DEPARTMENT OF JUSTICE

Intra-Office Memorandum

Privileged and Confidential
Attorney Work Product
Prepared In Contemplation of Litigation:

"The Force" ("Force") is a sausage-shaped product advertised by American Technologies Group, Inc. ("ATG") as increasing gas mileage and improving engine performance when placed in the air intake system of a motor vehicle. ATG represents that the "active ingredient" in "The Force" consists of "I_E^TM Crystals," said to be a substance discovered and now manufactured by ATG.

ATG General Counsel John Dab in a May 21, 1997 letter to me made a number of representations regarding what he referred to as "I_E^TM Crystals" ("Ie," "IE," or "I_E"). Those representations are relevant here both because the purported existence of "Ie," described as a new form of ice stable at room temperatures, is integral to the product claims for Force, and also because the truth value of the statements bear on the credibility of ATG and Mr. Dab. In his letter, Mr. Dab stated, inter alia, that: TRADENET had contacted ATG "to see if we could provide a scientific basis for the performance of their Laundry Solution"; based on a "preliminary analysis," ATG told TRADENET that "the globes were weak in their effect on water and that the concentration" (of "structured water") "was erratic and unreliable"; that ATG offered to provide "an interim solution with consistent quality containing our I_E^TM crystals at higher crystalline concentrations than in their existing product and provide a scientific explanation as to how the solution works." Mr. Dab stated further that ATG had conducted studies which "indicate that ATG's globe contains I_E crystals" and that "when the globes are placed in water overnight, the water in which the ATG globe was placed has I_E crystals." Mr. Dab enclosed with the letter ATG's 4/1/97 "R&D Report" which he said "explains why the I_E crystals reduce the surface tension of water thereby increasing water's ability to dissolve dirt." Mr. Dab also enclosed two vials of water and stated that one of the vials contained "I_E" and that shaking the vials would produce bubbles in the vial with the "I_E" but not in the other vial. Finally, Mr. Dab stated that analysis of the samples "in accordance with the procedures in our R&D Reports will identify the water containing I_E."

With a July 8, 1997 letter Mr. Dab enclosed some documents regarding a product called "The Force" including two articles published by Dr. Shui-Yin Lo and two reports written by Dr. Selim Senkan. The core materials said to substantiate the existence of "Ie" are the two articles published by Dr. Lo, ATG's R&D director and "chief scientist." Dr. Lo authored one article, "Anomalous State of Ice," and co-authored another, "Physical Properties of Water with I_E Structures," both published in 1996 in Modern Physics Letters B. These articles presented Dr. Lo's theoretical basis and purported experimental and photographic evidence for what then became "I_E^TM" Crystals." The core claim, I think, for "The Force" as well as for the several "globe" laundry products we dealt with previously is that " I_E Crystals," as described and depicted in the articles by Dr. Shui-Yin Lo ("Lo") and the ATG "R&D" Reports, that is, a form of ice stable at room temperatures, are a real substance or material discovered by Lo and now manufactured by ATG for use in various products. Lo claims in his articles to present a theoretical basis for believing "Ie" exists, and also presents experimental and "direct," i.e., photographic, evidence for the existence of "Ie" as he describes it. It turns out that the purported theoretical basis is at odds with several well established physical laws; at least some of the experimental "evidence" Lo presents contradicts his own theory; and even the bona fides of the publication in which Lo's articles appeared and its publisher may be somewhat dubious.

