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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission

Litigation Release No. 17832 / November 8, 2002

Securities and Exchange Commission v. International Heritage, Inc., Stanley H. Van Etten, Claude W. Savage, Larry G. Smith and International Heritage, Incorporated, a Nevada Corporation, United States District Court for the Northern District of Georgia, Civil Action No. 1:98-CV-0803-RWS

The Securities and Exchange Commission announced today that an application for an order to show cause why defendant Larry G. Smith (Smith) should not be held in civil contempt was filed by the Commission on November 4, 2002, in the United States District Court for the Northern District of Georgia, based on his failure to pay disgorgement and civil penalties, as directed by the Court's January 3, 2000 order. That order enjoined Smith from further violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also ordered Smith to pay disgorgement in the amount of $1,367,235 with prejudgment interest, and imposed a civil penalty of $110,000.

On March 16, 1998, the Commission alleged in its complaint that beginning in April, 1995, International Heritage, Inc. (IHI), a North Carolina corporation, through Smith and others, solicited individuals throughout the United States to invest in a pyramid scheme through misleading promotional materials, meetings, videotapes, internet web pages, and national conference calls to increase investor interest. Investors purchased "business centers" and IHI raised more than $150 million from over 155,000 investors. The complaint alleged that interests in the program, which are described by IHI as business centers, are securities. In addition to selling interests in the pyramid scheme, between July 17, 1997 and November 1, 1997, the defendants sold $5 million in notes convertible into shares of IHI common stock. According to the complaint, the defendants knowingly misrepresented IHI's financial condition to investors and concealed the fact that IHI was operating a pyramid scheme. Smith was a founder and director of IHI.

For tips on how to avoid Internet "pump-and-dump" stock manipulation schemes, visit http://www.sec.gov/investor/online/pump.htm. For more information about Internet fraud, visit http://www.sec.gov/divisions/enforce/internetenforce.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.

See also: L.R. 15672 (March 17, 1998); L.R. 16264 (August 26, 1999); L.R. 16330 (October 7, 1999); L.R. 16407 (January 10, 2000); and L.R. 16531 (May 1, 2000).



Modified: 11/08/2002