DEFENDANT PLEADS GUILTY TO ISSUING FALSE ANTHRAX PRESS RELEASES

WASHINGTON, D.C. – Assistant Attorney General Michael Chertoff of the Criminal Division and United States Attorney Carol C. Lam of the Southern District of California announced today that Charles W. Kallmann, the former Chief Executive Officer of 37Point9, Inc., pleaded guilty in federal court in San Diego, California, to a criminal information charging him with two counts of securities fraud for issuing false press releases in an effort to bolster his company's sagging stock price during the anthrax scare in 2001.

37Point9 Inc., was a holding company headquartered in San Diego. The common stock of 37Point9 was registered with the United States Securities and Exchange Commission (SEC) and was traded on the Over the Counter Bulletin Board, a quotation service operated by the National Association of Securities Dealers (NASD).

According to the criminal information, Kallmann exploited the publicity generated by the October 2001 anthrax incidents to fraudulently promote the sale of 37Point9 shares through the issuance of false press releases promoting an anti-anthrax product. In October 2001, Kallmann drafted two press releases which made false and misleading claims about the development, testing and effectiveness of a product named "SurfaceShield" which was purportedly designed to have a long term killing effectiveness against anthrax, as well as a wide variety of bacteria, viruses, germs and fungi. One of the press releases stated that a wholly owned subsidiary of 37Point9 had entered into an agreement with a laboratory "to develop an addition to its SurfaceShield product that will enable the enhanced SurfaceShield to kill bacillus anthracis (anthrax) while it is in its vegetative state and prior to release and sporulation of vegetative cells." In fact, 37Point9 had not entered into such an agreement.

37Point9 was a thinly traded "penny stock."Around the time of the issuance of the false press releases, the volume of trading in 37Point9 shares increased approximately 1500 percent to over 32 million shares and the price of 37Point9 shares increased approximately 300 percent.

"The defendant in this case brazenly manipulated his company's stock price," said Assistant Attorney General Michael Chertoff. "Worse still, he did it by exploiting public fears about the anthrax scare."

John R. Kingston, Acting Special Agent in Charge of the FBI's San Diego Division, added: "This case illuminates the FBI's commitment to corporate fraud investigations and particularly those who attempt to exploit the public's anxieties."

Kallmann faces a maximum sentences of 10 years in prison on each of the securities fraud counts. A sentencing hearing has been scheduled for June 9th before U.S. District Judge Gonzalez.

This case was investigated by the FBI, in cooperation with the NASD. The matter was referred by NASD to the Fraud Section, Criminal Division, U.S. Department of Justice, and prosecuted by DOJ Trial Attorney Raja Chatterjee.

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