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Some questions for David Martin, Managing Director of Carbon-Expert

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Last week, REDD-Monitor wrote a post about a Marbella-based company called Carbon-Expert Ltd, which sells carbon credits to the public. The question, as with all such companies, is whether Carbon-Expert is another boiler room scam.

Certainly, as outlined in last week’s post, the company’s website includes some potentially misleading information about the possibilities for members of the public to invest in carbon credits and making a profit. And earlier today, a commenter on REDD-Monitor posted part of an email received last year from Carbon-Expert, offering carbon credits from a hydropower project in India at £4.90 per credit:

As a Hydro Electric project, this is a highly sought after credit. It meets key criteria set out in corporate & social responsibility policy, has strong ‘brochure appeal’ and we are confident that it will attract a minimum resale price of between GBP 7.50 and GBP 8.00 within 18-24 months. Indeed, with the introduction of Mandatory Carbon Reporting in April 2012 we are now extremely confident of exceeding this as many companies are now pre-empting the limited supply of quality projects and already coming to market and stockpiling them in anticipation for the future.

A few hours after the post about Carbon-Expert went up on REDD-Monitor, David Martin, the Managing Director of Carbon-Expert, sent me an email asking for my phone number so that we could “have a discussion”. I wrote back telling Martin that I would be happy to correct any factual errors that there might be in the article. And that I would be happy to post a response from him on REDD-Monitor as a separate post.

On 6 April 2013, he wrote again. “There is a whole host of factual errors on your post,” he wrote. However, instead of explaining what the errors are, Martin asked me to, “Please go to www.carbon-expert.com and you will notice a lot of what you have written is out of date.” Which, I’m afraid, doesn’t help much.

REDD-Monitor sent Martin a series of questions on 8 April 2013, since when I’ve not heard from him. The questions are posted below and REDD-Monitor looks forward to posting David Martin’s response to these questions. Oh, and there’s one more question: Is Carbon-Expert another boiler room scam?

From: Chris Lang
Date: 8 April 2013 21:17
Subject: Re: conversation
To: David Martin
 
Dear David,
 
Thanks for getting in touch. I do have several questions that I would like to ask you about Carbon-Expert’s sales of carbon credits to the public and what appear to be misleading claims by Carbon-Expert about the value of those carbon credits as an investment.
 
The questions are as follows:
 
1. In your email (dated 6 April 2013) you state that, “There is a whole host of factual errors on your post. Please go to www.carbon-expert.com and you will notice a lot of what you have written is out of date.” I would be very grateful if you could point out exactly what the factual errors are in order that I can correct them.
 
2. The minimum “investment” in carbon credits with Carbon-Expert is £5,000. How many carbon credits Carbon-Expert has sold to investors and for how much money in total? (I asked you this question on 5 April 2013. In your reply, dated 6 April 2013, you declined to answer.)
 
3. The Carbon-Expert website (on the “Carbon credits” page) includes the suggestion that investors can “Profit from carbon credits with high annual returns.” In a recent court case involving a company that was offering carbon credits as an investment the judge said that the company was selling “near worthless carbon credits” and that “The true position is that the credits were not a suitable investment at all as they were a wasting asset unlikely ever to be profitable.” How do you justify the claim that high annual returns are possible from buying carbon credits from Carbon-Expert?
 
4. “Carbon credit investments offer one of the best growth opportunities since the dot com boom,” states Carbon-Expert’s web page about selling carbon credits. This seems to me to be potentially misleading. The dot-com “boom” was a three-year speculative bubble that peaked in March 2000, followed by a collapse. Some companies failed completely, other lost a large percentage of their market value. Wouldn’t you agree that carbon credit investments are just like the dot-com boom, but without the boom?
 
5. Carbon-Expert’s presentation states that the company sources its carbon credits from the following projects:

  • Sulige Natural Gas Power Plant (China);
  • Barra Grande Hydroelectric Power Plant (Brazil);
  • Hydropower project on the Manasi River (China);
  • Gansu Huanghe Bingling Hydropower Project (China);
  • Hindalco Hirakud Aluminium Smelter Waste Gas Destruction (India); and
  • Himachal Pradesh Hydropower Project, (India).

Are there other projects that Carbon-Expert sells carbon credits from? What is the vintage of the carbon credits that Carbon-Expert sells?
 
6. In Carbon-Expert’s 2012 Investment Brochure (which incidentally you have so far declined to send me, although I requested a copy on 4 and 5 April 2013) is the statement that “Demand in the voluntary market is further intensified by those who can see the high potential returns provided by this relatively new commodity. Independent investors are now beginning to build vast portfolios of carbon credits in order to speculate on the projected future growth.” Could you please put me in touch with an independent investor, with a “vast portfolio” of carbon credits, in order that I can ask them some questions about the returns so far and the projected future growth.
 
7. The same Investment Brochure states that “VERs can be bought online from companies such as JP Morgan or Citola where you will pay between 7.50 and 14.00 GBP per credit. Alternatively, they can be purchased directly from Carbon-Expert at wholesale prices ranging from 4.70 to 5.33 GBP per credit.” Please provide some evidence that JP Morgan and Citola are selling carbon credits online for these prices. Could you also please explain how Carbon-Expert can afford to undercut JP Morgan and Citola by so much? What price does Carbon-Expert pay for its carbon credits?
 
