In re ADMINISTRATIVE AND CEASE-AND-DESIST

 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 86239 / June 28, 2019 
 
ACCOUNTING AND AUDITING ENFORCEMENT 
Release No. 4055 / June 28, 2019 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-19224 
 ORDER INSTITUTING PUBLIC  
In the Matter of ADMINISTRATIVE AND CEASE-AND-DESIST 
 PROCEEDINGS PURSUANT TO SECTIONS 4C 
 AND 21C OF THE SECURITIES EXCHANGE 
R. GORDON JONES, CPA, ACT OF 1934 AND RULE 102(e) OF THE 
 COMMISSION’S RULES OF PRACTICE, 
 MAKING FINDINGS, AND IMPOSING 
Respondent. 
 
REMEDIAL SANCTIONS AND A CEASE- 
AND-DESIST ORDER                                              
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that public 
administrative and cease-and-desist proceedings be, and hereby are, instituted against R. Gordon 
Jones, CPA (“Respondent” or “Jones”) pursuant to Sections 4C
1
 and 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of 
Practice.
2
 
 
                                                 
1
 Section 4C provides, in relevant part, that:  
 
 The Commission may censure any person, or deny, temporarily or permanently, to any 
person the privilege of appearing or practicing before the Commission in any way, if that 
person is found . . . (3) to have willfully violated, or willfully aided and abetted the 
violation of, any provision of the securities laws or the rules and regulations issued 
thereunder. 
 
2
 Rule 102(e)(1)(iii) provides, in pertinent part, that: 
 
 The Commission may . . . deny, temporarily or permanently, the privilege of appearing or 
practicing before it . . . to any person who is found...to have willfully violated, or 
willfully aided and abetted the violation of any provision of the Federal securities laws or 
the rules and regulations thereunder. 

2 
II. 
 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purposes of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over him and the subject matter of these 
proceedings, which are admitted, and except as provided herein in Section V, Respondent consents 
to the entry of this Order Instituting Public Administrative and Cease-and-Desist Proceedings 
Pursuant to Sections 4C and 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the 
Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions and a Cease-
and-Desist Order (“Order”), as set forth below.   
 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
3
 that:  
 
Summary 
 
1. These proceedings arise out of Jones’s improper application of generally accepted 
accounting principles (“GAAP”) and participation in the preparation of materially misstated 
financial statements included in Blue Earth, Inc.’s (“Blue Earth”) periodic reports filed with the 
Commission for at least the reporting periods ended September 30, 2013 through December 31, 
2014.  Blue Earth used Jones, an accounting consultant, to make GAAP determinations and assist in 
preparing the company’s financial statements. 
 
2.  Jones failed to comply with GAAP in determining the accounting treatment of the 
company’s most significant transactions.  His actions resulted in the company improperly recording 
on its books and records and reporting in its financial statements a purported $44 million 
“Construction in Progress” asset, instead of allocating almost the entirety of that amount to 
goodwill.   The asset comprised 56%  and 51% of the company’s reported assets in the financial 
statements included in the company’s Form 10-Q for the third quarter of 2013, filed in November 
2013, and its 2013 Form 10-K, filed in March 2014, respectively.   
 
3. Jones further compounded the improper application of GAAP when he 
recharacterized the improperly classified “Construction in Progress” to “Property and Equipment” 
on the company’s balance sheets included in the company’s Forms 10-Q for the first and second 
quarters of 2014, filed in May and August 2014, respectively. 
 
4. Lastly, Jones failed to comply with GAAP in determining that a fully vested share-
based payment award issued pursuant to an employment contract, the cost of which, in this instance, 
                                                 
3
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding 
on any other person or entity in this or any other proceeding.   

3 
should have been immediately expensed, could be recorded as an asset and amortized over three 
years.  This resulted in the company improperly recording on its books and records and reporting in 
its financial statements a purported $4.6 million asset that should have been expensed.  The 
improper accounting resulted in Blue Earth understating its expenses by approximately $4.3 million, 
which constituted a 43% understatement of its net income (loss) before taxes and of its net loss, in 
its financial statements included in the Form 10-Q for the first quarter of 2014, and a 10% 
understatement of its net income (loss) before taxes, a 9.4% understatement of its net loss and 3.4% 
overstatements of assets in the financial statements included in the company’s Form 10-K for the 
year ending December 31, 2014.  
 
5. As a result, Jones knowingly generated misstated books, records and accounts for 
Blue Earth.  Jones also aided and abetted and caused Blue Earth’s failure to make and keep books, 
records, and accounts which fairly and accurately reflected the company’s transactions, to maintain 
a system of internal accounting controls, and to file accurate periodic reports with the Commission.   
 
Respondent 
 
6. R. Gordon Jones, age 64, resides in Farmington, Utah.  Jones has been licensed as 
a Certified Public Accountant (“CPA”) in the State of Utah since June 1980.  He was licensed as a 
CPA in Oklahoma from December 1995 until June 2001, at which time his license was cancelled 
at his request.  During the relevant period, he provided accounting services to public and private 
companies, including making accounting determinations and preparing financial statements in 
accordance with GAAP.    
 
