Wednesday, January 27, 2010

DONALD D. STONE - Charles Long and Patent Theft...

""In or about September 1989, Plaintiff, a surfer for over 25 years, envisioned a non-abrasive, non-skid coating for surfboards. With only a high school education and no formal chemistry background, Plaintiff began independent research and development on a non-abrasive, non-skid coating for surfboards.

In or about October 1990, Plaintiff discovered that a mixture of off-the-shelf components, such as Vaseline TM (from the drug store) and Plastidip TM (from the hardware store), could produce certain qualities desirable for non-abrasive and non-skid coatings on water-wet surfaces.

Plaintiff continued his independent research and development through 1991 until he believed he had a working formula to demonstrate.

In or about September 1991, after several hundred experiments, Plaintiff finally developed a formulation that met all the necessary criteria for a possible surfboard application: non-abrasive, wet traction coating, adhesion to substrate, and easy to clean.

On or about September 20, 1991, Plaintiff demonstrated his invention, which he named Octo-Grip, at the Action Sports Retail Trade Show in Atlantic City, New Jersey.

Shortly thereafter, Procter, a customer of Plaintiff’s fiberglass repair company in Ocean City, Maryland, convinced Plaintiff that he (Procter) could raise the operating capital to finance the cost to patent Plaintiff’s technology and to commercialize it.

Plaintiff entered into a verbal agreement with Procter where Procter was to receive shares in the proposed corporation in exchange for his work raising money on behalf of the proposed corporation.

In or about October 1991, Procter introduced Plaintiff to Charles Longo touting Longo as a potential investor in the proposed corporation.

In or about November 1991, Procter and Plaintiff contracted Ken Darnell, a patent agent, to conduct a patent search to determine if the invention Plaintiff had discovered could be patented. The patent search, concluded in November 1991, showed that Plaintiff’s invention was unique and could be patented.

In or about November 1991, Procter introduced Plaintiff to Burgee, an attorney with the law firm Miles & Stockbridge at the Miles & Stockbridge office in Frederick, Maryland.

Procter and Burgee were childhood friends and Burgee was Procter’s personal and business attorney.

Plaintiff and Procter engaged Burgee to form a corporation to be known as Donald Stone Industries, Inc. for the purpose of developing Plaintiff’s invention and to commercialize the resultant technology.

Unknown to Plaintiff at the time he was introduced to Burgee, Longo, Procter, Burgee, and Miles & Stockbridge were engaged in numerous fraudulent schemes allegedly involving money laundering and conspiracies to commit federal bankruptcy fraud by diverting Longo’s personal assets, as a debtor in possession, and the assets of the bankrupt NTS, a corporation Charles Longo exclusively controlled, into various legitimate businesses and real estate transactions in Frederick, Maryland and throughout Maryland.

On December 6, 1991, DSII was incorporated as a Maryland corporation with an initial stock distribution of 5,000 (five thousand) shares of Common stock, 3,000 (three thousand) shares of Class A Voting Common stock, and 2,000 (two thousand) shares of Class B Non-voting Common stock.

a) The Articles of Incorporation were signed in the offices of Miles & Stockbridge in Frederick, Maryland. The Articles of Incorporation recorded the following as officers of the Corporation: Donald D. Stone, President and Bruff J. Procter, Secretary/Treasurer.

b) On or about December 7, 1991, in the presence of Burgee in the Miles & Stockbridge offices in Frederick, Maryland, Plaintiff and Procter were issued stock in DSII as follows: Donald D. Stone, President, stock certificate number A-1 for 61% of the Class A Voting stock, which represented controlling interest of DSII; and Bruff Procter, Secretary/Treasurer, stock certificate number A-2 for 39% of the Class A Voting stock.

c) Neither Burgee nor Procter explained to Plaintiff that investors in DSII would be sold shares of stock from Plaintiff’s 61%.

On or about December 6, 1991, Burgee advised Plaintiff and Procter that operating capital for DSII could be raised through a private offering to not-more-than 35 (thirty-five) accredited investors (individuals with an annual income or not less than $200,000.00 and a minimum net worth of $1,000,000.00) and that Burgee and Miles & Stockbridge could provide DSII with the necessary documents and questionnaires that investors would have to complete for consideration as accredited investors.

In or about January 1992, Burgee and Miles & Stockbridge prepared a Licensing Agreement by which Plaintiff would license his invention to DSII.

a) On or about January 13, 1992, Plaintiff signed the licensing agreement as licenser. Procter, as receiver for DSII, signed the licensing agreement as licensee.

b) Burgee never informed Plaintiff that neither he nor Miles & Stockbridge had experience or expertise in drafting patent licensing agreements.

c) Burgee and Miles & Stockbridge, as corporate attorney for DSII, never filed the license agreement with the U.S. Patent Office.

d) Burgee was acting under a gross conflict of interest by concurrently representing DSII, Procter, and Plaintiff.