As University of Oregon chemistry professor Dr. Paul Engelking put it, if "Ie" were real, its discovery, and Lo's description of it, would be Nobel Prize material, disproving several fundamental principles of physics and warranting publication in Nature or Science, not in an obscure letters journal like Modern Physics Letters B. It is nevertheless in Modern Physics Letters B that Lo chose to publish his work [and, significantly, there has been no follow-up publication in any more thoroughly peer-reviewed journal. See discussion in my "Vol. 3" memorandum]. The "direct evidence" for "Ie" presented in these articles consists of the photographs they contain. However, the articles also present descriptions of supposed experimental evidence. It does not leap out at the lay reader, but promptly impressed experts to whom I showed this material, that Lo's own experimental "evidence" contradicts him in a number of places. The articles contain inconsistencies any meaningful peer review should have caught. For example, Lo states, "If water molecules group together to form larger structures such as the [IE] structure that is proposed, then the resulting structured water should have a larger dielectric constant." Lo, "Physical Properties of Water with I_E Structures," p. 923 (emphasis added) Yet Lo's own experimental finding is that "the [IE] structured water has a twenty percent smaller dielectric constant." (Id.; emphasis added.)

ATG represented in press releases -- and has repeatedly asserted -- that the publication of these articles, together with a presentation by Dr. Lo at a conference held at Dartmouth College ("the Dartmouth conference"), indicate that ATG and Lo's "science" has "passed peer review." Modern Physics Letters B ("MPLB") is a "refereed" journal, which means that articles submitted for publication are subject to prior review by individuals said to have some expertise in the relevant field. In materials recently submitted to substantiate the existence of "Ie," ATG includes a letter from the "Commissioning Editor" of World Scientific Publishing Co., Inc., publisher of MPLB. The letter is addressed to Dr. Lo and states that every paper submitted for publication in certain journals is subject to prior review by referees who are "the world experts in the field." The journals mentioned are IJMPA (presumably, International Journal of Modern Physics A) (not B) and MPLA (again, presumably, Modern Physics Letters A) (again, not B). It may be simple carelessness on ATG's part, but there is no description, in this section purporting to describe "the peer review process for publishing these two papers in Modern Physics Letter," of the procedure for securing publication in MPLB. Be that as it may, it's difficult to see how a trained scientist could have missed the internal contradictions in Lo's material. Moreover, Dr. Carroll DeKock, chairman and professor of chemistry at OSU, besides summarily dismissing the substance of Lo's articles, told me that World Scientific Publishing Company, which publishes MPLB, had also published a document thirty years old with a new date and no indication of the prior history of the document.

As mentioned, one of Lo's articles includes what purport to be photographs of "Ie" structures. Additional such photographs are presented in a document labeled ATG "R&D" dated 4/1/97. The Department contracted with Structure Probe, Inc., an independent laboratory, to evaluate the evidence for the existence of "Ie." Structure Probe tested several samples of aqueous solutions which were said to contain "Ie". These included samples of two "globe" products marketed as laundry detergent substitutes as well as a vial submitted directly to me by ATG General Counsel John Dab. Structure Probe found no evidence of "Ie" in the globe products or in the vial.

We have a tape recording of Jennifer Kemp, an operations manager of TradeNet Marketing, Inc., which was in the business of selling the globes, stating unequivocally that the globe samples we submitted to Structure Probe also contained ATG's product. Nevertheless, ATG appears to question whether those products in fact contained ATG's "Ie." However, Structure Probe also found no evidence of "Ie" in the vial supplied by ATG, and perhaps most tellingly, did find, and photograph, in West Chester, Pennsylvania, tap water, evidence of structures similar to those offered by ATG as proof of the existence of "Ie."

We thought back in June that only a combination of transmission electron microscopy and product performance testing (e.g., laundry effectiveness) would ultimately resolve our case. However, I believe Structure Probe rather ingeniously solved that problem by not simply failing to find "I_E" in certain solutions but by finding structures similar to Dr. Lo's in local tap water. Structure Probe thus produced powerful evidence from which it may be concluded both that "I_E" as described by ATG and Dr. Lo (that is, a new form of ice formed as Lo describes and stable at room temperatures) does not exist, and that there's nothing very special in what ATG and Lo claim is "I_E." ATG is in the position of arguing that a substance which either doesn't exist, or appears in tap water that has been left to stand for awhile, has a variety of productive effects (cleaning laundry, increasing gasoline mileage, etc.) In any case, the lab concluded that the "structures" are bacteria or some other microorganism. Affidavit of Andrew W. Blackwood, Ph.D. (October 28, 1997) and Structure Probe Technical Report # 34674 (copies attached).

