DETROIT - When Detroit-area businessman George Rashid Sr. patented a radar-brake technology in the 1950s to stop a car automatically whenever it sensed a nearby object, he likely envisioned several uses for it.
He probably figured automakers would embrace the safety aspects of the technology, which had front and rear sensors and gauged weather conditions and car speed. He also may have thought it would apply to other forms of transportation.
What he likely didn't imagine was that after his death, his sons Jack and Charles would face jail terms for using the technology to bilk $6.5 million from more than 140 investors - including friends and family - over eight years.
Wowed by demonstrations of a device that would smoothly stop the vehicle after Charles or Jack had barreled toward another car, a wall or a person, investors would write checks for thousands of dollars. One investor, an in-law of Jack Rashid, put up $330,000 of his own and raised another $2.1 million from friends and other investors.
The technology was real. What weren't real, federal prosecutors said, were the commitments to buy it, which were written on phony company letterhead. The fabricated documents made it look as if General Motors, Fiat S.p.A., Siemens AG and Code-Alarm Inc. had committed hundreds of millions to the brothers' companies. Documents also were faked using the names of Cadillac, Masco Corp., BMW Group and Northwest Airlines Corp., the prosecutors said.
Since 1975, the Rashid brothers had formed at least three companies: Vehicle Radar Safety Systems Inc. of Mount Clemens, Mich.; Advanced Radar Technologies Inc. of Fraser, Mich.; and Advanced Radar Technologies-Canada. But investigators said the first signs of fraud began only in 1988, when the brothers started collecting money from investors.
As early as the 1950s, the technology and the Rashids received glowing press reports from The Washington Post, St. Petersburg Times and Popular Science and was featured on the early-1980s TV show 'That's Incredible.'
Prosecutors aren't sure what the Rashids' long-term plan was, though they speculate the brothers thought they eventually would get some real contracts to repay investors. Nor is it certain what they did with the money.
'What we do know is they were not investing the money on the company but on their lifestyles,' said Cynthia Oberg, an assistant U.S. attorney handling sentencing in the case.
The Rashids fooled financial planners, engineers and doctors - some so thoroughly they refused to believe something was wrong even when the FBI called, court records show.
To report this story, Crain's Detroit Business reviewed affidavits from the FBI, bank records, indictments and copies of the false purchase orders. Interviewed were investors, federal prosecutors, the defendants' attorneys and executives at companies named in the falsified letters. The Rashids themselves declined to be interviewed.
BUILDING A CASE
The falsified documents and investors' testimony were the basis for the government's case against the Rashids and their attorney, Jack Chilingirian of Novi, Mich.
The trial wrapped up this summer. On Nov. 15, U.S. District Judge John Corbett O'Meara is expected to sentence 52-year-old Jack Rashid to a five-to-seven-year prison term for conspiracy to launder money.
Chilingirian, 56, who also was convicted on a money-laundering count, was sentenced last week Oct. 18 to three years in federal prison. Chilingirian's role, prosecutors said, was concealing the fraud, as well as 'lulling investors' into thinking everything would work out.
Charles Rashid, 41, convicted of mail fraud, wire fraud and conspiracy, was sentenced in September to 37 months in jail and three years of parole. The three will have to pay back the $6.5 million, Oberg said.
Strangely, at least two years before the FBI began to look into the Rashids, an attorney at GM knew Jack Rashid was using a fake GM purchase order to raise money from investors. The attorney told Jack Rashid to 'cease and desist' but did not contact any legal authority.
The eight-year scheme was successful because much of what the Rashids told investors was true. The crash-prevention system uses a radar sensor to detect an obstacle in front of or behind a vehicle. If a collision is imminent, the device applies the brakes.
IT REALLY WORKS
Rashid Sr., who died in the early 1980s, obtained patents in 1957 and 1975. Vehicle Radar Safety also received Federal Communications Commission approval for the system in 1985, which was necessary because the device emitted an electronic signal.
The elder Rashid, according to numerous press reports, came to the United States in the 1920s from Beirut, Lebanon, at age 16. He studied electronics at Cass Tech High School in Detroit and later went into business as a grocer, starting with a small store.
By the late 1940s, he owned eight stores; three car dealerships; real estate in Detroit; a home in Grosse Pointe, Mich.; and a farm in Anchorville, Mich.
Those early media reports also describe how he got the idea for a radar-brake technology after a harrowing drive home behind a semi-trailer on a foggy night in the 1940s. Swindled investors, federal investigators and attorneys for the defendants still rave about the elder Rashid's technology.
'It really works. That's what's so interesting and tragic,' said Tom Cranmer, a Bloomfield Hills, Mich., attorney who represents Chilingirian. 'The technology could have been something in the right hands.'
