Cover Story: Pipe Schemes

For decades, truckers have hauled cargo on the nation's highways with little regulation on how much pollution their rigs puff into the atmosphere. In December 2000, during Bill Clinton's final days in the White House, the Environmental Protection Agency decided that needed to change. The EPA created a new rule requiring diesel engines built after Jan. 1, 2010, to have cleaner exhaust. Nitrogen-oxide emissions were to be cut by as much as 95 percent.

The new rule sent engine makers scrambling for a fix. And one Seattle-area company seemed to have it.

Kirkland-based Integrated Fuel Technologies, started by a former real-estate developer named Robert Firebaugh, purportedly had developed an effective new catalytic converter system which broke down nitrogen oxides into separate (and harmless) nitrogen and oxygen molecules.

With the engine industry under the gun, and truckers hoping to avoid an extensive retrofit of their vehicles when they replaced the engines, Firebaugh's idea was "a bright spot," says Jay Thompson, president of a consulting firm in Denver called Transportation Business Associates. The journal Science News announced the invention as a big step forward in cleaning up diesel emissions. And Integrated received expressions of interest from Bellevue-based PACCAR, the third-biggest truck manufacturer in the world.

But the converter that could rescue the truckers is now being choked by litigation. Firebaugh's investors, many of them a close-knit group of Mormons, have accused him of ripping them off. They say he lured them in with half-truths, developed a design that was unworkable, and diverted some of their money to hair-loss treatments, a lakefront house in Medina for his mistress, and trips to Las Vegas.

As they've pursued their claims, the investors have discovered that they're by no means the first to feel duped by Firebaugh. The Seattle entrepreneur has more than a dozen people, including old business partners, landowners, and a former lawyer, after him for more than a million dollars in deals dating back to 2000.

Firebaugh was pushed out of Integrated last year by the company's board of directors. Engineers and contractors who worked with him say they've now successfully built the system that Firebaugh had claimed he could make. But Firebaugh insists he alone owns the rights to the system, called DeNOx. In current litigation over control of the company, he argues that greedy investors are trying to take over his company and steal his invention, while the investors say the system wasn't fully developed until they got the thieving Firebaugh out of the way. The two sides have launched competing lawsuits in King County Superior Court, but the outcome of the battle already appears to be a lose-lose, as it prevents all parties from capitalizing on a huge opportunity.

Sitting in his attorney's Lynnwood office, clad in a Disney California Adventure windbreaker, Firebaugh says: "I think it's a tragedy, or a travesty." It may well be both.

The Integrated saga starts with an oddity: a real-estate developer suddenly jumping into the diesel business. In 2006, Firebaugh was working on several land deals in and around Kellogg, Idaho—site of the Silver Mountain ski resort, home of the world's longest single-trip gondola. It was in Idaho that Firebaugh met a fellow Idaho deal-maker named Barry Sadler.

Sadler also happened to own a Texas-based diesel-engine maker called Dr. Performance, which he was looking to unload. One late winter day in 2006, while the two men were discussing their various business ventures, Firebaugh floated the idea of buying the business, Sadler recalls. The two flew to Texas together, where Firebaugh got a crash course in the diesel industry. He learned that making diesel engines run better was a promising business: In addition to the EPA's new emissions standards, truck owners were looking for better fuel mileage. Sadler says Firebaugh saw the potential. "He sniffs money out like a dog," he says.

In Texas, Firebaugh started looking for an investor to help him buy Dr. Performance, and came across Kenny Laughlin, a venture capitalist with a pronounced Texas twang. Speaking from Texas, Laughlin says he gave Firebaugh $200,000 to get Integrated off the ground in exchange for a 5 percent stake, assuming the company would buy Dr. Performance as a subsidiary.

Laughlin was named a co-signer on the bank account Firebaugh opened with the money. Not long after he wrote the initial check, Laughlin says, he looked at the bank statements and found expenditures totaling $168,000. Among the expenses was a trip to Las Vegas and a new car, he claims.

Laughlin refused to have any further dealings with Firebaugh. (He also went ahead and bought Dr. Performance himself.) This past August he sued Firebaugh for the $168,000 in King County Superior Court.

Firebaugh denies misspending the money. In his version of the story, he skips over all that. He says that after entertaining the idea of buying the Texas company, his college classes in chemistry and physics kicked in and he started dreaming up his own ideas for reducing emissions. "I started to think this stuff up, as it were," he explains.

Firebaugh had fastened onto a big market. As the 11 million truck engines now on the road are replaced, they'll need to reduce to almost zero the amount of invisible, acid-rain-inducing, smog-creating nitrogen-oxide particles they belch into the air.