Fake Detection System Lands Floridian with Stock Fraud Charge

NEWARK, N.J. (AP) - A man pleaded guilty Wednesday to stock fraud in connection with promoting a device that he claimed would protect people against chemical and biological attacks.

Stewart Kaiser also admitted that the device, which he promoted in the aftermath of the 9/11 terror attacks, was neither patented nor operational.

Federal authorities maintained the device pictured in a fraudulent news release was actually a filing cabinet painted yellow with a siren and flashing red light attached and that Kaiser's promotion helped him sell his company's stock at inflated prices.

``This was just a classic pump and dump stock swindle,'' Assistant U.S. Attorney Robert Kirsch said.

Kaiser's wife, Nancy C. Vitolo, pleaded guilty Tuesday to making false statements to federal authorities who investigated the case.

The couple, who had lived in Sparta and are now in Boynton Beach, Fla., remain free pending sentencing. Kaiser, 38, faces up to 10 years in prison and a $1 million fine. Vitolo, 41, faces up to five years in prison and a $250,000 fine.

They were indicted in July, nine months after a plea bargain collapsed, in connection with the device and their company, Flanders-based R-Tec Technologies Inc.

Prosecutors outlined a scheme that began when Kaiser started soliciting investors in January 1998, and ended soon after his news release of Sept. 24, 2001, promoting a device called the C-BAND, or Chemical & Biological Alarm and Neutralization Defense System.

R-Tec stock was trading at 46 cents a share on the day of the news release, but amid a 34-fold increase in volume reached $2.40 on Sept. 28, 2001. Kaiser admitted selling 50,000 shares that day, shares he had placed in his mother's account two days earlier. The sale netted a substantial profit, court papers said.

R-Tec stock, which traded on the NASD Over The Counter Bulletin Board, is now essentially worthless. Company operations ceased 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 2003 in court, Kaiser said he was never an officer in the company, just an ``independent consultant.''

Kaiser was listed as the contact on the C-BAND news release, which touted the device as a self-contained unit, easily installed in airports, malls and sports arenas, that would alert people when it detects a ``harmful bio or chem-agent.'' 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.

Vitolo admitted that she lied to investigators by saying that $400,000 in checks sent by investors and made out to her was ultimately transferred to R-Tec.

Instead, the money went for personal expenses, she said. The money helped purchase the couple's six-bedroom home in Sparta and items from Bloomingdale's, Fortunoff, Lord & Taylor, Macy's, Neiman Marcus, Nordstrom, Saks Fifth Avenue and Victoria's Secret, according to the indictment.