WHAT ABOUT THIS????????????????
Engine Inventor Accused of Fraud
By DIANA B. HENRIQUES
Published: July 23, 1994
To the self-chilling beverage can and the speed-boosting horseshoe the Federal Government would now add the Coates Rotary Valve Cylinder Engine, developed and promoted in the last four years by George J. Coates, a New Jersey inventor.
Like the beverage can that can't, and the speedy horseshoe that wasn't -- both features of earlier unrelated schemes that cost public investors dearly -- the Coates engine is now described by securities regulators as a device chiefly useful for generating cash for its inventor.
Lawyers from the New York regional office of the Securities and Exchange Commission went to court yesterday morning against Mr. Coates, 53, of Wall, N.J. In a civil case filed in Federal District Court in Manhattan, the S.E.C. accused Mr. Coates of lying about the merits of his invention and using those falsehoods to illegally sell $6.5 million in stock to nearly 400 people across the country.
Hours later, Mr. Coates was arrested at his New Jersey office by United States Postal Service inspectors, acting on a criminal complaint signed by the United States Attorney's office in Manhattan. The complaint charged Mr. Coates with one count of mail fraud in connection with his solicitation of investors.
"Many of these investors were neither wealthy nor sophisticated" and were induced to invest their savings on the basis of Mr. Coates's claims, Herbert J. Cohen, an S.E.C. lawyer, said in an affidavit filed in the civil case. The S.E.C. charged that Mr. Coates had used much of the money he raised for his own personal expenses, including the purchase of $1.1 million worth of real estate. Talk of Fleeing Country
The lawyer for Mr. Coates, William J. Wolf of Lakewood, N.J., did not respond to messages left at his office yesterday. Mr. Coates remained in custody in New Jersey yesterday evening and could not be reached for comment. Under Federal procedure, he was to be arraigned before a magistrate, who would consider a bail request; prosecutors then must obtain a grand jury indictment within a specified period of time, or negotiate an extension with the defendant.
In announcing the arrest, United States Attorney Mary Jo White noted that Mr. Coates had told investors, former business associates and even staff lawyers at the S.E.C. that he intended to flee the country if confronted by the authorities. If convicted on the mail-fraud charge, he would face a possible five-year prison term and a fine of up to twice the gross loss incurred by investors.
According to the lawsuit, Mr. Coates falsely contended that his engine produced less pollution and ran more efficiently than conventional engines. He contended that its performance had been verified by independent testing laboratories; not true, the lawsuit said. In fact, the lawsuit charged that the only emissions tests done on the engine, in 1990 and 1991, showed that it generated so much pollution that it could not hope to meet Federal or state emissions standards.
Nevertheless, many people were fooled by the inventor's claims, the S.E.C. said. Forged and Unreliable Tests
Mr. Coates distributed forged and unreliable tests to potential investors, the commission said, and one test was an "unofficial tuneup test conducted at a local service station." He also said he had received "hundreds of thousands" of orders, the commission charged, when he actually had a single order for two prototypes, "which actually cracked or failed during preliminary testing."
Magazines and newspapers -- including The New York Times -- featured his engine in articles published in 1992. Mr. Coates then distributed some of those articles to potential investors, along with newsletter articles and letters he prepared, according to court documents.
As early as April 1990, the commission charged, Mr. Coates started selling stock to individual investors without registering it with the commission, as required by Federal law. Between April 1990 and the present, according to the commission, his companies raised $5.3 million through stock sales, and he personally raised an additional $1.2 million by selling shares that the S.E.C. said might have been counterfeit.
Those unregistered stock sales have continued ever since, said Richard Walker, regional S.E.C. director -- which is why the commission asked Judge Kimba M. Wood of Federal District Court in Manhattan yesterday to freeze Mr. Coates's assets and appoint a receiver to take control of his business. Order to Freeze Assets
Judge Wood signed an order at midday freezing the assets and appointing a receiver to oversee the company's affairs.
The S.E.C. has asked Judge Wood to approve both a preliminary and a permanent injunction barring Mr. Coates from any future violatons of securities laws. In most S.E.C. cases, such requests are the legal equivalent of locking the barn after the horse is gone; but in this case, the agency argued in court yesterday, the requested injunctions against future violations have a very compelling goal: to stop Mr. Coates from continuing to sell his stock to the public.
According to S.E.C. documents filed with Judge Wood before Mr. Coates was arrested, Mr. Coates continued to buy and sell his company's stock in violation of securities laws even while the commission was investigating him. "As recently as July 14, 1994, Coates admitted that he buys stock personally from investors and sells it to other investors," a commission lawyer noted in an affidavit. "Coates admits that he makes a profit on each of these transactions and that despite advice from an attorney to stop selling stock, he will 'keep doing it forever.' "
Why so many replies so angry??? Instead to talk about why did that happen???
This is why you loosing...You can only namecalling people, which is very easy and only possible to do without brain...