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July 18, 2001

OFFICE OF THE UNITED STATES ATTORNEY
SOUTHERN DISTRICT OF CALIFORNIA
San Diego, California


United States Attorney
Patrick K. O'Toole

For Further Information, Contact: Assistant U. S. Attorney Stephen P. Clark (619) 557-5096

For Immediate Release

NEWS RELEASE SUMMARY

Patrick K. O'Toole, United States Attorney for the Southern District of California, announced today that a federal grand jury has handed up an indictment charging eight individuals with offenses arising out of fund raising for Basic Research Corporation, an entity which was located in San Diego, California, and Advanced Technologies International, Ltd., a Bahamian corporation. Among those charged is Kostanenos N. Hronopoulos, who is alleged to have been the controlling owner and operator of Basic Research Corporation, Advanced Technologies International, and other, related entities.

The thirty-eight count indictment, which was unsealed today, alleges that six defendants raised approximately $12 million from investors by falsely representing to them that their funds would be used for the development and promotion of allegedly innovative technologies attributed to Stephen H. Smith ("the Smith Technologies"), also named as a defendant in the indictment. The indictment further charges that the six defendants secretly transferred the ownership of the Smith Technologies among various entities controlled by Hronopoulos. According to the indictment, investors also were not told that Hronopoulos had previously been convicted of the federal felony offenses of conspiracy to commit mail fraud and to commit securities fraud, and of income tax evasion, or that Paul F. Scheibe, a fund raiser also named in the indictment, had previously been convicted of the federal felony offense of selling unregistered securities, or that Hronopoulos had been permanently enjoined from selling unregistered securities and from committing fraud in the sale of securities by a United States District Court Order filed in an earlier case brought by the United States Securities and Exchange Commission. Also named in the indictment are Lawrence W. Taggart, a San Diego attorney, Gilbert N. Holloway, who resides in La Jolla, California, and Richard G. Boyer, a resident of Costa Mesa, California, all of whom were, at various times, directors, officers, employees and/or agents of the entities soliciting funds from members of the public for the ostensible purpose of developing the Smith Technologies.

The indictment unsealed today further alleges that the defendants converted millions of dollars of the investor money to the defendants' personal use and benefit, and that the defendants concealed from the Internal Revenue Service their conversion of investor funds. Five of the defendants are further charged with conspiring to commit money laundering offenses and with conspiring to defraud the United States by obstructing the Internal Revenue Service's collection of federal income taxes. Kirsten Kullberg Hronopoulos and Patricia Moreno Smith are charged in the indictment in the tax conspiracy count and, together with their above-named spouses, with evasion of federal income taxes for the years 1995 through 1998. The tax loss to the United States allegedly resulting from the tax evasion is more than $715,000. A criminal forfeiture count in the indictment seeks the forfeiture of cash and property with a value of more than $7 million.

Federal agents arrested Stephen H. Smith, today. He was arraigned this afternoon by United States Magistrate Judge Louisa S. Porter. His next court appearance is scheduled for August 24, 2001 at 2:00 p.m. before United States District Judge Barry Ted Moskowitz. Defendants Kostanenos Hronopoulos, Kirsten Hronopoulos, Paul Scheibe, Stephen Smith, Patricia Smith, Lawrence W. Taggart, Gilbert Holloway, and Richard G. Boyer are scheduled to appear for arraignment during the next few days.

DEFENDANTS

Kostanenos N. Hronopoulos (1)

Kirsten Kullberg Hronopoulos (2)

Stephen H. Smith (3)

Patricia Moreno Smith (4)

Paul F. Scheibe (5)

Lawrence W. Taggart (6)

Gilbert N. Holloway, III (7)

Richard G. Boyer (8)


SUMMARY OF CHARGES

Count 1

18 U.S.C. 371 (conspiracy to commit mail and wire fraud)
Defendants: 1, 3, 5, 6, 7, 8
Maximum penalty: 5 years; $250,000

Counts 2-14

18 U.S.C. 1341 (mail fraud)
Defendants: 1, 3, 5, 6, 7, 8
Maximum penalty: 5 years; $250,000

Counts 15-25

18 U.S.C. 1343 (wire fraud)
Defendants: 1, 3, 5, 6, 7, 8
Maximum penalty: 5 years; $250,000

Counts 26,27

18 U.S.C. 1512 (witness tampering)
Defendant: 1
Maximum penalty: 10 years; $250,000

Count 28

18 U.S.C. 1956(h) (money laundering conspiracy)
Defendants: 1, 3, 5, 6, 8
Maximum penalty: 20 years; $500,000

Count 29

18 U.S.C. 371 (income tax conspiracy)
Defendants: 1, 2, 3, 4, 5, 6, 8
Maximum penalty: 5 years; $250,000

Counts 30-33

26 U.S.C. 7201 (income tax evasion)
Defendants: 1, 2
Maximum penalty: 5 years; $250,000

Counts 34-37

26 U.S.C. 7201 (income tax evasion)
Defendants: 3, 4
Maximum penalty: 5 years; $250,000

Count 38

Criminal forfeiture
Defendants:1, 2, 3, 4, 5, 6, 8



AGENCIES

Federal Bureau of Investigation
Internal Revenue Service, Criminal Investigation Division



An indictment is not evidence that the defendants committed the crimes charged. They, like all defendants, are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.