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Good Science, But Bad|Business, Partner Claims

HOUSTON (CN) - An inventor of bacteria-resistant plastic defrauded a partner by using his $1.3 million to start his own companies, the partner claims in court.

RADR Development Ltd. sued Frank Fosco Jr. and his wife Robyn Fosco in Harris County Court. Those are the only parties to the lawsuit.

The Foscos own 60 percent of Houston-based Scientific Molecular Holdings LLC aka SMT Holdings and SMT Patents LLC, while RADR Development owns 40 percent of the companies, the complaint states.

"The SMT Companies are involved in the business of developing technology, including patented processes, to integrate anti-biological agents into plastics and other polymers to protect the materials from bacteria, fungus, mold or virus for the life of the substance," the complaint states. "Mr. Fosco is the inventor of the patented processes; however, the patents are owned by SMT Patents."

On Scientific Molecular Holdings' LinkedIn page, the company's name is listed as BioGuard SMT-Scientific Molecular Holdings.

The LinkedIn page specifies what the company does in more detail than the lawsuit.

"BioGuard/SMT offers the very latest technologies available for infection control. ... Instead of inventing and producing a single product or grouping of related products, SMT aggregates a broad range of technology solutions to deliver floor to ceiling pathogen-fighting protection as never seen before," the LinkedIn profile states.

"Products include air purification, surface cleaners, disinfectants, and protectants, textiles including gowns and patient curtains, as well as IT and others. Many products incorporate state-of-the-art Nano technology which is introduced in several different ways to enhance the antimicrobial performance of each item. In the end, these proprietary technologies when properly deployed allow us to achieve our objective which is stated in three simple words ... 'WE SAVE LIVES.'"

In the lawsuit, RADR Development claims RADR owner Randall K. Lowry Jr. "was approached by a third party to invest in a start-up with the Fosco defendants" in 2011.

Lowry agreed and had RADR supply money to unwind the Foscos' previous ventures, RADR claims.

"After resolving the Fosco defendants' prior mistakes, and using the funding supplied by RADR, the parties formed multiple companies to implement a plan to develop and sell products using the technology," according to the complaint.

They formed SMT Holdings and SMT Patents in November 2011 and registered them in Texas, with the Foscos owning a majority 750 units and RADR owning 250 units, RADR says.

They appointed Frank Fosco president, in charge of operations; while Lowry was appointed board chairman, responsible for negotiating deals, according to the complaint.

"These plans failed and sales projections were not met; the SMT companies failed in their mission," the complaint states. "They were not able to survive or conduct business without shutting down - and again the Fosco defendants turned to RADR to induce it and its principal, Mr. Lowry, into a substantial investment to fund the entities' future activities."

To keep the SMT Companies alive, RADR claims, the Foscos made false claims about their prospects and induced RADR "to purchase more units in both companies and infuse capital of approximately $1.3 million."

Things went no better the second time, RADR claims, as Frank Fosco used the $1.3 million "for personal, non-business related purposes - including to set up his own companies and misappropriate intellectual property."

Not only that, RADR says, Frank Fosco withheld info about negotiations with customers, and kept quiet about the companies' compliance with federal regulations.

"RADR has also lost the value of past capital contributions, ongoing contributions and future additional capital commitments all totaling approximately $2 million," according to the lawsuit.

RADR Development seeks punitive damages for shareholder oppression, breach of fiduciary duty, fraud and negligent misrepresentation.

It also seeks a declaration it's entitled to a refund of all the money it invested in the SMT Companies.

It is represented by Thomas Kruse with Baker Hostetler of Houston.

Frank Fosco spoke briefly with Courthouse News on the phone, but did not return an email seeking comment.

The lawsuit lists the Foscos' home address in Illinois; Frank Fosco was reached at an Illinois area code.

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