[LETTERHEAD OF DURLAND & COMPANY]
25 January 2000
Office of the Chief Accountant
US Securities & Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
VIA: FACSIMILE
RE: ENVIRONMENTAL REMEDIATION HOLDING CORP.
FILE NO. 0-17325
Gentlemen:
This firm has reviewed the Form 8-K filed 18 January 2000 by Environmental
Remediation Holding Corp., (the "Company"), to provide notice of our
resignation as the independent auditors for the Company. Our response to
this Form 8-K follows:
We hereby incorporate by reference our resignation letter dated 12 January
2000. See Exhibit 1 attached.
The claim in Part 4, paragraph 2 of the Form 8-K, which reported that the
Company has insufficient financial resources to commence and complete the
Fiscal 1999 audit may be misleading. The Company has available a Line of
Credit from a related party under common control which has not been fully
utilized. Our current understanding is that approximately $2,000,000
remains available for use by the Company. New management did not provide
nor discuss with this firm any information or documentation underlying new
management's assertion that the Company is in default under the provisions
of the Line of Credit. This firm's review, as non-attorneys, of the
Securities Purchase Agreement, ("SPA"), and incorporated Senior Secured
8.00% Exchangeable Promissory Note, ("SSEPN"), indicates that, contrary to
the December Form 8-K, the only Event of Default under Section 5 of the
SSEPN available to the related party under common control issuer of the
SSEPN would have to be caused by the Company's new management which also
controls the issuer.
In Part 4, paragraph 4 of the Form 8-K the company reported that the Board
of Directors discovered, sometime after 3 August 1999, that the financial
records of the Company for periods prior to the change of control were, in
many cases, incomplete and inaccurate. This claim may also be misleading.
The Company's records were in good order when we completed our audit of the
financial statements at 30 September 1998. This firm believes that both
SEC rules and professional accounting standards obligate the Company's
management to provide the Company's independent auditors the documentation
supporting the conclusion that the Company's records are insufficient to
permit the Fiscal 1999 audit to commence prior to the filing of the
December Form 8-K which made that assertion. No documentation supporting
this assertion was provided to this firm either prior to that filing nor to
the date of our resignation. This firm believes that protection of the
shareholders of the Company demands a review by independent Certified
Public Accountants of the documentation upon which management relied upon
to conclude that the Company's records cannot be audited.
We strongly object to the statement in Part 4, paragraph 4 of the Form 8-K
that the Company would have dismissed this firm as the Company's
independent auditors. Although the Company has the right to dismiss any
independent audit firm at anytime they wish, the inference by the statement
made is that the dismissal would have been for cause. Such statement is
highly speculative, contrary to the full information provided to the new
management prior to their taking control of the Company and completely
contrary to the actions as taken by the new management of the Company from
the date of the change of control, through the date of our resignation. No
specific information or documents have been provided to this firm to
support this conclusion, and again, that which has been provided to this
firm supports an opposite conclusion.
This firm suggests that the misrepresentations made in the December Form 8-
K are motivated by new management's desire to not draw on the Line of
Credit issued by a related party under common control.
In Part 4, paragraph 5 of the Form 8-K management asserts that this firm
did not respond to requests for information and documentation during the
period from the change in control in August 1999 to date. Without waiver
of the position that this firm was not obligated to provide information or
documentation until its past due statements for professional fees were
paid, this firm did provide all requested information and documentation in
this firms possession within 48 hours of receipt of the request where
possible.
In Part 4, paragraph 5 management is asserting that this firm did not
consider the system of internal control in the audit of the Company, or
provide the Company's then Board of Directors with correspondence regarding
our consideration of the Company's system of internal control subsequent to
the audit completion. This firm knows of no information which justifies
the claim by new management in the December Form 8-K that the Company's
financial records cannot be audited. The consideration of internal control
during the financial statement audit process is solely for the purpose of
the audit firm determining its audit procedures and not to provide any
assurance concerning such system of internal control. This firm did
provide the Company's Board of Directors correspondence regarding our
consideration of the Company's system of internal control on December 29,
1997, February 12, 1999 and March 5, 1999.
