U.S. Securities and Exchange Commission
Litigation Release No. 18659 / April 7, 2004
Securities and Exchange Commission v. Timothy R. Heyman and Heyman International, Inc., (U.S.D.C. N.D. AL., Case Number CV-04-CO-0686-S, filed April 5, 2004)
On April 5, 2004, the Securities and Exchange Commission filed a Motion for a Temporary Restraining Order seeking an asset freeze and other emergency relief in the United States District Court for the Northern District of Alabama to halt an ongoing $10 million Ponzi scheme conducted by Timothy R. Heyman ("Heyman"), and Heyman International, Inc. ("Heyman International"). The Court entered temporary restraining orders restraining and enjoining Heyman and Heyman International from violations of the registration and antifraud provisions of the federal securities laws. The Court also entered orders to freeze the assets of Heyman, Heyman International and Heyman International investor funds wherever located, among other emergency relief.
The Commission's Complaint alleges that from at least June 2001 to the present, Heyman raised at least $10 million from approximately 150 investors through the unregistered offer and sale of securities issued by Heyman International in the form of "Depository Agreements." According to the Commission's Complaint, Heyman represents to investors in the Depository Agreements that: he has access to "certain proprietary high yield depository accounts, and trading programs in the United States and elsewhere;" investor funds will be deposited in these accounts to "increase the overall yield of the accounts" and that, as a result, investors will earn a minimum of 10% per month on their principal investment. Heyman also represents in the Depository Agreement that investor funds are fully refundable. The Commission's Complaint alleges that, in reality, Heyman is operating a Ponzi scheme by using investor funds to pay previous investors their monthly returns and to pay his personal expenses. The Commission's Complaint alleges that Heyman has used at least $1.3 million of investor funds to pay personal expenses, including several luxury cars and lavish trips. The Complaint also alleges that Heyman invested at most a de minimus amount of investor funds and that Heyman International does not have sufficient funds in its bank accounts to repay investors as represented in the Depository Agreement.
The Complaint seeks orders of preliminary and permanent injunction enjoining Heyman and Heyman International from violating 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 Commission's Complaint also seeks against the Defendants disgorgement plus prejudgment interest and civil penalties. The Court ordered the parties to appear for a Show Cause Hearing on April 15, 2004 in the United States District Court for the Northern District of Alabama on the Commission's Motion for a Preliminary Injunction. The Commission acknowledges the assistance and cooperation of the Federal Bureau of Investigation, the Internal Revenue Service and the State of Alabama Securities Commission. The Alabama Securities Commission has simultaneously issued a Cease and Desist Order against Heyman and Heyman International. The Cease and Desist Order also names Donald E. Watts, Betty Watts and Omni Fasteners Components Corp., all of Pell City, Alabama, alleging the unregistered sale of securities and that they acted as unlicensed broker-dealers and agents in violation of the Alabama Securities Act. All of the agencies' investigations are continuing
