Davis/RSF's claim of forming a new investment group as of their April 2017 filing is intentionally misleading, and differs markedly from the historical record memorialized in their own IRS Form 990 tax filings.
Review of relevant IRS 990 filings for years 2001 - 2014 makes it abundantly clear that Davis and RSF have been operating a well coordinated investment group, with clear strategic intent, since at least 2001, when the partners accelerated their development activities around their Filigreen Farm venture. The catalyst was the unexpected death in January 2001 of Michael Arlen Davis' father, notorious AARP founder Leonard Davis. Leonard's sudden passing transformed his son M.A.D. overnight into an extremely wealthy man with a plan.
“Our family is partners with two others in a modest, diverse Biodynamic farm in Mendocino County, California..." Janet Jyll Johnstone, President of Canobie Films Foundation, wife of Michael Arlen Davis
"Then we went to Filigreen Farm and my mouth dropped and never has gone back into shape yet." Roseman Creek Ranch
Filigreen Farm is described by RSF (e.g. on Yggdrasil Land Foundation's website) as follows:
Five acres have been set aside for development as intensive horticultural teaching gardens. Anderson Creek, a major tributary of the Navarro River, bisects the farm and has, over the years, undergone extensive stream bank stabilization projects, serving as a training ground for other at-risk riparian lands. A Conservation Easement held by the Anderson Valley Land Trust further protects the property. In the future the farm will also provide environmental education opportunities and a farm intern training program. At present there is a long term lease in place with annual rent payments and an organizational support fee"
The Yggdrasil website underscores that the largest acreage is devoted to growing wine grapes with a relatively small amount of land allocated to activities related to "demonstration farming". Filigreen Farm wine is marketed under the Donkey and Goat label and retails for about $28 per bottle, so it must be good.
Ownership of the assets comprising Filigreen Farm are divided and shared in a manner similar to the manner seen at Cyanotech.
Parcels 1 and 2, according to Mendocino County records, are owned by Davis’ Skywords entity. Review of IRS 990 filings for Skywords indicates Davis acquired these parcels for $950K in 2007.
Under IRS rules, Davis is not allowed to enter into such transactions as he is a “disqualified person” due to his significant financial support of RSF - such transactions are treated as obvious conflicts of interest for both parties.
Parcels 10, 11, and 12 are the parcels occupying the business address of Filigreen Farm, #11800 Anderson Valley Way, Boonville CA 95415. At this address is the residence of Christopher Tebbutt, Filigreen’s resident landscape architect, caretaker, and manager of farming operations. The three #11800 parcels also appear to be the location of the “demonstration farm” portion of Filigreen, with landscaping praised by local critics and described within Yggdrasil’s literature as having the future potential to be used for educational purposes.
Chris Tebbutt's "Land and Place"
#11800 Anderson Valley Way is also the headquarters of Tebbutt’s “Land & Place” landscape design company which reportedly generates annual revenues of between $500K and $1M. Tebbutt and his “Land & Place” design company have long been an integral element in the development of Filigreen Farm. Yggdrasil’s 2001 IRS Form 990 states, “significant gifts were received to enable Yggdrasil to retain Land & Place, Inc. to begin the land, orchard, and farm restoration on the Boonville, CA property.”
We can reasonably assume Davis was the unnamed 2001 benefactor, and review of Davis’ Skywords 2014 IRS Form 990 reveals that Skywords (a registered 501(c)(3) entity) directly paid Tebbutt as a full-time employee $60,190 during 2014.
1800 Anderson Valley Way Partnership
Parcels 10, 11 and 12 are not owned by RSF/Yggdrasil, they are owned by an entity known as “11800 Anderson Valley Way Partnership” (“11800 AVWP”). Very little information has been found on 11800 AVWP. However, a brief announcement discovered in the online archives of the Anderson Valley Advertiser from 2010 reports that Davis/Skywords is the actual owner of 11800 Anderson Valley Way Partnership.
Why pay retail?
