benz. She’d asked Romero to go to the Embassy and get the keys.
Romero took the elevator up and knocked. The way he remembered it, the door opened, and there, standing on a floor littered with empty Bud Light bottles, was McKelvy. The two men were not merely colleagues, they were friends. They plopped onto a couch, McKelvy dropping his 6-foot-4-inch, 250-pound frame. Romero learned the keys to the Benz were gone. And sure enough, so was the girl. While Romero stuck around, waiting, the two men discussed their dream of making a movie together. It would be dark and atmospheric; McKelvy already picked a tagline: What’s the Definition of Insanity?
Young with long dark hair, Romero is the kind of computer-programmer dude who wears flip-flops to work. He’d built a website for the Mantria Corporation, a new green company for which McKelvy was the lead investment broker and ultimately the sole money engine. This startup, as McKelvy had put it to anyone who’d listen, was a revolutionary investment opportunity. Mantria, so went the pitch to investors, was constructing the country’s first carbon-negative residential community, where energy-efficient housing would be built with sustainable materials, and the whole thing would be powered by alternative energy. As if that weren’t enough, Mantria was also supposedly on the verge of releasing an unprecedented technology that turned garbage into usable materials and produced something called biochar, a charcoal that when used as a fertilizer was carbon-negative. Operating from his hometown of Denver, McKelvy would raise close to $40 million from hundreds of investors, the majority of them from Colorado.
After a while, a short Latina woman walked into the hotel room holding a bag of groceries and the car keys. Slurring, McKelvy yelled at Romero. Romero yelled back. Something about the family’s car and the prostitute. From a corner of the bottle-strewn room, the prostitute piped up: “Why are you talking about me like I’m not here!” She put down the keys, Romero grabbed them, and he split. Talk about the definition of insanity: “It was classic Wayde under pressure,” Romero says. “The bigger things get, the harder Wayde crashes.”
The crash had only just begun. In November 2009, some six months after that night in the hotel, the Securities and Exchange Commission (SEC) filed a civil lawsuit against McKelvy and his wife, and against the Philadelphia-based owners of Mantria. As far as the SEC was concerned, McKelvy had fleeced his investors out of tens of millions of dollars in a big, green Ponzi scheme.
Multimillion dollar white-collar scams are as American as apple pie. See, most recently, Bernie Madoff, who wormed his way into Wall Street and decimated the portfolios of thousands of investors to the tune of $17 billion. Sentenced to life in prison, Madoff has become the infamous face of financial-market malfeasance nationwide. Coloradans, meanwhile, witnessed their own high-profile grifter. Denver hedge fund manager Sean Mueller ripped off 65 people, including John Elway, for some $71 million. Last December, Mueller was sentenced to 40 years in prison. But whereas Madoff’s and Mueller’s frauds could have occurred anywhere, during almost any era, McKelvy and Mantria’s “business plan” was based on a uniquely contemporary premise, and one that has been especially appealing for Coloradans.
The United States shouldn’t be dependent on foreign oil; the country must create a workforce for the 21st century; the environment must be protected: These are a few of the reasons the federal government has been nudging industry toward green, or clean, energy. The national trend has dovetailed nicely with progressive thinking in Colorado, where conservation and sustainability are rooted in the mountain lifestyle. Former Governor Bill Ritter lured numerous clean-tech companies to Colorado, including the world’s largest wind turbine manufacturer, Vestas. He successfully championed a bill that required the state to produce 30 percent of its electricity from renewable energy, the largest proportion in the Western states.
Colorado is so synonymous with green power that in February 2009, President Obama chose to announce his $787 billion economic-stimulus package—filled with “clean-energy” provisions—in Denver. The venue the president chose was the Denver Museum of Nature and Science, where the roof is home to a solar-panel field, which was installed by a Boulder-based company, Namasté Solar. Indeed, one would be hard-pressed to imagine a place more perfect than Denver to exemplify the confluence of environmentalism and capitalism (not to mention the venture capitalism of Boulder). Arguably, no one is more primed for green investment opportunities—or susceptible to clean-energy con men—than Coloradans. “If you can show me how to save the world,” as a Denver-area woman who was one of the first Mantria investors puts it, “sign me up.”
It was just after Obama’s Denver appearance that McKelvy and his Philly-based Mantria partner, CEO Troy Wragg, were telling investors that the company was engaged in promising meetings with the president of Ivory Coast; that Mantria was hobnobbing with the Clinton Global Initiative; and that the company was “this close” to selling $240 million worth of its “systems.” To develop their audacious projects Wragg and McKelvy needed cash. Mantria investors, according to the SEC, were offered securities in the form of “promissory notes, stock, limited partnership interests, and so-called profits interest.” These contracts promised extraordinary returns over periods as short as eight months.
