Wonder Product Now Looks Less Wonderful : Brothers Indicted in ‘Space-Age’ Wood Scheme
Ron Pecoff, an Escondido nurseryman, went right to the edge on “impervium,” nearly staking $500,000 or more on the promise of a miracle wood substitute fused from the fibers of a fast-growing, wild, South American weed.
But Pecoff, edgy about the demand of San Diego businessmen Walter and Alex Gutierrez for payment up front to use their unproven wonder product, let a deal to manufacture plant pallets from what the Gutierrezes called “impervium” fall apart--even when his bank seemed ready to participate.
His decision looked like a good one Wednesday, when the bottom fell out of the impervium market.
Federal agents arrested the Gutierrez brothers in Orange County, where a U.S. magistrate ordered them held in connection with a 48-county indictment charging them with conspiracy, fraud, tax evasion, perjury and obstruction of justice.
The indictment, returned secretly last week by a federal grand jury in San Diego and unsealed Wednesday, describes what prosecutors say was an elaborate hoax--lasting at least seven years--in which the brothers duped investors of $1 million with outlandish promises about their “Space-Age” wood, cement and ceramic synthetics.
Many of the victims of the alleged scheme were Christian businessmen who learned of the products when Walter Gutierrez, 56, appeared in March, 1984, on the “700 Club,” an evangelical television program, according to Judith F. Hayes, a special assistant U.S. attorney.
Financial institutions allegedly defrauded by the brothers included the New City Bank in Orange and Eureka Federal Savings and Loan in Northern California. The brothers are accused of defrauding customers in California, Colorado, New Mexico, Illinois and Oklahoma.
Their businesses, Imperial Dynamics and W and A Research, were headquartered in San Diego from 1979 to 1985, the period covered by the indictment. Hayes said the company most recently has operated out of Orange County.
In sales pitches and promotional appearances, the indictment alleges, the brothers wove an intricate scheme of lies. Among the alleged falsifications:
- They claimed they were skilled research scientists, but in fact “had little, if any, education, training or experience in any scientific discipline,” the indictment says.
- The brothers told prospective licensees and lenders that they had contracts with such major companies as Sinclair Paints, Johns Manville Corp. and Honda of America, when no such contracts existed. They also claimed involvement in a $150 million project for manufacturing prefabricated homes overseas--the brothers described impervium as “the answer to housing shortages in underdeveloped countries,” the indictment says--and a contract to produce 250,000 impervium flower pots. Neither contract existed, according to the indictment.
- The Gutierrezes claimed “impervicon,” their concrete substitute--supposedly made from vines, leaves and twigs--could be used to build jet runways and load-bearing walls. But when prospective customers tested the product, they discovered that exposure to weather made it crack and crumble, prosecutors said.
- The secret to the synthetics, the brothers claimed, was their discovery of a new “high fusion science” in which molecular fibers of organic materials were sensitized and fused into strong, durable products. In fact, impervium actually was just fiberglass and resins, according to the indictment.
No products ever were successfully manufactured with the brothers’ products, and no licensee ever earned a profit, the indictment says--despite the Gutierrezes’ claims.
Questions about the brothers’ companies surfaced with the indictment in 1984 of Michael and Peggy Dupont of Point Loma. Their Dupont Energy Control Corp. induced dozens of people to invest in the Gutierrezes’ manufacturing processes, prosecutors alleged.
The Duponts pleaded guilty in August to charges of tax evasion and selling unregistered securities. Hayes said they are expected to testify against the brothers.
Also, Arthur Clifford Kellogg, a Fullerton accountant, pleaded guilty to obstructing justice by refusing to turn over documents subpoenaed by the grand jury investigating the Dupont and Gutierrez companies.
Pecoff, president of Pecoff Brothers Nursery and Seed in Escondido, said Wednesday that business associates and the Gutierrezes themselves convinced him that impervium could be an ideal product for manufacturing pallets.
“I was told by some people that they produce a product that does many, many things and was really God’s gift to the industrial world,” Pecoff said.
He talked with the Gutierrezes about paying them as much as $1.5 million for the right to use impervium for pallets but said he dropped the idea because of last-minute doubts about the product--and the brothers’ insistance on payment up front.
Pecoff said he was glad he hesitated before investing in the supposed miracle products, but still wonders if he missed an opportunity.
“Even to this day, I still think their product could have worked,” he said. “If it did, they would have been multibillionaires.”
