Richard T. Hammack

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16868 \ January 23, 2001

SECURITIES AND EXCHANGE COMMISSION v. RICHARD T. HAMMACK,
Civil Action No. 00 C 7623 (N.D. Ill.) (Castillo, J.)

The Securities and Exchange Commission ("Commission") announced that on December 5, 2000, Judge Castillo of the United States District Court for the Northern District of Illinois entered an Emergency Order freezing the assets of Richard T. Hammack ("Hammack") of Oakbrook, Illinois until December 14, 2000. Earlier on the same day, the Commission filed a complaint and motion seeking a temporary emergency asset freeze. Judge Castillo also set a hearing date of December 14, 2000 to hear a motion to freeze Hammack's assets for the duration of the proceedings and to enter a preliminary injunction.

The Commission's complaint alleged that Hammack, a former registered representative in the Oak Brook, Illinois office of a brokerage firm, misappropriated more than $1.9 million from approximately 56 customers between January 1999 and October 2000. Hammack misappropriated money from his customers' investments in variable annuities.

The Commission alleged that as part of his scheme, Hammack forged his customers' names on annuity distribution request forms to cause the insurance companies to send out distribution checks to investors. Before investors received these distribution checks, Hammack called them and told them that they would soon be receiving distributions by mistake. In fact, there were no "mistaken distributions." Hammack then drove to each of his customers' residences and persuaded them to give him the checks, assuring them that he would redeposit the checks into their annuity accounts.

The Commission's complaint further alleged that contrary to what he told his customers, Hammack endorsed and deposited the distribution checks into his own personal bank account or into a business account under his control at a local bank. To conceal his scheme, Hammack drafted and mailed letters to customers falsely stating that the funds in question had been returned to the insurance companies. The complaint alleged that Hammack drafted these letters on either firm letterhead or fake insurance company stationery that he created to appear as though the insurance companies drafted and sent the letters.

The Commission's complaint alleged that Hammack's conduct violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to an injunction and asset freeze, the Commission's complaint also seeks the disgorgement of any investor funds Hammack may have misappropriated as well the imposition of financial penalties.