Additional evidence consists of the statement of Structure Probe and other experts that there are compelling reasons why water is a liquid at room temperature, and that there is no theoretical basis for believing "Ie" as described by ATG and Lo -- that is, a new form of ice which is stable at room temperature -- is real.

We have settled with all parties our claims regarding the globe products. However, Structure Probe's findings remain relevant to the evaluation of product claims ATG makes for Force, in which "Ie" is again said to be the "active ingredient."

Upon receiving Structure Probe's report, we served a Notice of Unlawful Trade Practices and Proposed Resolution ("Notice") on, among others, ATG. The Department in a cover letter sent with the Notice summarized the results of Structure Probe's testing and analysis. In its initial response to the Notice, ATG proposed that we conduct further testing for the existence of "Ie." ATG proposed that to do so, we modify the EPA method used by Structure Probe, which is a widely used method for characterizing the particulate content of water. ATG directed that the UV or ozone treatment of the test water, a routine aspect of the method, be eliminated, because those procedures had been shown to be damaging to the "Ie" structures. Structure Probe's Dr. Blackwood pointed out that those procedures are in the method specifically to remove the sort of structures he photographed, which otherwise appear in tap water which has been allowed to stand under ambient lab conditions for a sufficient period of time. See my October 16, 1997 memo to the file and October 14 and 15 correspondence with ATG. At that point ATG hired outside counsel, so no further direct communication with the company has occurred. However, on or about November 6, 1997 ATG submitted through counsel Kurt Hansen two volumes of documents to substantiate the existence of "Ie" and the product claims made for Force.

According to its July 1997 "Journal" published on the Internet, ATG then planned to produce or already manufactures a number of other cleaning products using "Ie." It claims Force is the only product it currently markets in the U.S. Force is advertised in the J.C. Whitney automotive products catalog, on the Internet, and through promotional materials such as a videotape I recently viewed. The tape is packaged in a container which has a blank space for the placement of the name of a distributor. The name in that space on the tape I was given is "TradeNet," but Mr. Hansen told me ATG has severed its relationship with TradeNet and that ATG expects the space will be filled with the name(s) of other distributor(s) in the future.

In the "substantiation" materials submitted to us, ATG began in its July 8th letter with Lo's articles and two articles by Dr. Selim Senkan which purport to test properties of "Ie." More recently, ATG has submitted the above-mentioned two volumes of additional documents contained in notebooks. The first notebook begins with quoted excerpts from statements of mine, characterized as "Assertions," followed by "Responses" from ATG. Copies of the opening pages of the notebook, which identify a number of documents attached as "Exhibits," are attached hereto. The notebook contains the report of an independent lab which ATG claims substantiates the existence of "Ie," and several reports of studies conducted at various universities purporting to measure effects of "Ie." ATG is arguing, in effect, that "Ie" must exist because it has various effects. However, Professor Engelking points out that while the lab found and photographed a number of "structures," its report does not attempt to identify those structures, and thus contains no evidence for the existence of "Ie." And apparently the university studies are fundamentally flawed by what Professor Engelking called a failure to control for the matrix effect: the labs worked with material ATG gave them, so any reported effects may be attributable to the "matrix" (liquid solution purportedly containing "IE") provided by ATG. The reports thus do not constitute substantiation of the "Ie" product claims.

In a meeting with me on November 26, 1997 at his office, Professor Engelking commented on the second volume of material submitted by ATG. The following is my understanding of Professor Engelking's commentary on those documents. The purpose of this summary is to memorialize my understanding of those comments for possible future reference. However, I have not confirmed that understanding in detail in every case, and Professor Engelking's comments are not intended to be exhaustive. A copy of the index to the documents, referred to as Exhibits, is attached to this memorandum.

Under the heading = "Science Behind The Force," Exhibit 1 and Exhibit 2 consists of the two articles by Dr. Lo published in Modern Physics Letters B. See the discussion supra.