 On May 4, 2001, the Commission issued a consent order against Jones pursuant to Rule 
102(e)(1)(ii) of the Commission’s Rules of Practice which denied him the privilege of appearing or 
practicing before the Commission as an accountant based on his failure to perform an independent 
audit according to the Generally Accepted Auditing Standards, with a right to apply for 
reinstatement after three years.  In the Matter of R. Gordon Jones, CPA and Mark F. Jensen, Ex. 
Act Rel. No. 44265 (May 4, 2001) (“2001 SEC Order”).  In 2015, the U.S. District Court for the 
District of Utah found in a contempt proceeding that Jones had violated the 2001 SEC Order and 
ordered him to comply with the 2001 SEC Order and disgorge $600,000 in fees associated with 
prohibited work he engaged in after entry of the Order, including fees earned from Blue Earth 
through mid-2012. 
    
Relevant Entity 
 
7. Blue Earth, Inc., a company incorporated in Nevada and  headquartered in 
Henderson, Nevada during the relevant period, purported to be a comprehensive provider of 
renewable and energy efficient services for small and medium-sized commercial and industrial 
facilities.  During the relevant period up to August 28, 2014, the company had a class of common 
stock registered with the Commission pursuant to Exchange Act Section 12(g) which was quoted 
on the OTC Bulletin Board.  Effective August 28, 2014, the company registered its common stock 
with the Commission pursuant to Section 12(b) of the Exchange Act, and the stock was listed on 
the NASDAQ Capital Market.  On March 21, 2016, Blue Earth filed for Chapter 11 bankruptcy.  

4 
The NASDAQ suspended trading in Blue Earth’s common stock on March 28, 2016 and then 
delisted the stock effective April 18, 2016.  Blue Earth filed with the Commission a Form 15 
terminating the registration of its common stock under Section 12(g) of the Exchange Act on 
August 1, 2016 and a Form 15 suspending its periodic reporting obligations under Section 15(d) of 
the Exchange Act on January 4, 2017.   
 
$44 Million “Construction in Progress” Asset  
 
8. Since 2010, Jones, a contract accountant, had prepared Blue Earth’s financial 
statements and made all GAAP determinations for the company, with limited substantive review 
by others in the company.  During the relevant period, Jones assisted the company in devising and 
maintaining the company’s internal accounting controls.   
 
9. On July 15, 2013, Blue Earth acquired a subsidiary it eventually renamed Blue 
Earth CHP (“BE CHP”).
4
  Through BE CHP, Blue Earth intended to enter into agreements with 
customers pursuant to which Blue Earth would develop, build, own, and operate combined heat 
and power (“CHP”) plants on land leased from the customer.  The plants would generate steam and 
electricity for the customer at below market rates, and Blue Earth would sell the excess electricity 
to the local utility.  Blue Earth paid for BE CHP with 15,500,000 shares of restricted company 
stock.  To determine the purchase price, the company multiplied the number of shares transferred 
by the share price resulting in $44,035,500.  
 
10. Shortly after the acquisition, BE CHP entered into seven non-binding term sheets 
with a major meat processing company.  At the insistence of the meat processing company, the 
term sheets expressly stated that they were non-binding.  The meat processing company would be 
bound only when the parties signed a “definitive agreement” for each facility, meaning: (i) a 
ground lease allowing Blue Earth access to the premises for purposes of constructing and operating 
the plant and (ii) a power purchase agreement obligating BE CHP to sell, and meat processing 
company to buy, steam and electricity at a set price.  No such contract was signed until August 
2014, when Blue Earth and the meat processing company executed a definitive agreement for one 
plant.  Blue Earth and the customer signed a definitive agreement for a second, smaller plant in 
December 2014.  Definitive agreements were not executed for any other plants.   
 
11. The GAAP provision governing accounting for business combinations, Accounting 
Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), generally requires the 
accounting acquirer to: (a) determine the purchase price which, in the case of a stock-for-stock 
acquisition is the fair market value of the shares transferred by the acquirer (unless the acquiree’s 
share price is more reliably measured); (b) identify all assets acquired, including intangible assets, 
and liabilities assumed; (c) determine the fair value of each such asset and liability; (d) allocate the 
purchase price to each identified asset and liability; and (e) allocate the residual to goodwill.  
                                                 
4
 Blue Earth initially acquired and combined two affiliated private entities to form BE CHP.  BE 
CHP is used herein to refer to the pre-merger entities and the single post-merger subsidiary into 
which they were combined. 

5 
 
12. Applying ASC 805 to its acquisition of BE CHP, Blue Earth should have identified 
all the assets acquired, including any intangible assets; determined the fair value of those assets; 
and then allocated the purchase price to the acquired assets, liabilities, and, if there was any 
residual, to goodwill.   
 
13. Jones knew the explicitly set forth requirements of ASC 805, but he deviated from 
them in several respects in accounting for the acquisition during the third quarter of 2013.  First, 
Jones took the position that, because BE CHP had no customer base or revenues at the time Blue 
Earth acquired it, it could have no goodwill.  Accordingly, Jones concluded that no portion of the 
$44 million could be allocated to goodwill.  Second, he had the entire purchase price recorded as 
an asset he named “Construction in Progress”, with no portion of the purchase price allocated to 
the immaterial tangible assets and liabilities.  Third, Jones did not determine whether Blue Earth 
obtained any identifiable intangible assets in the acquisition.  Fourth, Jones did not obtain a fair 
value of any identifiable intangible asset prior to his having the entire $44 million recorded on Blue 
Earth’s books as “Construction in Progress.” 
 
