Several government agencies, including the Securities and Exchange Commission, are investigating an obscure corporation here which claims it will soon manufacture an engine that will solve the energy crisis.
The firm, Stewart Energy Systems of Idaho, has bought five square miles of land near the North Idaho hamlet of Athol, and has already erected production facilities. SESI, a company spokesman said, plans to build a self-contained city on the tract for an estimated 3,000 employees.
But SESI, owned by land developer A. Lamont Nibarger of nearby Spokane, Wash., is under investigation by the SEC for failing to register sale of securities. Washington State's securities commission and the Spokane sheriff's department are also looking into SESI for possible fraud.
Spokesman for these agencies say the firm, which has never manufactured anything, has been able to raise more than $10 million, ranging from $12,500 for a "membership" to as much as $70,000 to $300,000 for "dealerships." Many investors, they say, are small businessmen and Mormons like most of SESI's officers.
The firm, originally based in Spokane where Nibarger owns a ranch protected by armed men and guard dogs, has been claiming for three years that its Stewart Energy Cycle Engine can do the work of conventional combustion engines, and more.
The new engine, it says, runs on volatile gases like freon, which are compressed into a usable energy form by the natural heat in the air or ground. It was developed by Salt Lake City inventor Robert C. Stewart, 57, also a Mormon.
Independent sources have seen only one single-cylinder prototype engine in working order. But SESI maintains in the promotional literature it sends to potential investors that the engine -- which works on a principle similar to that of the steam engine -- can provide power for everything from a Boeing 747 to factories, homes, autos and farm machinery.
Several West Coast technical experts who have studied the SESI engine, however, say that while it may have merit on paper it will not do everything SESI has been telling investors.
Said Normal Parrish, a San Francisco technical consultant for the Bureau of Standards, "I defy any airplane to run 10 feet on two, 10 or 100 of their engines." Robert Curran, a Boeing propulsion expert in Seattle, said, "I just don't see how it would be feasible to drive an airplane with that thing."
SEC Attorney Barbara Barnhardt said the firm has been selling the memberships mostly on a "word-of-mouth basis" to scores of conservative Mormons, many on the East Coast, without registering sales of the memberships with the commission.
The SEC's Seattle office in June 1978 ordered an investigation of SESI, Nibarger and others associated with SESI to determine if they "made to purchasers untrue statements of material facts" while engaged in the offer and sale of securities.
Although ordered by a Spokane federal court last year to comply with SEC registration orders, SESI has been in only partial compliance. It still has not registered with the commission under the Securities Act of 1933 and the SEC has stepped up its investigation in the last month.
Paul Campbell of the Spokane Better Business Bureau said he has had hundreds of inquiries from persons asked to invest in SESI, but so far no complaints. Those making the inquiries, said Campbell, are "political conservatives and . . . the least likely to complain."
Nibarger has protested the SEC investigation but has refused to be interviewed by the press. But SESI general manager Vic Fisher said that because of harassment, the firm may move all its facilities to the People's Republic of China where, he said, "We've been given an offer of an 80,000 - square - foot factory, fully equipped, with a labor pool at $5 an hour. We'd get a five-year holiday on taxes."
But at least one expert thinks that relocation to China is an unlikely prospect. Lilley Monk of the U.S. Department of Commerce's China division, said, "It all sounds a little far-fetched. I don't know of any 80,000-square-foot factories available, and there is no taxation law in China. Why should they give anyone a 'holiday.'"
SESI's sales pitch comes with a hard sell. SESI shows potential investors a film narrated by television actor William Conrad, star of the old private eye series, "Cannon." Conrad's Los Angeles-based agent declined to comment on the actor's work for the company.
The sound track opens with trumpets and a drum roll.
"The stage has been set for one of the greatest breakthroughs in energy development of this century," Conrad begins. "Now an invention is in development which can soon heat an entire home for years at a time without power lines, power automobiles and airplanes, run factories and pump water across vast acres of land and give the American people freedom from the yoke of fossil fuel dependence. Its name: the Stewart Energy Cycle.
"There is a good reason that Stewart Energy Systems is telling its story direct to the public.
The reason is harassment of its development by various bureaucrats and regulatory agencies is continuing. The only reason we have an energy shortage itself is that it is probably the greatest fraud that's ever been perpetrated on humanity ... the grave shortage exists because bureaucrats and oil giants have perpetrated the myth that we have to exist on oil."