Said Code-Alarm Chief Executive Rand Mueller, who had his signature forged on a fake contract with the Rashids: 'I was very impressed by the radar brake and stunned when I heard about the whole scam. I'd looked at the technology and told Jack to send me a schematic, but he never did.'
EASY TO FOOL INVESTORS
Why didn't any automakers buy the device?
'There seemed to be liability concerns. If the radar-brake stopped suddenly, someone could get whiplash or rear-ended. It would have to be absolutely foolproof,' said one investor, Paul Tindall, a financial planner in Toronto.
In fact, automakers increasingly are offering similar, though nonbraking, radar technology for the rear of a car. Ford Motor Co.'s 1999 Windstar, Explorer and Mercury Mountaineer use a similar technology in which a sensor inside the car beeps when a vehicle backs up and nears an object. Mercedes-Benz has vehicles with similar options.
So impressive was the Rashid technology that a private investigator hired by investor Tindall to investigate the Rashids came back to Tindall raving about the technology.
'The investigator says to me, `You wouldn't believe what this radar-brake thing can do,' ' said Tindall, who says he invested $330,000. 'I told him, `Yes, I've seen it. I just want to know if I'm being defrauded.' He said, `Oh yeah, you sure are,' then he went back to raving about the technology.'
And because the technology worked so impressively, it became easy to fool investors.
'The thing is, 99 percent of what Jack was telling us was true. It was just that 1 percent that was false,' Tindall said. 'That 1 percent is the part that made it a fraud and cost us all money.'
Jack and Charles Rashid began collecting money from investors for the radar-brake system and their company Vehicle Radar Safety in 1988, according to an affidavit filed with the court by FBI Special Agent Matthew Iskrzycki.
Typically the Rashids would raise money from a block of investors with one contact person or group leader.
BROTHERS KNOWN, TRUSTED
The first investor to provide money was Stephen Rozichcq, a Canadian businessman who brought in 12 investors from 1988-94. His group put in just over $2 million.
Investors typically would receive a promissory note spelling out how much money they'd get back. The promised return ranged from 300 to 1,000 percent.
'Investors knew the Rashids, and time and again they relied on the Rashids' integrity or these alleged purchase orders, and they got defrauded for it,' Oberg said.
JACK WAS THE LEADER
Jack was the business leader and primary contact, according to investors and investigators. He would talk to investors about the phony contracts and when the big payoffs for them would occur.
Charles would explain and demonstrate the radar-brake system. Demonstrations often took place on metro Detroit highways or in Macomb County, where the brothers lived.
'Jack would shift lanes at 90 miles per hour and speed at a car, and the technology would kick in. I'd ask Jack if he was worried, and he said `No, I'm friends with police all over town,' ' said Joe Hayden, another investor.
Investors continued to pour in as the Rashids continued to produce fabricated evidence of contracts. In 1991, Rozich was shown a letter with the Cadillac logo committing $36 million to Vehicle Radar Safety for Cadillac's exclusive rights to the technology. The letter also said Cadillac would pay $12.7 million directly to Rozich.
The letter carried a signature purporting to be that of Ellie Torre, Cadillac assistant general sales manager. Torre later testified that she didn't sign the letter and was unaware of its existence until the FBI showed it to her last year.
One Rozich investor, Larry Cheek, told the FBI he invested $743,000 in Vehicle Radar Safety based on a 1992 contract Jack Rashid showed him. The contract said Siemens AG would pay $40 million for the exclusive license to manufacture the radar-brake system. Rashid also showed Cheek six Siemens letters explaining why the contract was being delayed.
Two other investors, Gary and Charles Rudder, began investing with the Rashids in 1992. They brought in 19 investors and $875,000.
One month before the Rudders came aboard, investor Cheek almost broke the scheme. In 1992, Cheek wrote GM a letter, enclosing a copy of a purchase order showing GM would buy 100,000 remote warning systems from Rashid for $314 each.
GM attorney Michael Robinson replied to Cheek on Oct. 29, 1992, telling him the purchase order was 'a fabrication.' He went on say GM was 'concerned about the matter you have brought to our attention' and would communicate those concerns to Rashid.
A letter was sent Oct. 30, 1992, to Jack Rashid and another company of his called Doppler Holding Co. in Mount Clemens.
`CEASE AND DESIST'
Robinson demanded that Rashid's company 'cease and desist making any further representations to any other persons or companies that there exists any form of purchaser/supplier relationship' between Rashid's company and GM or any of its divisions or subsidiaries.
That was as far as GM's Robinson went with the issue, said GM spokesman Dan Jankowski.