8. The Investment Brochure includes “a simple guide to the investment process” on page 8. Colemans draws up the contract and holds the client’s money in escrow until the carbon credits are transferred to the client. Colemans then releases the money to Carbonex. Is that Carbon-ex S.à r.l., the Luxembourg-based company? Is Carbon-Expert acting as a broker for Carbon-ex S.à r.l.?
 
9. Another Carbon-Expert brochure describes the “7 steps of Carbon Trading”. Step 2 has Carbon-Expert negotiating directly with CDM project managers. But doesn’t Carbon-Expert sell VERs? Step 5 starts with, “2012 Legislation kicks in”. What legislation is this referring to? Step 6 talks about demand for offsets soaring, added liquidity, “increased demand which stimulates price pressure, forcing prices for Carbon offsets higher”. None of this has actually happened. Step 7 mentions Carbon-Expert’s “pre-defined exit strategies”. Could you please explain what these exit strategies are?
 
10. Carbon-Expert claims to be “The UK’s Leading Carbon Trading Company”. That’s pretty impressive for a company that was registered less than one year ago. What evidence to you have to back up this claim? Does Carbon-Expert sell more carbon credits than any other UK-based carbon trading company? Or employ more staff than any other UK-based carbon trading company?
 
11. How many people are employed at Carbon-Expert’s office in London? Is this a virtual office? (Incidentally, the photograph used in a Carbon-Expert brochure is a photograph of the building at 89 Worship Street London, instead of 50 Jermyn Street.) How many people are employed at Carbon-Expert’s offices in Marbella and Dubai?
 
Thanks for your time and I look forward to hearing from you. Please consider your answer to be on the record.
 
Regards, Chris Lang

 

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  1. Chris,

    I wait with bated breath for a response to your well set out questions from David Martin. I avoided them because I cannot trust a company with a dodgy London address and well Marbella for God’s sake……..the historical retreat of those wishing to avoid the long arm of the law.

    Come on Mr Martin come clean with clear unambiguous answers!!

  2. I have had dealings with David Martin because as an existing VER investor i was interested to learn how Carbon Expert could assist me with exit strategies, this being something that they were offering to do via their website. The resultant conversations highlighted that as a new client i needed to purchase further credits in order for them to take responsibility for a proportion of my existing holding. I came to the conclusion that their only motivation was to sell more carbon credits at £3.98 which David Stated would be worth £7.50 in 6-9 months. If it were not for the fact that they have placed photographs of their key staff on their website they would be no different from any other company. David did confirm that carbon Expert do not have a london office, they rented a room whenever a meeting was needed with a client.

  3. The purpose of REDD-Monitor, according to its chief blogger Chris Lang, is ‘to create a debate’. He blogs on ‘issues I find interesting’. That would be all well and good if Mr. Lang refrained at the same time from tarnishing the reputation of reputable companies such as Carbon-Expert by his approach of ‘let’s throw everything at them and see what sticks’.
    Mr. Lang has recently blogged about my company. He quotes in full the risk warning that our website gives and we appreciate that. He also draws attention to our desire to be ‘ethical and transparent’, but bemoans the fact that we do not spell out what those ethics are. We could spend time and money putting together a directory of ethics, but ethics depend on actual behaviour. This is more difficult to put into writing and few companies try.
    I will leave aside, as idle frippery, points raised to do with the colour of my tie and the fact that I am the sole director of my company. I have no idea what colour tie REDD-Monitor favours nor the number of directors a company ‘should’ have, but I doubt whether Mr. Lang does either. Is a company with 10 directors better than a company with 1 ?
    To turn to more substantive issues, REDD asks if Carbon-Expert is a boiler room operation. We definitely are not. A typical boiler room operation sells worthless shares or commodities with no way in which the investor can get a return on his/her money. My company is actively working on an exit strategy which aims to give our investors a return.
    REDD claims that we make ‘misleading’ or ‘potentially misleading’ statements and sets itself up to decide what might mislead. It does not state what authority it has to decide what is and is not misleading. It just decides for itself and then sets out to try to blacken the name of those it decides not to like.
    Mr. Lang has sent me a list of questions he would like answered. Some of them ask for information about clients and their investments that would be confidential in any company. If he was to ask a bank or a stockbroker who has invested in what and can I please have their names, he would either be politely asked to leave or have his collar felt by security.
    If our clients have questions, they can contact me or one of my colleagues, as I have written on the REDD-Monitor before. We will help them all we can. We have no interest in fuelling vendettas brought against us by those who are out only to denigrate.

    David Martin
    Managing Director
    Carbon Expert

  4. @David Martin (#4) – Thanks for your response. I’ll try (again) to explain why I think that Carbon-Expert is misleading people. The basic point is that Carbon-Expert is selling carbon credits as an investment, but carbon credits make a really poor investment. Please watch the presentation by Andy Ager at the City of London Police – it’s excellent and very clear, in particular the part about the voluntary market.

