Hydrogen Technology Corp. v. U.S.

• Citation: 831 F.2d 1155
• Decision Date: 27 October 1987
• Docket Number: No. 87-1284,87-1284
• Parties: HYDROGEN TECHNOLOGY CORP., Plaintiff, Appellant, v. UNITED STATES of America, Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 1155

831 F.2d 1155

HYDROGEN TECHNOLOGY CORP., Plaintiff, Appellant, v. UNITED STATES of America, Defendant, Appellee.

No. 87-1284.

United States Court of Appeals,

First Circuit.

Argued Sept. 10, 1987.

Decided Oct. 27, 1987.

Norman Jackman with whom Marc A. Comras and Comras & Jackman, P.A., Boston, Mass., were on brief, for plaintiff, appellant.

Martha B. Sosman, Asst. U.S. Atty., with whom Frank L. McNamara, Jr., Acting U.S. Atty., Boston, Mass., was on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, GARTH, ^* Senior Circuit Judge, and BOWNES, Circuit Judge.

BOWNES, Circuit Judge.

This appeal arises out of a criminal investigation by the Federal Bureau of Investigation (FBI) into possible wire fraud by one Ambrose J. Hartnett. Hartnett's alleged fraud lay in falsely representing to investors the properties and potential of a hydrogen generating device developed by Hartnett. In the course of its investigation, the FBI obtained a prototype of Hartnett's generator and dismantled it during a laboratory examination procedure. The dismantling process effectively destroyed the device. No criminal prosecution of Hartnett was ever brought. Hartnett's company, Hydrogen Technology Corporation (HTC), subsequently brought a claim under the Federal Tort Claims Act (FTCA), 28 U.S.C. Secs. 2671-80, alleging that the government acted negligently in destroying the generator. The district court granted summary judgment for the United States and HTC appeals. Because we agree with the district court that the FBI acted with due care in conducting its investigation, we find the government immune under 28 U.S.C. Sec. 2680(a) and affirm.

I.

The record on appeal consists largely of documents compiled by the FBI in the course of its investigation of Hartnett, including numerous FBI reports on interviews with HTC investors. These documents reveal that in the late 1970's, Ambrose J. Hartnett began promoting to investors a device known as the Hartnett Hydrogen Generator. This generator was represented to be a technological breakthrough which could provide an ultra-economical source of energy for home use. According to Hartnett, the core of the generator consisted of a chamber where highly heated water came into contact with what was described as a "catalyst" of metal shavings. As the result of a reaction between the metal shavings and water, hydrogen was produced and could be channeled out of the chamber. Part of the generated hydrogen would be bled out of the generator and used for home heating purposes; the remainder would be fed back into a burner and would in turn heat the reactor core, sustaining the high temperatures necessary for the separation of hydrogen from water. Thus, according to Hartnett, the generator, once initially heated by external sources, would be self-sustaining and would require no further external input other than a small amount of water. Equipped with such a generator, Hartnett claimed, the average home could be heated for about twenty-three cents a month.

At the time Hartnett contacted potential investors, he advised them that the final version of the generator for home use would be completed in less than a year. He also told investors he had interested a French firm, Cruesot Loire Company, in the device, and that the French government had agreed to guarantee all loans and investments in the project up to $100,000,000. According to Hartnett, as soon as the final generator was completed, Cruesot Loire would pay $10,000,000 for worldwide manufacturing rights. Hartnett eventually persuaded a number of people to invest a total of $415,000 in the project. Approximately half of the investors were from the Fort Wayne, Indiana, area; the remainder resided in and around Chatham, Massachusetts, where the generator was being developed.

In return for their payment, investors received a percentage share of the project. Most investors paid $25,000 for a one percent share; others paid as much as $50,000 for the same share while still others received a five percent interest for $25,000. Hartnett also claimed at various times to have invested anywhere from $400,000 to $800,000 of his own money in the generator. Once the generator was sold to Cruesot Loire, Hartnett told investors, they would receive their share of the royalties from generator sales ($100 on each sale at a base price of $400-700 per unit). Hartnett also told some investors that they would be given managerial positions in the corporation overseeing generator sales, and would receive annual salaries ranging from $80,000 to $85,000.