14. After the asset was booked in the company’s internal records, Jones sought from 
the company’s Chief Financial Officer (“CFO”) support for the $44 million “Construction in 
Progress” asset in connection with the year-end audit.   
 
15. In October 2013, the CFO provided to Jones a discounted cash flow (the “October 
2013 DCF”) the CFO had prepared which purportedly supported the $44 million “Construction in 
Progress” asset valuation.  It purported to be a DCF of the cash flows anticipated from constructing 
and operating non-existent and speculative CHP plants at seven of the meat processing company’s 
sites and from the sale of steam and electricity to the facilities and local utility companies over a 
more than 10-year period.  The DCF was based on two assumptions: (a) that definitive agreements 
existed in relation to all seven sites; and (b) that full financing was available to BE CHP to 
construct and operate the seven plants.  Neither assumption was based in fact.   
 
16. Jones knew that the October 2013 DCF purported to value the equity cash flows of 
the BE CHP enterprise, and not any discrete asset or assets of the acquired business.  He knew 
from the face of the October 2013 DCF that it was based on cash flows from CHP plants at seven 
sites for which definitive agreements had not been signed.  Nonetheless, the company provided the 
October 2013 DCF to the auditor in connection with the year-end audit.  Jones made additional 
inquiries about the status of the contracts prior to Blue Earth’s filing of its 2013 Form 10-K with 
the Commission in March 2014, and he learned that definitive agreements still were not signed for 
any site.   
 
17. Despite knowing all of this, Jones proceeded to assist in the preparation of financial 
statements included in the third quarter Form 10-Q filed with the Commission in November 2013 
and fiscal year 2013 Form 10-K filed in March 2014 that listed the $44 million “Construction in 
Progress” asset under “Other Assets” on the balance sheet and allocated nothing to goodwill.  The 
$44 million “Construction in Progress” asset represented 56% and 51% of Blue Earth’s total assets 
on its balance sheet for the reporting period ended September 30, 2013 and December 31, 2013, 

6 
respectively.   
 
18. In the first and second quarters of 2014, Jones improperly recharacterized the $44 
million “Construction in Progress” asset originally under “Other Assets” as “Construction in 
Progress” under “Property and Equipment” on the company’s books and records and on the 
balance sheet of the company’s financial statements reported with the Forms 10-Q filed in May 
and August 2014.       
 
Improper Capitalization of Compensation Expense 
 
19. In February 2014, Blue Earth hired an individual to run its capital formation 
subsidiary pursuant to a three-year employment agreement for a salary of $120,000 per year.  At 
the same time, Blue Earth separately issued to the individual 1,725,000 shares of Blue Earth 
restricted common stock, with no vesting schedule, valued at approximately $4.6 million.  The 
value of the shares should have been expensed in the quarter they were issued as a compensation 
expense under ASC 718 Compensation — Stock Compensation (“ASC 718”).  Instead, Blue Earth 
recorded the $4.6 million as an asset, capitalized it, and amortized it over three years. 
    
20. The shares were issued to the individual pursuant to a so-called “Sale of Goodwill” 
agreement under which Blue Earth purported to purchase the executive’s “Seller’s Goodwill” 
which included, among other things, an agreement that the individual share information about 
certain of his relationships, recommend Blue Earth to his contacts in the energy efficiency and 
clean tech industry, and enter into an employment agreement with Blue Earth.  Under the “Sale of 
Goodwill” agreement, Blue Earth issued the shares to the individual upon the execution of the 
agreement.  There were no conditions to the individual receiving the shares, nor was there any 
vesting period.       
 
21. Although it was characterized as a purchase of “Seller’s Goodwill,” the purpose of 
the transaction was to secure the services of the individual.  The value Blue Earth derived from the 
transaction was the individual’s services, namely the executive’s contacts within the industry and 
his potential use of that information to raise funds for Blue Earth.     
 
22. Under ASC 718, the $4.6 million fair value of the shares issued should have been 
treated as stock compensation.  As stock compensation, without a vesting period, the $4.6 million 
share payment from Blue Earth to the individual should have expensed in the period it was made, 
instead of being capitalized as an asset and amortized over three years.   
 
23. Jones, who was charged with determining the appropriate accounting treatment 
under GAAP, knew the facts set forth in Paragraph 21.  However, instead of recognizing the $4.6 
million expense in the year incurred, Jones improperly had it recorded as an asset which Jones 
determined should be amortized over three years.   
 
24. Jones also proceeded to assist in the preparation of financial statements included in 
the Forms 10-Q filed with the Commission in May, August, and November 2014 and in the 2014 
Form 10-K filed in March 2015 that listed the asset, reduced to nearly $3.2 million through 

7 
amortization.  In the financial statements included in the Form 10-Q for the first quarter of 2014, 
this accounting error resulted in Blue Earth understating its expenses by approximately $4.3 
million, which constituted a 43% understatement of its net income (loss) before taxes and of its net 
loss.  In the financial statements included in the 2014 Form 10-K, this resulted in a Blue Earth 
understating its expenses by nearly $3.2 million, which constituted a 10% understatement of its net 
income (loss) before taxes and 9.4% understatement of its net loss, and overstatement of its assets 
by 3.1%.  
 