Parcels 3, 4, 5, 6, 7, 8, and 9 are the properties owned by RSF/Yggdrasil. Filigreen Farm LLC, the entity created by Davis/Ginungagap, rents this property from Yggdrasil under a 30 yr lease agreement. Review of Yggdrasil IRS Form 990 filings reveals “farmland lease revenue” indicating that the Davis-controlled Filigreen Farm, LLC pays Yggdrasil only $15,000 per year for use of the Yggdrasil-owned parcels.
Referencing the above satellite image, the leased Yggdrasil acreage is the property used as a vineyard supplying Davis’ Filigreen Farm wine-making operations. It is highly unlikely that other wine growers in Anderson Valley operate under a similarly low-price lease/land-cost arrangement. In any case, such lease agreement is also disallowed as Davis and the entities he controls are clearly “disqualified persons” with respect to transactions with RSF and the Yggdrasil entity it controls.
The "Big Bang"
As discussed previously, it should be painfully obvious to reasonable shareholders that the Davis and RSF Investment Group did not form as of April 2017, with their 13D amendment. Their claim of forming a new investment group as of this past April is intentionally misleading, and differs markedly from the factual history revealed in their own IRS form 990 filings. In fact, review of relevant IRS form 990 filings for years 2001 - 2014 makes it abundantly clear that Davis and RSF have been operating a well coordinated investment group, with clear strategic intent, since at least year 2001.
The catalyst that drove this group's formation was the sudden death of notorious AARP founder Leonard Davis in January 2001, The elder Davis' sudden passing transformed his son Michael Arlen Davis overnight into an extremely wealthy man on a mission.
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Yggdrasil was specifically chartered to receive land, and hold conservation easements. Yggdrasil reported acquiring its original Filigreen Farm related property in Mendocino county in lateDecember 2000, and commencing full operations in 2001. Davis created Ginungagap in 2004 (a predecessor entity was active during 2003) Davis then formed a taxable entity within Ginungagap called Filigreen Farm LLC, which immediately leased Yggdrasil’s Mendocino properties under a 30-year lease agreement.
Ginungagap and Yggdrasil were formed as closely related entities
That Davis and RSF created their respective tax exempt entities with the intention of having them closely collaborate is signaled by the names of their respective not-for-profit entities:“Ginungagap” and “Yggdrasil” are not random words, they are foundation elements within Norse mythology. Yggdrasil is the tree of life, an eternal green Ash tree, with branches that stretch out over all the world and extend up and above to the heavens. “Ginungagap” is what came before, the dark, lifeless void.
The Davis/RSF partnership began accumulating assets in the the early 2000s. Yggdrasil (RSF) acquired its first Filigreen Farm land parcels by 2001. Davis's Skywords acquired his initial block of Cyanotech public voting stock during 2002, and Davis joined the board in 2003. Ginungagap is the entity through which Davis has funded the development of Filigreen Farm.
The stream of uninterrupted charitable money Davis/Skywords pumped into Ginungagap during 2001- 2014 is summarized in the table below. It should be obvious to all but the conflicted and unreasonable that Davis is a significant donor to RSF and thus a "disqualified person" under IRS rules.
Alan York - Revered Pied Piper of Organic Wine
Evidence has been discovered that Davis obtained the assistance of Alan York in developing the vineyard properties he controls at Filigreen Farm. York was a revered organic wine-making consultant who, upon information and belief, resided at #11600 Anderson Valley Way until around the time of his death in 2013. York is known to have had a close working relationship with Filigreen’s resident caretaker and manager of operations, Christopher Tebbutt, due to their apprenticeships under Alan Chadwick, viewed as the father of organic farming in the United States (see below)
York’s reputation as a wine-making consultant includes credit for convincing the first wave of American vintners to adopt organic wine growing practices. In addition to his work developing Filigreen’s winemaking operations, York was a paid consultant for well-regarded vineyard owner/operators such as the Benzinger and Fetzer families. In addition, Sting (the rock star, not the retired pro wrestler) enlisted York to develop Il Palagio, Sting’s private organic wine estate in Tuscany (Italy).
Alan York is also known to have had a close working relationship with Filigreen’s resident caretaker and manager of operations, Christopher Tebbutt, due to their apprenticeships under Alan Chadwick, viewed as the father of organic farming in the United States.