Exhibit 3 is described as "The Peer Review Process for Publishing These Two Papers." However, the Exhibit simply lists the editors of the Modern Physics Letters series, and does not identify Lo's editors. As mentioned above, competent peer review should have caught a number of problems with Lo's articles.

Exhibit 4 is described as a published paper by Professor Senkan of UCLA entitled "Effects of Fuel Additives on Carbon Deposits and Emissions from a Single Cylinder SI- Engine," which is provided "since I_E was the test additive." This experiment involved a fuel additive. The applicability of experiments involving an additive is dubious in view of the fact that the directions for use of "The Force" do not involve adding anything directly to the engine fuel, but onnly inserting the product int the air intake system, where it is (according to the promotional video) supposed to be absorbed by the air filter. The experimenter did not control for I_E, but added alcohol and water, purportedly along with "I_E," to the test engine. Adding alcohol and water alone to the engine could well improve its performance.

Exhibit 5 consists of Dr. Lo's curriculum vitae. The documents indicate that Lo has a background in high energy physics; he apparently does not have credentials in physical chemistry. Also, he is a theoretician, not an experimentalist.

Curriculum vitae for Dr. Senkan is provided as Exhibit 6. These documents indicate that Senkan is an experimentalist, affiliated with UCLA, and has credentials in chemical engineering; yet he did not control for "I_E" in the experiment discussed above in connection with Exhibit 4.

Exhibit 7 purports to be "AFM (Atomic Force Microscope) documentation of I_E." The document shows a photograph apparently taken with an AFM. However, the exhibit does not indicate what is depicted; it could be pretty much anything, seen through an atomic force microscope.

Exhibit 8 purports to be "Laser Auto-correlation for I_E." The exhibit shows the particle size distribution which is typical of most liquids. Bubbles have a definite size distribution; the exhibit could show the distribution of bubbles. Whoever conducted the experiment did not control for "I_E" by measuring particle size distribution both with and without "I_E."

The next series of exhibits is placed under the heading, "Product Testing for The Force." Many of these tests are for a fuel additive (while "Force" is supposed to evaporate into the air filter, not be added to the engine fuel). Exhibits 9, 10, and 12, are for an additive; the others are unclear. What is the additive? According to the Materials Safety Data Sheet (MSDS) for "Force", Exhibit 23 (copy attached), the additive includes alcohol and water. Changing the fuel composition can change the emission characteristics of an engine. Depending upon the tuning of the engine, adding alcohol and water to an engine could give higher gas mileage.

Exhibit 9 purports to show methane tests at UCLA which "proved that The Force has a catalytic effect on hydrocarbon fuels." The listing of exhibits states that, "since methane is the simplest form of hydrocarbon," it was tested first. Exhibit 9 purports to show the results of adding an additive to the burning of methane. If one's automobile ran on natural gas, the results of this experiment would be directly applicable.

Exhibit 10 is a report of coke reduction tests at UCLA by Dr. Senkan and others, see discussion of Exhibit 4 supra, which are said to further prove the effect of "The Force." The report describes the experiment in part as follows:

Deionized (DI) water or water containing the additive (I_E crystals, Lo 1996, Lo et al. 1996) was pumped using as [sic] high precision metering syringe pump....

At this point there should be a complete description of the nature and source of the "additive." Sound scientific procedure would require that the researchers identify all samples, and identify all sources of standard materials. Such careful identification would be especially important for such a highly "nonstandard" material as "IE crystals." The report does not describe the substance used, either as to source or manner of preparation. The researchers thus tested for the effect of an inadequately described substance, presumably supplied by Dr. Lo or ATG. Alcohol could account for the difference in the results obtained, and may well have been present as a component in the unidentified substance. See MSDS for "The Force," which indicates 10% propyl alcohol.

The description of Exhibit 11 indicates that it is the "Czech Republic testing which ... is required to sell The Force in Europe." The test reported in this exhibit involved a change in the air intake system. It is mainly an air pollution test. However, while the experiment shows that engine output increased, it also shows that fuel consumption increased in the circumstances of the test.