25. In February 2016, the company restated its financial statements for the year ending 
December 31, 2014, after concluding that the $4.6 million originally recorded as an asset should 
have been expensed in the quarter during which it was paid. 
 
Violations 
 
26. Section 13(b)(5) of the Exchange Act provides that no person shall knowingly 
falsify any book, record, or account subject to Section 13(b)(2)(A).  Rule 13b2-1 under the 
Exchange Act provides that no person shall, directly or indirectly, falsify or cause to be falsified 
any book, record or account subject to Section 13(b)(2)(A). 
 
27. As a result of Jones’s conduct described above, certain assets and expenses were 
misrecorded on Blue Earth’s books, records, and accounts.  Jones willfully violated Section 
13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder by, directly or indirectly, knowingly 
falsifying Blue Earth’s books, records, and accounts.  
 
28. Section 13(b)(2)(A) of the Exchange Act requires issuers with a class of securities 
registered under Exchange Act Section 12 to make and keep books, records, and accounts which in 
reasonable detail accurately and fairly reflect the transactions and dispositions of their assets.  
Section 13(b)(2)(B) of the Exchange Act requires issuers with a class of securities registered under 
Exchange Act Section 12 to devise and maintain a system of internal accounting controls sufficient 
to provide reasonable assurances that transactions are recorded as necessary to permit preparation 
of financial statements in conformity with GAAP. 
 
29. Blue Earth violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act by 
failing to keep books, records and accounts that accurately and fairly reflected the above-described 
transactions and failed to maintain a system of internal accounting controls.  Jones improperly 
applied GAAP to the above-described transactions, as a result of which assets and expenses were 
misrecorded on Blue Earth’s books, records, and accounts.  Jones knew, or was reckless in not 
knowing, that by engaging in the conduct described above, he provided substantial assistance to 
Blue Earth in its violation of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.  As a 
result, Jones willfully aided and abetted and caused Blue Earth’s violations of Sections 13(b)(2)(A) 
and 13(b)(2)(B) of the Exchange Act.   
 
30. Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder 
require issuers with a class of securities registered under Section 12 of the Exchange Act to file 
quarterly and annual reports with the Commission and to keep this information current. The 

8 
obligation to file such reports embodies the requirement that they be true and correct.  See, e.g., 
SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978). 
 
31. Blue Earth included materially misstated financial statements in its quarterly and 
annual reports for periods ended September 30, 2013 through December 31, 2014 in violation of 
Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.  The materially 
misstated financials resulted from Jones improperly applying GAAP to the above-described 
transactions.  Jones knew, or was reckless in not knowing, that by engaging in the conduct 
described above, he provided substantial assistance to Blue Earth in its violation of Section 13(a) 
of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.  As a result, Jones willfully 
aided and abetted and caused Blue Earth’s violations of Section 13(a) and Rules 12b-20, 13a-1 and 
13a-13 thereunder. 
 
Findings 
 
 Based on the foregoing, the Commission finds that Jones: (a) willfully violated Section 
13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder; and (b) willfully aided and abetted and 
caused Blue Earth’s violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange 
Act, and Rules 12b-20, 13a-1, and 13a-13 promulgated thereunder. 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Jones’s Offer. 
 
 Accordingly, it is hereby ORDERED, effective immediately, that: 
 
 A. Jones shall cease and desist from committing or causing any violations of and any 
future violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act and 
Rules 12b-20, 13a-1, 13a-13, and 13b2-1 promulgated thereunder.   
 
 B. Jones be, and hereby is, denied the privilege of appearing or practicing before the 
Commission as an accountant.   
 
 C. Jones shall, within 10 days of the entry of this Order, pay a civil money 
penalty in the amount of $70,000 to the Securities and Exchange Commission for transfer to 
the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If 
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.   
 
Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 

9 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK  73169 
 
Payments by check or money order must be accompanied by a cover letter identifying R. 
Gordon Jones as a Respondent in these proceedings, and the file number of these proceedings; a 
copy of the cover letter and check or money order must be sent to Carolyn M. Welshhans, Division 
of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.   
 
 D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes.  To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
Action, he shall not argue that he is entitled to, nor shall he benefit by, offset or reduction of any 
award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a 
Penalty Offset, Respondent agrees that he shall, within 30 days after entry of a final order granting 
the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 
Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 
an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 
private damages action brought against Respondent by or on behalf of one or more investors based 
on substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
 
V. 
 
It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 
523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by 
Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 
amounts due by Respondent under this Order or any other judgment, order, consent order, decree  
 
 
 
 
 
 

10 
 
or settlement agreement entered in connection with this proceeding, is a debt for the violation by 
Respondent of the federal securities laws or any regulation or order issued under such laws, as set 
forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19). 
 
 By the Commission. 
 
