By James McNair
The Cincinnati Enquirer
Now that investment promoter George Fiorini is under federal indictment, Tristate residents who entrusted him with millions of dollars wonder more than ever whether they will get their money back.
It's possible - if they keep paying lawyers to sustain their collection efforts in court.
Or they can place their trust in the Los Angeles business associates of an alias-using former car salesman now locked up in a federal prison for bank fraud. The associates are willing to cover a fourth of the investors' losses, but only if they become an overnight sensation in the field of medical waste disposal.
From 1995 to 2002, up to 200 people bought about $13.5 million worth of high-yielding notes from Fiorini and the company he represented, Guardian Investments of Mason. Many were retirees who sank their life savings into Fiorini's "worry-free" 10 Percent Income Plus Plan.
The federal government weighed in Wednesday. It charged that the 10 Percent Income Plus Plan was nothing more than Fiorini's personal piggy bank.
Fiorini, 53, was indicted on 79 counts of fraud, money laundering and income tax evasion. The indictment says he spent the money frivolously, and public records suggest that he's broke. Citibank is foreclosing on his house on Wesselman Road in Miami Township. When he appears before a federal judge Thursday, he will be represented by a public defender. He says he can't afford legal counsel.
Still, lawyers involved in the civil battle against Fiorini and Guardian smell a tantalizing feast downstream. Most of the $13.5 million was funneled into a New Jersey company called Sanitec Inc., which owned a proprietary method of destroying medical waste by microwave. Fiorini's victims see it as their lone likely salvation.
Where it gets sticky is that Guardian's manager, Stephen Ventre, introduced the venture to his cousin Terry Quatkemeyer, a former Cincinnatian who moved to the tony Los Angeles suburb of Bel Air, changed his name to Terry Quinn and racked up two bank fraud convictions in 11 years. Ventre says Quatkemeyer misappropriated $8.3 million from Guardian and used the money to buy Sanitec for himself, as well as for unrelated business purposes. The two sides are fighting over Sanitec and the money - Quatkemeyer from a prison cell in Texas.
Fiorini's customers filed lawsuits of their own, and the dispute has become an all-out legal war in almost 20 courtrooms. Sanitec, apparently, is worth the fight.
The medical waste technology was developed by the Swiss conglomerate Asea Brown Boveri and spun off into the freestanding company in the mid-1990s. The machines, which cost $600,000 and up, are being used by almost 80 customers in North America, South America, Europe, Asia and Australia. Guardian ran one in Florence and had 260 customers, including St. Elizabeth Medical Centers and the IRS Service Center in Covington. But the operation closed in August.
Joe Delloiacovo, Sanitec's president until resigning a year ago, said he continues to receive queries from potential buyers of the machine. In a telephone interview from New Jersey, he said interest emanates from countries as far away as China, Malaysia and India. But he said the battle over the technology ownership is preventing those orders from being filled.
"We need movement," he said. "Something has to happen such that there is an entity that can deliver goods; otherwise the company's reputation will go down the toilet and the value of the asset will be irreparably harmed.
"Everybody recognizes that if something isn't done quickly and a settlement reached, the (Guardian) note holders won't get anything."
The Quatkemeyer group - called A.B.B. Sanitec West - has offered such a settlement, said its Cleveland lawyer, John Climaco. In exchange for the rights to the Sanitec technology, it has agreed to pay the Fiorini-Guardian investors a total of $3.5 million, or about 30 percent of the amount due. The catch is that the money would take the form of a 2 percent royalty skimmed from Sanitec West revenue and placed into a separate trust account.
Accepting that deal would require a considerable leap of faith by the badly burned investors. According to a March 17 document in support of a $1 million securities offering, Sanitec West operates only two waste disposal machines and needs to raise the cash for working capital, even though it says it raised $5 million in two previous offerings. The interest rate on the note portion - 12 percent - makes Fiorini look like a piker.
Sanitec West also has some head-turning financial projections: $2.4 million in net income on $6.6 million in revenue in 2003, growing to $13.7 million in profit on $27.9 million in revenue in 2006.
Sanitec West executives did not return the Enquirer's calls last week. Climaco said he is waiting on lawyers for Fiorini-Guardian investors to act on his settlement offer.
"My clients do not believe they have any legal obligation to the note holders," he said. "This was a way to resolve a lot of litigation."
Climaco said Quatkemeyer was falsely accused of misappropriating the $8.3 million from Guardian. He said Guardian loaned Quatkemeyer the money.
Tim Fischer, one of the two Cincinnati lawyers negotiating with Climaco on behalf of Guardian investors, said he is studying the settlement offer and Sanitec West.
"If we're going to enter into a settlement with anyone involving payments over time in the future, as opposed to a lump sum, you need to have some sort of security and you need to verify that the people and the business you enter into this agreement with have the ability to follow through on their promises," Fischer said.
If Fischer does his due diligence, he will learn that Sanitec West and its top financial adviser and ex-CEO, David Kaye, were barred from selling its units in Texas in December. The Texas State Securities Board ruled that the defendants, who were not registered with the state, misled investors by downplaying the riskiness of the offering.
Charlie Flugel, a retired engineer in Enfield, Conn., arrived at his own conclusions about the Sanitec West units, which go for $20,000 apiece. He said he didn't like the fact that the company's future hinged on a lawsuit.
"I saw enough sleazy or queasy things that made me uncomfortable about investing," Flugel said.
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