Biosterile releases falsified By Doug LeDuc
of The News-Sentinel
Posted on Mon, Jul. 21, 2003
A bankrupt Fort Wayne high-tech company contributed to the downfall of a Florida executive facing sentencing on securities fraud charges.
The local company is Biosterile Technologies, which appeared to have a promising future with security scanning equipment, but filed for Chapter 7 bankruptcy in June 2002.
The executive, Anthony M. Damato, is scheduled to be sentenced Oct. 3 in the U.S. District Court for the Southern District of Florida.
Damato -- former president and chief executive officer of Eagle Building Technologies who pleaded guilty to the charges -- faces a maximum sentence of up to 10 years in prison, mandatory restitution, and up to $1 million in fines.
In a statement on the plea, the office of Marcos Daniel Jimenez, U.S. attorney in Miami, said Damato admitted falsifying news releases about the testing and capabilities of Biosterile equipment.
A separate civil lawsuit by the federal Securities and Exchange Commission is more detailed.
The SEC complaint said Eagle and Damato issued a series of news releases about Biosterile equipment over 34 trading days, starting two weeks after the terrorist attacks of Sept. 11, 2001.
During that period, the closing bid for Eagle's shares jumped to $10 from $5.40, and average daily trading volume in the company's shares increased to 74,547, the complaint said. Average daily trading volume in Eagle shares had been only 44,424 for 34 trading days prior to the first release in the series, it said.
Biosterile had developed and was refining products designed to commercialize electron beam and X-ray technology developed in the former Soviet Union. The products ranged from medical sterilization equipment to detection systems for airports and other secure areas.
In addition to operations employing more than 30 at 7616 Disalle Blvd., the company said it had a work force of 100 in Moscow, including many engineers and scientists who had worked on military projects.
It had received city approval in 2000 for a tax abatement on $300,000 of equipment it planned to install here, but Fort Wayne economic development officials said it never filed for the abatement.
The company ousted a CEO in July 2001. Executives would not comment on the change in leadership at the time, and could not be reached for comment on its bankruptcy.
A few weeks after the Sept. 11, 2001 terrorist attacks, Biosterile executives said they hoped there would be enough increased demand for Biosterile scanners developed that summer to justify investment in equipment to manufacture them.
Eagle was "a selling agent for Biosterile," said Lisa Hendrickson Hughes, the SEC's Denver attorney who submitted the complaint.
In a Sept. 25, 2001 news release, Eagle said the Biosterile scanner, its Insight Detection Sentinel, had been tested at New York's LaGuardia airport, according to the SEC complaint.
The release said the technology could detect specific types of explosives -- from TNT to plastic bombs -- and other weapons.
"Damato and Eagle imply in the press release that the Sentinel system can be used at American airports to combat terrorism," the SEC complaint says.
But, the complaint says, the release failed to disclose that the system had not been tested by the Federal Aviation Administration, as required, and failed the test at LaGuardia.
"The defendants also fail to disclose that neither Biosterile nor Eagle have the production facilities to commercially produce the Sentinel system," it said.
The complaint said a news released issued by Eagle and Damato Nov. 8 announced the company would demonstrate the product before Congressional leaders.
In that release, Eagle said, "we are confident the cost-effectiveness and unique dual display technology of the Sentinel will make this surveillance system the most viable option for the nation's airports and in turn restore America's confidence in air travel."
Between Sept. 25 and Nov. 8, 2001, Eagle and Damato touted Biosterile's medical sterilization equipment as a way to protect mail from anthrax contamination, the complaint said. That was in the midst of a series of anthrax-laden letters and packages showing up in several Eastern cities.
An Oct. 26, 2001 news release from Eagle failed to mention the equipment had not been tested for the ability to kill anthrax bacteria, and Eagle wasn't geared up to mass produce the equipment, the complaint said.
Damato also admitted filing false quarterly and annual SEC reports in his guilty plea, according to Jimenez's office.
He also admitted creating fraudulent bank account statements and purchase orders and diverting privately invested funds "to create the false appearance of substantial revenue to Eagle Building from sales and operations in India," the U.S. attorney's office said.
The SEC complaint said "Damato knew . . . there were no substantive operations in India." |