On or about January 7, 1992, Longo, Procter, Burgee, and Miles & Stockbridge induced Plaintiff (working in Florida) to believe that Longo was an accredited investor.

a) Longo, Procter, and Burgee told Plaintiff that Longo had presented check number 272, drawn on Citizens Bank of Maryland in the amount of $15,000.00 (fifteen thousand dollars) as an investment in DSII.

b) In or about May 1995, Plaintiff discovered that the $15,000.00 check presented by Longo as an investment into DSII was made payable to Bruff Procter, an individual, not to DSII.

c) Procter refused to open an DSII corporate checking account. Instead, Procter deposited the $15,000.00 check into the bank account of Fiber Technology in Frederick County National Bank in Frederick, Maryland.

d) Further, Plaintiff discovered that the deposit transaction did not occur until January 23, 1992.

e) Fiber Technology was a checking account exclusively controlled by Procter and his wife Michelle Procter. Though some of the $15,000.00 investment into DSII was used for DSII expenses, a portion of the investment was used by Procter and his wife for their own personal enrichment.

Between January 1992 and the spring of 1992, Plaintiff made repeated, unsuccessful requests to Procter for Procter to open a DSII corporate checking account and to deposit the invested funds into that account.

In the spring of 1992, when Procter had still not opened a DSII corporate checking account or deposited the funds into a DSII account, Plaintiff, who was working in Florida, returned to Maryland and personally collected from Procter $5,507.69 (five thousand, five hundred seven dollars and sixty-nine cents), the amount remaining from the $15,000.00 investment.

a) Plaintiff then opened a DSII corporate checking account at Calvin B. Taylor Bank in Ocean City, Maryland, and deposited into the DSII corporate checking account $5,507.69, the amount retrieved from Procter.

b) The DSII corporate checking account was structured so that either Plaintiff or Procter could sign checks on the account without requiring a countersignature.

c) Plaintiff used the funds to continue DSII research, development, marketing, and to cover the expenses to obtain a patent on the developing technology.

Also in the spring of 1992, because it appeared that the technology DSII was developing would have a greater number of possible applications -- and thereby greater financial value -- than was originally envisioned, Procter approached Burgee about how to raise additional operating capital for DSII.

a) Shortly after Procter’s request to Burgee, Burgee arranged a meeting of Plaintiff, Procter, and Burgee at the downtown Baltimore offices of Miles & Stockbridge with Miles & Stockbridge attorney John B. Frisch (“Frisch”).

b) Burgee and Frisch led Plaintiff and Procter to believe that additional capital could be raised by making a private offering to Miles & Stockbridge clients Sandy Panitz, Frank Sarro, and others.

c) Plaintiff requested that additional capital be raised within three (3) months because DSII and Plaintiff were operating under extreme financial hardship.

In the fall of 1992, DSII terminated its relationship with Miles & Stockbridge because of nonperformance and delays by Miles & Stockbridge.

In or about September 1992, Plaintiff personally borrowed $5,000.00 (five thousand dollars) from Capital Cash (P.O. Box 9560, Manchester, New Hampshire) at 21.9% interest to keep Plaintiff and DSII solvent because of Procter’s refusal to raise any operating capital for DSII (other than the alleged $15,000.00 Longo, Procter, and Burgee were inducing Plaintiff to believe was an investment into DSII).

In the Fall of 1992, Plaintiff returned to Florida and began working in a cabinet shop to support himself and the research and development efforts for DSII.

In or about December 1992, Procter secured a $30,000.00 (thirty thousand dollars) investment into DSII from Sapperstein of Baltimore, Maryland for which Sapperstein was given 4% of Class A Voting Common stock in DSII. Plaintiff, working in Florida, traveled to Maryland to meet Sapperstein, to receive the investment, and to deposit the $30,000.00 into the DSII checking account at Calvin B. Taylor Bank in Ocean City, Maryland.

In or about December 1992, DSII paid to Andrew Sherman (“Sherman”), an attorney, the sum of $2,000.00 (two thousand dollars) for Sherman to create a Licensing Memorandum which DSII could use to introduce its technology to potential licensees.

DSII terminated its agreement with Sherman in or about late February 1993, for delay in producing the finished Memorandum.

During the first quarter of 1993, Plaintiff, continuing to work in a cabinet shop in Florida, and Procter engaged in a massive licensing effort.

a) The licensing effort consisted of contacting personnel in major corporations throughout the United States that might have applications for DSII’s technology and then faxing them the DSII licensing memorandum.

b) From this licensing effort, Plaintiff and DSII met with representatives of Stride Rite shoes in Boston, Massachusetts, one of the largest seller of shoes in the United States, for the possible application of DSII’s technology in their Sperry Top Sider shoe soles.

