SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17217 / November 1, 2001
SECURITIES AND EXCHANGE COMMISSION v. MICHAEL E. HILL, INDIVIDUALLY AND DOING BUSINESS AS FINANCIAL INVESTMENTS, AND MIKE HILL, INC., et al. (U.S.D.C., Northern District of Texas, Dallas Division, Civil Action No. 3:01-CV-2189-X)
On November 1, 2001, at the Commission's request, Judge Joe Kendall of the United States District Court for the Northern District of Texas, issued orders freezing the assets and halting securities law violations by Michael E. Hill, a Dallas-area broker, and his company, Mike Hill, Inc. ("MHI"). Hill and MHI are accused of engaging in a $4 million securities scam, which targeted senior citizens. The court also appointed a receiver to recover and preserve assets for the benefit of the victims of the scam. These orders were entered in a civil lawsuit filed by the Commission on October 31, 2001.
In its action, the Commission accuses Hill of offering bogus certificates of deposit (CDs) to his elderly brokerage clients and to the general public through newspaper advertisements. Hill lured his investors with promises of above-market rates on 30-month CDs purportedly issued by a Dallas-area bank. In fact, Hill never purchased the CDs for his investors. Instead he pooled about $4 million of investor funds in a bank account in the name of MHI, which he controlled. From there, Hill transferred a substantial portion of the funds into a brokerage account, also in MHI's name, in which he traded risky securities. Hill also used investor funds to make ponzi payments of interest and principal to investors and for his own personal benefit, including more than $500,000 to purchase an office building complex. Hill still owes about $2 million in principal, plus accrued interest, to investors, who he is fraudulently rolling over into new 30-month investments.
The Commission has charged the following defendants and relief defendant in its action:
- Defendant Michael Earl Hill, age 55 and a resident of Plano, Texas, has conducted business under the assumed name, Financial Investments, since at least 1984. Hill was a registered representative with several broker-dealers between 1991 and the present. He is currently licensed, but unassociated with any broker-dealer.
- Defendant MHI is a Texas domestic corporation. It is wholly owned by Hill and has its principal place of business in Plano, Texas. MHI also operates under the d/b/a Financial Investments. All investor funds raised in this scheme were deposited in bank and brokerage accounts in MHI's name.
- Relief Defendant Stalwart Financial Investments, L.L.C., is a Texas limited liability company. Hill is its sole managing member. Stalwart owns an office complex in Plano, Texas with a market value in excess of $1 million. More than $500,000 of investor funds misappropriated by Hill was used to purchase this property.
The Commission's complaint charges Hill, individually and d/b/a Financial Investments, and MHI with violating the antifraud provisions found in Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, as well as the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act. The complaint seeks a temporary restraining order, preliminary and permanent injunctions, an asset freeze, interim accounting, disgorgement with prejudgment interest and a civil money penalty against each defendant, as well as the appointment of a receiver over the assets of the defendants and relief defendant. In addition, the complaint seeks disgorgement against the relief defendant. Finally, the Commission also seeks an order prohibiting the movement, alteration and destruction of books and records, and expedited discovery - all of which were granted by the Court today.
The Commission would like to thank the Texas State Securities Board, United States Postal Inspection Service in Dallas, and the NASD District 6 office in Dallas for its assistance in the investigation of this matter.