Not Just Another Conspiracy Theory (Michael Rion)

The following post has been submitted by Michael Rion

Not Just Another Conspiracy Theory

This is a story about something that took place back in 1980. I’ve even seen it mentioned briefly in passing here on ECW, quite a while back, but I don’t believe you’ve heard about it from my particular perspective. First a little about me; I’m 71 years old and a retired Real Estate Broker/Developer in Southern California. I’m not now, nor have I ever been a scientist or researcher.

However for the first 20 years of my professional life I was a shoe designer and in early 1980 my wife and I had just returned to Southern California from Melbourne Australia, where I had been on assignment for a large shoe manufacturer there for about two years. Upon our return I had a job waiting for me, but my wife, who was not the domestic type, was not so lucky and needed to seek new employment. We rented a Condo in Redondo Beach, a southern coastal suburb of Los Angeles.

At about that same time a new television show, aptly named “That’s Incredible” aired on ABC and was an immediate hit. On one of the earlier episodes a man named Dr. Gerald Schaflander was featured. He claimed to have invented a new fuel for automobiles, which was half the price of gasoline and totally non-polluting. We were fascinated, by both the man and his invention. What’s more he was located nearby in Los Angeles just to the north of where we lived. On a whim we called up and arranged an appointment with the idea in mind of perhaps investing some money.

Schaflander’s company was called Consumer’s Solar Electric Power Corporation, or CSEP, and was located in Culver City California. Schaflander, who met with us personally, had a Ph.D. in social psychology. He was very charismatic and somewhat eccentric. He was a person who in many ways was like Andrea Rossi and the similarities of this story to his do not end there. Like Rossi, he had been involved over the years in several failed ventures, some of which were controversial in nature.

He had started CSEP in Menlo Park California, up near San Francisco, six years earlier. I don’t know how many here are old enough to remember, but in 1974 we were fresh out of the first gasoline shortages brought about by OPEC embargos in an effort to raise the price of crude oil, and we were due shortly to enter the second wave in 1976. Both instances resulted in many gas station closures and long waiting lines, sometimes blocks long, at the few that remained open. At the time the official story line was that we were running out of oil and more of the same was to be expected. Although this eventually proved untrue most folks believed it at the time, and it was life altering for many. The embargo was successful in that it nearly tripled the price of gasoline, from 35 cents gal. in 1972 to around $1.10 gal. by 1980. At the same time we were being bombarded with new and expensive EPA requirements, which made autos both more costly and much less fuel efficient. It was even worse in California, which was even stricter on emissions.

It was Schaflander’s aim to come up with a new kind of fuel that was both cheaper and less polluting. While not a scientist, he was very good at two things, organization and raising capital, so over the next 6 years he did just that and assembled a team of scientist to work on the problem. Early on they settled on a form of Hydrogen as the most likely solution.

By 1980 they had been successful in coming up with a formulation of hydrogen fuel which would stay liquid at normal temperatures, was less volatile than gasoline and, with suitable carburetion modifications, was compatible with the gasoline engines then available commercially. It was also basically non-polluting as the only emissions were water vapor and unmeasurably small quantities of itrous Oxide, which were specific to the additives necessary to maintain the liquid state of the fuel. Even better it could be produced at less than half the price of gasoline. Just like with LENR, most main stream scientists at the time declared that what he claimed was scientifically impossible (This has since been determined to not be the case).

During our visit we were given a tour of the facility and invited to drive one of a fleet of six 1979 Chevrolet Caprices, which had been converted for that purpose. One of the cars had been earlier driven to the east coast and back for testing purposes. We were then shown official test results from the SCAQMD (the Southern California equivalent of the EPA, but much stricter at the time) which showed the emission totals. Based on that we made the decision to make a modest investment, but most remarkably, during our interview Dr. Schaflander became impressed with my wife’s personality and professional qualifications. As a result he offered her a job as his personal assistant at a very attractive salary.

During her tenure there we both became very involved with efforts to raise money and at seminars he gave for that purpose we met movie stars and celebrities, many who invested heavily in the venture. Jack Nicholson was just one such personalities and here is a link to a promotional video he did for them in 1978 We still have a company brochure that he autographed for us at the time. It was fascinating at the time to sit in a large room with perhaps a hundred potential investors, many of them the who’s who of Hollywood, seated in folding chairs listening to updates regarding the development process.

Not surprisingly there was much resistance over the years by numerous entities, mostly unidentified, but strongly suspected, at the time, to have direct ties to several of the large oil companies. I don’t want to go into a lot of detail here about it, but I’m providing a link here to an article published in “The Nation” , which gets into it further. At one point even, one major oil company offered to buy out the company offering several million dollars via a letter of intent. Although this was later dismissed as having been fabricated by Schaflander, my wife professes to have seen the official letter of intent and then personally typed up a letter of rejection from Shaflander, who refused on altruistic principals (during the time my wife was there he drove a beat-up 66 VW, lived in a rented one bedroom apartment and drew an embarrassingly small salary, that is when the money was there to pay it, so he clearly wasn’t in it for the money). Sadly most of the hard proof for this later went missing after being confiscated by federal authorities.

