Citywire for Financial Professionals
Stay connected:

View the article online at

Woodford tech holding hit by fraud claim

Industrial Heat, a technology company backed by Neil Woodford, hit by $89 million lawsuit from scientist in dispute over claimed invention.

Woodford tech holding hit by fraud claim

A technology company backed by star fund manager Neil Woodford has been hit with a lawsuit by a scientist who claims he is owed $89 million (£61 million) for the use of his invention.

Industrial Heat, an energy technology company held by the manager’s Woodford Equity Income fund and Woodford Patient Capital (WPCT ) investment trust, has been hit by the legal action from Andrea Rossi, a scientist who claims to have invented a ‘low energy nuclear reaction’ device.

This approach has been shunned by the scientific mainstream but claims to be able to generate energy at more moderate conditions than the high temperatures required for other forms of nuclear fusion.

Rossi has claimed that Industrial Heat has ‘systematically defrauded’ his intellectual property rights to the ‘energy catalyser’, or E-Cat.

According to the lawsuit, in 2012, Rossi granted Industrial Heat a licence to use the intellectual property behind the E-Cat in a series of countries.

It claims that as part of the deal, Rossi would be paid $1.5 million (£1.04 million) once the agreement was struck, $10 million after a 24-hour test of the device, and a further $89 million following a 350-day test.

While the first two payments were made, Rossi is now claiming the $89 million payment, arguing the 350-day test had been proved successful.

He argued that Industrial Heat’s claim to the intellectual property behind the device had been crucial to its fundraising.

‘Industrial Heat, [president] Darden and [vice president] Vaughn were able to raise substantial sums of money from numerous investors including, but not limited to, approximately $50 million from the Woodford funds (including Woodford Patient Capital and Woodford Equity Income) predicated upon their claims that Industrial Heat… had “acquired Rossi’s intellectual property”,’ the lawsuit reads.

Industrial Heat has dismissed Rossi’s claims. ‘They are without merit and we are prepared to vigorously defend ourselves against this action,’ it said in a statement.

‘Industrial Heat has worked for over three years to substantiate the result claimed by Rossi from the E-Cat technology – all without success. Leonardo Corporation [Rossi’s business] and Rossi have also repeatedly breached their agreements.’

Woodford holds around 2% of his Patient Capital investment trust in Industrial Heat, representing a £15 million stake. The unquoted company also makes up 0.2% of his Woodford Equity Income fund, a stake worth £19 million.

Woodford Investment Management said it was 'not appropriate' to comment on the lawsuit. 'Industrial Heat is currently working with numerous scientists to build a diverse portfolio of innovative technology, such as low energy nuclear reactions, in the quest to eliminate pollution,' it added.

'We continue to share this quest for what we believe could be a significant development and exploitation of new energy sources.'

Meanwhile Northwest Biotherapeutics (NWBO.O), another Woodford holding that has been the subject of controversy after it was subjected to allegations of financial impropriety, has admitted in its annual report that it ‘did not maintain an effective anti-fraud programme’.

The company has hired a former FBI agent to investigate the allegations following pressure from Woodford.

20 comments so far. Why not have your say?


May 17, 2016 at 15:56

Read the wikipedia page on E-Cat and ask yourself what percentage of your investments you'd allocate to something like this.

report this


May 17, 2016 at 16:20

Woodford may know a thing or two about investing, but clearly not enough to avoid being apparently scammed by "cold fusion" proponents (or as some would call them, charlatans) for over £30M.

report this

Another Commenter

May 17, 2016 at 18:12 contains an extensive library of articles, including hundreds of scientific papers, related to Low Energy Nuclear Reactions ("Cold Fusion").

Airbus has a patent in this area.

