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In the wake of the Sweetwater Development debacle, in which dozens of Niagara County investors lost millions of dollars, the state Attorney General's office is investigating another local firm to determine whether the company received funds diverted from Sweetwater.
Continuum Environmental Inc., which has offices at 826 Pine Ave., is the target of a probe similar to that of Sweetwater Development, in which investors poured upwards of $14 million into a housing subdivision in central Florida that was recently sold in bankruptcy for a reported $1 million.
A common thread linking the two companies is the involvement of disgraced local financial consultant Richard Muto, who, in addition to being the target of a criminal investigation, has been sued by a number of Sweetwater investors for $7.2 million.
Law enforcement officials have characterized the Sweetwater Development deal as a "Ponzi scheme," in which investors' money is used simply to pay dividends to other investors with an appropriate percentage taken off the top by the organizer of the fraud.
"This is, without a doubt, the biggest investment scam ever to hit Niagara County," one law enforcement official said of Sweetwater.
But, while Muto actually became an officer in Sweetwater Development, he appears to have been involved with Continuum primarily as a promoter of the company's stock.
Continuum, which also claims to have offices in Tulsa, OK and County Claire, Ireland, was founded in 1996 by Youngstown resident Lawrence Conaway. Literature distributed by the company to area investors or "members," as they are called, claims that Conaway developed a unique method for extracting oil from what are known as "oil sands" while working in his garage.
Such technology has existed for decades, but the cost is prohibitive.
"Why would you spend $50 to extract a barrel of oil from sand when you could just buy a barrel of oil for $22?" said one industry source.
Conaway claimed to have come up with an improved and more cost-effective process for extracting the oil, and said he applied for a patent on the process in June of last year.
Whether a patent was ever granted is uncertain.
What is certain is that Richard Muto lured numerous area investors to Continuum -- some of whom also had money in the Sweetwater Development scam.
It was this alleged connection, sworn to in affidavits given by victims in the Sweetwater investigation, that instigated the state's probe of Continuum.
"I attended two of the members' meetings, one at the Quality Inn and the second at the Hotel Niagara," said one investor who has $5,000 tied up in Continuum shares. "There were between 200 and 300 people at each of those meetings, so I would imagine that's how many investors they had locally."
In a Monday interview, Conaway told the Reporter he had been a victim of Muto's as well.
"My relationhip with Richard Muto has been as tragic for me as it has been for everybody else," Conaway said. "He reneged on a note with me and I took back all his stock in Continuum.
The company's Web site makes reference to a Dec. 3, 2001 article in "Chemical Engineering" magazine concerning "Continuum's technology for extracting oil from tar sands," but an exhaustive search of the magazine's online archives found no trace of the alleged article.
"As far as I know, no oil was ever produced," said one investor, who asked not to be identified. "When the Sweetwater story came out, I started getting concerned."
Following the expose of the Sweetwater Development scam in the May 7 edition of the Reporter and the subsequent lawsuit, Muto shuttered his Niagara Falls office and fled to Las Vegas, where he is listed as the president and sole shareholder of a company called Your Wish Inc. The company was designed as a direct sales vehicle, although there is no evidence it ever sold anything.
Sources close to Muto said he received death threats from disgruntled Sweetwater investors following the revelations.
Although he attempted to sell his Lewiston home, the judge handling the Sweetwater lawsuit ordered Muto's assets -- along with those of his wife, Deborah -- frozen at a hearing late last month.
Law enforcement sources said it is believed Muto transferred considerable funds to offshore accounts in the Cayman Islands and Belize, an allegation bolstered by the fact that numerous victims of the Sweetwater scam received checks signed by Muto and drawn on a bank in the Caymans.
| Niagara Falls Reporter | www.niagarafallsreporter.com | July 23 2002 |