During this later period things began to escalate. It was in 1978 I believe, when CSEP signed a huge contract to supply Simplot agricultural Corporation with thousands of gallons of the new fuel for use in irrigation pumps and farming implements. Near that same time they entered into a deal with the Postal Administration to convert P.O. Jeeps to the new fuel on an experimental basis, for testing purposes. Not long after the rejection of the oil company purchase offer the first shipment of HY-fuel (250 gallons) was ready for delivery to Simplot. To everyone’s surprise the fuel tanker was turned away by Simplot upon arrival at their depot in Idaho, and the contract was abruptly canceled on the grounds that the chemical makeup of the fuel hadn’t been disclosed as agreed. It had been though, and there was written proof, but there was no money to allocate for pursuit of a legal remedy at that stage.

About a week or so after that the agreement with the Postal Administration was also withdrawn and four partially converted Jeeps were reclaimed. Schaflander responded by purchasing a retired PO Jeep to continue development, and a short time later perfected it, but all to no avail. It was also during this period that the SEC became involved. First, they sent questionnaires to a few of the largest investors asking if they felt they’d been enticed to invest through misrepresentation. You can imagine the effect on investment this had. Schaflander responded by copying the questionnaire and sending it to all of the investors, several hundred in all, just to demonstrate transparency.

It was also about this time that accounts from two different banks, which were used for operating expenses, were frozen by the U.S. government without explanation. Schaflander responded by filing suit to have the funds released, but without money to pay employees most were given layoff notices, including my wife. Some of the essential personnel were presented the alternative of receiving stock, at a 3 for one discount, in lieu of salary, which also included my wife. As her income was not essential for us at that time she accepted and we eventually ended up with over 10,000 shares of common stock in the company. Because of her insider status we were both committed, and believed 100% in Schaflander and the operation. What’s more, we still do to this day.

Regrettably our faith had little effect, when a couple of months later the FBI, with perhaps a dozen federal officers in tow, arrived one day and gathered all remaining personnel in the front lobby. They then proceeded to confiscate all files and paperwork, much of which contained proprietary information. They literally loaded file cabinets on hand trucks, wheeled them out to a waiting truck and loaded them inside. Later they returned and impounded the fuel tanker with over 250 gallons of Hy-fuel on board. As the files were essential to day to day operation Schaflander responded by filing another suit in federal court to have them returned. My wife stayed on to assist with the paper work. The end finally came a few weeks later when, probably at least partly in response to the federal suit, federal deputies arrived and arrested Schaflander and his CFO Steven Wright. They were arraigned on charges of mail fraud with the intent to defraud investors, after which they were allowed to post bail. It may be a stretch, but we’ve both come to believe that the U.S. Government colluded with one or more large oil companies to shut down a potentially viable alternative energy source.

The rest of the story is recorded in legal history, which can still be sourced on the internet today. They were both convicted on 10 counts of mail fraud and sentenced to 4 years each in federal prison. I’m not sure about Wright, but Schaflander never admitted to any wrong doing and as a result served the entire 4 year sentence, even though he was eligible for parole in just 24 months. As for myself and my wife I do believe we investors were defrauded, not by CSEP or Dr. Schaflander, but by the US government who, by effectively sabotaging and then shutting down the operation, deprived every investor of any potential return on investment.

By the way, Hy-fuel has apparently since been found to be exactly what it was claimed to be. But Schaflander’s biggest innovation was making it affordable. He did this by using, otherwise useless, salt contaminated ground water under the Arizona desert to manufacture hydrogen via electrolysis by using then newly invented gallium aluminum arsenide solar cells to provide electricity via solar collectors (old technology now, but it was ground breaking then). But the real secret was that he had perfected a way of mass producing the cells, which reduced the cost by a factor of 10, thus overcoming the negative cost ineffectiveness of producing hydrogen by electrolysis.

Right after the 1980 incident I was very outspoken about my opinion; all the way up to and including the convictions. Once that came about though almost all of the public (including the movie stars who lost all of their money) seemed to accept that it had all been a scam right from the very beginning and it became nearly impossible to counter that without starting an argument (sound familiar?). So I stopped trying. We kept thinking that my wife would be called as a witness for the defense, but it never happened. I’ve read legal post mortems on the internet regarding the case and the conclusion seems to be that both Schaflander and Wright were victims of ineffective council, and could probably have won an appeal on that basis. To their credit they were both virtually penniless after the seizure and probably weren’t able to afford good representation; might have been part of the plan right along. Based on this experience I have a hard time completely discounting suggestions that LENR may have hidden resistance, from unknown entities working behind the scenes. Dr. Gerald Schaflander (like Fleischman and Pons) is now out of the controversy, but the CFO Stephen Wright could still be out there somewhere. It would be interesting if he saw this and responded.