Two investors have sued an importer of Chinese buses and its principals for alleged fraud and securities violations. The suit names Bus and Coach America Corporation (BCA) of Burbank, Calif., four of its officers and one to 50 “fictitiously named Defendant Does” who are “unknown to plaintiffs.”
The suit was filed by Havenrock Capital LLC of Beverly Hills, Calif., and the Foreman Family Trust of Orange County, Calif. The parties said they invested $350,000 in Advanced Vehicle Manufacturing (AVM) as result of a fraudulent scheme. The suit claims the funds were transferred to BCA.
The defendants were identified as Lawrence Brennan, chief executive officer and a BCA owner; Robert Miller, secretary, chief financial officer and a BCA owner; David Killackey, director and a BCA owner; and Harry Wilson Black, chief financial officer and accountant of AVM.
AVM was described as “a startup company in the business of selling Chinese-manufactured, all-electric passenger buses with state-of-the-art, cost-efficient battery technology. Plaintiffs are informed and believe and based thereon allege that AVM has never made any sales and is either insolvent or on the brink of insolvency,” according to the suit filed in U.S. District Court for Central California in Los Angeles.
One of the investors learned of AVM in October 2017 at the Los Angeles Cleanteach Incubator, which presented the company as the exclusive North American distributor for electric buses manufactured by the Chinese company Yinlong. The investors stated they subsequently were shown a bus that allegedly was on loan from Yinlong, given false financial documents and told AVM held $3.5 million in purchase orders from two cities for 16 buses.
Havenrock invested $310,000 in AVM and the Foreman Trust invested $40,000. In February 2018, after the promised shipment of buses from Yinlong had not arrived, the investors said they demanded to further inspect AVM records. Then, they allege, they found that no buses had been ordered and their investments had been transferred to Bus and Coach America while AVM was in default on a $200,500 loan from Yinlong. The investors were told they had purchased 300,000 shares of common stock and 972,727 shares of preferred stock in AVM but that only 1,500 shares of AVM stock existed and all were owned by BCA.
The investors also allege they were told that the buses would arrive in compliance with U.S. regulations but in fact would require modifications that would be performed by a company owned by one of the defendants.
In summary, the investors argue, “Defendants knew or should have known their representations to be false when made because they had no intent to set up or operate AVM as a legitimate business, Indeed, after almost 12 months or purported operations, AVM still does not have dealer plates or basic paperwork required to operate its business.”
On Dec. 3 U.S. District Judge Manuel L. Real denied the defendants’ motion to dismiss the suit on jurisdictional grounds. The parties have requested that a trial be set in March or August and “continue to discuss potential settlement,” according to a Nov. 29 joint filing.
The Zhuhai Yinlong Energy Co. website says the company began as a developer of lithium batteries and has extended to production of electric vehicle power systems and electric vehicles. The company’s electric buses are in service in 40 Chinese cities. The company says its battery customers include Bombardier, Ford, Proterra and BAE Systems.