Skepticism is prudent; unthinking denial has its own risks.

report this

sam via mobile

May 17, 2016 at 18:15

Go to Ecat world blog or Ego Out

blog if you want to learn more.

report this

Ed the 5th

May 17, 2016 at 18:32

Pseudo-science or real science?

report this

Another Commenter

May 17, 2016 at 18:53

Recent Popular Mechanics article on the US Congress' interest in Cold Fusion

report this


May 17, 2016 at 20:49

I'm find with having an open mind, and all of these areas need investigating freely, but paying someone multiple millions of the back of nothing more than unscientific evasion is just stupid. Yes, here might be some new physics, it's unlikely but maybe there is. So engage with real physicists who care about science rather than illusionists.

report this

Mats Lewan

May 17, 2016 at 23:39

Rossi makes offer on Swedish factory building – plus more updates

report this

John via mobile

May 18, 2016 at 04:16

The real scandal here may have been done by Tom Darden (industrial Heat, aka Cherokee Investments). He also applied for patents for a device similar to Rossi's, and he duped the Chinese for over $100 million.

report this

Keith K

May 18, 2016 at 05:32

Rossi is at the lead of the commercial field, for people who have followed LENR for some time. He's moved on to working on deals with ABB.

report this

Keith K

May 18, 2016 at 05:47

Rossi is at the lead of the commercial field, for people who have followed LENR for some time. He's moved on to working on deals with ABB, while he's suing IH.

report this

David via mobile

May 18, 2016 at 07:35

Validation from Swedish Elforsk (r&d)

report this

AlainCo (aka Alain Coetmeur)

May 18, 2016 at 08:23

The behavior of Woodford is quite rational, cautious, and moderately visionary.

The science of LENr is quite established despite the fairy tale wrote on Wikipedia (a handful of mind guard have blocked any dissenting paper).

For those interested in the science I would advise to read :

- Excess Heat by Charles Beaudette, which describe the situation , the reality of the critics (4 refuted article claiming debunking, many failures amon more success and much theory beside that)

- the science of LENR by Edmund Storms.(he is probably the man on eart who have read the most papers on the subject, and he tried to improve publication quality in the domain, despite blocus by many journals)

for shorter articles, you have

- in Naturwissenschaften Status of Cold Fusion 2010 by Edmund Storms,

- the review of Current science "Special Section: Low Energy Nuclear Reactions" 108(04) 25 feb 2015 with many article, reviewing some subject or some geographic zone

- some presentations makde by Hagelstein, or De Chiaro for IEEE meeting on 23-September-2015 in teradyne

ENEA have presentation, articles and report on the subject.

US Navy Spawar reserashers (pam Boss, Stan Czpak, ...) have worked until ~2010 on the subject with some success and many peer reviewed publication.

Now US navy NRL works with SRI and ENEA on the subject.

Toyota and MHI never stopped working on the subject.

Shell have funded some successful research in French CNAM (after CEA labs, despite success, were forbidden to work on it), and di a review around 2012.

Elforsk (Swedish EPRI/DoE) reviewed the domain and funded E-cat tests.

NTVA/Tekna in Norway organised a meeting recently to discuss of a Plan-B to hedge oil economy with LENR... They invited McKubre among others.

Nasa GRC published some report and slides. Doug Wells in Nasa work on LENR aircraft concept, but not much on LENR itself.

Airbus Group Chief Scientist signed MoU with LENR-Cities to support the development of an LENR entrepreneur ecosystem, organised in Airbus Toulouse the 11th Workshop of ISCMNS, and own a modest patent about control of plasma triggered LENr reactors (not sure their technology is ready, but they protect the design)

Japan is funding few LENR programs under NEDO/ImPACT (energy, nuclear remediation, and another I forgot), with MHI, Toyota, Clean Planet, Nissan.

Ukraine just funded and recognized LENr research, thanks to the effort of Vladimir Vysotskii, and maybe to the Russian research, which despite hierarchical opposition is quite innovative (I've seen some interesting presentation by researshers from Kurshakov institute on heterogeneous plasmoid... based on discovery working on hypersonic missile improvement).

Anyway the recognized science is far from the claims of Andrea Rossi.