York was also President of the Biodynamic Farming and Gardening Association around the time RSF organized Yggdrasil as a non-profit supporting organization for itself (RSF), the Biodynamic Farming and Gardening Association (Alan York), and Michael Fields Agricultural Institute (founded by Yggdrasil president/trustee Christopher Mann).
Filigreen Farm is a Taxable Entity?
At a minimum, it is surprising that Davis would tuck a commercial for-profit grape/wine venture below two levels of non-profit entities that he controls. Money flows down from Skywords, into Ginungagap, and then into Davis’ Filigreen Farm, LLC and RSF/Yggdrasil’s Filigreen Farm property. Because Davis’ Filigreen Farm, LLC is not, like the other entities, a nonprofit required to publicly disclose its tax filings, there is no visibility into its operations. At a minimum, however, it clearly benefits and gains competitive advantages from all the “nonprofit” activity occurring around it, with this prompting questions as to whether Davis has abused the intent and purpose of the 501(c)(3) tax-exemptions enjoyed by his and RSF’s related and commingled entities.
In addition to any of the tax and and other business/competitive advantages Davis may derive from the structure he has created with RSF around Filigreen Farm, Davis seems to have also developed the Mendocino County farm property as a tax-advantaged Northern California wine-country spiritual retreat for himself and his RSF partners/friends, managed and maintained, at least in part, with tax-exempt donations used to acquire/pay for the professional services of individuals such as Christopher Tebbutt and Alan York.
Michael Arlen Davis formed a close investment partnership with Rudolf Steiner Foundation in the early 2000s to acquire control of two valuable agricultural assets, one on the Kona-coast of the big island of Hawaii and the other in the beautiful wine country of Northern California. A key feature of the plan was to use a purpose-built network of 501(c)(3) private foundations to avoid public scrutiny, in addition to reducing the tax bills for both partners.
In their own IRS, SEC, and Nevada Court filings we can see abundant evidence of their concerted efforts to conceal the depth of their relationship, and to obscure the partners’ end objectives. For example, if Davis’ purposes are purely charitable, why has he retained the lion’s share of both assets within entities he controls, and why has he taken personal control over the operations of each property?
Moving past motive, Davis has egregiously violated basic SEC ownership reporting requirements at Cyanotech since 2003 and fundamental IRS self-dealing rules at Filigreen Farm. Davis is chairman of the board of a public company that appears to have secretly accumulated a voting control stake by “parking” shares with a strategic affiliate and concealed this fact by making incomplete and inaccurate Section 16 filings for more than a decade.
The result of the “parking” is two intermingled not-for-profit entities owning a 33% stake in an operating business in an apparent attempt to sidestep Section 4943 prohibitions on one not-for-profit entity owning more than a 20% stake in such an entity. For shareholders to truly understand the impact of Davis and RSF on our Cyanotech investments, we must have an appreciation for Davis’ long-term, very close and strategic relationship with RSF.
Davis did not decide that he needed a tax deduction in 2010 and thereby elected to make a gift of Cyanotech shares to RSF that year; rather 2010 was the year Davis and RSF extended their partnership into Cyanotech. The Davis-controlled entities that made cash and stock “gifts” to RSF (i) were themselves tax-exempt not-for-profits, and (ii) they had already been heavily funding the other Davis/RSF project at Filigreen Farm for years.
The shareholders of Cyanotech have for years be en victims of Davis’ schemes at Cyanotech. It appears the American taxpayers have long been cheated by Davis’ use of tax-exempt entities to finance his Mendocino County retreat. Until 2016, it seems no one had pulled together the elements necessary to identify these realities, but they are both known now and, via Meridian’s Schedule 13D filings, been made notorious.
Because Davis has surrounded himself on Cyanotech’s board with hand-picked individuals apparently motivated to protect him, and because those directors have entrenched themselves, among other things voting themselves exceptional indemnification rights backed by Cyanotech’s corporate assets, Federal enforcement action appears necessary to force compliance with the law and to protect the interests currently being harmed by Davis and his collaborators.