Wednesday, July 7, 2004 Posted: 8:26 PM EDT (0026 GMT)
NEWARK, New Jersey (AP) -- A husband and wife have been indicted on charges they tried to pass off a filing cabinet as a security device that could protect people against chemical and biological attacks in the wake of the 2001 terrorist attacks.
Federal authorities say the filing cabinet, which was painted yellow and had a siren and flashing red light attached, was promoted by Stewart Kaiser in a press release that helped him sell his company's stock at inflated prices.
His wife, Nancy C. Vitolo, allegedly lied to investigators by saying that $400,000 in checks sent by investors and made out to her was transferred to their company, R-Tec Technologies Inc.
Instead, the money went for personal expenses, aiding in the purchase of the couple's six-bedroom home and other items, according to the three-count indictment handed up Wednesday by a federal grand jury.
Kaiser, 38, is charged with securities fraud, which carries up to 20 years in prison and a $5 million fine, and obstructing justice, which carries up to five years and a $250,000 fine. Vitolo, 41, is charged with making a false statement, which carries up to five years in prison and a $250,000 fine.
Lawyers for both said they maintain their innocence.
The complaint and indictment outline a scheme that began when Kaiser started soliciting investors in 1998 and ended soon after his press release of September 24, 2001, promoting a device called the C-BAND, or Chemical & Biological Alarm and Neutralization Defense System.
C-BAND was actually filing cabinet from R-Tec's Flanders office, and R-Tec had no patent on any special technology, according to court papers.
R-Tec stock was trading at 46 cents a share on the day of the press release but reached $2.40 four days later -- when Kaiser sold 50,000 shares he had placed in his mother's account two days earlier, court papers said.
R-Tec stock, which traded on the NASD Over The Counter Bulletin Board, is now essentially worthless.