Brillouin Energy, helped by SRI researcher Michael McKubre only report an energy gain of 4 (not a COP, but energy gain is 4x excitation, letting hope after engineering to have COP 4x in a cooled reactor). They are part of the portfolio of Industrial Heat, so in Woodford.

Lenuco (George Miley - see his proposant on Future Energy ultralightstartup platform) also transferred his IP to a vehicle in Netherland visibly controlled by IH.

Dennis Letts who have done some of the most interesting experiments about controlling and triggering LENR (through magnetic field, THz signal, laser) alsowork happily for industrial Heat.

Only rossi seems unhappy of the way IH works. What emerge from the exchange on that subject let me now very skeptical on Rossi's technology, and nearly sure IH could not obtain any valuable IP/KnowHow from Rossi. that is my opinion, and it is public, but not definitive.

Not investing in LENR, with it's potential, is a huge risk.

2% of your asset value it what I would call hedging the risk.

If LENR get real, it is an extremely disruptive technology, that will transform many leaders into stranded assets, and create much values beside.

LENR, even if you are convinced it is real science, is a very risky business.

You have first the technology risk, to transform scientific evidences without theory (JF Geneste of Airbus was clear in LENRG Milano that theory is required for good engineering and sustainable industrial development), into a workable technology.

You then have the huge, even more huge than technology, risk around market and commercialization.

With Rossi you also see what I would call the "Golum Effect", when inventors get crazy about their invention, not realizing that without fuènding, engineering, market creation, sales, lobbying, they have no future. this is a huge human risk.

Investment is risk assessment, and the first risk is to trust.

Sometime you have to cut the loses, and stop trusting. It seems to be the bad moment for rossi.

Can you afford the risk not to have LENR in your portfolio ?

Can you take the risk not to have tried E-cat ?

Can you accept 10Mn Loses over what would be a >1Bn business opportunity, in a 7Tn$ market ?

Considering the possibility of E-cat being void, or IP not being transferred, nor being transferable, what is the value of having Brillouin Energy technology, lenuco technology, Dennis letts competence, in your portfolio ?

What is risky today ?

What is valuable today ?

report this

Uwe Doms - The New Fire

May 18, 2016 at 12:54

Woodford is just a minor casualtiy of a much bigger story

Could be of interst for the hired a former FBI agent.

report this

Mary Yugo

May 18, 2016 at 19:07

The emphasis of this article on the law suit by Rossi against Industrial Heat (IH) is wrong and misleading. The *real* issue here is how Rossi managed to fool and deceive Darden (IH) and Woodford to begin with. The answer has to be that their so-called due diligence was defective, sloppy, negligent and incompetent. The story here is who Rossi is and what his claims are worth (nothing).

It boggles the mind how IH and Woodford could have bought heavily into Rossi's claims with millions of dollars. Had they bothered to consult with any number of sources from the internet and from universities, they would have required far faster and better tests than they did.

For openers, Rossi has an extensive history of criminality which is summarized expertly and convincingly here:

When viewed objectively, Rossi has no history of accomplishments. He has never made a proven major discovery or sold a popular product. Instead, he created an environmental disaster with his Petroldragon project in Italy. He spent time in prison in Italy-- how long it was is argued. He bought a PhD diploma from a now closed diploma mill.

Rossi also sold an incredible story to DOD in the early 2000's. This was that he had made a high efficiency thermoelectric converter. But no credible documentation exists for the prototype and the actual devices Rossi delivered in return for millions of dollars of funding, were rejected junk made in Russia.

This and many other important issues which prove that Rossi has nothing is documented here:

It is beyond my comprehension that neither Woodford nor IH ever consulted with Steven Krivit, Gary Wright, several professors (particularly Pomp and Ekstrom) who helped expose Rossi's scam, and me. For an article about the Swedish professors who refuted Rossi's claims, see this Swedish report which translates OK with Google:

Every experiment and test Rossi has allowed has major flaws in the science and measurement. Rossi was told about these flaws from the start in 2011 and refused to repeat the experiments with corrections. Instead, he has produced ever changing new results which always decline in both power and efficiency (what they call "COP"). This is a classic pattern for a free energy scam which is exactly what Rossi's claims are.