'He did his due diligence. You can't always control people that are trying to defraud other people using your name,' Jankowski said.Did Cheek demand his money back?
The fake GM order also was used with another investor named Joseph Boyle, who provided $95,000 to Charles Rashid, who told him he needed the money to pay off his mother's mortgage.
Another investor group leader was Hayden, who worked in medical-equipment sales in Macomb County, Mich. He brought in 46 investors, mostly friends and family, and about $184,000. Hayden was shown copies of an alleged $250 million contract with BMW and Masco. It purported to be signed by Masco CEO Richard Manoogian.
The Rashids apparently had confused Masco Corp., which makes faucets, kitchen cabinets and other home products, with MascoTech Inc., an auto supplier.
Investigators later found a ripped-up, hand-written copy of the alleged Masco-BMW contract in the trash. Parts of it were duplicated from a similar alleged contract with German auto supplier Siemens AG, with the word 'Siemens' crossed out and BMW-Masco written over it.
`I'M SO EMBARRASSED'
Jack Rashid also showed Hayden an escrow document with the name of the National Bank of Detroit indicating $250 million in an escrow account for the Rashids. It, too, was a fake.
Hayden was supposed to meet in 1994 with a BMW executive to discuss the German carmaker's interest in the Rashids' technology. The meeting was canceled suddenly, said Hayden, when Rashid told him the executive's wife had been killed in a car accident.
'I'm so embarrassed that I bought what Jack Rashid told me,' said Hayden, who now lives in Texas. 'He was promising me and my friends that we'd get back 10 times our investment and we'd get that month after month. I became friends with Jack, and he told me he'd make sure I was taken care of. I thought we were very close.'
EVEN FAMILY TAKEN
The largest investor group was brought in by Tindall. He'd known Jack Rashid for 20-plus years when Jack called him in 1994 and said, 'Hey, do you want to make a lot of money?' recalled Tindall.
'When he called, I wasn't the least bit skeptical. I knew the technology worked and I'd seen Jack at a lot of weddings and funerals. He was family. No one had a bad thing to say about him. He was one of those guys whose handshake was their word,' said Tindall, who brought in 40-plus investors and nearly $2.5 million.
He and other investors were promised their money back in a few months and triple their original investment shortly after. For example, a $50,000 investment would turn into $200,000 within a year.
Tindall, whose wife's half-brother had a daughter who married Jack, is now under investigation by the Ontario Securities Commission to make sure he didn't profit by the Rashids' plan.
'He gave me this detailed mock-up of how the technology would look in a plane cockpit. I called a local airplane mechanic and everything Jack said checked out,' Tindall said.
Vehicle Radar Safety filed for Chapter 11 bankruptcy protection in 1992. Around 1994, it converted to a Chapter 7 liquidation. The brothers started both Advanced Radar Technologies-Canada and Advanced Radar Technologies in 1995.
It was about this time that the FBI began looking into the Rashids. Assistant U.S. Attorney Oberg did not know an exact date but said calls from investors got things rolling.
'The FBI was already looking into the Rashids when I called them in 1995,' Hayden said.
Tindall said he became suspicious and hired the investigator when Jack went on an alleged 'big business trip' to China and returned far sooner than Tindall thought possible.
The FBI, Internal Revenue Service and Justice Department wrapped up their investigations early this year and went to trial in April. Jack Rashid reached a plea bargain with federal prosecutors and pleaded guilty to conspiracy to launder money.
Jack Rashid's attorney, Richard Lustig,cq of Birmingham, Mich., would not comment for the story because the sentence was still pending. He said Jack Rashid would not comment either.
Charles Rashid's attorney said Charles will begin his 37-month sentence in the next few weeks.
At dispute during Charles' trial was how much he knew about the phony purchase orders.
Charles' attorney, Birmingham lawyer Edward Wishnowcq, says his client was 'in large part duped by his older brother Jack, just like these other people were.'
WISER BUT WARIER
Federal prosecutors dispute that and say the 24 counts of federal mail fraud, wire fraud and conspiracy found by a jury against Charles prove he knew of the misrepresentations.
Chilingarian's sentence is still undetermined. His attorney said he should be required to pay back only $350,000, while Oberg said it should be closer to $2.6 million.
Tindall and Hayden say they feel wiser but warier for the experience. Hayden called it an 'expensive education' and readily admits he could have 'lost all my money' because of his faith in Jack Rashid.
Tindall, still fighting to save his reputation in Ontario, says he has become distrustful.
'It was like an invasion into my home. You start to feel like someone can get you if they want to. If someone really wants your home or your car or to kill you, they will,' he said.
'Sure I've become less trusting. The only reason I even know I'm talking to a reporter is that the U.S. Attorney's office called me to say you'd be calling.'