The inventor of a system of rotational molded flood walls has pleaded guilty to securities fraud, leaving in doubt the future of a project developed as a quick way to replace sandbags when flood waters are rising.
Dennis Peppard was sentenced Feb. 2 to six months in jail. He pleaded guilty in U.S. District Court in Cheyenne, Wyo., to one count of securities fraud for selling unregistered securities. Peppard had raised $1.1 million from investors for his former company, SWI Mitigation Services Inc.
Creative Plastics Inc., a small Baltimore rotomolder that had been touted as the key manufacturer of the walls, since has gone out of business. Meanwhile, some contentious civil litigation in Wyoming has taken control of the patents from Peppard and given it to his former investors, who say they lack the money to move forward.
"Everybody has told us we have a product with tremendous potential, but we don't have any money," said Gene Krakow, an insurance agent in Cheyenne and vice president of Segment Systems Inc., a shell corporation of investors that now controls the patents. "We want someone to come in and buy the patents or do something."
While the project left some investors angry, the court did not find any evidence that Peppard committed fraud, said John Masterson, assistant U.S. attorney in Cheyenne. The six-month jail term is the maximum Peppard could have received for the securities violation, Masterson said.
Peppard could not be reached for comment. His public defender, Cheyenne lawyer Jim Barrett, said his now-indigent client simply was not good at business.
"He was an awful businessman," Barrett said. "The [Wyoming] secretary of state's office [which investigated Peppard] in our meetings characterized him as a nutty professor. ... He has these ideas. He does not follow through."
According to a story by The Associated Press, though, U.S. District Judge Clarence Brimmer said Peppard developed several investment schemes in the late 1980s and 1990s that did not see a return to investors.
Officials with the former Creative Plastics could not be reached, but a staff member in the office of one of its former investors, Baltimore physician Selvin Passen, said the company went out of business.
Creative Plastics told Plastics News in 1997 it had a license to manufacture the flood walls and was working with government officials on the design. Creative said at the time that it took a "leadership" role in the project after SWI ran into financial problems.
Passen told the Baltimore Business Journal in 1997 that he loaned Peppard more than $330,000. Passen did not return telephone calls, but officials familiar with the Wyoming cases said Creative's problems did not seem related to SWI.