Two brothers were convicted by a federal jury Thursday on charges that they organized an elaborate hoax in which they duped investors of $3 million with claims that they had found a way to transform common weeds into “Space Age” synthetic building materials.
Walter Gutierrez, 58, and his brother Alex, 55, both of San Diego, were found guilty of 39 counts each of conspiracy to commit bank fraud, mail fraud and wire fraud, conspiracy to defraud the government, and filing false income-tax returns.
Good Faith Doubted
The jury that sat through the 16-week trial deliberated for four days before reaching the guilty verdicts on all counts. The jurors rejected defense arguments that the brothers had a good-faith belief that their project would eventually produce the results they promised.
Judith Hayes, the California deputy attorney general who prosecuted the case, said the brothers’ scheme to promote the materials went on more than seven years. They gave the products names, including “Impervium” and “Impervicon,” and at one time peddled them on the “700 Club,” an evangelical television program, according to the charges.
The products did not contain weeds, Hayes said, but were made of ordinary resin mixed with other common products such as fiberglass that “weren’t particularly new.”
To impress investors, the brothers would sometimes don white laboratory coats, hire a few workers, and show the investors around a bogus factory, Hayes said.
According to the charges, the brothers claimed they were skilled research scientists, but had little, if any, education, training or experience in any field of science.
They also told prospective licensees and lenders that they had contracts with such major companies as Sinclair Paints, Johns Manville Corp. and Honda of America, but no such contracts existed.
Cracked and Crumbled
Impervicon, their concrete substitute--supposedly made from vines, leaves and twigs--could be used to build jet runways and load-bearing walls, they claimed. But, when prospective customers tested the product, they discovered that exposure to weather made it crack and crumble, according to the charges.
Questions about the brothers’ companies surfaced in 1984 with the indictments of Michael and Peggy Dupont of Point Loma. Their Dupont Energy Control Corp. induced dozens of people to invest in the Gutierrez brothers’ ventures, according to prosecutors.
Both Duponts pleaded guilty to securities fraud and tax-evasion charges last year.
U.S. District Judge Earl Gilliam on Thursday ordered that the Gutierrez brothers be taken into custody and scheduled sentencing for Oct. 17.