 
Vanessa A. Countryman 
Secretary 
 
 
 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 86239 / June 28, 2019 

 

ACCOUNTING AND AUDITING ENFORCEMENT 

Release No. 4055 / June 28, 2019 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-19224 

 ORDER INSTITUTING PUBLIC  

In the Matter of ADMINISTRATIVE AND CEASE-AND-DESIST 

 PROCEEDINGS PURSUANT TO SECTIONS 4C 

 AND 21C OF THE SECURITIES EXCHANGE 

R. GORDON JONES, CPA, ACT OF 1934 AND RULE 102(e) OF THE 

 COMMISSION’S RULES OF PRACTICE, 

 MAKING FINDINGS, AND IMPOSING 

Respondent. 

 

REMEDIAL SANCTIONS AND A CEASE- 

AND-DESIST ORDER                                              

 

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that public 

administrative and cease-and-desist proceedings be, and hereby are, instituted against R. Gordon 

Jones, CPA (“Respondent” or “Jones”) pursuant to Sections 4C1 and 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of 

Practice.2 

 

                                                 
1 Section 4C provides, in relevant part, that:  

 

 The Commission may censure any person, or deny, temporarily or permanently, to any 

person the privilege of appearing or practicing before the Commission in any way, if that 

person is found . . . (3) to have willfully violated, or willfully aided and abetted the 

violation of, any provision of the securities laws or the rules and regulations issued 

thereunder. 

 
2 Rule 102(e)(1)(iii) provides, in pertinent part, that: 

 

 The Commission may . . . deny, temporarily or permanently, the privilege of appearing or 

practicing before it . . . to any person who is found…to have willfully violated, or 

willfully aided and abetted the violation of any provision of the Federal securities laws or 

the rules and regulations thereunder. 



2 

II. 

 

In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purposes of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over him and the subject matter of these 

proceedings, which are admitted, and except as provided herein in Section V, Respondent consents 

to the entry of this Order Instituting Public Administrative and Cease-and-Desist Proceedings 

Pursuant to Sections 4C and 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the 

Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions and a Cease-

and-Desist Order (“Order”), as set forth below.   

 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds3 that:  

 

Summary 

 

1. These proceedings arise out of Jones’s improper application of generally accepted 

accounting principles (“GAAP”) and participation in the preparation of materially misstated 

financial statements included in Blue Earth, Inc.’s (“Blue Earth”) periodic reports filed with the 

Commission for at least the reporting periods ended September 30, 2013 through December 31, 

2014.  Blue Earth used Jones, an accounting consultant, to make GAAP determinations and assist in 

preparing the company’s financial statements. 

 

2.  Jones failed to comply with GAAP in determining the accounting treatment of the 

company’s most significant transactions.  His actions resulted in the company improperly recording 

on its books and records and reporting in its financial statements a purported $44 million 

“Construction in Progress” asset, instead of allocating almost the entirety of that amount to 

goodwill.   The asset comprised 56%  and 51% of the company’s reported assets in the financial 

statements included in the company’s Form 10-Q for the third quarter of 2013, filed in November 

2013, and its 2013 Form 10-K, filed in March 2014, respectively.   

 

3. Jones further compounded the improper application of GAAP when he 

recharacterized the improperly classified “Construction in Progress” to “Property and Equipment” 

on the company’s balance sheets included in the company’s Forms 10-Q for the first and second 

quarters of 2014, filed in May and August 2014, respectively. 

 

4. Lastly, Jones failed to comply with GAAP in determining that a fully vested share-

based payment award issued pursuant to an employment contract, the cost of which, in this instance, 

                                                 
3  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding 

on any other person or entity in this or any other proceeding.   



3 

should have been immediately expensed, could be recorded as an asset and amortized over three 

years.  This resulted in the company improperly recording on its books and records and reporting in 

its financial statements a purported $4.6 million asset that should have been expensed.  The 

improper accounting resulted in Blue Earth understating its expenses by approximately $4.3 million, 

which constituted a 43% understatement of its net income (loss) before taxes and of its net loss, in 

its financial statements included in the Form 10-Q for the first quarter of 2014, and a 10% 

understatement of its net income (loss) before taxes, a 9.4% understatement of its net loss and 3.4% 

overstatements of assets in the financial statements included in the company’s Form 10-K for the 

year ending December 31, 2014.  

 

5. As a result, Jones knowingly generated misstated books, records and accounts for 

Blue Earth.  Jones also aided and abetted and caused Blue Earth’s failure to make and keep books, 

records, and accounts which fairly and accurately reflected the company’s transactions, to maintain 

a system of internal accounting controls, and to file accurate periodic reports with the Commission.   

 

Respondent 

 

6. R. Gordon Jones, age 64, resides in Farmington, Utah.  Jones has been licensed as 

a Certified Public Accountant (“CPA”) in the State of Utah since June 1980.  He was licensed as a 

CPA in Oklahoma from December 1995 until June 2001, at which time his license was cancelled 

at his request.  During the relevant period, he provided accounting services to public and private 

companies, including making accounting determinations and preparing financial statements in 

accordance with GAAP.    