This firm is not comfortable relying on representations of the new
management of the Company because of their failure to pay our past due
invoices of approximately $85,000 as agreed to by the new management, the
breach of the contractual obligation in our engagement letter for the audit
of fiscal 1999 which required the Company to pay this firm a retainer of
$30,000 prior to the commencement of the audit, management's failure to
continue to draw on the Line of Credit issued by a related party under
common control, the failure of the new management to provide this firm a
draft copy of the December Form 8-K and the opportunity to review the
documentation underlying management's assertions in the December Form 8-K
and the assertion in the December Form 8-K that the Board of Directors
determined that the financial records were in any case inaccurate,
incomplete and unauditable and the further assertion that the Board of
Directors determined not to attempt to borrow funds to complete the audit.
This firm was made aware prior to its resignation that the only two members
of the Board of Directors who were independent with regard to the company
under common control issuer of the SSEPN and SPA had no knowledge prior to
the filing of the December Form 8-K of these board actions. See Exhibits 2
and 3 attached which we incorporated by reference. As these are material
assertions within the December Form 8-K, this firm is not comfortable
relying on representations made in the past, currently or in the future by
the current management of the Company. This firm believes that the
December Form 8-K wrongfully made an adverse impact on the financial
condition of the Company.
Sincerely,
/S/ STEPHEN H. DURLAND
Stephen H. Durland, CPA
Durland & Company, CPAs, PA
cc: Andrew Lee, Esq.
Benjamin Lackey, Esq.
William Scott, Esq.
Stephen Weiss, Esq.
James Griffin, Esq.
Mr. Geoffrey Tirman
Enclosures
EXHIBIT 1
[LETTERHEAD OF DURLAND & COMPANY]
12 January 2000
Mr. Geoffrey Tirman
President, CEO & Chairman of the Board of Directors
Environmental Remediation Holding Corp.
16101 La Grande Drive, Suite 100
Little Rock, AR 72223
VIA: FACSIMILE
Dear Mr. Tirman:
Effective immediately, because of irreconcilable differences, this firm, of
its own volition, resigns as the independent auditor of Environmental
Remediation Holding Corp. The Company engaged this firm to complete the
Fiscal 1999 audit by engagement letter dated 8 September 1999.
Specifically, the reasons for our resignation include, but are not limited
to, the following:
1. The Company failed to supply a draft of the Company's Form 8-K filed
on 23 December 1999, nor advise this firm that it intended to file a Form
8-K, nor advise this firm that the Form 8-K had been filed. The Company
did not discuss the justification for the filing of the Form 8-K or cause
this firm, as independent auditor, to review the documentation underlying
the assertions in this Form 8-K. Further, the Company has refused our
specific request, made by letter dated 10 January 2000, to review the
documentation underlying the assertions in this Form 8-K, except at this
firm's expense.
2. The Company has not paid our outstanding fee statements of
approximately $85,000 for professional services rendered to the Company
during the last quarter of 1998 and first eight months of 1999. The
Company also has not paid the $30,000 retainer as it agreed in the
engagement letter as a pre-requisite to the commencement of the fiscal 1999
audit.
3. Current management accepted and continues to control the Company
without fulfillment of their affiliates' obligation to lend to the Company
a total of $4,000,000 under the Line of Credit attached as Exhibit A to the
Securities Purchase Agreement dated 3 August, 1999.
We hereby remind you of the Company's obligation to file a Form 8-K with
regard to this resignation.
Very truly yours,
/S/ STEPHEN H. DURLAND
Stephen H. Durland, CPA
Durland & Company, CPAs, P.A.
cc: Office of the Chief Accountant, US Securities and Exchange Commission
William Scott, Esq.
Andrew Lee, Esq.
Mintmire & Assoc.
Ms. Laura Kleber, CFO and Director
Mr. Mark Lee, Director
Mr. Brian Ladin, Director
Ms. Noreen Wilson, Director
Mr. James Callender, Director
EXHIBIT 2
[LETTERHEAD OF JAMES R. CALLENDER, SR.]