From this meeting, DSII was introduced to a raw material supplier to Stride Rite.

c) Also from this licensing effort, DSII entered into a research and development agreement with Golf Pride, a division of Eaton Industries and the largest manufacturer of golf club grips in the world, for the possible application of DSII’s technology in their golf club grips.

d) Both agreements indicated the enormous possible potential value of DSII’s emerging technology.

During the first quarter of 1993, as Plaintiff was preparing the 1992 K-1 tax forms for investors, Procter informed Plaintiff that the $30,000.00 invested by Sapperstein was actually not made by Sapperstein but rather by his father Gilbert, and that the K-1 form was to be made out to Gilbert Sapperstein.

In or about March 1993, Sapperstein invested an additional $15,000.00 (fifteen thousand dollars) in DSII for which he was given 2% of DSII’s Class A Voting stock.

All corporate documents and stock certificates would remain in the exclusive control of Burgee, Procter, and Longo in the offices of Miles & Stockbridge until Spring 1993.

During the second quarter of 1993, DSII entered into a research and development agreement with Miles Polymer, a large international chemical conglomerate, for possible application of DSII’s technology in polyurethane shoe soles. DSII also initiated contacts with Nike and Goodyear Tire and Rubber Company.

This agreement and these contacts reaffirmed the enormous possible potential value of DSII’s emerging technology and Plaintiff’s invention.

On or about June 17, 1993, Warfield and Glick made a combined investment into DSII of $22,500.00 (twenty-two thousand, five hundred dollars) for which they were given 2.5% of DSII’s Class A Voting stock.

In the fall of 1993, Longo, Procter, John L. Milling (“Milling”), John J. Sellinger (“Sellinger”), James R. Johnson (“J. Johnson”), Carl F. Johnson (“C. Johnson”), and Gary Boardwine (“Boardwine”) realized that their securities fraud scheme, being perpetrated through SCI and WI, was collapsing.

They then focused their attention on DSII as a legitimate enterprise to further their fraudulent schemes and began shifting their accomplices into doing work for DSII.

a) In the summer of 1993, Longo introduced Plaintiff to Milling, a securities attorney in New Jersey, stating that Milling could help with DSII’s licensing efforts.

b) Unknown to Plaintiff at the time Milling was introduced to him, Milling was creating the securities documents Longo was using to sell the fraudulent securities through SCI and WI.

c) Allegedly, under this fraudulent scheme, the student loans were bundled into $10,000.00 (ten thousand dollars) packages by Longo/SCI then sold by WI to investors throughout the United States

i) To insure the investment, Longo’s long-time personal friend and business attorney, Sellinger, was alleged to be acting as the escrow agent between SCI and WI.

ii) Sellinger was alleged to be maintaining a cushion in the escrow account to make the investors “whole” in the event there was a default on the securities.

However, Longo and Sellinger never maintained this account, thereby defrauding the investors who bought these securities.

iii) The money from the sale of these fraudulent securities was to be used to operate SCI, but Longo was diverting a portion of the money from the sale of these fraudulent securities through Boardwine and C. Johnson, persons who had been involved with Longo in numerous other fraudulent schemes, to Shippers’ Choice of Virginia.

On or about September 28, 1993, after a DSII corporation meeting in the real estate office of Moore, Warfield, and Glick at 128th Street in Ocean City, Maryland, Longo persuaded Plaintiff that he (Longo) could get the DSII corporate papers in order, would help Plaintiff issue stock certificates to investors, and would obtain additional financing for DSII.

Plaintiff, believing Longo had befriended him -- and at that time unaware of Longo’s propensity to engage in criminal conduct -- gave over to Longo DSII’s corporate documents and the stock certificates issued to Plaintiff (certificate number A-1) and to Procter (certificate number A-2) on December 7, 1991.

In or about mid-October 1993, Plaintiff personally financed his travel and lodging to attend the Licensing Executive Society business convention in San Francisco, California on behalf of DSII to introduce DSII’s emerging technology to major United States corporations.

a) At this convention, Plaintiff was able to interest H.B. Fuller, the third largest adhesives and sealant manufacturer in the United States, and Becton Dickinson, one of the largest medical product suppliers in the United States, in the emerging technology Plaintiff had invented.

b) While at this convention, Longo, Sapperstein, G. Sapperstein, Procter, and Warfield seized control of DSII by calling and holding a fraudulent board meeting. At this meeting they elected Longo as president of DSII.

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