The investors were sworn to secrecy concerning all aspects of the hydrogen generator project. Hartnett said he was extremely fearful of intervention by the government or oil companies who might want to steal his invention or otherwise prevent him from producing a device in direct competition with petroleum fuels. Because of these security concerns, Hartnett told investors, he had not tried to obtain a patent in the United States. Only after investors had bought into Hartnett's venture were they permitted to visit the Chatham facility and view test firings of experimental generators.

Having been assured that development of the generator would be completed by the beginning of 1980, investors became anxious when in late 1980 and 1981 no final model was forthcoming. Hartnett proffered various excuses for these delays. He explained to some investors that he was encountering difficulty developing a nozzle for the hydrogen burner and in obtaining ceramic material for the generator core. Others were informed that special materials, including silver, nickel, sapphire, and titanium were being incorporated into the reactor chamber in order to withstand the 7000 degree Farenheit temperatures Hartnett claimed were produced. At times Hartnett also referred to special grooves that were being machined into the chamber and which, along with oscillating magnets, created greater turbulence within the reactor and boosted hydrogen production. Some investors were shown a circular tube-shaped device which Hartnett claimed to be a "self-starter" under development. In the self-starter mechanism, a small quantity of hydrogen was allegedly mixed with an unidentified chemical compound; additional hydrogen and oxygen would be produced and burned off, generating sufficient heat to bring the core up to its operating temperature.

At no point was Hartnett gloomy about the ultimate workability of his generator. Indeed, in 1981, Hartnett told the investors that the prototype generator was working at 140% efficiency, and needed to be tuned down to 100% or else the device might "blow a building down." On the night of January 19, 1982, Hartnett staged a test firing of his final prototype, which he termed a great success. A scientific consultant hired by Hartnett observed the test firing and executed a sworn statement indicating that the generator functioned properly and produced hydrogen. In subsequent interviews with the FBI, however, the consultant said that the core temperature reached only 1600 degrees Farenheit, that the device was not self-sustaining in that it needed periodic refuelings with iron, and that Hartnett's generator could only be used for industrial, not home heating, purposes. In spite of Hartnett's glowing predictions, the Hartnett Hydrogen Generator has never been produced commercially nor have manufacturing rights been sold to Cruesot Loire or any other entity.

Upon learning of Hartnett's promotional activities, the Fort Wayne, Indiana, FBI office in January of 1981 initiated an investigation into possible violations of the federal wire fraud statute, 18 U.S.C. Sec. 1343. FBI investigators interviewed both Hartnett and the investors in his venture. Through the French police, the FBI also contacted Cruesot Loire Company and Francois Mayer, Hartnett's alleged business associate there. Mr. Mayer indicated that, contrary to Hartnett's claims, he had only spoken briefly with Hartnett on a technical matter related to the generator, and had never discussed financing or marketing the generator, let alone expressed an interest in purchasing rights to the device.

To evaluate the technological feasibility of the Hartnett Hydrogen Generator, the FBI contacted Dr. Fred Gornick, a Professor at the University of Maryland, who was affiliated with the United States Department of Energy and had a special background in the chemistry of hydrogen energy. Gornick informed the FBI that, while the production of hydrogen from iron and water is a well-known chemical reaction, many of Hartnett's claims were incredible. According to Gornick, no known substance can withstand temperatures of 7000 degrees Farenheit, so that even if the generator could produce such temperatures, it would simply melt. Hartnett's claim that his generator was self-sustaining made it, according to Gornick, a perpetual motion machine, in violation of the First Law of Thermodynamics. Overall, Gornick described the purported design, materials, cost, and output of the generator as "both inconsistent and ridiculous."

The FBI forwarded the results of its investigation to the United States Attorney's Office in Fort Wayne, but that office declined to prosecute Hartnett. In an April 1983 letter to the FBI, the Assistant United States Attorney in charge of the Hartnett case cited a number of factors mitigating against prosecution. First, the prosecutor thought there was insufficient credible and admissible evidence to prove that Hartnett had defrauded investors. Second, there were currently ongoing civil lawsuits between investors and Hartnett in Indiana and Massachusetts. Through these lawsuits, the return of investors' money might be effected. Third, many of the investors in the generator were reluctant to come forward and admit that they had been duped by Hartnett. Indeed, some still believed that the generator might prove to be a viable energy producer. Finally,...