Exhibit 12 is a test performed by the Society of Automotive Engineers (SAE) "for US claims." Fuel consumption does appear to have decreased (by one percent?). However, the test involved an additive which was added directly to the fuel; there was no control for "I_E."

ATG represents that Exhibit 13 is DEKRA testing, "provided for German sales of The Force." The DEKRA testing involved the use of a "Clean Air Pac." This is only an emissions test. The "Pac" was introduced into the carburetor. Using a control would have meant running the test twice with a plastic bag in the carburetor both times. There was no such control. The test was run once with nothing in the carburetor, and a second time with a plastic bag in the carburetor. Changing the resistance in the air filter region could have an effect. Many engines are tuned for a slightly dirty filter. Inserting a plastic bag in the air intake system could produce results similar to those that one would get from a slightly dirty filter, and thus in such cases, enhance engine performance.

ATG states Exhibit 14, described as "FTP (Federal Test Procedure)," is "provided for fuel economy claims in US." However, Exhibit 14 gives only data, or results; there is no description of the test.

Exhibit 15 is described as AAA (American Automobile Association) testing "provided for acceleration claims." The test shows a decrease in acceleration; this is consistent with choking the air flow to the engine.

Exhibit 16, described as "Core Laboratories testing ... provided for reduction of carbon claims," provides no description of the experiment or test.

Exhibit 17, described as the results of Japanese testing "required to sell in that country," is presented in Japanese without translation.

Exhibit 18 is described as "Hungarian Railroad testing for larger diesel engines." The tester apparently did not understand the product, and punctured the package. The test shows a decrease in fuel consumption; but the measuring point used is not the normal operating point for a diesel engine. The measuring point used would occur only at idle or extreme revs (i.e., high speed). The test shows either an increase or a decrease in emissions; it isn't clear which.

Exhibit 19 shows testing by "Trans-Tex Filters" and the description asserts that carbon reduction "is readily apparent." Exhibit 19 consists of a summary of claimed results; it does not describe the tests which were purportedly performed to achieve the results. The tests appear to have involved the operations of a large fleet of vehicles. The tests might be a summary of wear results, possibly indicating the content of various metals in the engine oil after a period of use. Professor Engelking could not find evidence of carbon reduction in the results; and as indicated, the tests themselves are not described.

Exhibit 20 purports to show Bob Sikorsky's testing. Sikorsky gives "before" and "after" results, but did not use a control; Sikorsky uses an additive and "The Force." Thus the test was not scientific. Exhibit 21 is Sikorsky's biographical information.

"Certifications for The Force." Exhibit 22 does not enhance the quality of the "substantiation." Exhibit 22 contains the statement, among others, the "ARB [California Air Resources Board], in the exercise of technical judgement, is aware of no basis on which The Force Maintenance Pac will provide either a decrease in emission or an increase in fuel economy." Exhibit 23 is the Material Safety Data Sheet (MSDS) for the product and shows that the product contains propyl alcohol (10% solution) and water. Various characteristics of the product, including boiling point, specific gravity, vapor pressure, melting point, vapor density, and evaporation rate, are all "same as water." The MSDS advises that the product should be treated as "water, with 10% alcohol."

The additional exhibits include installation instructions for "The Force" (Exhibit 24), an order form for the product (Exhibit 25), packaging (Exhibit 26), and a video which was provided to TradeNet for marketing of "The Force" (Exhibit 27). I have viewed the video, which contains representations that "The Force" contains "I_E," and that the product will improve gasoline mileage and engine performance.

Summary and Conclusions. Every element of "substantiation" submitted for the product claims is inadequately described or fundamentally flawed, and/or actually contradicts the claim in question. Specifically with reference to the second notebook, it is possible that changing the air intake, by throttling the engine back, could reduce emissions. The exhibits provided do not appear to show anything else. Several contain inadequate descriptions, or none at all, of the testing ostensibly performed. At least two (Exhibits 11 and 15) contain findings that contradict the product claims; see also Exhibit 22.