    You point out that a boiler room operation sells worthless shares or commodities. You sell carbon credits to the public, as investments. As I pointed out in question 3 above, in a recent case against a company selling carbon credits, the judge described the carbon credits offered as “near worthless”, “not a suitable investment at all”, and “a wasting asset unlikely ever to be profitable”. Given this, it seems to me to be misleading to state (as Carbon-Expert’s website does) that that investors can “Profit from carbon credits with high annual returns”.

    Or when Carbon-Expert sent out an email offering carbon credits from a hydropower project for sale at a price of £4.90 per credit (which seems pretty expensive in the first place), and adds that “we are confident that it will attract a minimum resale price of between GBP 7.50 and GBP 8.00 within 18-24 months”, don’t you think that is ever such a tinsy, tiny bit misleading?

  5. Thank you for your email of today. In it you make three main points:

    1. That in your opinion carbon credits make a poor investment. You are entitled to your opinion and my colleagues and I will not be trying to persuade you to buy. However, no less a figure than Lord Hanson (who knew something about it) opined that, ‘The value of something is the price it will fetch in a sale’. He is correct. No one buys what they consider a poor investment in the same way that no one backs a horse to lose and no one has to buy.

    2. That in a quoted case the judge said carbon credits were ‘near worthless’. The judge is also entitled to his opinion, but judges adjudicate on law and may offer comments on the case in question. They themselves would laugh all the way to Pommeroys at the idea that they were able to offer investment advice.

    3. That ‘we are confident …. that it will attract a minimum resale price between GBP 7.50 and 8.00 within 18-24 months.’ is misleading. We contend that this is not misleading in the slightest. We are confident. The only thing to be discussed is whether that confidence is well-founded or misplaced. That is what the client has to judge as they do on every occasion we speak.

    I do hope that we can now consider this dialogue closed and my colleagues and I can go back to spending our time serving our clients.

    David Martin
    Carbon Expert
    17 April 2013

  6. Thank you for your reply Mr. Martin. A few points:

    1. I note that you have declined to answer several of Chris’ questions on the grounds of “confidentiality”. Some might argue this is a rather convenient way to avoid difficult questions. For example; you have not answered the question as to why your brochure displays an image of an address which is apparently not your actual UK address. Can you please explain why you are displaying a potentially misleading image in your bruchure? I don’t see how revealing the reason for this could be considered “confidential”.

    2. Your point regarding the potentially misleading statement that was quoted above. You advertise yourselves as “carbon experts” and “the UK’s leading carbon trading company”. This would strongly suggest that you have some expertise in the carbon markets. Therefore it is not unreasonable to conclude that if you were “confident” that a carbon commodity would achieve a certain price, that confidence would NOT be misplaced. Unless your aim was to deliberately mislead potential clients.

    3. You suggest that the the judge in the case mentioned above is not qualified, in any way, to comment on the value of carbon investments. I’m sorry but this is utter rubbish. The judge would have been presented with all the relevant information and would have been in an excellent position to comment on the value of the commodity in question. In a far better position than someone who had an ulterior motive, for example a broker seeking to sell carbon credits.

    4. You dismiss as “idle frippery” the points about the colour of your tie. I can only suggest that you improve your photoshopping skills if you wish to avoid future idle frippery. There are plenty of excellent courses available.

  7. This trail seems to have gone cold, but lets have a closer look.

    Carbon Expert do run a legitimate consultancy business in advising corporations on their carbon footprint and Public Relations. They have a number of sizeable and prestigious clients, particularly in the Middle East.

    Carbon Expert also sell VERs to private investors on the basis that they will sell these on to their corporate clients to offset their carbon footprint at a profit.

    Sounds good but lets have a closer look. It is unclear whether any of Carbon Experts clients have actually bought VERs from them, and even if they have whether Carbon Expert have sourced these from their private investors.

    Carbon Expert sources most of the credits they sell to investors from Carbon-Ex Sarl, who have also sourced many of the boiler rooms we know about as well as selling direct.

    Carbon Expert say they make a commission of about 10-12% on selling credits, but the projects they sell credits in and the price (£4-5)are similar to those from all the other brokers we know about. We know that ‘wholesale’ these credits trade for about 50p so is it likely that Carbon Expert are only making this margin on the uplift?

    Carbon Expert have also sold CRTs (a US version of Voluntary Credits) to clients on the basis that if they were to become of the Cap and Trade (CCA) market their value would increase, and even in a Worst Case scenario where they did not, they could be sold at a profit. In fact CRTs are very difficult to trade and generally go for round 60p compared to the £5.67 clients have paid for them.

    Carbon Expert claim to run an ethical business. Why would they then persuade and elderly lady to invest her life savings and her entire SIPP into carbon credits?

    It would be interesting to know how many credits Carbon Expert have sold to investors, and how many of those they have actually sold on to corporations.

    Either Carbon Expert are legitimately acting in good faith on behalf of their clients or the vast majority of their profits is actually coming from selling credits to investors when there is very little chance of them actually selling them on, and the consulting side of their business is an ideal front for this.

    You decide.