 

 On May 4, 2001, the Commission issued a consent order against Jones pursuant to Rule 

102(e)(1)(ii) of the Commission’s Rules of Practice which denied him the privilege of appearing or 

practicing before the Commission as an accountant based on his failure to perform an independent 

audit according to the Generally Accepted Auditing Standards, with a right to apply for 

reinstatement after three years.  In the Matter of R. Gordon Jones, CPA and Mark F. Jensen, Ex. 

Act Rel. No. 44265 (May 4, 2001) (“2001 SEC Order”).  In 2015, the U.S. District Court for the 

District of Utah found in a contempt proceeding that Jones had violated the 2001 SEC Order and 

ordered him to comply with the 2001 SEC Order and disgorge $600,000 in fees associated with 

prohibited work he engaged in after entry of the Order, including fees earned from Blue Earth 

through mid-2012. 

    

Relevant Entity 

 

7. Blue Earth, Inc., a company incorporated in Nevada and  headquartered in 

Henderson, Nevada during the relevant period, purported to be a comprehensive provider of 

renewable and energy efficient services for small and medium-sized commercial and industrial 

facilities.  During the relevant period up to August 28, 2014, the company had a class of common 

stock registered with the Commission pursuant to Exchange Act Section 12(g) which was quoted 

on the OTC Bulletin Board.  Effective August 28, 2014, the company registered its common stock 

with the Commission pursuant to Section 12(b) of the Exchange Act, and the stock was listed on 

the NASDAQ Capital Market.  On March 21, 2016, Blue Earth filed for Chapter 11 bankruptcy.  



4 

The NASDAQ suspended trading in Blue Earth’s common stock on March 28, 2016 and then 

delisted the stock effective April 18, 2016.  Blue Earth filed with the Commission a Form 15 

terminating the registration of its common stock under Section 12(g) of the Exchange Act on 

August 1, 2016 and a Form 15 suspending its periodic reporting obligations under Section 15(d) of 

the Exchange Act on January 4, 2017.   

 

$44 Million “Construction in Progress” Asset  

 

8. Since 2010, Jones, a contract accountant, had prepared Blue Earth’s financial 

statements and made all GAAP determinations for the company, with limited substantive review 

by others in the company.  During the relevant period, Jones assisted the company in devising and 

maintaining the company’s internal accounting controls.   

 

9. On July 15, 2013, Blue Earth acquired a subsidiary it eventually renamed Blue 

Earth CHP (“BE CHP”).4  Through BE CHP, Blue Earth intended to enter into agreements with 

customers pursuant to which Blue Earth would develop, build, own, and operate combined heat 

and power (“CHP”) plants on land leased from the customer.  The plants would generate steam and 

electricity for the customer at below market rates, and Blue Earth would sell the excess electricity 

to the local utility.  Blue Earth paid for BE CHP with 15,500,000 shares of restricted company 

stock.  To determine the purchase price, the company multiplied the number of shares transferred 

by the share price resulting in $44,035,500.  

 

10. Shortly after the acquisition, BE CHP entered into seven non-binding term sheets 

with a major meat processing company.  At the insistence of the meat processing company, the 

term sheets expressly stated that they were non-binding.  The meat processing company would be 

bound only when the parties signed a “definitive agreement” for each facility, meaning: (i) a 

ground lease allowing Blue Earth access to the premises for purposes of constructing and operating 

the plant and (ii) a power purchase agreement obligating BE CHP to sell, and meat processing 

company to buy, steam and electricity at a set price.  No such contract was signed until August 

2014, when Blue Earth and the meat processing company executed a definitive agreement for one 

plant.  Blue Earth and the customer signed a definitive agreement for a second, smaller plant in 

December 2014.  Definitive agreements were not executed for any other plants.   

 

11. The GAAP provision governing accounting for business combinations, Accounting 

Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), generally requires the 

accounting acquirer to: (a) determine the purchase price which, in the case of a stock-for-stock 

acquisition is the fair market value of the shares transferred by the acquirer (unless the acquiree’s 

share price is more reliably measured); (b) identify all assets acquired, including intangible assets, 

and liabilities assumed; (c) determine the fair value of each such asset and liability; (d) allocate the 

purchase price to each identified asset and liability; and (e) allocate the residual to goodwill.  

                                                 
4 Blue Earth initially acquired and combined two affiliated private entities to form BE CHP.  BE 

CHP is used herein to refer to the pre-merger entities and the single post-merger subsidiary into 

which they were combined. 



5 

 

12. Applying ASC 805 to its acquisition of BE CHP, Blue Earth should have identified 

all the assets acquired, including any intangible assets; determined the fair value of those assets; 

and then allocated the purchase price to the acquired assets, liabilities, and, if there was any 

residual, to goodwill.   

 

13. Jones knew the explicitly set forth requirements of ASC 805, but he deviated from 

them in several respects in accounting for the acquisition during the third quarter of 2013.  First, 

Jones took the position that, because BE CHP had no customer base or revenues at the time Blue 

Earth acquired it, it could have no goodwill.  Accordingly, Jones concluded that no portion of the 

$44 million could be allocated to goodwill.  Second, he had the entire purchase price recorded as 

an asset he named “Construction in Progress”, with no portion of the purchase price allocated to 

the immaterial tangible assets and liabilities.  Third, Jones did not determine whether Blue Earth 

obtained any identifiable intangible assets in the acquisition.  Fourth, Jones did not obtain a fair 

value of any identifiable intangible asset prior to his having the entire $44 million recorded on Blue 

Earth’s books as “Construction in Progress.” 