SENT VIA FACSIMILE TO: 501/821-6888
January 14, 2000
Geoffrey Tirman, Chairman of the Board, President and CEO
Environmental Remediation Holding Corp. ("ERHC")
18101 LaGrande Drive, Suite 100
Little Rock, AR 72223
Re: Notice of Resignation as an Officer and Director of ERHC, and as
Chief Executive Officer of STPETRO
Dear Mr. Tirman:
Based on actions that have been taken by the current management of ERHC, I
hereby tender my resignation, effectively immediately.
The most significant issues that constitute the basis of such resignation
is my disagreement with actions taken by the Board of Directors without my
knowledge or an opportunity to cast a vote on behalf of what is now the
minority shareholder group, or in my opinion the best interest of ERHC as a
company. These actions include the following:
1. ERHC filed a Form 8K recently in which it was stated that the Board of
Directors took action in deciding to file the Form 8K stating that
ERHC could not complete and file a Form 10K as required. Not only was
I not notified of a meeting of the Board, but also certainly I was not
given an opportunity to vote on what I consider an important issue.
2. I disagree with the decision not to file a Form 10K and believe that
this failure to file is detrimental to the other shareholders of ERHC.
3. When the Talisman Group took control ERHC management, the purpose of
the working capital line was to pay outstanding accounts payable and
to fund ongoing efforts, etc., on a $200,000.00 per month budget for
salaries and operating expenses. In this regard, such commitments
have not been met.
A number of people, including myself, were promised by you that their
verifiable past due salaries and expenses would be paid. This has not
happened. These employees spent their own personal monies and worked
without compensation to keep the company alive and functioning during
a period when no financing was available for salaries or expenses.
I was asked by you to continue with ERHC as an Officer and Director.
The terms and conditions negotiated with you on August 27, 1999 for my
services have not been honored including reimbursement for business
and travel expenses on your behalf, at your request.
Further, any number of other bills which were part of the transaction
have not been paid, including bills to our SEC counsel and auditors
who had continued to execute their responsibility to the Company
during this period of no financial support, and who also cooperated
with you and worked diligently to make your deal work and provide the
shareholders with the greatest possibility of gaining the benefit of
their investment. When the old board voted on your offer, the Company
was on the verge of bankruptcy. We saw your offer as the only
potentially viable one that met the required time frame for the
Company and its shareholders. If we had known that you did not intend
to meet your financial commitments, I am sure the old board would have
felt that bankruptcy or to seek alternate financing would have been
the better option. Further, I believe that your failure to meet your
commitments is a breach of the agreement under which you were issued
stock.
4. Since I have not been privileged to the planning, strategy, or
decision making process, I do not know the real management motivation
for recent actions taken in regard to Sao Tome and Principe. These
actions, which resulted in a public news release by the government of
D.R.S.T.P. announcing that they were canceling the contract and
partnership with ERHC, may very well be justifiable by ERHC
management, however, without public reporting (i.e., a filing of Form
10-K), the only public information out there is that what was released
by the D.R.S.T.P. government.
This lack of reporting has created much concern amongst shareholders
and investors, and in my opinion is detrimental to the position of the
minority shareholders and note holders.
All of these issues constitute some of the major reasons for me hereby
tendering my resignation, effective immediately.
Very truly yours,
/S/ JAMES R. CALLENDER, SR.
James R. Callender, Sr.
EXHIBIT 3
January 14, 2000
Mr. Geoffrey Tirman
President, CEO & Chairman of the Board of Directors
Environmental Remediation Holding Corp.
16101 La Grande Drive, Suite 100
Little Rock, AR 72223
Via: Facsimile
Dear Mr. Tirman:
Effective immediately, based on your request as the President, CEO and
Chairman of the Board of Directors and majority shareholder of
Environmental Remediation Holding Corporation, I am hereby resigning my
positions as an officer and Director of Environmental Remediation Holding
Corporation, and I further resign my position as a member of STPetro, that
being President of the General Assembly.
In resigning, I am confirming that I have not been involved with the
company on any decisions since I was placed on the Board of Directors, nor
have I attended any meetings of the Board of Directors nor voted or taken
any other actions, nor been asked to attend any such meetings or vote on
any actions. I was never involved in any of the business decisions, nor
did I participate in Board decisions, if any. As you will recall, I went
on the Board of Directors at your request, and I am resigning at your
request.
Very truly yours,
/S/ NOREEN WILSON
Noreen Wilson