UNITED STATES ATTORNEY AND SEC BRING FRAUD CHARGES AGAINST FORMER OFFICERS OF U.S. WIRELESS, INC.

In another significant case of corporate fraud, the United States Attorney's Office for the Northern District of California, the United States Securities and Exchange Commission and the Federal Bureau of Investigation today announced the filing of separate criminal and civil charges against two former officers of U.S. Wireless, a San Ramon, California-based wireless systems designer.  Named in the filings were former Chief Executive Officer Oliver Hilsenrath, and former General Counsel David Klarman.  The criminal indictments against Mr. Hilsenrath and Mr. Klarman were unsealed this morning in San Francisco federal court.

Mr. Klarman was arrested this morning by special agents of the Federal Bureau of Investigation at his home in the Hamptons in New York.  Mr. Klarman is scheduled to make his initial appearance in federal court in New York later today.  No date has yet been set for his appearance in San Francisco federal court, where the case will proceed before U.S. District Judge William H. Alsup.  An arrest warrant was issued for Mr. Hilsenrath, who currently resides in Israel.  The Justice Department will seek to extradite Mr. Hilsenrath.

The Criminal Indictment

After the fraud was discovered in March 2001, U.S. Wireless requested the resignations of Mr. Hilsenrath and Mr. Klarman.  Within months of discovering and announcing the fraud, the Company filed Chapter 11 Bankruptcy and sold off its assets.

Both Mr. Hilsenrath and Mr. Klarman were indicted on three counts of securities fraud, in violation of 15 U.S.C. § 78ff, which carries a maximum penalty of 10 years imprisonment and a $1 million fine.  In addition, Mr. Hilsenrath was indicted on 33 counts of wire fraud, and Mr. Klarman was indicted on 16 counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346.  Each wire fraud violation carries a maximum penalty of five years in prison and a $250,000 fine plus restitution.

Any criminal sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court.  An indictment simply contains allegations against an individual and, as with all defendants, Mr. Hilsenrath and Mr. Klarman must be presumed innocent unless and until convicted.

The SEC Complaint

According to the SEC's civil complaint, from August 1997 to January 2000, Mr. Hilsenrath and Mr. Klarman had U.S. Wireless transfer common stock and stock options worth approximately $3.2 million and cash totaling approximately $428,000 to several offshore entities that they secretly owned and controlled.  Under the direction of Mr. Hilsenrath and Mr. Klarman, the cash and stock transfers were originally recorded in U.S. Wireless's books and financial statements as compensation for services, or as the sale of stock for valid consideration.  The defendants also represented in at least one public filing that they were not affiliated with the offshore entities being issued stock.  Mr. Hilsenrath and Mr. Klarman also made misrepresentations about the transfers to U.S. Wireless's auditors.  In early 2001, U.S. Wireless's Board of Directors received information challenging the validity of the transfers.  Once the unauthorized and illegal character of the transfers was realized, U.S. Wireless restated its financial results for fiscal 2000 to increase its annual net loss from $11.4 million to $17.7 million, or by more than 55 percent.

The SEC complaint charges Mr. Hilsenrath and Mr. Klarman with committing securities fraud, causing U.S. Wireless to file false and misleading financial statements with the SEC, and lying to U.S. Wireless's auditors.   The Commission seeks an order enjoining them from future violations of these provisions, barring them from serving as directors or officers of companies reporting to the Commission, requiring them to disgorge their ill-gotten gains, and requiring them to pay civil money penalties.

"Today's indictment alleges that the defendants betrayed the trust of U.S. Wireless shareholders by using the company's money for their own personal gain," said Deputy Attorney General Larry Thompson, the head of President Bush's Corporate Fraud Task Force. "The Department of Justice remains committed to identifying and prosecuting those corporate executives who use the company's coffers as their own."

These defendants are the 13^th and 14^th individuals charged in the last year with corporate fraud violations by the U.S. Attorney's Office in San Francisco.  Over the same period, the U.S. Attorney's Office has convicted 18 defendants on corporate fraud charges.  In announcing the charges against Mr. Hilsenrath and Mr. Klarman, U.S. Attorney Kevin V. Ryan, a member of President Bush's Corporate Fraud Task Force, said, "Once again, the message from this and other recent corporate fraud prosecutions should be loud and clear: To corporate executives who enrich themselves illegally, the U.S. Attorney's Office, FBI and SEC will be vigorous and aggressive in prosecuting individuals who engage in criminal acts."

Helane Morrison, head of the SEC's San Francisco District Office, said, "Hilsenrath and Klarman disregarded their duties to U.S. Wireless shareholders and looted the company for their own benefit.  We will continue to work closely with criminal authorities to ensure that corporate officers who engage in such conduct are held accountable."

Mark Mershon, Special Agent in charge of the FBI's San Francisco field office, said, "Today's arrest demonstrates the high priority the FBI places on securities fraud.  The FBI will continue to investigate any person involved in this type of criminal activity."

The criminal prosecution is the result of an investigation by the FBI and U.S. Attorney's Office with assistance from the SEC.  Hartley M.K. West and Anne-Christine Massullo are the Assistant U.S. Attorneys prosecuting the case.  The civil case was investigated by the SEC. 

All press inquiries to the U.S. Attorney's Office should be directed to Assistant U.S. Attorney Matthew J. Jacobs at (415) 436-7181.