 

14. After the asset was booked in the company’s internal records, Jones sought from 

the company’s Chief Financial Officer (“CFO”) support for the $44 million “Construction in 

Progress” asset in connection with the year-end audit.   

 

15. In October 2013, the CFO provided to Jones a discounted cash flow (the “October 

2013 DCF”) the CFO had prepared which purportedly supported the $44 million “Construction in 

Progress” asset valuation.  It purported to be a DCF of the cash flows anticipated from constructing 

and operating non-existent and speculative CHP plants at seven of the meat processing company’s 

sites and from the sale of steam and electricity to the facilities and local utility companies over a 

more than 10-year period.  The DCF was based on two assumptions: (a) that definitive agreements 

existed in relation to all seven sites; and (b) that full financing was available to BE CHP to 

construct and operate the seven plants.  Neither assumption was based in fact.   

 

16. Jones knew that the October 2013 DCF purported to value the equity cash flows of 

the BE CHP enterprise, and not any discrete asset or assets of the acquired business.  He knew 

from the face of the October 2013 DCF that it was based on cash flows from CHP plants at seven 

sites for which definitive agreements had not been signed.  Nonetheless, the company provided the 

October 2013 DCF to the auditor in connection with the year-end audit.  Jones made additional 

inquiries about the status of the contracts prior to Blue Earth’s filing of its 2013 Form 10-K with 

the Commission in March 2014, and he learned that definitive agreements still were not signed for 

any site.   

 

17. Despite knowing all of this, Jones proceeded to assist in the preparation of financial 

statements included in the third quarter Form 10-Q filed with the Commission in November 2013 

and fiscal year 2013 Form 10-K filed in March 2014 that listed the $44 million “Construction in 

Progress” asset under “Other Assets” on the balance sheet and allocated nothing to goodwill.  The 

$44 million “Construction in Progress” asset represented 56% and 51% of Blue Earth’s total assets 

on its balance sheet for the reporting period ended September 30, 2013 and December 31, 2013, 



6 

respectively.   

 

18. In the first and second quarters of 2014, Jones improperly recharacterized the $44 

million “Construction in Progress” asset originally under “Other Assets” as “Construction in 

Progress” under “Property and Equipment” on the company’s books and records and on the 

balance sheet of the company’s financial statements reported with the Forms 10-Q filed in May 

and August 2014.       

 

Improper Capitalization of Compensation Expense 

 

19. In February 2014, Blue Earth hired an individual to run its capital formation 

subsidiary pursuant to a three-year employment agreement for a salary of $120,000 per year.  At 

the same time, Blue Earth separately issued to the individual 1,725,000 shares of Blue Earth 

restricted common stock, with no vesting schedule, valued at approximately $4.6 million.  The 

value of the shares should have been expensed in the quarter they were issued as a compensation 

expense under ASC 718 Compensation — Stock Compensation (“ASC 718”).  Instead, Blue Earth 

recorded the $4.6 million as an asset, capitalized it, and amortized it over three years. 

    

20. The shares were issued to the individual pursuant to a so-called “Sale of Goodwill” 

agreement under which Blue Earth purported to purchase the executive’s “Seller’s Goodwill” 

which included, among other things, an agreement that the individual share information about 

certain of his relationships, recommend Blue Earth to his contacts in the energy efficiency and 

clean tech industry, and enter into an employment agreement with Blue Earth.  Under the “Sale of 

Goodwill” agreement, Blue Earth issued the shares to the individual upon the execution of the 

agreement.  There were no conditions to the individual receiving the shares, nor was there any 

vesting period.       

 

21. Although it was characterized as a purchase of “Seller’s Goodwill,” the purpose of 

the transaction was to secure the services of the individual.  The value Blue Earth derived from the 

transaction was the individual’s services, namely the executive’s contacts within the industry and 

his potential use of that information to raise funds for Blue Earth.     

 

22. Under ASC 718, the $4.6 million fair value of the shares issued should have been 

treated as stock compensation.  As stock compensation, without a vesting period, the $4.6 million 

share payment from Blue Earth to the individual should have expensed in the period it was made, 

instead of being capitalized as an asset and amortized over three years.   

 

23. Jones, who was charged with determining the appropriate accounting treatment 

under GAAP, knew the facts set forth in Paragraph 21.  However, instead of recognizing the $4.6 

million expense in the year incurred, Jones improperly had it recorded as an asset which Jones 

determined should be amortized over three years.   

 

24. Jones also proceeded to assist in the preparation of financial statements included in 

the Forms 10-Q filed with the Commission in May, August, and November 2014 and in the 2014 

Form 10-K filed in March 2015 that listed the asset, reduced to nearly $3.2 million through 



7 

amortization.  In the financial statements included in the Form 10-Q for the first quarter of 2014, 

this accounting error resulted in Blue Earth understating its expenses by approximately $4.3 

million, which constituted a 43% understatement of its net income (loss) before taxes and of its net 

loss.  In the financial statements included in the 2014 Form 10-K, this resulted in a Blue Earth 

understating its expenses by nearly $3.2 million, which constituted a 10% understatement of its net 

income (loss) before taxes and 9.4% understatement of its net loss, and overstatement of its assets 

by 3.1%.  

