Federal authorities maintain the device was actually a filing cabinet painted yellow with a siren and flashing red light attached and that Stewart Kaiser's fraudulent press release helped him sell his company's stock at inflated prices.
They also charge that his wife, Nancy C. Vitolo, lied to investigators by saying that $400,000 in checks sent by investors and made out to her was ultimately transferred to their company, Flanders-based R-Tec Technologies Inc.
Instead, the money went for personal expenses, aiding in the purchase of the couple's six-bedroom home in Sparta and purchasing items from Bloomingdale's, Fortunoff, Lord & Taylor, Macy's, Neiman Marcus, Nordstrom, Saks Fifth Avenue and Victoria's Secret, 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.
Kaiser lawyer Mark O. Wasserman said, ``He denies all the allegations contained in the indictment, and will defend them vigorously.'' Vitolo also maintains her innocence, said her lawyer, James T. Gibbons.
The couple have been free on a bail of $100,000 bond each set in November on an FBI complaint. Their prior court appearance was Sept. 22, when a plea bargain was scrapped after a bizarre daylong hearing that saw them rehire and then fire their lawyers.
The complaint and indictment outline a scheme that began when Kaiser started soliciting investors in January 1998, and ended soon after his press release of Sept. 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 such technology, according to court papers.
R-Tec stock was trading at 46 cents a share on the day of the press release, but amid a 34-fold increase in volume reached $2.40 on Sept. 28, 2001 - when Kaiser sold 50,000 shares he had placed in his mother's account two days earlier, giving him a substantial profit, court papers said.
R-Tec stock, which traded on the NASD Over The Counter Bulletin Board, is now essentially worthless, with operations ceasing following a raid in January 2002 by FBI and Postal Inspection Service agents.
Vitolo served as vice president, director and secretary of R-Tec. Under oath in September in court, Kaiser said he was never an officer in the company, just an ``independent consultant.''
Prosecutors responded that he chose not to have a title because of a prior bankruptcy. The indictment said Kaiser raised money from investors, attempted to develop products and issued press releases.
Kaiser was listed as the contact on the C-BAND press release, which touted the device as a self-contained unit that would alert people when it detects a ``harmful bio or chem-agent'' that could be easily installed in airports, malls and sports arenas. It would then ``isolate and neutralize the harmful agents'' by ``using a series of high electromagnetic frequency signals.''
On Nov. 15, 2001, the Securities and Exchange Commission ordered R-Tec to stop publicizing the device. The stock regulators determined that R-Tec had no plans to produce the device and lied about having patents for its components.
