Investing Scam Nets Brothers 20 Years Each

A federal judge Friday sentenced two brothers to 20 years each in prison for running a scam that bilked investors of $3 million with claims that they used “high fusion science” to convert weeds and twigs into highly durable building materials.

U. S. District Judge Earl B. Gilliam imposed the sentences on Walter Gutierrez, 58, and brother Alex, 55, for the San Diego-based scheme that claimed victims in California, Colorado, New Mexico, Illinois and Oklahoma.

In July, a federal jury convicted the brothers on 39 counts each of conspiracy to commit wire fraud, bank fraud and mail fraud; filing false income-tax returns; and conspiracy to defraud the government. The charges cover a seven-year period, from 1979 to 1985, when the brothers ran locally based businesses called Imperial Dynamics and W & A Research.

The brothers perpetrated an elaborate hoax that claimed “high fusion science” could turn ordinary weeds into a high-strength wood substitute called “Impervium,” said Judith Hayes, the California deputy attorney general who prosecuted the case. What was touted as a revolutionary scientific process purportedly fused the molecular fibers of organic materials, yielding a cost-competitive product that could be drilled and hammered just like ordinary wood.

In fact, the material they showed investors was a synthetic polyester resin that has been around since the 1950s and is very expensive to use, Hayes said.

“Although they could make samples that looked terrific and looked just like wood, they couldn’t compete,” she said.

Another phony product, “Impervicon,” was supposed to be a space-age cement made from vines, leaves and twigs and could be used for jet runways and load-bearing walls. Yet the samples they showed were actually polyester resin mixed with rock and sand--a mixture that not only cracked after exposure to weather but also was 10 to 20 times more expensive than normal concrete, Hayes said.

To perpetrate the elaborate hoax, the brothers posed as skilled research scientists, although they had a minimum of scientific training. They sometimes wore white laboratory coats and even hired a few people as “workers” when it came time to show would-be investors around a bogus factory, prosecutors said.

In March 1984, they went on the “700 Club,” a popular evangelical Christian television show, to tout their miracle products. The appearance lured a number of Christian businessmen to invest.

They also wooed investors by saying they had contracts with companies such as Johns Manville, Honda of America and Sinclair Paints, prosecutors said, when, in fact, the contracts did not exist.

The scheme began to unravel in 1984 when Michael and Peggy Dupont of Point Loma were indicted on charges of securities fraud and tax evasion, to which they pleaded guilty last year. The Duponts’ energy company persuaded dozens of people to put their money into the Gutierrez’ space-age building products, prosecutors said.

The brothers were silent at their sentencing Friday, but attorney Robert Schroth, who represented Walter Gutierrez, said later that they thought the 20-year terms from Gilliam were extremely harsh.