 

25. In February 2016, the company restated its financial statements for the year ending 

December 31, 2014, after concluding that the $4.6 million originally recorded as an asset should 

have been expensed in the quarter during which it was paid. 

 

Violations 

 

26. Section 13(b)(5) of the Exchange Act provides that no person shall knowingly 

falsify any book, record, or account subject to Section 13(b)(2)(A).  Rule 13b2-1 under the 

Exchange Act provides that no person shall, directly or indirectly, falsify or cause to be falsified 

any book, record or account subject to Section 13(b)(2)(A). 

 

27. As a result of Jones’s conduct described above, certain assets and expenses were 

misrecorded on Blue Earth’s books, records, and accounts.  Jones willfully violated Section 

13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder by, directly or indirectly, knowingly 

falsifying Blue Earth’s books, records, and accounts.  

 

28. Section 13(b)(2)(A) of the Exchange Act requires issuers with a class of securities 

registered under Exchange Act Section 12 to make and keep books, records, and accounts which in 

reasonable detail accurately and fairly reflect the transactions and dispositions of their assets.  

Section 13(b)(2)(B) of the Exchange Act requires issuers with a class of securities registered under 

Exchange Act Section 12 to devise and maintain a system of internal accounting controls sufficient 

to provide reasonable assurances that transactions are recorded as necessary to permit preparation 

of financial statements in conformity with GAAP. 

 

29. Blue Earth violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act by 

failing to keep books, records and accounts that accurately and fairly reflected the above-described 

transactions and failed to maintain a system of internal accounting controls.  Jones improperly 

applied GAAP to the above-described transactions, as a result of which assets and expenses were 

misrecorded on Blue Earth’s books, records, and accounts.  Jones knew, or was reckless in not 

knowing, that by engaging in the conduct described above, he provided substantial assistance to 

Blue Earth in its violation of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.  As a 

result, Jones willfully aided and abetted and caused Blue Earth’s violations of Sections 13(b)(2)(A) 

and 13(b)(2)(B) of the Exchange Act.   

 

30. Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder 

require issuers with a class of securities registered under Section 12 of the Exchange Act to file 

quarterly and annual reports with the Commission and to keep this information current. The 



8 

obligation to file such reports embodies the requirement that they be true and correct.  See, e.g., 

SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978). 

 

31. Blue Earth included materially misstated financial statements in its quarterly and 

annual reports for periods ended September 30, 2013 through December 31, 2014 in violation of 

Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.  The materially 

misstated financials resulted from Jones improperly applying GAAP to the above-described 

transactions.  Jones knew, or was reckless in not knowing, that by engaging in the conduct 

described above, he provided substantial assistance to Blue Earth in its violation of Section 13(a) 

of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.  As a result, Jones willfully 

aided and abetted and caused Blue Earth’s violations of Section 13(a) and Rules 12b-20, 13a-1 and 

13a-13 thereunder. 

 

Findings 

 

 Based on the foregoing, the Commission finds that Jones: (a) willfully violated Section 

13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder; and (b) willfully aided and abetted and 

caused Blue Earth’s violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange 

Act, and Rules 12b-20, 13a-1, and 13a-13 promulgated thereunder. 

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Jones’s Offer. 

 

 Accordingly, it is hereby ORDERED, effective immediately, that: 

 

 A. Jones shall cease and desist from committing or causing any violations of and any 

future violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act and 

Rules 12b-20, 13a-1, 13a-13, and 13b2-1 promulgated thereunder.   

 

 B. Jones be, and hereby is, denied the privilege of appearing or practicing before the 

Commission as an accountant.   

 

 C. Jones shall, within 10 days of the entry of this Order, pay a civil money 

penalty in the amount of $70,000 to the Securities and Exchange Commission for transfer to 

the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If 

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.   

 

Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 



9 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK  73169 

 

Payments by check or money order must be accompanied by a cover letter identifying R. 

Gordon Jones as a Respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to Carolyn M. Welshhans, Division 

of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.   

 

 D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes.  To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action, he shall not argue that he is entitled to, nor shall he benefit by, offset or reduction of any 

award of compensatory damages by the amount of any part of Respondent’s payment of a civil 

penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a 

Penalty Offset, Respondent agrees that he shall, within 30 days after entry of a final order granting 

the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 

Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 

an additional civil penalty and shall not be deemed to change the amount of the civil penalty 

imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 

private damages action brought against Respondent by or on behalf of one or more investors based 

on substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

 

V. 

 

It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 

523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by 

Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 

amounts due by Respondent under this Order or any other judgment, order, consent order, decree  

 

 

 

 

 

 

http://www.sec.gov/about/offices/ofm.htm


10 

 

or settlement agreement entered in connection with this proceeding, is a debt for the violation by 

Respondent of the federal securities laws or any regulation or order issued under such laws, as set 

forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19). 

 

 By the Commission. 

 

 

Vanessa A. Countryman 

Secretary