Misrepresentation is the legal name for lying. It is not necessarily a false representation of material fact, in fact it has nothing to do with the securities business. It applies to any business transaction or relationship. It can be outright lying, or false representation of fact, but can also be, and usually is, lying by omission.
the false statement of fact is simply everything in that Summary. The way it was allowed into the public domain, JBI is not accountable for it. In a court of law, since they say it cannot be relied upon, it is meaningless. Yet it is being touted as proof of the economic viability of the product. And as far as I know (not firsthand) they have statements on their website touting it.
Great things is pretty obvious. If that Summary were true, JBI would be making money hand over fist with P2O.
Anyway, let's move beyond that. I am not going to get into a legal discussion.
I believe 3 things happened here (I am not going to do detailed research to rehash this, so this is from memory).
- JBI made a vague statement in a PR about this study that was conducted
- someone "leaked" the title page
- JBI made a statement saying it could not be relied upon.
I know the purpose of these studies. I worked in Mining several years ago and had a couple of FEL 1 and FEL 2 documents come across my desk. They are to provide business justification, including an ROI analysis, to justify capital expenditure. In this case, the documents I had concerned mines to be built for completion around 2020. That is looking pretty far ahead. They are progressive in detail, moving from being primarily assumptions to being based on hard facts and plans. There will always be assumptions, the most obvious being metals prices. We all know that the price of Primary Metals crashed last summer. The correlation with mining stocks was quite clear.
Now as an employee or Consultant my responsibilities are quite clear. These documents are of strategic importance, therefore Confidential to the Client (Owner). They are also confidential to the Consultant that performs the work. It is representative of SAIC's work, and hence neither side wants a report like this getting out into the public domain. It reveals SAIC's work methods in a very competitive business (the EPCM business).
And frankly, given JBI's results to-date, it would be embarrassing for SAIC. It implies they don't know what they are doing.
I can see it being targeted towards new investors, but the same information should be distributed to all investors. And the nature of the SAIC report is suspicious. Normally these things are based on ROI information, specific to the project only. EBIT DA has nothing to do with anything. It could have been combined with company financials to do Pro Forma statements, but the way it is written is suspect. The use of an Order of Magnitude estimate is suspicious as well. All you have to do is look on the AACE website to see that the accuracy of an OOM estimate is something like +60/-40%. It is highly assumptive and is only used in initial stages of analysis. JBI was way beyond that when this work was supposedly done.
The first event, making a reference to a study in a PR, was probably not a good idea.
The second event, the leak into the public domain, was definitely a breach of trust by JBI and a mistake. When I was working in Mining, I could have easily taken home a copy of a FEL document and leaked it, maybe to a competitor. My reputation would have been trashed. Similar to, about 10 years ago now, someone went to Pepsi with the magic formula for Coke. I kid you not. Pepsi did not accept the information and informed Coke. The guy was charged with something.. Everybody that works for a company, especially in Capital Projects, signs an agreement regarding Confidentiality, and there would just be no incentive to leak something into the public domain. It would damage reputations. It would be self-damaging.
JBI failed in letting that information be public, in some way, even if it is managing people, or HR policies. I would bet that SAIC is pissed about it, and probably would not work for them again.
I doubt it is strategically damaging to JBI, because it is simply unbelievable. I don't think anyone would care, especially if the details did not get out.
But the last event is the most important. JBI issues a statement saying that it cannot be relied up. Well, that is in essence, announcing that the document is authentic. All they had to do was to have no comment on it. That would have been the only option. While it seems a as if they are being forthright and all, in fact it is indirectly putting facts into the public domain which are misleading. Whether JBI engineered the leak or not, they let it happen, and in their statement regarding the fact that it cannot be relied upon they are in fact standing behind it.
And at the end of the day they cannot be held accountable for it.
I call that lying or misrepresentation.
