KiOR: The inside true story of a company gone wrong. Part 3, “You’ve Cooked the Books”

“No one would take our stuff”

In February John Karnes joined KiOR as the new CFO replacing Kevin Denicola who had resigned. It was a critical moment. As an early-stage company, KiOR was cash-hungry. One of the most important sources for funds to build out the company’s projects was the loan from the Mississippi Development Authority.

KiOR hired Dennis Cuneo, a business executive with established ties to Mississippi state officials, as its representative.

As the state of Mississippi alleges:

“Faced with the realization that no oil company would agree to offtake and refine the Company’s oil, Khosla explained KiOR’s situation to Dennis Cuneo and asked him to present the blendstock agreement to the MDA as having satisfied the terms of the MOU. On or about February 20, 2011, Cuneo notified Governor Barbour that KiOR had entered into an offtake agreement with Hunt. Cuneo requested that Governor Barbour direct the MDA to release funds. Governor Barbour called the MDA’s CFO, Kathy Gelston, after communicating with Cuneo. Governor Barbour notified Gelston that she would soon receive a communication from Cuneo in which Cuneo would request a release of funds. Governor Barbour instructed Gelston to release funds upon Cuneo’s request.”

The problem? The offtake agreement with Hunt did not supply them with a bio-oil for Hunt to upgrade using refinery-based hydrotreating technology. Rather, Hunt agreed to offtake finished blendstock, upgraded by KiOR.

“It was the alkali content, said former KiOR staffer Larry Bauer. “we had found quickly that no one could take our stuff.”

Meanwhile, ExxonMobil was having problems of its own. It wasn’t a question of being able to upgrade the fuel.

On February 28, according to the state of Mississippi:

ExxonMobil Corporation Vice-President of Corporate Strategic Planning, William M. Colton, notified Cannon and Khosla of problems Exxon was having making KiOR’s numbers work.