Nanoscale to close following charges against executive

By Bill Felber

Nanoscale, once the crown jewel of K-State’s corporate-technology park but lately beset by criminal charges against a former executive, is being closed here.

Company officials released a one-paragraph statement confirming the closure decision Friday. The announcement contained no indication when the closure would become effective, nor did it indicate whether the decision was linked either directly or indirectly to the federal prosecution of Aaron Madison, former head of Nanoscale operations here.

The full text of the statement read: “NanoScale Corporation has completed a voluntary surrender of all assets to Landmark National Bank. NanoScale’s commercial business activities have ceased, and the Company is cooperating with Landmark to optimize the value of the assets during an orderly shutdown period. We have no other comments.”

Indications were that efforts are underway to halt operations here by the end of March. Until its takeover by Landmark Bank, Nanoscale was owned by Symark, a technology commercialization and business development organization based in Naples, Fla. The owner of Symark, Bill Sanford, is a KSU graduate who also serves as Nanoscale’s board chairman. The top local official is Kyle Kappenberger, vice president and general manager of the Manhattan operation. The company’s board of directors includes several well-known local figures: Bill Snyder, KSU’s head football coach; Terry King, former dean of the College of Engineering,; and John Graham, a retired academic and business executive here.

Madison pleaded guilty in August to a federal charge of wire fraud stemming from false invoices Madison submitted to the Department of Defense and the Department of Health and Human Services. At the time, it was reported that those contracts amounted to 90 percent of the company’s business. Federal officials estimated the fraud at about $500,000. Authorities said Madison used cash from the fraudulent invoices to meet the company’s expenses, including monthly payroll. He has since been sentenced to a probated sentence and ordered to pay restitution.

There were no charges brought against Nanoscale, but estimates of the dollar loss to the company as a result of the Madison legal issues have ranged into the millions of dollars.

Manhattan Holdings Inc., a venture representing the combined interests of the city, state and university, was believed to have invested about $250,000 in Nanoscale, money that is now considered lost.

Nanoscale was founded in the mid 1990s by Kenneth Klabunde, a University Distinguished Professor of Chemistry at Kansas State University, as a university effort to monetize the value of research. At the time, those efforts focused on defensive measures against chemical warfare agents that were of interest to the military.

The company grew so that by 2002 it employed 25 persons and functioned out of a new building in the tech park along North Manhattan Avenue. Nanoscale came to be viewed as a leader in the university’s effort to merge academic research with commercial avenues.

Although officials would not confirm this for the record, the company’s problems apparently developed as Sanford, who joined the firm in 2003, pushed efforts to expand product applications from the government into the civilian world. “The company could not get that launched as we needed to,” lamented Klabunde, who has since separated himself from the firm. “I always thought things were going to take off,” he added.

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