There was never a need to test anything of Rossi's for a year-- the idea that this sort of test would be persuasive when it closely involved Rossi and the "customer" was his lawyer -- that idea is preposterous, yet that is what happened.

A proper test NOT involving Rossi could have been done in weeks rather than a year, by any number of university departments or government test labs. Had Rossi's claims been real, the rights could have been licensed for billions of dollars to the likes of GM, GE, Elforsk, Airbus, Google, Elon Musk, Bezos and so on. Instead, only negligent believers, amazingly incompetent and ignorant with science, like IH and Woodford would bite on Rossi's silly bait.

What has happened here is that a proven crook has bamboozled and flummoxed the executives of two large investments funds-- executives who are highly paid to know how to choose good expert consultants and to perform proper due diligence. Unfortunately for the shareholders of the funds, none of those things happened.

report this


May 21, 2016 at 09:38

Jeez, there's a few brain-dumps here!

For unrelated issues, I've dumped the Woodford fund..........a toxic mix of fags & pharma.

report this


May 21, 2016 at 09:59

Perhaps a few people would benefit from spending a few minutes reading the wikipedia article on a thing called the "Scientific method". It's familiar to the vast majority of people, but clearly not all.

report this

AlainCo (aka Alain Coetmeur)

May 22, 2016 at 09:24


scientific method is a good guide.

for example you should not dismiss experimental results, especially when replicated , just because you have no theory.

Logic and scientific method which use it, says that a successful replication of an anomaly is enough to challenge a theory and many failed experiment which dont show the anomaly.

one things also thats cientific method says is that when results don't support your theory, you should not bend the data like MIT did and as it was reported by their MIT editor himself.

High impact peer review journals shoul also accept to retract papers, like the one on Lewisn, hanse, and Morrison which are proven false by competent people based on known science.

to learn what is scientific method, I advise you to read the matching chapter in Charles Beadette book "Excess Heat".

Many of the scientific method errors about Cold Fusion rejections are well described.

Many people today take the inverted Popper argument as scientific method :

- if theory and experiment disagree, then experiment is wrong.

- one failed replication of an anomaly is enough to confirm a theory

report this


May 26, 2016 at 08:46

Maybe there is some new science there, and I have no argument with experimentation proceeding alongside trying to find new theories to explain any reproducible anomalies.

This is rather different to throwing tens of millions towards someone to license the rights to commercialise something where the creator has deliberately blocked efforts to do objective scientific testing on the invention, and where the are no credible theories as to how it operates.

As to your "inverted Popper" at the end, that bares no resemblance to any version of the scientific method that I have ever encountered. I don't know where you met it, or if it's an invention of your own, but please take it outside and shoot it.

report this

AlainCo (aka Alain Coetmeur)

May 26, 2016 at 10:53

Inverted Popper method, is the usual :

it cannot be real you have no theory,

or the usual "the model says" so it is proved, even if data dissent

about betting million on LENR, what about betting billion on things that should work in 50 years, and are so since 50years.

LENR even if you are not aware of the scientific evidence, can be considered as a risk you cannot take , not to have investigated.

The research efforts required to make basic recherch on LENR is few dozens of millions (current research are too dispersed and budget limited to be productive). Some beyond Woodford consider that seriously, just to see if the cards are good.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts

In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

More about this:

Look up the funds

  • CF Woodford Equity Income C Inc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the investment trusts

Look up the fund managers

  • Neil Woodford
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

What others are saying


Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add to your safe senders list so we don't get junked.


Sunday Papers: Bosses attack May on Brexit muddle

by Himanshu Singh on Jun 24, 2018 at 05:58

Sorry, this link is not
quite ready yet