12-22-04 -- Kaiser, Stewart et al. -- Guilty Plea -- News Release

N.J. Man Admits Securities Fraud for Hawking Bogus Chemical-Bio Agent Detection Device After 9/11

- Wife Admits Lying to Federal Investigators -

NEWARK, N.J. - A former Morris County man today admitted in court that within two weeks of the Sept. 11 terror attacks he fraudulently ran up the stock price of his small company by publicly touting a supposed device that could detect and neutralize chemical and biological agents unleashed by terrorists, U.S. Attorney Christopher J. Christie announced.

Stewart Kaiser, 38, formerly of Sparta, N.J. and now of Boynton Beach, Fla., pleaded guilty to a Superseding Indictment charging him with securities fraud. Kaiser's wife, Nancy Vitolo, 41, pleaded guilty on Tuesday to the Superseding Indictment, which charged her with making false statements to federal authorities investigating the matter, according to Robert Kirsch and Craig Carpenito, the Assistant U.S. Attorneys who handled the cases.

Kaiser and Vitolo are both free on separate $100,000 bonds pending sentencing, which Judge Bissell set for late March.

At Kaiser's plea hearing before Chief U.S. District Judge John W. Bissell, Kaiser admitted that he issued a false press release to boost the value of R-Tec Technologies, Inc., a publicly traded New Jersey corporation which he helped form, and then days later sold 50,000 shares held in his mother's name. At various times, R-Tec was located in Brooklyn, N.Y., and Allamuchy and Flanders, N.J.

Kaiser admitted that, on Sept. 24, 2001, in the aftermath of September 11, he issued the press release claiming that the company had "patented" an operational and effective anti-terrorism system which he named C-BAND, short for "Chemical & Biological Alarm & Neutralization Defense system."

Kaiser admitted in court today that the C-BAND contraption was neither patented nor operational.

In the press release, Kaiser cited the 9/11 terror attacks and claimed that C-BAND was proven effective to combat a biological or chemical attack. Kaiser also falsely claimed that the device was "engineered" and "designed" to be "easily installed in airports, subways, schools, shopping malls, sports arenas, government buildings and any facility where large groups of people may gather."

"This was a repulsive, greed-inspired attempt to capitalize on the fears of a nation after the Sept. 11 terror attacks," said Christie. "This contraption would be laughable if the fraud Kaiser was attempting to pull off was not so reprehensible. The C-Band was little more than a slap-together metal filing cabinet painted bright yellow and capped with a flashing red light."

Kaiser issued the flagrantly false news release through the PRNewswire, which was then distributed to the Bloomberg Professional Service and other major business media. (The fraudulent news release is attached, as well as a subsequent Securities and Exchange Commission cease and desist order.)

R-Tec traded primarily on the Nasdaq Over-the-Counter Bulletin Board under the stock symbol RTTC. Following issuance of the news release, both the price and trading volume of R-Tec stock skyrocketed.

Two trading days prior to issuance of the press release, only 1,000 shares of RTTC were traded all day, and the closing price was 46 cents per share. Four days after release of the news release, on Sept. 28, 2001, approximately 428,000 shares were traded at prices as high as $2.40 per share, settling back to $1.45 per share at the close of the trading day.

Kaiser further admitted that two days after he issued the false press release, on September 26, 2001, he caused 50,000 R-Tec shares to be transferred into a brokerage account held in the name of his mother, over which he had trading authority. Kaiser admitted he then directed the stock broker, two days later, on September 28, to sell the 50,000 shares, resulting in receipt of more than $68,000. When asked "was some of that money remitted by your mother back to you,?" Kaiser responded, "Yes."

"This was just a classic pump and dump stock swindle," said Kirsch, the prosecutor.

The National Association of Securities Dealers detected a sharp rise in the stock's price and, according to Superseding Indictment, began in inquiry of the claims made in the press release. Kaiser then began to assemble a non-operational prototype of the C-BAND unit which consisted of a yellow filing cabinet with a flashing red light and an attached siren, according to court documents. On November 15, 2001, the SEC issued a cease and desist order that R-Tec stop any false representations about C-BAND.

On Tuesday, Vitolo, Kaiser's wife, pleaded guilty to making false statements to the law enforcement agents of the FBI and U.S. Postal Inspectors. Vitolo stated that in 1998, while serving as an R-Tec officer and director, numerous individuals gave her checks intending to purchase shares of R-Tec. Vitolo admitted that these investment checks were made payable to her personally, and that she deposited these checks in her personal bank accounts held at Skylands Community Bank in Hackettstown, N.J., and certain New Jersey branches of the Bank of New York.

Vitolo admitted that she lied to federal law enforcement officers by stating that all of the investors' money was used for corporate expenses relating to R-Tec, when in fact, she had used the investors' money to make personal. purchases unrelated to the business of R-Tec or the investors. For example, according to the charging documents, Vitolo used approximately $400,000 of the investors' money toward the purchase of a luxury six-bedroom house; expenses relating to a personal boat; and made numerous purchases from Bloomingdale's, Fortunoff, The Limited, Lord & Taylor, Macy's, Neiman Marcus, Nordstrum, Saks Fifth Avenue and Victoria's Secret.

Stewart Kaiser faces a maximum penalty of 10 years in prison and a $1 million fine. His wife, Nancy Vitolo, faces a maximum penalty of five years in prison and a $250,000 fine.

U.S. Attorney Christie credited Special Agents of the FBI, under the direction of Special Agent in Charge Joseph Billy, Jr.; and Postal Inspectors, under the direction of Postal Inspector in Charge Martin D. Phanco, both in Newark, for bringing the case against Kaiser and Vitolo.

The cases were prosecuted by Assistant U.S. Attorneys Kirsch and Carpenito, of the Securities and Health Care Fraud Unit of the U.S. Attorney's Office.

-end-

Defense counsel:

Kaiser - Mark Wasserman, Esq. Syosset, New York

Vitolo - James Gibbons, Esq. Carteret, N.J.