The reality, according to the SEC, was that Mantria produced virtually no revenue in its two years of operation. The purported $240 million deal vanished. Mantria’s product sales amounted to unloading one bag of biochar. It went for $97. The facts, so say the feds, show that every dime investors received was funded by new investors—in other words, a classic Ponzi scheme. McKelvy was not an employee or corporate officer of Mantria, but he was a rainmaker, persuading investors to empty their retirement accounts for the promise of 17 to “infinite” percent returns.
Since 2008, securities officials have targeted at least five alleged scams involving clean energy, prompting the Financial Industry Regulatory Authority to release an investor alert stating, “It seems like everybody’s going green these days—even fraudsters.” And according to the state and federal paper trail, Mantria is the biggest green scam to date in the United States: Investors lost some $35 million, more than all of the other green scams combined. In the SEC complaint, McKelvy is akin to the Madoff of green—with a touch of Tony Robbins. And there may be another similarity between McKelvy and Madoff, and, for that matter, the local Mueller crook: McKelvy appears to be another financial fraud halted too late due to regulatory bureaucracy.
Troy Wragg, a working-class kid from Philly turned scrappy entrepreneur, created Mantria in 2005 while in his early 20s. His espoused dream was that Mantria would develop a carbon-negative residential utopia. Big dreams from a relative nobody like Wragg needed capital. For about two years, he was in business with BridgePoint Ventures LLC, a Florida-based real estate management firm. Sometime around 2007, however, BridgePoint ended its partnership with Mantria. “We had a pretty unceremonious parting of ways,” says Edward dePasquale, a BridgePoint vice president. The way dePasquale explains it, Wragg’s Mantria was over-appraising real estate, and BridgePoint decided “that we didn’t want to deal with him in any way, shape, or form.” Fortunately for Wragg, one of BridgePoint’s affiliates, Wayde McKelvy, who ran an LLC called Speed of Wealth, saw an opportunity in Mantria, and that same year the two began working together.
The men complemented each other quite well. Wragg was a fast-talking, youthful city slicker from the East Coast; McKelvy, twice the kid’s age, was a rugged, charismatic Coloradan. He attended South High School, then the University of Northern Colorado, where he played offensive lineman on the football team and majored in business. According to three of McKelvy’s former UNC teammates, he was the champion of the freshman beer “chug-a-lug” contest; he had a “screw loose”; and he wasn’t above eating a handful of worms to get a laugh. Former teammate Don Barlass remembers that McKelvy “definitely enjoyed school, enjoyed football, and enjoyed life. If Wayde was around, you knew you’d be having fun.” None of McKelvy’s old pals would have pegged him as a guy to scam anyone. On Team Mantria, Wragg rattled off numbers and stats, whereas McKelvy talked about big-picture-type stuff, in rousing and sometimes blunt everyman language.
On calls with potential investors in spring 2008, the personalities of the new partnership clearly had found their rhetorical groove. The two men were soliciting funds for Mantria Financial LLC, set up ostensibly to finance purchases in the carbon-negative utopia. According to the pitch, this community, Legacy Ridge, in Dunlap, Tennessee, had everything. Ten miles of streams, 12 miles of bluff lines, a five-star restaurant, and two designer golf courses—all being built with sustainable materials and powered by alternative energy. Any investment, Wragg laid out, would earn 17 percent annually for the next two-and-a-half years, and then an additional half-percent equity stake in the company’s projected profits ($70 million) after another two-and-a-half years. The possibilities were astronomical. A $250,000 buy-in would bear a $456,250 profit.
Enter McKelvy: “What Troy and I know,” he said in his folksy Colorado baritone, “is that if we make you happy with your returns—and that’s our number one priority, by the way—that you will always invest with us and we will have an ongoing business.” No one on that call questioned McKelvy’s compensation package. He was pulling 12.5 percent off the top of every investment he brought in, which is a rate of commission double that of what is typical for a well-compensated financial broker. And although the SEC requires broker-dealers be licensed, McKelvy, along with Wragg, was not.
“For those of you waffling out there,” a caller on the teleconference said, “quit your waffling and get with the program. These guys know what they’re doing 110 percent.” Another caller added: “You can’t get a better education than from Wayde.”
In one of the calls, the former college football player sounded as if he were in a locker room at halftime, throwing down a gut-check challenge to his team: “A lot of things I hear out there. Number one: ‘It’s too good to be true.’ The first thing I say is, ‘Well then shouldn’t you jump in it right now?’ I’m sure you’ve heard that it’s too good to be true to get those kinds of returns in this market. Well folks, those of you who are invested with us know it’s not too good to be true. You get your checks. We keep coming out with better products.”